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What changed in Mawson Infrastructure Group Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Mawson Infrastructure Group Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+368 added−377 removedSource: 10-K (2024-04-01) vs 10-K (2023-03-23)

Top changes in Mawson Infrastructure Group Inc.'s 2023 10-K

368 paragraphs added · 377 removed · 164 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeCustomer Co-location and Hosting Services Due to our strategy of investing in digital asset infrastructure, including entering into site leases, power purchase agreements and acquiring MDCs and other equipment necessary for facilities designed for mining Bitcoin, we are able to offer other businesses in the digital asset infrastructure industry the opportunity to have their ASIC Miners and other equipment located within our facilities.
Biggest changeCustomer Co-location Services Mawson offers other businesses and customers in the digital assets industry the opportunity to have their Miners and other equipment located within our facilities. Mawson generates revenue from these customers for their use of our co-location services and facilities. The customer typically keeps all Bitcoin mined in this manner, while paying Mawson for providing co-location services.
Before committing to a site, Mawson considers a range of investment criteria, including factors such as climate, community acceptance of Bitcoin mining operations, secure tenure through long term leases, or the ability to acquire sites, the existence of demand response programs which Mawson can participate in, the ability to secure low cost, stable, low carbon or carbon-neutral sustainable power, labor and skills availability, local taxation regimes, and proximity to Mawson’s existing supply chains and operations.
Before committing to a site, Mawson considers a range of investment criteria, including factors such as climate, community acceptance of Bitcoin mining operations, secure tenure through long term leases, or the ability to acquire sites, the existence of energy demand response programs which Mawson can participate in, the ability to secure low cost, stable, low carbon or carbon-neutral sustainable power, labor and skills availability, local taxation regimes, and proximity to Mawson’s existing supply chains and operations.
The Network Hash Rate can also decline from time to time, which means that Mawson’s hash rate relative to the Network Hash Rate would increase (if Mawson continued to deploy the same amount of hash rate), increasing the chance that Mawson will be rewarded with Bitcoin. 2 As Mawson increases its hash rate it increases its chance of solving a particular problem and earning the right to place a block on the blockchain and at the same time earning a Bitcoin reward, as well as a potential transaction fee.
The Network Hash Rate can also decline from time to time, which means that Mawson’s hash rate relative to the Network Hash Rate would increase (if Mawson continued to deploy the same amount of hash rate), increasing the chance that Mawson will be rewarded with Bitcoin. 2 As Mawson increases its hash rate it increases its chance of solving a particular problem and earning the right to place a block on the blockchain and at the same time earning a Bitcoin reward, as well as any potential transaction fee.
The Bitcoin mining network is made up of a variety of competitors, from individual ‘sub-scale’ hobbyists to large, listed mining operations. We compete with the other listed mining companies directly for the acquisition of new Miners, and raising capital.
The Bitcoin mining network is made up of a variety of competitors, from individual ’sub-scale’ hobbyists to large, publicly listed mining operations. We compete with the other publicly listed mining companies directly for the acquisition of new Miners and raising capital.
The original equipment used for mining Bitcoin utilized the Central Processing Unit (“CPU”) of a computer to mine various forms of cryptocurrency. Due to performance limitations and growing competition to mine Bitcoin, CPU mining was rapidly replaced by the Graphics Processing Unit (GPU), which was in turn replaced by Application-Specific Integrated Circuit (“ASIC”) Miners.
The original equipment used for mining Bitcoin utilized the Central Processing Unit (“CPU”) of a computer to mine various forms of cryptocurrency. Due to performance limitations and growing competition to mine Bitcoin, CPU mining was rapidly replaced by the Graphics Processing Unit (“GPU”), which was in turn replaced by Application-Specific Integrated Circuit (“ASIC”) Miners.
Individual Bitcoin Miners risk going for extended periods of time without earning any Bitcoin rewards. To smooth the earning of Bitcoin rewards, most miners, including Mawson, will join a ‘mining pool’ (that is a group of other miners). A large group of miners with greater hashing power is more likely to earn a cryptocurrency reward.
Individual Bitcoin Miners risk going for extended periods of time without earning any Bitcoin rewards. To facilitate the earning of Bitcoin rewards, most miners, including Mawson, will join a ‘mining pool’ (that is a group of other miners). A large group of miners with greater hashing power is more likely to earn a cryptocurrency reward.
The original reward was 50 Bitcoin per block, but after the last halving the reward was reduced to its current level of 6.25 Bitcoin per block. The next halving for the Bitcoin blockchain is anticipated to occur in or around March 2024.
The original reward was 50 Bitcoin per block, but after the last halving the reward was reduced to its current level of 6.25 Bitcoin per block. The next halving for the Bitcoin blockchain is anticipated to occur in or around April 2024.
Further, because Mawson can be flexible in the way it operates its Bitcoin mining data centers and how it uses energy, Mawson can increase electricity grid stability by providing demand for energy producers when aggregate power demand is low, and then lowering its own usage when aggregate power demand is high.
Further, because Mawson can be flexible in the way it operates its Bitcoin mining data centers and how it uses energy, Mawson can contribute to electricity grid stability by providing demand for energy producers when aggregate power demand is low, and then lowering its own usage when aggregate power demand is high.
Regulations may substantially change in the future and it is presently not possible to know how regulations will apply to our businesses, or when they will be effective. As the regulatory and legal environment evolves, we may become subject to new laws, further regulation by the SEC and other agencies, which may affect our mining and other activities.
Regulations may substantially change in the future, and it is presently not possible to know how regulations will apply to our businesses, or when they will be effective. As the regulatory and legal environments evolve, we may become subject to new laws, further regulation by the SEC and other agencies, which may affect our mining and other activities.
As the global network has modernized and become more efficient, the hash rate required to regularly solve for a block (that is, the ‘network difficulty’) has increased significantly, leading to Bitcoin miners acquiring ever large fleets of more efficient ASIC Miners. The expanding fleets of ASIC Miners generally require more electrical power.
As the global network has modernized and become more efficient, the hash rate required to regularly solve for a block (that is, the ‘network difficulty’) has increased significantly, leading to Bitcoin miners acquiring larger fleets of more efficient Miners. The expanding fleets of Miners generally require more electrical power.
Factors Affecting Profitability The main factors affecting Mawson’s Self-Mining profitability are (in no particular order): ● The market price of Bitcoin; ● The reward Mawson earns for its mining operations; ● Changes in the Network Hash Rate (as described above); ● Changes in the cost of hardware, such as Miners, containers, transformers; ● The cost of land, or leases; and ● The cost of power. 4 There is a risk that a change in any of these factors will have a detrimental effect on Mawson’s business.
Factors Affecting Profitability of Bitcoin Self-Mining business The main factors affecting Mawson’s self-mining profitability are (in no particular order): ● The market price of Bitcoin; ● The reward Mawson earns for its mining operations; ● Changes in the Network Hash Rate (as described above); ● Type of hardware, such as types of Miners, used and deployed; ● The cost of land, or leases or other operational costs; and ● The cost of power. 4 There is a risk that a change in any of these factors could have a detrimental effect on Mawson’s business.
Mawson’s strategy is to operate as a mining operation, rather than a cryptocurrency investment company. This means that Mawson regularly liquidates its Bitcoin holdings for traditional fiat currency. Mawson has established relationships with several digital currency exchanges through which Mawson sells Bitcoin on a regular basis.
Mawson does not hold any material amount of Bitcoin on its balance sheet. Mawson’s strategy is to operate as a mining operation, rather than a cryptocurrency investment company. This means that Mawson regularly liquidates its Bitcoin holdings for traditional fiat currency. Mawson has established relationships with several digital currency exchanges through which Mawson sells Bitcoin on a regular basis.
Bitcoin miners, including Mawson, also compete with more traditional industries, for example, when obtaining the lowest cost, sustainable electricity, or access to sites with reliable sources of power. Many Bitcoin mining operations are not publicly operated, and therefore data is not readily available. Listed companies operating comparable businesses include: ● Core Scientific, Inc.
Bitcoin miners, including Mawson, also compete with more traditional industries, for example, when obtaining the lowest cost, sustainable electricity, or access to sites with reliable sources of power. Many Bitcoin mining operations are not publicly operated, and therefore data is not readily available.
Mawson uses proprietary financial models, which it is constantly refining, which highlight to Mawson when participation in the Energy Markets Program will create greater value than Bitcoin mining. Mawson then decides whether to mine and whether to curtail its energy usage, by switching off its ASIC miners.
Mawson uses proprietary financial models, which it is constantly refining, that highlight to Mawson when participation in the Energy Markets Program should create greater value than operating is self-mining. Mawson then decides whether to mine or to curtail its energy usage, by switching off its miners.
Other products and services and investments Mawson will from time to time opportunistically sell hardware that it has acquired, whether used or unused, which is surplus to its requirements, or in order to fund newer and better equipment. Hardware that Mawson would typically sell includes ASIC miners, transformers and/or MDCs.
Other products and services Mawson will from time to time opportunistically sell hardware that it has acquired, whether used or unused, which is surplus to its requirements, or in order to fund newer and better equipment.
Any legislative changes regarding climate change or market interventions as a result of the Ukraine war could add significant burden and costs to our business, including costs related to making our energy consumption more efficient and lower impact on the environment, environmental monitoring and reporting, and other costs to comply with such changes.
Any legislative changes regarding climate change or energy security could add significant burden and costs to our business, including taxes, or other costs related to making our energy consumption more efficient and lower impact on the environment, environmental monitoring and reporting, and other costs to comply with such changes.
Price caps could be introduced which may have long-term effects on power prices. If fossil fuel projects are not allowed proceed, then this may have an effect on power prices if sustainable or renewable energy is insufficient. Corporate Information Our principal place of business is 201 Clark Street, Sharon, Pennsylvania 16146.
Price caps could be introduced which may have long-term effects on power prices. If fossil fuel projects are not allowed to proceed, then this may have an effect on power prices if sustainable or renewable energy is insufficient or unreliable. Corporate Information Our principal place of business is 950 Railroad Avenue, Midland, Pennsylvania 15059.
If energy prices are too high, then the cost of mining may be too high to make Bitcoin mining economical. This is especially true at times when Bitcoin prices are low, and network difficulty is high.
This means that energy is a material input cost for Mawson’s operations. If energy prices are higher, then the cost of mining may be too high to make Bitcoin mining economical. This is especially true at times when Bitcoin prices are low, and network difficulty is high.
Typically, this will occur when energy prices spike, and the mining of Bitcoin becomes unprofitable. In this way we can provide stability to the energy grid by reducing our demand on renewable or sustainable energy at times of peak usage, or low supply, potentially reducing prices for other users.
In this way we can provide stability to the energy grid by reducing our demand on renewable or sustainable energy at times of peak usage, or low supply, potentially reducing prices for other users.
Bitcoin Self-Mining At the core of Mawson’s operations is ‘Bitcoin mining’. Put very simply, Bitcoin mining involves the use of specialized computers to solve algorithmic problems in order to update the distributed or decentralized ledger of Bitcoin transactions securely. In return for providing this security to the Bitcoin ledger, Bitcoin miners are rewarded with Bitcoin.
Bitcoin Self-Mining Bitcoin mining involves the use of specialized computers (“Miners”) to solve algorithmic problems in order to update the distributed or decentralized ledger of Bitcoin transactions securely. In return for providing this security to the Bitcoin ledger, Bitcoin miners are rewarded with Bitcoin. The decentralized ledger is the key innovation of the Bitcoin protocol.
As of March 11, 2023, we had 40 full time and 3 part time employees based in the U.S. and Australia. We also use contractors where practical and further rely on the extensive expertise of our external advisers, including legal, audit, financial, IT and compliance consultants, who may be engaged on an hourly basis, or on a project basis.
As of March 1, 2024, we had 30 plus full time employees. We also use contractors where practical and further rely on the extensive expertise of our external advisers, including legal, audit, financial, IT and compliance consultants, who may be engaged on a time basis, or on a project basis.
This process will reoccur until the total amount of Bitcoin currency rewards issued reaches 21 million and the theoretical supply of new Bitcoin is exhausted, which is expected to occur in or around 2140. The value of Bitcoin has historically risen after each halving event, on a halving to halving basis.
This process will re-occur until the total amount of Bitcoin currency rewards issued reaches 21 million and the theoretical supply of new Bitcoin is exhausted, which is expected to occur in or around 2140.
ITEM 1. BUSINESS. Overview General Mawson Infrastructure Group Inc is a corporation incorporated in Delaware in 2012. Shares of Mawson’s common stock have been listed on The Nasdaq Capital Market since September 29, 2021.
ITEM 1. BUSINESS. Overview General Mawson Infrastructure Group Inc. (“Mawson,” the “Company,” “we,” “us,” and “our”) is a corporation incorporated in Delaware in 2012. Shares of Mawson’s common stock, par value $0.001 per share (“Common Stock”) have been listed on The Nasdaq Capital Market since September 29, 2021.
The decentralized ledger is the key innovation of the Bitcoin protocol. It is a public ledger that can be viewed by anyone with specialist knowledge, and is typically kept by more than one entity. An example of a centralized ledger would be a ledger of bank account transactions kept by a financial institution.
It is a public ledger that can be viewed by anyone with specialist knowledge and is typically kept by more than one entity. An example of a centralized ledger would be a ledger of bank account transactions kept by a financial institution. Miners perform computational operations to solve specific computing problems in support of the Bitcoin network.
If Mawson decides to curtail its energy use, then during these periods Mawson’s Bitcoin revenue may be significantly reduced. In addition to hosting revenues that may be available, Mawson has developed an Energy Markets Program. In addition to energy hedges and derivatives that Mawson may be able to purchase, Mawson participates in demand response programs.
If Mawson decides to curtail its energy use, then during these periods Mawson’s Bitcoin revenue may be significantly reduced but should be supplemented by the payments provided by the Energy Markets Program revenue for curtailment activity. In addition to energy hedges and derivatives that Mawson may be able to purchase, Mawson participates in demand response programs.
It should also be noted that the reward for Bitcoin mining is scheduled to halve approximately every 4 years. This phenomenon, which is a feature of the Bitcoin protocol, is known as ‘halving’. The Bitcoin blockchain has undergone halving three times since its inception, on November 28, 2012, July 9, 2016, and May 11, 2020.
This phenomenon, which is a feature of the Bitcoin protocol, is known as ‘halving’. The Bitcoin blockchain has undergone halving three times since its inception, on November 28, 2012, July 9, 2016, and May 11, 2020.
While Mawson takes steps to mitigate these risks, they cannot be avoided altogether. In particular, the market price of Bitcoin can be volatile, sometimes being subject to major changes in value in short time periods. For example, 2022 was a prolonged period of falling Bitcoin value.
While Mawson takes steps to mitigate these risks, they cannot be avoided altogether. In particular, the market price of Bitcoin can be volatile, sometimes being subject to major changes in value in short time periods. In addition, the reward for Bitcoin mining is scheduled to halve approximately every 4 years.
These ASIC Miners are designed specifically for the task of solving computing problems in support of the Bitcoin network, which maximizes the rate of hashing operations. As with most current large scale mining operations, Mawson only operates ASIC Miners. Hash rate is a measure of the processing speed of a Miner.
These ASIC Miners are designed specifically for the task of solving computing problems in support of the Bitcoin network, which maximizes the rate of hashing operations. Hash rate is a measure of the processing speed of a Miner. Mawson’s hash rate is the sum total of its Miners’ hash rates.
If Mawson’s proportion of the Network Hash Rate grows, then Mawson’s chance of solving a block on the Bitcoin’s blockchain should increase and, therefore, Mawson’s chance of earning a Bitcoin reward should increase.
Similarly, the sum total of all Miners actively trying to solve a block in the Bitcoin network is known as the “Network Hash Rate”. If Mawson’s proportion of the Network Hash Rate grows, then Mawson’s chance of solving a block on the Bitcoin’s blockchain should increase and, therefore, Mawson’s chance of earning a Bitcoin reward should increase.
(currently in Chapter 11 bankruptcy protection) ● Marathon Digital Holdings, Inc. ● Riot Platforms, Inc. ● Hut 8 Mining Corp. ● TeraWulf Inc. ● HIVE Blockchain Technologies Ltd ● Bitfarms Ltd ● Iris Energy Limited 6 ● Cipher Mining Inc.-- ● Stronghold Digital Mining, Inc.-- ● Argo Blockchain plc ● Greenidge Generation Holdings Inc ● Applied Digital Corp ● Galaxy Digital Holdings Ltd Human Capital Our employees are critical to our success.
Publicly Listed companies operating comparable businesses include: ● Marathon Digital Holdings Inc. ● CleanSpark Inc. ● Riot Platforms, Inc. ● Bitfarms Ltd ● Cipher Mining Inc. ● Hut 8 Mining Corp. ● Core Scientific, Inc. ● Applied Digital Corp. ● Iris Energy Ltd. ● HIVE Blockchain Technologies, Inc. 6 ● TeraWulf, Inc. ● Bit Digital Inc. ● Argo Blockchain plc ● Stronghold Digital Mining, Inc. ● Greenidge Generation Holdings Inc. ● Ionic fka Celsius Human Capital Our employees are critical to our success.
Counter-party risk is a key issue when entering into hosting arrangements with customers, and Mawson employs a number of mitigation strategies including deposits and upfront charges. 3 Energy Markets Program To power all the ASIC miners at its facilities, Mawson uses substantial amounts of energy. This means that energy is a material input cost for Mawson’s operations.
Counter-party risk is a key issue when entering into co-location arrangements with customers, and Mawson employs a number of mitigation strategies to decrease the risks arising from counter-parties, including requiring deposits and charging upfront fees. 3 Energy Markets Program Mawson has developed an Energy Markets Program. To power all the miners at its facilities, Mawson uses substantial amounts of energy.
Our Australian office is located at Level 5, 97 Pacific Highway, North Sydney New South Wales 2060. Our contact email is info@mawsoninc.com, and our website is www.mawsoninc.com. Shares of our common stock have been listed on The Nasdaq Capital Market since September 29, 2021. Available Information Our investor relations website is available at mawsoninc.com.
Our contact email is info@mawsoninc.com, and our website is www.mawsoninc.com. Shares of our Common Stock, par value $0.001 per share (“Common Stock”), have been listed on The Nasdaq Capital Market since September 29, 2021. Available Information Our investor relations website is available at www.mawsoninc.com.
Minimum fees can help generate revenue during periods when our Bitcoin self-mining may not be profitable (for example, due to high energy prices, high difficulty, and low Bitcoin prices).
Such fees can provide upfront benefits, which helps decrease risk in the business, and potentially enables Mawson to have different types of revenue streams. Minimum fees can help generate revenue during periods when our Bitcoin self-mining may not be as profitable (for example, due to high energy prices, high network difficulty, and low Bitcoin prices).
Environment Digital asset mining requires a large amount of computing power, which in turn requires a large amount of electricity. At Mawson we recognize the important role digital asset mining can play in supporting the growth of renewable or sustainable energy sources.
At Mawson we recognize the important role digital asset mining can play in supporting the energy grid and we seek to utilize and support renewable or sustainable energy sources. We hope to support the growth of further renewable or sustainable power into the grid.
These arrangements can be customized for each customer’s situation and strategy, and allows Mawson to diversify its income streams, while adjusting its risk profile. For example, customers may agree to be charged upfront infrastructure fees, minimum fees, and maintenance fees. Such fees can provide upfront benefits, which de-risks the business, allows Mawson to expand more quickly.
This kind of arrangement is known as ‘co-location’ and can be customized for each customer’s situation and their and Mawson’s strategy and allows Mawson to supplement or diversify its income streams, while adjusting its risk profile. For example, customers may agree to be charged upfront infrastructure fees, minimum fees, and maintenance fees.
Mawson enters into Power Purchase Agreements (“PPA”) with its power suppliers that set out the terms and duration of the supply or power. Government Regulation Government regulation of blockchain and cryptocurrency is being actively considered by the United States (federal and state) and international governments, and their agencies and regulatory bodies.
Mawson enters into Power Purchase Agreements (“PPA”) with its power suppliers that set out the terms and duration of the supply or power.
Mawson is a ‘Digital Asset Infrastructure’ business, which owns and operates (through its subsidiaries) data centers for the generation of Bitcoin cryptocurrency (also known as “Bitcoin mining”), predominately in the United States. Our data centers consist of our proprietary modular data centers (“MDCs”), and we continue to develop our MDC technology to improve their performance.
Mawson is a ‘Digital Infrastructure’ Company, which operates (through its subsidiaries) data centers for the generation of Bitcoin cryptocurrency (also known as “Bitcoin mining”), in the United States. Because Mawson takes part in Bitcoin mining, it is often referred to as a Bitcoin miner.
We seek to power our operations with renewable or sustainable power and in doing so we hope to support the introduction of further renewable or sustainable power into the grid. We also enter into arrangements where we may be compensated in certain circumstances if we curtail or reduce or cease our energy usage.
We also enter into arrangements where we may be compensated in certain circumstances if we curtail or reduce or cease our energy usage. Typically, this will occur when energy prices spike, and the mining of Bitcoin may become unprofitable.
The Company identifies potential risks associated with workplace activities in order to develop measures to mitigate possible hazards. ESG Governments around the world have been introducing new energy policies and legislation in response to climate change and the effects on energy markets of the Ukraine war.
ESG Governments around the world have been introducing new energy policies and legislation in response to climate change and energy security.
As at the date of this Annual Report, Mawson operates its own MDCs in one data center facility in Midland Pennsylvania, USA, on land that we have leased on long-term arrangements. Midland has a 100MW capacity once fully developed. A second data center facility is being developed at Sharon Pennsylvania, USA.
As of the date of this Annual Report, Mawson operates its own miners in two data center facilities located in Midland and Bellefonte Pennsylvania, USA, that have been leased on long-term arrangements. The Midland site currently has 100MW of capacity available for both self-mining and co-location services and is capable of further development.
By operating more Miners, Mawson will increase the amount of power it requires to operate the Miners, thus increasing its costs. Mawson and its competitors have deployed increasingly sophisticated and efficient Miners in greater numbers, which has meant that older, less efficient Miners have become too inefficient to economically deploy, and have become redundant.
By operating more Miners, Mawson will also most likely increase the amount of power it requires to operate the Miners, thus increasing its costs.
For example, the state of New York has instituted a partial ban on crypto-currency mining in that state. For additional discussion regarding the potential risks existing and future regulation pose to our business, see the Section entitled “Risk Factors” herein. Competition The cryptocurrency industry, in particulate Bitcoin mining, is dynamic and global.
For additional discussion regarding the potential risks existing and future regulation pose to our business, see the Section entitled “Risk Factors” herein. Co-location customers Mawson has three co-location customers that in total represent approximately 82 MW and approximately 25,284 miners.
Demand response programs compensate Mawson for periods of curtailment, and can generate additional revenues for Mawson.
Demand response programs leverage the timely reduction of energy use by our facilities to benefit other power customers. These demand response programs may compensate Mawson for periods of curtailment and can generate additional revenues for Mawson during times of higher energy prices.
Our core revenue generating operation is the mining of Bitcoin. During the year ended December 31, 2022, we mined 1,342.59 Bitcoin resulting in revenues totaling $43.11 million. Mawson’s policy is to liquidate any mined Bitcoin within a reasonable time after receipt. Mawson does not hold any material amount of Bitcoin on its balance sheet.
We generate revenue through the mining of Bitcoin and then selling the Bitcoin that we mine. During the year ended December 31, 2023, we mined 741.33 Bitcoin and sold 741.33 Bitcoin resulting in revenues totaling $ 21.59 million. Mawson at this time typically liquidates any mined Bitcoin within a reasonable time after receipt.
Going forward, DSS’s large scale computing infrastructure enables it to handle large computing loads on demand, which will allow it to offer ‘compute-as-a-service’, including for the application of artificial intelligence. 5 Suppliers Mawson engages a range of suppliers for access to hardware and software required to mine Bitcoin. This includes the manufacturers of the Miners, MDCs and transformers.
Hardware that Mawson would typically sell includes miners, transformers and/or MDCs. 5 Suppliers Mawson engages a range of suppliers for access to hardware and software required to mine Bitcoin, provide co-location services and for its energy markets program. This includes the manufacturers of the Miners, MDCs, and transformers.
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Because Mawson takes part in Bitcoin mining, it is often referred to as a Bitcoin miner. Our primary business is the operation of our own fleet of Application-Specific Integrated Circuit (“ASIC”) computers known as “Miners” within our data centers. The Miners are used for the ‘mining’ of Bitcoin.
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The Company has 3 primary businesses – digital currency or Bitcoin self-mining, customer co-location and related services, and energy markets. As of the date of this Annual Report, we operate two data center facilities in Pennsylvania, USA, and have rights to develop other sites of various sizes in Ohio.
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As at the date of this Annual Report, we operate one data center facility located in Pennsylvania, USA, and are constructing a second. We are actively seeking out future sites for additional data center facilities. The Miners we operate are focused on the process of digital mining, specifically for Bitcoin.
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We seek to power our operations and facilities with renewable or sustainable power to further support our sustainability priorities.
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In exchange for powering down our systems and curtailing the power we draw from the grid in response to periods of high electricity demand on the local grid network, we may receive net energy benefits or compensation. In addition, in 2022 we entered into a new contract which allows us to trade our energy to achieve net energy benefits.
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We may also operate in related and adjacent businesses, including transacting in new and used crypto-currency mining and modular data centers (“MDCs”) equipment on a periodic basis, subject to prevailing market conditions and any surplus we may be experiencing. 1 Our Products and Services Mawson’s business Mawson has three main businesses through which it generates its revenue: ● Bitcoin self-mining; ● Customer co-location services; and ● Energy markets program.
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We have recognized a derivative asset on our balance sheet for the contract, which has been measured at fair value with any changes in fair value recognized in our statement of operations. Both these arrangements have been particularly useful during periods of high energy prices, and low Bitcoin prices, when our Bitcoin mining business has been less profitable.
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The Bellefonte site currently has 8.8MW of capacity that is used entirely for self-mining and is also capable of expansion. As noted below, Mawson’s lease for property in Sharon, Pennsylvania was terminated and Mawson has moved completely out of the facility, which was a non-operating site.
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We offer ‘hosting’ or ‘co-location’ facilities to other businesses who wish to have their Miners located within our facilities and MDCs. These businesses pay us fees for the use of our facilities and related services. As at the date of this Annual Report Mawson’s major hosting customer is Celsius Mining LLC.
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The value of Bitcoin has historically risen after each halving event, due to the reduced supply of Bitcoin, however, there can be no guarantee that this will occur again in the future, or the timing known if such an event were to happen.
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Mawson successfully ended its hosting contracts with a number of sub-scale hosting customers during 2022. We also sell new and used crypto currency mining and MDC equipment on a periodic basis, subject to prevailing market conditions and any surplus we may be experiencing.
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Factors Affecting Profitability of Customer Co-location Services business The main factors affecting Mawson’s co-location profitability are (in no particular order): ● Reliance on a large, single co-location services customer; ● Provide services at a profitable rate; ● Ability to acquire competitively priced power ; and ● Hire and retain employees needed to provide services and other functions.
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As of December 31, 2022 Existing Operations Online Order and Purchase Agreements Cumulative Fleet Fully Deployed Total miners online 8,792 - 8,792 Total miners on order - - - Total miners in storage 15,010 - 15,010 Total miners 23,802 - 23,802 1 Our Products and Services Mawson’s business Mawson has three main businesses through which it generates its revenue: ● Self-mining; ● Hosting; and ● Energy Markets Program.
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Mawson has taken a number of steps to attempt to mitigate the risks inherent to the co-locations services business. The Company currently has three co-location services customers that it believes should help reduce the risk of exposure to a single customer.
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Mining hardware performs computational operations to solve specific computing problems in support of the Bitcoin network.
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Additionally, Mawson has service agreements in place with its customers that it believes provides the terms and protections to drive the profitability of the co-location business, Mawson also has power agreements in the Pennsylvania-New Jersey-Maryland Interconnection (“PJM”) markets that provide it the competitive pricing needed for its customers.
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Mawson’s hash rate is the sum total of its Miners’ hashrates. Similarly, the sum total of all Miners actively trying to solve a block in the Bitcoin network is known as the “Network Hashrate”.
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The PJM Energy Market procures electricity to meet consumers’ demands both in real time and in the near term. Mawson works with the communities in which it is involved to attract and retain the employees needed to run this business.
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The Sharon facility is scheduled to come online incrementally through 2023/24 commencing in Q2, 2023 starting with 12MW of self-mining operations. Sharon has a 120MW capacity once fully developed. Together the facilities will have a capacity of 220MW once fully developed.
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While none of these are guarantees, Mawson believes it has put necessary measures in place to minimize the risk associated with its co-location services business.
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These customers who pay us a fee for the use of our facilities and related services The customer typically keeps all Bitcoin mined in this manner, while paying Mawson for the costs of mining, plus a margin. This kind of arrangement is known as ‘hosting’ or ‘co-location’.
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Factors Affecting Profitability of Energy markets business The main factors affecting Mawson’s Energy management profitability are (in no particular order): ● Acquire appropriate hedge contracts; ● Access to power providers programs; and ● Regulatory or other changes.
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Mawson owns an interest in Cosmos Asset Management Pty Ltd (“Cosmos Asset Management”), an Australia based crypto investment manager. During the year ended December 31, 2022, Cosmos Asset Management was placed into voluntary administration, and is in the process of being wound up.
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Mawson works closely with the PJM power providers and other power consultants to help ensure they stay up to date with the latest power provider programs. Mawson closely monitors the power markets and pricing in order to identify ways to maintain or enhance its profitability from potential opportunities.
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Cosmos Asset Management successfully launched three cryptocurrency related exchange traded funds in Australia, which were amongst the first of their kind, however due to the falling cryptocurrency market, investor uptake of the investment products was not sufficient to ensure that Cosmos Asset Management could operate sustainably.
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Mawson is in contact with various local, state and federal agencies to monitor changes in the regulatory environment that could potentially impact the energy management business. Environment and Sustainability Digital asset mining requires a large amount of computing power, which in turn requires a large amount of electricity.
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Cosmos Asset Management had agreed a debt funding package and corporate restructuring with Purpose LP and its other shareholders (including Mawson), however Cosmos Asset Management was placed into voluntary administration before this package could be fully implemented. We have a 20.63% interest in a Web 3 infrastructure business Distributed Storage Solutions Limited (“DSS”).
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The Company currently has the following principal suppliers: - Energy Harbor LLC - Navitus LLC - Jewel Acquisition LLC Government Regulation Government regulation of blockchain and cryptocurrency is being actively considered by the United States of America (both at the federal and state levels) and by non-US governments, and their agencies and regulatory bodies.
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DSS is a decentralized data storage and compute infrastructure business offering enterprise grade solutions servicing AI and HPC customers in the open science and medical research fields.
Added
One of the customers is a wholly owned subsidiary of Consensus Technology Group (“CTG”) that currently uses approximately 70 MW and approximately 21,756 miners. Should something negative happen to this customer and or its relationship with Mawson, the Company could lose a significant amount of revenue that it may not be able be unable to replace in a timely fashion.
Removed
DSS is a member of the Filecoin Network of storage providers whereby it generates the native token FIL in return for proving its capacity and integrity of data stored to the blockchain in a process known as proof-of-space.
Added
Currently, market demand for co-location services outweighs supply and between finding new or with its other two co-location customers, Mawson believes that the Company could replace the customer’s position. Competition The cryptocurrency industry, in particular Bitcoin mining, is dynamic and global.
Removed
Decentralized data storage providers seek to provide an emerging alternative to the current large single company providers such as Amazon Web Services, Azure (Microsoft), and Google Cloud.
Added
Our future success has significant dependence on the performance and continued service of our management team and key employees. Our success and growth may be influenced by our ability to attract, retain and motivate qualified personnel. We compete for scarce qualified management and other personnel in a highly competitive workforce environment.
Removed
We want to attract a committed and talented workforce. We believe that our ability to attract and retain such a workforce is at least in part dependent on our ability to foster an environment that is sustainably safe, respectful, fair, and inclusive of everyone and their ideas, and promotes diversity, equity and inclusion.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Relating to Laws, Regulatory Frameworks, and Legal Action - regulatory changes and changes in interpretations of existing regulations, including for digital assets like Bitcoin, or Bitcoin mining itself; - our ability to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002; - future developments regarding the treatment of digital assets for U.S. federal income and foreign tax purposes, or other taxes on Bitcoin mining; - regulatory intervention by governments impacting the right to acquire, own, hold, sell, exchange or use Bitcoin or other cryptocurrencies; and - material litigation, investigations or enforcement actions by regulators and governmental authorities.
Biggest changeRisks Relating to Laws, Regulatory Frameworks, and Legal Action - regulatory changes and changes in interpretations of existing regulations, including for digital assets like Bitcoin, or Bitcoin mining itself (including the imposition of taxes, limits on mining (or power usage), or new licensing regimes); - our ability to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002; - future developments regarding the treatment of digital assets for U.S. federal income and foreign tax purposes, or other taxes on Bitcoin mining; 9 - regulatory intervention by governments impacting the right to mine, acquire, own, hold, sell, exchange or use Bitcoin or other cryptocurrencies; - additional legislation or guidance may be issued by U.S. and non-U.S. governing bodies that may differ significantly from our practices or interpretation of the law, which could have unforeseen effects on our financial condition and results of operations, additional legislation or guidance may be issued by U.S. and non-U.S. governing bodies that may differ significantly from our practices or interpretation of the law, which could have unforeseen effects on our financial condition and results of operations; - legislative, regulatory and litigation threats regarding climate change and energy conservation, legislative, regulatory and litigation threats regarding climate change and energy conservation; - changes to laws regarding the operation of exchanges by third parties may make the business model unsustainable and may lead to an inability to exchange mined Bitcoin for fiat currency efficiently, changes to laws regarding the operation of exchanges by third parties may make the business model unsustainable and may lead to an inability to exchange mined Bitcoin for fiat currency efficiently; - material litigation (including with our lenders and counter-parties counterparties), investigations or enforcement actions by regulators and governmental authorities; and - because there has been limited precedent set for financial accounting of Bitcoin and other cryptocurrency assets, the determination that we have made for how to account for cryptocurrency assets transactions may be subject to change.
This occurs on a schedule built into Bitcoin’s programming and happens every 210,000 blocks with the purpose being to issue the total supply into the market less frequently over time. This supply effect increases Bitcoin’s scarcity, which has, historically, increased its price. When Bitcoin first started, 50 Bitcoins were rewarded to miners per block produced.
This occurs on a schedule built into Bitcoin’s programming and happens every 210,000 blocks with the purpose being to issue the total supply of Bitcoin into the market less frequently over time. This supply effect increases Bitcoin’s scarcity, which has, historically, increased its price. When Bitcoin first started, 50 Bitcoins were rewarded to miners per block produced.
If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, operating results and financial condition could be adversely affected. 15 Global climate change and related environmental regulations may have an adverse effect on our business operations and financial position.
If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, operating results and financial condition could be adversely affected. Global climate change and related environmental regulations may have an adverse effect on our business operations and financial position.
U.S. holders may wish to consult their tax advisors about the potential application of the PFIC rules to an investment in our ordinary shares. Regulatory intervention by governments could affect the right to acquire, own, hold, sell, exchange or use Bitcoin or other cryptocurrencies.
U.S. holders may wish to consult their tax advisors about the potential application of the PFIC rules to an investment in our ordinary shares. 22 Regulatory intervention by governments could affect the right to acquire, own, hold, sell, exchange or use Bitcoin or other cryptocurrencies.
Additional capital may not be available to us, or even if it is, the cost of such capital may be high. We may be forced to obtain additional capital when our stock price or trading volume or both are low, or when the general market for cryptocurrency companies is weak.
Additional capital may not be available to us, or even if it is, the cost of such capital may be high or even uncommercial. We may be forced to obtain additional capital when our stock price or trading volume or both are low, or when the general market for cryptocurrency companies is weak.
If we are unable to acquire rights to use such land, or lose the rights to land we currently occupy, this would likely mean that we would lose access to the relevant supply of electricity. A lack of access to the electricity would significantly impact the profitability and viability of our business.
If we are unable to acquire rights to use such land or lose the rights to the land we currently lease or occupy, this would likely mean that we would lose access to the relevant supply of electricity. A lack of access to electricity would significantly impact the profitability and viability of our business.
In the event of a security breach, we may also be forced to cease operations, or suffer a reduction in assets, the occurrence of each of which could adversely affect us. 13 We may not have, or be able to obtain or maintain, relevant business insurance.
In the event of a security breach, we may also be forced to cease operations, or suffer a reduction in assets, the occurrence of each of which could adversely affect us. We may not have, or be able to obtain or maintain, relevant business insurance.
Our guidance is based on certain assumptions, and may vary from actual results, If our assumptions are not met or are impacted as a result of various risks and uncertainties, the market value of our common stock could decline significantly. 24
Our guidance is based on certain assumptions, and may vary from actual results, if our assumptions are not met or are impacted as a result of various risks and uncertainties, the market value of our Common Stock could decline significantly.
If it occurs to a significant number of Bitcoin users, investors and traders, this may lead to a loss of confidence in Bitcoin and its value, leading to a fall in the Bitcoin price. 16 Risks Relating to Cryptocurrency Mining, Bitcoin Price and Technology Significant contributors to all or any digital asset network could propose amendments to the respective network’s protocols and software that, if accepted and authorized by such network, could adversely affect us.
If it occurs to a significant number of Bitcoin users, investors and traders, this may lead to a loss of confidence in Bitcoin and its value, leading to a fall in the Bitcoin price. 17 Risks Relating to Cryptocurrency Mining, Bitcoin Price and Technology Significant contributors to all or any digital asset network could propose amendments to the respective network’s protocols and software that, if accepted and authorized by such network, could adversely affect us.
This may be because it would be illegal for them to do so, or in situations where the legal position is unsure, but subject to material risk. If we, or our major business partners (e.g. exchanges, mining pools, or ASIC suppliers) are unable to obtain banking services, this will cause material business disruption and loss and damage to our business.
This may be because it would be illegal for them to do so, or in situations where the legal position is unsure, but subject to material risk. If we, or our major business partners (e.g. exchanges, mining pools, or miner suppliers) are unable to obtain banking services, this will cause material business disruption and loss and damage to our business.
As a result, the marketplace may lose confidence in, or may experience problems relating to, digital asset exchanges / custodians, including prominent exchanges / custodians handling a significant portion of the volume of digital asset trading. 19 A lack of stability in the digital asset exchange market and the closure or temporary shutdown of digital asset exchanges due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in the digital asset networks and result in greater volatility in digital asset values.
As a result, the marketplace may lose confidence in, or may experience problems relating to, digital asset exchanges / custodians, including prominent exchanges / custodians handling a significant portion of the volume of digital asset trading. 20 A lack of stability in the digital asset exchange market and the closure or temporary shutdown of digital asset exchanges due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in the digital asset networks and result in greater volatility in digital asset values.
This would likely have a material adverse effect on our business, financial condition, results of operations and prospects. Such supply chain disruptions have the potential to cause material impacts to our operating performance and financial position if the delivery of equipment for our facilities is delayed. Mining equipment is prone to breakdown or fail.
This would likely have a material adverse effect on our business, financial condition, results of operations and prospects. Such supply chain disruptions have the potential to cause material impacts to our operating performance and financial position if the delivery of equipment for our facilities is delayed. Mining equipment is prone to breakdown, fail or become obsolete.
Such changes could materially adversely affect our business, financial condition, results of operations and prospects. 17 A failure to properly monitor and upgrade the Bitcoin network protocol could damage the Bitcoin network and adversely affect us.
Such changes could materially adversely affect our business, financial condition, results of operations and prospects. 18 A failure to properly monitor and upgrade the Bitcoin network protocol could damage the Bitcoin network and adversely affect us.
Additionally, if our electricity suppliers are negatively affected by the international supply chain issues they may not be able to maintain or grow their facilities, and may breach their commitments to supply us with the contracted power, or we may be unable to source extra power in the future to enable our growth.
Additionally, if our electricity suppliers are negatively affected by the international supply chain issues, they may not be able to maintain or grow their facilities and may not be able to supply us with power, or we may be unable to source extra power in the future to enable our growth.
Any legislative changes regarding climate change could add significant burden and costs to our business, including costs related to making our energy consumption more efficient and lower impact on the environment, environmental monitoring and reporting, and other costs to comply with such changes.
Any legislative changes regarding climate change or energy usage could add significant burden and costs to our business, including costs related to making our energy consumption more efficient and lower impact on the environment, environmental monitoring and reporting, taxes and other costs to comply with such changes.
If we were unable to source Miners from those suppliers (for example due to overwhelming global demand for Miners) at a commercial price, or at all, this would have a materially adverse impact on our business, financial condition, results of operations and prospects.
If we, or our customers, were unable to source Miners from those suppliers (for example due to overwhelming global demand for Miners, or due to geopolitical tensions, or war) at a commercial price, or at all, this would have a materially adverse impact on our business, financial condition, results of operations and prospects.
Although, at each prior halving event, the short-term subsequent effect on the Bitcoin price has been an increase in price, this trend may not continue in the future and may have a reverse effect on the Bitcoin price, in which case, our business, financial condition, results of operations and prospects may be materially adversely affected.
At each prior halving event, the short-term subsequent effect on the Bitcoin price has been an increase in price, however this trend may not continue in the future, in which case, our business, financial condition, results of operations and prospects may be materially adversely affected.
Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred. Increased Interest Rates Central banks around the world (including the US Federal Reserves, and the Reserve Bank of Australia) have been increasing their interest rates.
Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred. Increased Interest Rates Central banks around the world (including the United States Federal Reserves) have been increasing their interest rates.
As a result of the material weaknesses in internal control over financial reporting described above, the Company’s management has concluded that, as December 31, 2022, the Company’s internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework issued by COSO.
As a result of the material weaknesses in our internal control over financial reporting, the Company’s management has concluded that, as December 31, 2023, the Company’s internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework issued by COSO.
If power prices increase further this will likely materially impact whether we can generate Bitcoin profitably, and how much net energy benefits we will be entitled to. 12 Our Modular Data Centers require developed land, preferably close to sustainable and reasonably priced electricity sources.
If power prices increase this will likely materially impact whether we can generate Bitcoin profitably, and how much net energy benefits we will be entitled to. 14 Our Data Infrastructure require developed land, preferably close to sustainable and reasonably priced electricity sources.
If the popularity and use of cryptocurrencies diminish and leads to their value decreasing, our business, financial condition, results of operations and prospects may be materially adversely affected. Future digital assets and digital currency development may lessen the usage of Bitcoin . Digital asset technology is rapidly advancing and changing and new digital assets are created regularly.
If the popularity and use of cryptocurrencies diminish and leads to their value decreasing, our business, financial condition, results of operations and prospects may be materially adversely affected. Future digital assets and digital currency development may lessen the usage of Bitcoin . Digital asset technology is evolving, and new digital assets can be created.
Due to the industry in which we operate, we may not be able to obtain or maintain some types of insurance that operators of similar businesses in other industries would usually obtain, at commercially viable premiums, or at all. Any digital assets we hold are not insured.
Due to the industry in which we operate, we may not be able to obtain or maintain some types of insurance that operators of similar businesses in other industries would usually obtain, at commercially viable premiums, or at all.
We expect our period-to-period financial results to vary based on a variety of factors, which we anticipate will fluctuate due to external factors such as the Bitcoin price and energy costs, may not be consistent or linear between periods.
Our financial results may vary significantly from period to period due to fluctuations in our revenue, operating costs and other factors. We expect our period-to-period financial results to vary based on a variety of factors, which we anticipate will fluctuate due to external factors such as the Bitcoin price and energy costs, may not be consistent or linear between periods.
While our current borrowings are at fixed rates of interest, any future borrowings or refinancing may be at higher interest rates than the rates that we have obtained in the past. We or our suppliers may not be able to procure or repair hardware that is required in our operations.
While our current borrowings are at fixed rates of interest, any future borrowings or refinancing may be at higher interest rates than the rates that we have obtained in the past. We or our suppliers may not be able to procure or repair hardware that is required in our operations. The global supply chains are increasingly risky and complex.
Any downtime of a significant number of our Miners and mining equipment will have a direct impact on us as they would not be performing their role, that is, solving hashes and earning a block reward. This could occur during an accident on site, or during transportation of a large number of Miners.
Any downtime of a significant number of our Miners and mining equipment will have a direct impact on us as they would not be performing their role. This could occur during an accident on site, or during transportation of a large number of Miners.
If Mawson is not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, we may not be able to assess whether our internal control over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our stock. 22 In addition, as a smaller reporting company and non-accelerated filer, we are not subject to the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.
If Mawson is not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, we may not be able to assess whether our internal control over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our stock.
We may become subject to certain claims, legal proceedings (including individual and class actions) and government investigations or enforcement actions, including in the ordinary course of business. Agreements entered into by Mawson sometimes include indemnification provisions which can subject Mawson to costs and damages in the event of a claim against an indemnified third party.
Legal Proceedings section) and may be subject in the future to claims, legal proceedings, government investigations or enforcement actions, including in the ordinary course of business. Agreements entered into by Mawson sometimes include indemnification provisions which can subject Mawson to costs and damages in the event of a claim against an indemnified third party.
A falling Bitcoin price directly affects our ability to generate revenue, which can affect our ability to meet our financial obligations. Further, volatility in energy prices has meant that the major input cost to generate Bitcoin has increased.
A falling Bitcoin price directly affects our ability to generate revenue, which can affect our ability to meet our financial obligations. Further, volatility in energy prices has often resulted in the major input cost to generate Bitcoin increasing.
Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment, management identified material weaknesses in internal control over financial reporting.
Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
The incentive for Bitcoin mining may decrease over time as the reward decreases. A Bitcoin halving occurs when block rewards, or the number of Bitcoins entering circulation whenever a block is produced (approximately every 10 minutes), is reduced by half. This means a new Bitcoin will be subsequently issued half as fast as before.
The incentive for Bitcoin mining may decrease over time as the reward decreases. A Bitcoin halving occurs when block rewards, or the number of Bitcoins entering circulation whenever a block is produced (approximately every 10 minutes), is reduced by half.
Banks and financial institutions may cease to provide financial services to persons involved in cryptocurrency transactions. Banks and other financial institutions can and have made legal and risk-based decisions to not accept customers such as digital assets investors or businesses that engage in Bitcoin-related activities or that accept Bitcoin as payment.
Banks and other financial institutions can and have made legal and risk-based decisions to not accept customers such as digital assets investors or businesses that engage in Bitcoin-related activities or that accept Bitcoin as payment.
Even if the suppliers have agreed to supply us with miners, they may fail to supply the Miners due to their inability to manufacture sufficient Miners due to a shortage of components or resources such as semiconductors, a default, insolvency, a change in control, or change of laws (including export/import restrictions, quotas or tariffs).
Even if the suppliers have agreed to supply us with miners, they may fail to supply the Miners due to their inability to manufacture sufficient Miners due to a shortage of components or resources such as semiconductors, a default, insolvency, a change in control, or change of laws (including export/import restrictions, quotas or tariffs). 13 Trade policies such as export/import restrictions, quotas or tariffs may reduce the ability of our suppliers to supply us with Miners or create a shortage or lack of components necessary for their manufacture or repair.
The reward has decreased over the years and, to date, following the last halving event in May 2020, the block reward is 6.25 Bitcoins per block. Halving events will continue until the block reward reaches zero. The process will end with a predetermined total of 21 million Bitcoins, estimated to be around the year 2140.
The reward has decreased over the years and, the current block reward is 6.25 Bitcoins per block. Halving events will continue until the block reward reaches zero. The process will end with a predetermined total of 21 million Bitcoins being issued, estimated to be around the year 2140.
Extreme weather events may: ● cause damage to one or more of our modular data centers (that house our Miners) and therefore reduce our ability to maximize the performance of the Miners; ● affect the delivery times of equipment ordered from our manufacturers and therefore impact our financial forecasts which were scheduled for a certain period of time; or ● cause power disruptions or cuts to our Miners, reducing operating times and the performance of the Miners.
The potential physical effects of climate change on our operations, if any, are highly uncertain. 16 Extreme weather events may: ● cause damage to one or more of our modular data centers (that house our Miners) and therefore reduce our ability to maximize the performance of or operate the Miners; ● affect the delivery times of equipment ordered from our manufacturers and therefore impact our financial forecasts which were scheduled for a certain period of time; or ● cause power disruptions or cuts to our Miners, reducing operating times and the performance of the Miners.
On the other hand, some governments could decide to subsidize or support certain Bitcoin mining projects, thus adding hashrate to the overall network, and having a material adverse effect on the amount of Bitcoin we may be able to mine, the value of Bitcoin and, consequently, our business, prospects, financial condition and operating results. 23 We may be subject to material litigation, investigations or enforcement actions by regulators and governmental authorities.
On the other hand, some governments could decide to subsidize or support certain Bitcoin mining projects, thus adding hash rate to the overall network, and having a material adverse effect on the amount of Bitcoin we may be able to mine, the value of Bitcoin and, consequently, our business, prospects, financial condition and operating results.
Our common stock has experienced fluctuations due to market dynamics, the Bitcoin downturn, and a Reverse Stock Split. The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.
The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.
Risks Relating to the Ownership of Our Common Stock and Other Common Risks - the volatility of our stock price; - the volatility and variation in our revenue and operating costs from period to period; and - our failure to meet our publicly announced guidance or other expectations.
Risks Relating to the Ownership of Our Common Stock and Other Common Risks - the volatility of our stock price; - the volatility and variation in our revenue and operating costs from period to period; and - our failure to meet our publicly announced guidance or other expectations. 10 Risks Relating to Our Business and Management We have incurred operating losses since inception.
Miners and related mining equipment used to mine digital assets are sophisticated machines, and may be operated for long periods of time. They are thus prone to breakdown and may not function at any given time.
Miners and related mining equipment used to mine digital assets are sophisticated machines and may be operated over two years or longer. They are thus prone to breakdown and may not function at any given time.
The network effect of reduced profit margins resulting in greater sales of newly mined digital assets could result in a reduction in the price of digital assets that could adversely impact our business, financial condition, results of operations and prospects. This process was manifest in 2022, And may continue or occur again in the future.
The network effect of reduced profit margins resulting in greater sales of newly mined digital assets could result in a reduction in the price of digital assets that could adversely impact our business, financial condition, results of operations and prospects.
Risks Relating to Our Business and Management We have incurred operating losses since inception. During the time we have operated we have incurred net losses. We expect to continue to incur losses for the near future, and these losses will likely increase as we pursue our growth strategy.
During the time we have operated we have incurred net losses. We expect to continue to incur losses for the near future, and these losses may likely increase as we pursue our growth strategy.
Due to the highly volatile nature of the price of Bitcoin, our historical operating results have fluctuated, and continue to fluctuate, significantly from period to period. Mawson does not use derivatives to hedge Bitcoin prices.
The prices that we receive for our Bitcoin depend on numerous market factors beyond our control. Due to the highly volatile nature of the price of Bitcoin, our historical operating results have fluctuated, and continue to fluctuate, significantly from period to period. Mawson does not use derivatives to hedge Bitcoin prices.
This may mean that we sell digital assets at a time when the prices on the respective digital asset exchange market are low, which could adversely affect our business, financial condition, results of operations and prospects. We rely on a small number of key people, the loss of which could have a significant impact on us.
We promptly and frequently liquidate cryptocurrencies. This may mean that we sell digital assets at a time when the prices on the respective digital asset exchange market are low, which could adversely affect our business, financial condition, results of operations and prospects.
Risks Relating to the Ownership of Our Common Stock and Other Common Risks The trading price of our common stock is likely to continue to be volatile. The trading price of our common stock has been highly volatile and could continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control.
The trading price of our Common Stock has been highly volatile and could continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control. Our Common Stock has experienced fluctuations due to market dynamics, and the Bitcoin downturn.
New digital assets competing with the digital assets we specialize in (such as Bitcoin) may increase in popularity and in turn cause a decline in the value of Bitcoin, which may in turn lead to a decline in the Bitcoin network and our ability to generate revenue from our current mining activities.
New digital assets competing with Bitcoin may increase in popularity and in turn cause a decline in the value of Bitcoin, which may in turn lead to a decline in the Bitcoin network and our ability to generate revenue from our current mining activities. This may include the development of so-called central bank digital currencies (CBCDs).
Changes in climate and its effect on the environment such as changes in rainfall, weather patterns, water supplies and shortages, sea level and changing temperatures could have an adverse effect on our operations and financial performance. The potential physical effects of climate change on our operations, if any, are highly uncertain.
Changes in climate and its effect on the environment such as changes in heat, humidity, snow, rainfall, weather patterns, water supplies and shortages, sea level and changing temperatures could have an adverse effect on our operations and financial performance.
The government of the People’s Republic of China in particular exerts a high level of influence and control over its economy and businesses (private and state owned).
The government of the People’s Republic of China in particular exerts a high level of influence and control over its economy and businesses (private and state owned). There have been various examples of government policies, decisions, laws and intervention into particular industries.
If our digital assets are lost, stolen or destroyed under circumstances rendering a party liable to us, the responsible party may not have the financial resources sufficient to satisfy our claim.
If our digital assets are lost, stolen or destroyed under circumstances rendering a party liable to us, the responsible party may not have the financial resources sufficient to satisfy our claim. Our digital assets are not insured. The sale of our digital assets to pay expenses at a time of low digital asset prices could adversely affect our business.
Our common stock may be traded by short sellers which may put pressure on the supply and demand for our common stock, further influencing volatility in its market price.
Our Common Stock may be traded by short sellers, which may put pressure on the supply and demand for our Common Stock, further influencing volatility in its market price. Public perception of our company or management and other factors outside of our control may additionally impact Mawson’s stock price.
Uncertainties due to evolving laws and regulations could also impede the ability of a China-based company, to obtain or maintain permits or licenses required to conduct business in China. Changes in any of these policies, laws and regulations, or the interpretations thereof, as they relate to the mining hardware suppliers, could have a negative impact on our business.
Changes in any of these policies, laws and regulations, or the interpretations thereof, as they relate to the mining hardware suppliers, could have a negative impact on our business.
If we are unable to continue to obtain sufficient electrical power on a cost-effective basis we may not be able to realize the anticipated benefits of our significant capital investments.
Access to reliable electricity sources at reasonable prices is critical to our growth and profitability. Our operations require significant amounts of electrical power. If we are unable to continue to obtain sufficient electrical power on a cost-effective basis, we may not be able to realize the anticipated benefits of our significant capital investments.
These risks are discussed more fully below and include, but are not limited to, risks related to: Risks Relating to Our Business and Management - our history of incurring losses; - our need to, and difficulty in, raising additional capital; - the potential of being delisted from NASDAQ; - downturns in the Cryptocurrency industry; - inflation; - increased interest rates; - the inability to procure needed hardware; - the failure or breakdown of mining equipment; - outages and limitations of internet connectivity; - access to reliable and reasonably priced electricity sources; - Cyber-security threats; - our ability to obtain proper insurance; - the prices of digital assets; - our reliance on a small number of key employees; - the COVID-19 pandemic; - our failure to effectively manage our growth; - our growth and other acquisitions; - the competitiveness of the cryptocurrency industry; - global climate change and related environmental regulations; - the potential cancellation or withdrawal of required operating and other permits and licenses; - construction risks; and - banks and other financial institutions ceasing to provide services to people in our industry, whether through choice or due to their own insolvency or failure.
These risks are discussed more fully below and include, but are not limited to, risks related to: Risks Relating to Our Business and Management - our history of incurring losses; - our need to, and difficulty in, raising additional capital and repossession of collateral securing current loans in default; - the potential of being delisted from NASDAQ; - downturns in the cryptocurrency industry; - inflation; - increased interest rates; - the inability to procure needed hardware; - the failure or breakdown of mining equipment; - outages and limitations of internet connectivity; - access to reliable and reasonably priced electricity sources; - cyber-security threats; - our ability to obtain proper insurance; - the prices of digital assets; - our reliance on a small number of key employees; - our failure to effectively manage our growth including not growing or improving our current hashrate; - the competitiveness of the cryptocurrency industry; - global climate change and related environmental regulations; - the potential cancellation or withdrawal of required operating and other permits and licenses; and - banks and other financial institutions ceasing to provide services to people in our industry, whether through choice or due to their own insolvency or failure. 8 Risks Relating to Cryptocurrency Mining, Bitcoin Price and Technology - changes to the Bitcoin network’s protocols and software; - the manipulation of the blockchain by malicious actors; - failures of the Bitcoin network to be properly monitored and upgraded; - the decrease in the incentive to mine Bitcoin; - an increase in the network difficulty; - the increase of transaction fees related to digital assets; - the downward pressure on the price of Bitcoin created by firms selling their Bitcoin; - political or economic crises or change; - the fraud or security failures of large digital asset exchanges; - the further development and acceptance of digital asset networks and other digital assets; - future digital asset and digital currency development; and - the development of quantum computing, and other new technologies.
If any of our key employees or service providers cease their involvement in our business or, in the unfortunate situation one or more of them are seriously injured or dies, this loss would have a significant and likely adverse impact on us. Our results of operations may be negatively impacted by a pandemic outbreak .
If any of our key employees or service providers cease their involvement in our business or, in the unfortunate situation one or more of them are seriously injured or dies, this loss would have a significant and likely adverse impact on us. 15 If we fail to grow our hash rate and to effectively manage the renewal of our Miner fleet and other plant and equipment, we may be unable to compete, and our results of operations could suffer.
Regulatory changes or interpretations could cause us (or any of our related entities) to register and comply with new regulations, resulting in potentially extraordinary, recurring or non-recurring expenses to continuing our digital assets business, or entering into new business ventures.
Regulatory changes or interpretations could cause us (or any of our related entities) to register and comply with new regulations, resulting in potentially extraordinary, recurring or non-recurring expenses to continuing our digital assets business, or entering into new business ventures. 21 We may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002.
Raising capital under any of these or similar scenarios, if we can raise any at all, may lead to significant dilution to our existing stockholders.
Raising capital under any of these or similar scenarios, if we can raise any at all, may lead to significant dilution to our existing stockholders. We may be forced to sell assets to raise capital, and we may not be able to realize the full value of those assets at the time of sale.
The responsibility of the direction and operation of our business relies heavily on a small number of key people, including our CEO and COO.
We rely on a small number of key people, the loss of which could have a significant impact on us. The responsibility of the direction and operation of our business relies heavily on a small number of key people, including our CEO and CFO.
Any reduction in confidence in the confirmation process or aggregate hashrate of any digital asset network may negatively impact the value of digital assets, which will adversely impact our business, financial condition, results of operations and prospects. 18 An increase in transaction fees could reduce the price of digital assets.
More significant reductions in aggregate hashrate on digital asset networks could result in material, though temporary, delays in block solution confirmation time. Any reduction in confidence in the confirmation process or aggregate hashrate of any digital asset network may negatively impact the value of digital assets, which will adversely impact our business, financial condition, results of operations and prospects.
A secure, reliable and fast internet connection is required for our Miners to validate and verify Bitcoin transactions, secure transaction blocks and add those transaction blocks to the Bitcoin blockchain.
Any extended outage or limitation of an internet connection at our sites could materially impact our operations and financial performance. A secure, reliable and fast internet connection is required for our Miners to validate and verify Bitcoin transactions, secure transaction blocks and add those transaction blocks to the Bitcoin blockchain.
However, as we grow, we may become subject to the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.
In addition, as a smaller reporting company and non-accelerated filer, we are not subject to the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. However, as we grow, we may become subject to the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.
Large holders of Bitcoin may be able to effect large price swings, especially if they were to liquidate their holdings, which would likely cause the price of Bitcoin to fall. Further, the Bitcoin market is highly unregulated and could be subject to market manipulation, especially by large holders.
Large holders of Bitcoin may be able to effect large price swings, especially if they were to liquidate their holdings, which would likely cause the price of Bitcoin to fall. A fall in the price of Bitcoin will have a negative impact on our revenues.
Supply chain disruptions may also occur from time to time due to a range of factors beyond our control, including, but not limited to, increased costs of labor, freight costs and raw material prices along with a shortage of qualified workers. Due to low Bitcoin prices, many Bitcoin mining companies have curtailed their mining operations, and have delayed expansion plans.
Supply chain disruptions may also occur from time to time due to a range of factors beyond our control, including, but not limited to, increased costs of labor, freight costs and raw material prices along with a shortage of qualified workers. There are a small number of major suppliers of Miners globally, and Miner manufacturing is located primarily in China.
In addition, the failure of any critical single piece of equipment may represent a single point of failure which could have widespread impacts. An example of this would be a fire within a substation resulting in a total power outage for a mining facility for a period until the substation was rebuilt.
An example of this could be a fire within a substation resulting in a total power outage for a mining facility for a period until the substation was rebuilt, or a blown fuse which may affect any part of our facility. Such widespread mechanical issues or critical failures for any material duration would therefore decrease our revenue.
If the amount of competing computational power in the Bitcoin network increases, then the difficulty of the mining process increases, which may lead to lower Bitcoin rewards for Mawson.
We expect existing competitors will expand their operations, new competitors will enter the industry, and some competitors will merge to create even stronger competitors. The digital asset mining industry is global. If the amount of competing computational power in the Bitcoin network increases, then the difficulty of the mining process increases, which may lead to lower Bitcoin rewards for Mawson.
We cannot be certain of future regulatory developments or interpretations, and it is difficult to list or describe all the risks that Mawson may be subject to in this space. 20 Bitcoin is presently legal in Australia and the U.S., however it may become illegal in the future, to acquire, own, hold, sell, exchange, advise on or use Bitcoins in Australia and the U.S. or one or more other countries, and may currently be illegal in some countries.
We cannot be certain of future regulatory developments or interpretations, and it is difficult to list or describe all the risks that Mawson may be subject to in this space.
We may be forced to sell assets to raise capital, and we may not be able to realize the full value of those assets at the time of sale. 9 Listing on The Nasdaq Capital Market (“Nasdaq”) Although our common stock is currently listed on Nasdaq, we may not be able to continue to meet Nasdaq’s minimum listing requirements or those of any other national exchange.
If we become unable to continue as a going concern, we may have to liquidate our assets, and might realize significantly less than the values at which they are carried on our financial statements, and our stockholders may lose all or part of their investment in our Common Stock. 11 Listing on The Nasdaq Capital Market (“Nasdaq”) Although our Common Stock is currently listed on Nasdaq, we may not be able to continue to meet Nasdaq’s minimum listing requirements or those of any other national exchange.
Governments and corporations around the world are conducting research and development to produce quantum computers which will be much more powerful than modern computers.
Many governments around the world, and central banks are reportedly considering or studying the potential for CBCDs, including the United States Federal Reserve. The development of quantum computing threatens the cryptographic protections of blockchain protocols. Governments and corporations around the world are conducting research and development to produce quantum computers which will be much more powerful than modern computers.
Through Chapter 11 bankruptcy protection, Celsius has avoided paying two pre-petition invoices to our subsidiary Luna Squares LLC totaling in excess of $1.8million. 10 Inflation in the global economy could negatively impact our business and results of operations. General inflation in the United States and around the world has risen to levels not experienced in recent decades.
Legal Proceedings section for further discussion. 12 Inflation in the global economy could negatively impact our business and results of operations. General inflation in the United States and around the world has risen to levels not experienced in recent decades.
The number of broker-dealers willing to execute trades in our common stock. The Cryptocurrency Industry has experienced multiple downturns Bitcoin prices have fallen substantially over lengthy time periods multiple times in cryptocurrency’s history. Most recently the Bitcoin price fell from over $65,000 in late 2021 to prices below $17,000 in early 2023.
The number of broker-dealers willing to execute trades in our Common Stock. The Cryptocurrency Industry and Bitcoin pricing can be volatile Bitcoin pricing has proven to be volatile, characterized by periods of extreme upturns and downturns that have lasted over lengthy time periods multiple times in cryptocurrency’s history.
The future expansion of our business likely requires substantial capital costs and expenses and there can be no assurance that subsequent operational objectives will be achieved. If we do not achieve our operational objectives, and if we do not generate cash flow and income, our financial performance and long-term viability may be materially and adversely affected.
If we do not achieve our operational objectives, and if we do not generate sufficient cash flow and income, our financial performance and long-term viability may be materially and adversely affected. Our inability to achieve and then maintain profitability would negatively affect our business, financial condition, results of operations and cash flows.
Corporate collapses of important companies in the Bitcoin ecosystem (other than Bitcoin miners) or other cryptocurrencies can also have an impact on confidence and the Bitcoin price. There have been a number of examples of this in the last year, such as the collapse of FTX.
Corporate collapses of important companies in the Bitcoin ecosystem, such as exchanges, funds, lenders, wallet providers and so on, or other cryptocurrencies can also have an impact on confidence and the Bitcoin price. We are also exposed to the effect a falling price can have on our counterparties, including the exchanges we use and our co-location customers.
With this size and operating history likely comes greater resources (financial, human, and technical), greater brand recognition and reputation, stronger business relationships, and economies of scale. We expect existing competitors will expand their operations, new competitors will enter the industry, and some competitors will merge to create even stronger competitors. The digital asset mining industry is global.
The cryptocurrency mining industry is highly competitive, especially for Bitcoin, and there are several competitors who are considerably larger than Mawson, and who have operated for longer in the industry. With this size and operating history likely comes greater resources (financial, human, and technical), greater brand recognition and reputation, stronger business relationships, and economies of scale.
Significant contributors to all or any digital asset network could propose amendments to the respective network’s protocols and software that, if accepted and authorized by such network, could adversely affect us. For example, with respect to Bitcoins networks, a small group of individuals contribute to the Bitcoin Core project on GitHub.com.
For example, with respect to Bitcoin networks, a small group of individuals contribute to the Bitcoin Core project on GitHub.com.
Based on some of our current operating plan estimates, we have sufficient cash to satisfy our working capital needs and other liquidity requirements over the next 12 months from the date of issuance of the accompanying consolidated financial statements. We may need to raise additional capital or significantly curtail our planned operations to remain a going concern.
In addition, the Celsius deposit of $15.33 million is the subject of an ongoing legal dispute. Advancing our future plans will require substantial additional investment. Based on our current operating plan estimates, we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over the next 12 months from the date of this report.
Risks Relating to Laws, Regulatory Frameworks, and Legal Action Digital assets such as Bitcoin are likely to be more highly regulated. Digital assets and cryptocurrencies have been the source of much regulatory consternation, resulting in differing definitional outcomes without a single unifying statement. We do not believe our mining activities require registration to conduct such activities and accumulate digital assets.
Risks Relating to Laws, Regulatory Frameworks, and Legal Action Digital assets such as Bitcoin are likely to be more highly regulated. Digital assets and cryptocurrencies have been subject to ongoing scrutiny by regulators and government. It is possible that regulation in the digital asset industry will increase.
Further, there could be reputational damage to our business caused by increased negative publicity surrounding cryptocurrency and the apparent effects on the environment. Cancellation or withdrawal of required operating and other permits and license. We must obtain various permits, approvals and/or licenses in order to construct and operate our facilities.
Further, there could be reputational damage to our business caused by increased negative publicity surrounding cryptocurrency and the apparent effects on the environment. We are subject to a highly-evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our business, reputation, prospects or operations.
Our business relies on certain hardware such as the Miners, containers in which to store the Miners, transformers for electricity supply, and cooling technologies.
Our business relies on cryptocurrency-specific hardware such as the Miners, and containers in which to operate the Miners, and also more general plant and equipment such transformers, breakers, power boards exhaust fans, deflectors, monitoring equipment and many other parts.
Removed
Risks Relating to Cryptocurrency Mining, Bitcoin Price and Technology - changes to the Bitcoin network’s protocols and software; - the manipulation of the blockchain by malicious actors; - failures of the Bitcoin network to be properly monitored and upgraded; - the decrease in the incentive to mine Bitcoin; - an increase in the network difficulty; - the increase of transaction fees related to digital assets: - the downward press on the price of Bitcoin created by firms selling their Bitcoin; - political or economic crises; 8 - the fraud or security failures of large digital asset exchanges; - the further development and acceptance of digital asset networks and other digital assets; - future digital asset and digital currency development; and - the development of quantum computing.
Added
We will need to raise substantial additional capital to continue our operations and execute our business strategy, meet our debt service obligations and execute our business strategy, and we may not be able to raise adequate capital on a timely basis, on favorable terms, or at all.
Removed
Our inability to achieve and then maintain profitability would negatively affect our business, financial condition, results of operations and cash flows. We may need to raise additional capital to continue our operations and execute our business strategy. We expect that we may incur net losses for the foreseeable future.
Added
Our inability to raise sufficient capital would have a material adverse effect on our financial condition and business.
Removed
Accordingly, our ability to continue as a going concern and execute our business strategy depends on our ability to raise additional capital through equity, debt or structured financings, collaborations and strategic alliances or other similar types of arrangements.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe do not own or lease any other land or buildings. We believe that our existing facilities are suitable and adequate to meet our current business requirements. However, Mawson is growing and, should we require additional or alternative facilities, we believe that such facilities can be obtained in reasonable time frames at commercial rates.
Biggest changeHowever, Mawson is growing and, should we require additional or alternative facilities, we believe that such facilities can be obtained in reasonable time frames at commercial rates.
Removed
ITEM 2. PROPERTIES. Our principal place of business is located at 201 Clark Street, Sharon, Pennsylvania 16146 where we have approximately 2,000 feet of office space. The entire Sharon site is approximately 11,800 square feet. Our principal executive offices are located at 97 Pacific Highway North Sydney NSW Australia where we license approximately 710 square feet of office space.
Added
ITEM 2. PROPERTIES. Our principal place of business is located at 950 Railroad Avenue, Midland, Pennsylvania 15059. We have the following leases: The Company leases 6-acres of land in Midland, Pennsylvania, which began in October 2021 for thirty-six months with the option to exercise four additional three-year extensions.
Removed
We have long term leases for each of our two mining facilities at two separate leased properties in Midland and Sharon Pennsylvania USA. Both are former regional industrial sites which Mawson is bringing back to life. The Midland site was formerly a large steelworks. The Sharon site is solely occupied by Mawson, and was formerly a [railway logistics yard].
Added
Effective May 24, 2023, Mawson Bellefonte LLC entered into a lease agreement for a 9,918 square foot developed mining facility in Bellefonte, Pennsylvania. The term of the lease is for two years and seven months, with an option to extend for five years.
Added
On March 16, 2022, Luna Squares Property LLC entered into a lease with respect to a property in the City of Sharon, Mercer County, Pennsylvania with Vertua Property, Inc. The term of the lease was for 5 years, with 2 options to extend for 5 years each.
Added
On February 2, 2024 the Sharon lease was terminated and as of March 2024 the Company has moved completely out of the facility. Effective May 1, 2023, Mawson Ohio LLC took an assignment of a lease agreement for approximately 64,600 square feet for an undeveloped site in Corning, Ohio.
Added
The term of the lease is for four years, with an option to extend for five years. We do not own or lease any other land or buildings. We believe that our existing facilities are suitable and adequate to meet our current business requirements.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, we have been in the past, and may be from time to time in the future, named as a defendant in certain routine litigation incidental to our business.
Biggest changeHowever, we have been in the past, and from time to time in the future, may be involved in certain litigation related to our businesses. For example, the Company and its subsidiaries receive letters of demand for payments from time to time which could lead to legal proceedings.
ITEM 3. LEGAL PROCEEDINGS. We are currently not, and have not been in the recent past, a party to any legal proceedings which may have or have had in the recent past significant effects on our financial position or profitability.
ITEM 3. LEGAL PROCEEDINGS. We have been made a defendant to certain legal proceedings which may have or have had in the recent past significant effects on our financial position or profitability.
Added
On July 13, 2022, Celsius Mining LLC and Celsius Network LLC and other related entities (collectively, “Celsius”), filed for bankruptcy relief under Chapter 11 in the United States Bankruptcy Court for the Southern District of New York (the “Court”), Case No. 22-10964.
Added
In that matter, on November 23, 2023, Celsius Mining LLC filed an adversary proceeding against Mawson, its subsidiaries Luna Squares LLC and Cosmos Infrastructure LLC, asserting various claims related to the alleged breach of a Co-Location Agreement and Secured Promissory Note. Adv.
Added
Case No. 23-01202, claiming it is owed approximately $8 million under the promissory note and claiming entitlement to return of $15.33 million paid as deposit. Mawson denies that Celsius Mining LLC is entitled to the relief it seeks in the adversary proceeding and is actively defending the matter.
Added
Mawson sought to have the matter removed from the adversary proceeding to arbitration based on the arbitration clause contained in one of the transaction’s agreements. Celsius opposed the removal and the matter was heard before the Court.
Added
On February 27, 2024, the Court ruled in part that the claims regarding the co-location agreement could be arbitrated, but the claims for the promissory note would stay before the Court. The Court appointed a litigation administrator to handle the claims arising out of the promissory note. Mawson is appealing this decision.
Added
Many of the related claims and disputes between Celsius and Mawson have been disclosed in more detail in Mawson’s previous filings with the SEC. 26 On October 16, 2023, Mr.
Added
Ariel Sivikofsky, who was previously engaged to provide CFO-related services to the Company, filed a claim against an Australian subsidiary Mawson Infrastructure Group Pty Ltd (MIG), and against Michael Hughes, Director of the Company, and Tom Hughes, General Counsel of the Company, in the Australian Federal Circuit and Family Court of Australia in relation to certain employment related claims.
Added
The applicant’s total claim is for up to AUD$216,980. MIG and the individual defendants dispute the claims, and denies Mr. Sivikofsky was an employee. On November 1, 2023, the proceedings against MIG were stayed pursuant to section 440D of the Corporations Act 2001 (Cth) (Corporations Act) on the grounds that MIG had been placed into voluntary administration.
Added
The proceedings against Michael Hughes and Tom Hughes have been settled.
Added
On December 22, 2023, Mawson Infrastructure Group Inc. and Luna Squares LLC made formal demand on CleanSpark Inc. and CSRE Properties Sandersville, LLC for $2,000,000 for breach of contract for failing to pay for an energy earnout provision contained in the Purchase and Sale Agreement dated September 8, 2022, between the parties.
Added
Subsequently, on January 12, 2024, Mawson and Luna filed notice of its claim for formal arbitration before the American Arbitration Association. The arbitration is proceeding.
Added
On March 28, 2024, the Company was made a defendant in a civil suit before the Supreme Court of NSW, Sydney Australia, in the matter entitled “W Capital Advisors Pty Ltd in its capacity as trustee for the W Capital Advisors Fund v.
Added
Mawson Infrastructure Group, Inc.”, Docket No. 2024/00117331, alleging a claim to seek US$166,218.60 as unpaid interest under a convertible note after the Company paid in full the principal of $500,000, and AUD$298,926.30 under a loan deed, plus interest and costs for sums due claiming corporate guarantee by the Company for a “Variation Deed to Loan Deed” dated September 29, 2022, executed by its Australian subsidiary, Mawson Infrastructure Group Pty Ltd.
Added
The company denies that the claimant is entitled to the relief it seeks and will actively defend its interests in the matter in due course.
Added
As noted previously in an 8-K filed on March 29, 2024, The Company, pursuant to Australian law, on March 28, 2024, sent a preliminary discovery notice to W Capital to obtain documents and to investigate if W Capital is a related party to Mr.
Added
James Manning, the Company’s former director and executive, and to investigate and ascertain if transactions between W Capital Advisors Pty Ltd and the Company were related party transactions. The Company and some of its subsidiaries are currently in disputes, as outlined below. These disputes may lead to litigation.
Added
On January 8, 2024, a commercial demand was made Flynt ICS Pty Ltd to a Mawson Australian subsidiary, MIG No. 1 Pty Ltd (on March 19, 2024, MIG No.1 Pty Ltd was placed into a court appointed liquidation and wind-up process, as disclosed in note 15 subsequent events), for $129,930, for sums due under a service agreement.
Added
On February 1, 2024, a former independent contractor, Noam Danenberg, through his professional company, N. Danenberg Holding (2000) Ltd, apparently filed a civil suit in Tel Aviv Israel against Mawson Infrastructure Group, Inc. for $90,000 in wages and other benefits. Mawson has never been formally served nor has it submitted to jurisdiction in Israel.
Added
On October 30, 2023, the directors of the Australian subsidiary, Mawson Infrastructure Group Pty Ltd (“Mawson AU”) appointed voluntary administrators to Mawson AU.
Added
Voluntary administration is a process under Australian corporate law where an external administrator is appointed to take control of the relevant entity, investigate and report to creditors about the relevant entity’s business, property, affairs and financial circumstances, and report on the options available to creditors. It is not a court process.
Added
On November 3, 2023, W Capital Advisors appointed receivers and managers under the terms of their security relating to their working capital facility. Neither of these processes are governed by the courts.
Added
On January 3, 2024, W Capital put Mawson on notice of its intent to collect what it asserts are past due amounts for the following claims as of December 31, 2023: (a) principal and interest payable on the Loan Amount advanced to Mawson under a variation deed, amounting to $1.30 million (AU $1.90 million); (b) the principal amount advanced under the Convertible Note, amounting to $0.50 million; and (c) interest payable on the principal amount advanced under a convertible note, amounting to $0.07 million.
Added
W Capital is also demanding issuance of the 1,500,000 registered shares by MIGI. The Company actively denies these claims but has agreed and did pay to W Capital $0.50 million on March 6, 2024, reserving its rights as they pertain to W Capital’s claims for the additional AU$1.30 million and 1,500,000 in registered stock.
Added
Other than as described above, we are currently not, and have not been in the recent past, a party to any litigation which may have or have had in the recent past significant effects on our financial position or profitability.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our Common Stock, par value $0.001, trades on The Nasdaq Stock Market LLC under the symbol “MIGI”. Holders As of March 17, 2023, there were approximately 136 stockholders on record.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our Common Stock, par value $0.001, trades on The Nasdaq Stock Market LLC under the symbol “MIGI”. Holders As of March 26, 2024, there were approximately 118 stockholders on record of our common stock.
Any future determination to pay cash dividends will be at the discretion of our Board and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as our Board deems relevant. Our ability to pay cash dividends is subject to limitations imposed by state law.
Any future determination to pay cash dividends will be at the discretion of our Board of Directors (“Board”) and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as our Board deems relevant. Our ability to pay cash dividends is subject to limitations imposed by state law.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers We did not repurchase any securities in the fourth quarter of the fiscal year covered by this report. 26
Purchase of Equity Securities by the Issuer and Affiliated Purchasers We did not repurchase any securities in the fourth quarter of the fiscal year covered by this Annual Report.
Removed
Unregistered Sales of Equity Securities and Use of Proceeds On September 29, 2022, Mawson entered into a letter variation relating to some of its Secured Convertible Promissory Notes, with an aggregate principal amount of $3.1 million, which gave those holders the option to elect for pre-payment (including accrued interest to maturity) subject to certain conditions.
Added
Unregistered Sales of Equity Securities and Use of Proceeds During the year ended December 31, 2023, there were no other unregistered sales of our securities that were not reported in a Current Report on Form 8-K or our Quarterly Reports on Form 10-Q.
Removed
Payments of the interest were permitted to be made partially in common stock of Mawson, at Mawson’s election.
Removed
All of the investors included in this letter variation elected for the pre-payment option and therefore $3.1 million principal repayments made during November 2022, Mawson issued 104,178 unregistered shares of our common stock to the holders of the Secured Convertible Promissory Notes during January 2023.
Removed
These shares issued were valued at $0.28 million on the date of issuance and represented a partial payment of the interest on the debt.
Removed
We believe that the foregoing sales qualified for exemption under Section 4(a)(2) of the Securities Act and/or Regulation D, as promulgated under the Securities Act, since the issuance of the securities by us did not involve a public offering.
Removed
The offerings were not “public offerings” as defined in Section 4(a)(2) due to the type of investors, the insubstantial number of investors involved in the offering, the size of the offering, the manner of the offering and number of securities offered.
Removed
In addition, these security holders represented as to the necessary investment intent as required by Section 4(a)(2) and/or Regulation D. We did not employ an underwriter in connection with the issuance of the securities described above.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the Years Ended December 31, 2022 2021 Reconciliation of non-GAAP adjusted EBITDA: Net loss: (54,035,559 ) (45,461,664 ) Share of net loss of associates accounted for using the equity method 1,254,025 368,426 Depreciation and amortization 63,200,178 14,113,730 Share based payments 3,012,480 22,491,100 Unrealized and realized losses 6,673,124 932,866 Other non-operating revenue (2,401,555 ) (902,629 ) Other non-operating expenses 7,624,435 2,114,699 Tax - 277,717 LO2A write-back - 23,963,050 Impairment of financial assets 3,375,230 - Fair value loss on investments 1,694,388 - EBITDA (non-GAAP) $ 30,396,746 $ 17,897,295 For the Quarters Ended December 31, 2022 2021 Revenue $ 16,852,208 $ 19,647,771 Cost of revenues (excluding depreciation) (6,759,938 ) (3,686,578 ) Gross Profit 10,092,270 15,961,193 Reconciliation of non-GAAP adjusted EBITDA: Net Profit/(loss): (18,808,069 ) 1,804,928 Share of net loss of associates accounted for using the equity method 1,254,025 90,630 Depreciation and amortization 17,138,505 6,186,396 Share based payments 887,806 711,203 Unrealized and realized losses 310,530 204,309 Other non-operating revenue (469,603 ) (322,924 ) Other non-operating expenses 3,263,618 1,040,202 Tax - 276,216 Fair value loss on investments 1,694,388 - Impairment of financial assets 2,240,682 - EBITDA (non-GAAP) $ 7,511,882 $ 9,990,960 Liquidity and Capital Resources General For the year ended December 31, 2022, we financed our operations primarily through: 1.
Biggest changeWe believe that adjusted EBITDA is useful to investors in comparing our performance across reporting periods on a consistent basis where one-time, or non-recurring gains or losses or expenses unrelated to operating activities would otherwise mask the Company’s operating performance. 32 For the Years Ended December 31, 2023 2022 Reconciliation of non-GAAP adjusted EBITDA: Net loss: $ (58,545,093 ) $ (54,035,559 ) Impairment of financial assets 1,837,063 3,375,230 Share of net loss of equity method investments 36,356 1,254,025 Depreciation and amortization 38,080,506 63,200,178 Stock based compensation 10,834,838 3,012,480 Losses on foreign currency transactions 1,738,845 6,673,124 Other non-operating income (517,918 ) (2,401,555 ) Other non-operating expenses 3,445,461 7,624,435 Change in fair value of derivative asset 7,241,883 (11,299,971 ) Fair value loss on investments - 1,694,388 Income tax 5,948,619 - Gain on deconsolidation (9,472,976 ) - EBITDA (non-GAAP) $ 627,584 $ 19,096,775 For the Quarters Ended December 31, 2023 2022 Revenue $ 14,020,930 $ 16,852,208 Cost of revenues (excluding depreciation) (9,136,465 ) (6,759,938 ) Gross Profit 4,884,465 10,092,270 Reconciliation of non-GAAP adjusted EBITDA: Net Profit/(loss): (10,179,181 ) (18,808,069 ) Impairment of financial assets - 2,240,682 Share of net loss of associates accounted for using the equity method - 1,254,025 Depreciation and amortization 9,454,968 17,138,505 Stock based compensation 5,358,903 887,806 Unrealized and realized (gain)/losses 322,909 310,530 Other non-operating income (272,223 ) (469,603 ) Other non-operating expenses 1,156,224 3,263,618 Fair value loss on investments - 1,694,388 Change in fair value of derivative asset 595,520 10,083,933 Income tax 3,644,165 - Gain on deconsolidation (9,472,976 ) - EBITDA (non-GAAP) $ 608,309 $ 17,595,815 Liquidity and Capital Resources General Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion of our financial condition and results of operations for the years ended December 31, 2022 and 2021 should be read in conjunction with our consolidated financial statements and the notes to those statements that are included elsewhere in this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion of our financial condition and results of operations for the years ended December 31, 2023 and 2022, should be read in conjunction with our consolidated financial statements and the notes to those statements that are included elsewhere in this Annual Report on Form 10-K.
On September 2, 2022, Mawson Infrastructure Group Pty Ltd entered into a Secured Loan Facility Agreement with W Capital Advisors Pty Ltd with a total loan facility of AUD$3 million (USD$1.9 million). This was amended on September 29, 2022, and the loan facility was increased to AUD$8 million (USD$5.2 million).
On September 2, 2022, Mawson AU entered into a Secured Loan Facility Agreement with W Capital Advisors Pty Ltd with a total loan facility of AUD $3.00 million (USD $1.9 million). This was amended on September 29, 2022, and the loan facility was increased to AUD$8.00 million (USD $5.2 million).
This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this Annual Report. All amounts are in U.S. dollars.
This discussion and analysis contain forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this Annual Report. All amounts are in U.S. dollar unless otherwise stated.
There was an impairment of financial assets during the year to December 31, 2022 of $3.38 million, $2.06 million related to the equity accounted investment TDI, $1.13 million is related to the equity accounted investment Cosmos Asset Management Pty Ltd and $0.19 million in relation to the deconsolidation of the Wize Entities.
During the year ended December 31, 2022, the Company recognized an impairment of $3.38 million of which $2.06 million related to the equity accounted investment TDI, $1.13 million related to the equity accounted investment Cosmos Asset Management Pty Ltd and $0.19 million was in relation to the deconsolidation of the Wize Entities.
Net loss available to Common Shareholders As a result of the foregoing, the Company recognized a net loss for the years ended December 31, 2022 and 2021 of $52.76 million and $44.96 million, respectively.
Net loss available to Common Shareholders As a result of the foregoing, the Company recognized a net loss for the years ended December 31, 2023 and 2022, of $60.42 million and $52.76 million, respectively.
In the year to December 31, 2022, share based payments were largely attributable to costs recognized for warrants issued to Celsius Mining LLC amounting to $1.67 million and $1.26 million in relation to long-term incentives for the Company’s leadership team.
Whereas in December 31, 2022, share based payments were largely attributable to costs recognized for warrants issued to Celsius Mining LLC amounting to $1.67 million and $1.26 million in relation to long-term incentives for the Company’s leadership team. Depreciation and amortization Depreciation consists primarily of depreciation of digital currency mining hardware and MDC equipment.
Selling, general and administrative Our selling, general and administrative expenses consist primarily of professional and management fees relating to: accounting, payroll, audit, and legal; equipment repairs; marketing; consultant fees; lease amortization and general office expenses. Selling, general and administrative expenses for the years ended December 31, 2022 and 2021 were $25.85 million and $16.06 million respectively.
Selling, general and administrative Our selling, general and administrative expenses consist primarily of professional and management fees relating to: employee compensation, audit; legal; equipment repairs; marketing; freight; insurance; consultant fees; lease amortization and general expenses. 30 Selling, general and administrative expenses for the years ended December 31, 2023 and 2022, were $19.18 million and $25.85 million, respectively.
The decrease in net cash provided by operating activities was primarily attributable to timing differences in trade and other receivables and trade and other payables. For the year ended December 31, 2022, and 2021, net cash used in investing activities was $32,540,422 and $128,247,751, respectively.
The decrease in net cash provided by operating activities was primarily attributable to timing differences in trade and other receivables and trade and other payables. For the year ended December 31, 2023, net cash provided by investing activities was $10.74 million and for the year ended December 31, 2022, net cash used in investing activities was $32.54 million.
Payments of the interest may be made partially in common stock of the Company, at the Company’s election. All of the investors included in this letter variation elected for the pre-payment option and therefore there were $3.1 million principal repayments made during November 2022. 6.
All of the investors included in this letter variation elected for the pre-payment option and therefore there were $3.1 million principal repayments made during November 2022.
In addition, Celsius Mining loaned Luna Squares LLC a principal amount of US$20,000,000 (“Principal”), for the purpose of funding the infrastructure required to meet the obligations of the Co-Location Agreement, for which Luna Squares LLC issued a Secured Promissory Note (the “Promissory Note”) in the principal amount equal to the Principal.
In connection with this agreement, Celsius Mining LLC loaned Luna Squares LLC a principal amount of $20 million, for the purpose of funding the infrastructure required to meet the obligations of the Co-Location Agreement, for which Luna Squares LLC issued a Secured Promissory Note for repayment of such amount.
Change in fair value of derivative asset During the year ended December 31, 2022, there was a change in the fair value of the derivative asset by $11.30 million in relation to our power pricing arrangements.
Change in fair value of derivative asset During the years ended December 31, 2023 and 2022, there was a loss on the fair value of the derivative asset by $7.24 million and a gain of $11.30 million, respectively, in relation to our power supply arrangements.
We believe our working capital requirements will continue to be funded through a combination of the cash we expect to generate from future operations, our existing funds, external debt facilities available to us and further issuances of shares. These are expected to be adequate to fund our operations over the next twelve months.
We believe our working capital requirements will continue to be funded through a combination of the cash we expect to generate from future operations, our existing funds, external debt facilities that may be available to us, further issuances of shares, and other potential sources of capital, monetization or funds.
Cost of revenues Our cost of revenue consists primarily of: direct power costs related to cryptocurrency mining and hosting, and cost of mining equipment sold. Cost of revenues for the year ended December 31, 2022 and 2021 were $47.72 million and $9.90 million, respectively.
Cost of revenues Our cost of revenue consists primarily of direct power costs related to digital currency mining and co-location services and cost of mining equipment sold. Cost of revenue for the years ended December 31, 2023 and 2022, were $28.56 million and $47.7 million, respectively.
As at December 31, 2022, AUD$4.9 million (USD$3.37 million) has been drawn down from this facility. The Secured Loan Facility accrues interest daily at a rate of 12% per annum and is paid monthly. Principal repayments due March 2023.
As of December 31, 2023, AUD $1.68 million (USD $1.15 million) has been drawn down from this facility, all of which is classified as a current liability. The Secured Loan Facility accrues interest daily at a rate of 12% per annum and is paid monthly. Principal repayments are paid ad hoc in line with the loan facility agreement.
The following table presents the major components of net cash flows (used in)/provided by operating, investing and financing activities for the year ending December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Net cash provided by operating activities $ 14,256,294 $ 22,953,792 Net cash used in investing activities $ (32,540,422 ) $ (128,247,751 ) Net cash provided by financing activities $ 13,986,496 $ 109,854,460 For the year ended December 31, 2022, net cash provided by operating activities was $14,256,294 and for the year ended December 31, 2021, net cash used in operating activities was $22,953,792.
The following table presents the major components of net cash flows (used in) provided by operating, investing and financing activities for the years ending December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Net cash (used in) provided by operating activities $ (2,545,664 ) $ 14,256,294 Net cash provided by (used in) investing activities $ 10,741,617 $ (32,540,422 ) Net cash (used in) provided by financing activities $ (4,647,279 ) $ 13,986,496 For the year ended December 31, 2023, net cash used by operating activities was $2.55 million and for the year ended December 31, 2022, net cash provided in operating activities was $14.26 million.
Hosting co-location revenue for the year ended December 31, 2022 and 2021 were $13.34 million and $0.85 million respectively. This increase is due to an increase in the number of co-location customers that we hosted during the year ended December 31, 2022.
Co-location services revenue for the years ended December 31, 2023 and 2022, were $16.36 million and $13.34 million, respectively. This 23% year over year increase was due to an increase in the number of miners we co-located during 2023.
The outstanding principal balance as at December 31, 2022, is $14.0 million. 5. On July 8, 2022, the Company issued secured convertible promissory notes to investors in the aggregate principal amount of $3,600,000 in exchange for an aggregate of $3,600,000.
On July 8, 2022, the Company issued secured convertible promissory notes to investors in the aggregate principal amount of $3.60 million (the “Secured Convertible Promissory Notes”) in exchange for an aggregate of $3.60 million in cash.
The increase in cost of revenue was primarily attributable to an increase in power costs related to energy costs to operate the mining equipment within our owned and hosting facilities.
The decrease in cost of revenue was primarily attributable to a decrease in power costs related to energy used to operate our self-mining equipment and co-location services.
As of December 31, 2022, and as of December 31, 2021, we had $4.51 million and $7.64 million, respectively, of outstanding long-term borrowings.
As of December 31, 2023 and 2022, we had $0 and $4.51 million, respectively, of outstanding long-term borrowings. As of December 31, 2023 and 2022, we had negative working capital of $33.18 million and $15.17 million, respectively.
During the year ended December 31, 2022, the realized and unrealized loss on foreign currency transactions was $6.67 million, and for the year ended December 31, 2021, there was a loss of $0.93 million. Interest expense for the year ended December 31, 2022 and 2021 were $6.06 million and $1.64 million, respectively.
During the years ended December 31, 2023 and 2022, the realized and unrealized loss on foreign currency transactions was $1.74 million and $6.67 million, respectively.
The Promissory Note accrues interest daily at a rate of 12% per annum. Luna Squares LLC is required to amortize the loan at a rate of 15% per quarter, with principal repayments starting in the third quarter following the closing. The Promissory Note has a maturity date of August 23, 2023. .
The Secured Promissory Note accrues interest daily at a rate of 12% per annum (with an overdue rate provision of an additional 200bps). Luna Squares LLC is required to amortize the loan at a rate of 15% per quarter, principal repayments began at the end of September 2022.
As of December 31, 2022, we had $23.61 million of outstanding short-term borrowings, and as of December 31, 2021, we had $11.10 million of short-term borrowings. The short-term borrowings as of December 31, 2022, relate to Celsius Mining LLC, W Capital Advisors Pty Ltd, the secured convertible promissory notes issued to investors and Marshall Investments MIG Pty Ltd.
The short-term borrowings as of December 31, 2023, relate to Celsius Mining LLC, W Capital Advisors Pty Ltd, the secured convertible promissory notes issued to investors and Marshall Investments MIG Pty Ltd (these loans are currently in default, refer to Material Cash Requirements section below for more information ) .
The decrease in net cash used in investing activities was primarily attributable to the decrease in the acquisition of cryptocurrency mining equipment. For the year ended December 31, 2022, and 2021, net cash provided by financing activities was $13,986,496 and $109,854,460, respectively.
For the year ended December 31, 2023, net cash used in financing activities was $4.65 million and for the year ended December 31, 2022, net cash provided by financing activities was $13.99 million. The cash used in financing activities during the year ended December 31, 2023, was primarily attributable to the repayment of borrowings.
In addition, other companies, including other companies in the Company’s industry, may calculate non-GAAP financial measures differently than the Company does, limiting their usefulness as a comparative tool. 33 The Company is providing supplemental financial measures for (i) non-GAAP adjusted earnings before interest, taxes, depreciation and amortization, or (“adjusted EBITDA”) that excludes the impact of interest, taxes, depreciation, amortization, share-based compensation expense, LO2A write-back, unrealized gains/losses on share of associates, and certain non-recurring expenses.
The Company is providing supplemental financial measures for (i) non-GAAP adjusted earnings before interest, taxes, depreciation and amortization, or (“adjusted EBITDA”) that excludes the impact of interest, income tax, depreciation, amortization, stock based compensation expense, change in fair value of derivative asset, impairment of financial assets, unrealized gains/losses, share of net loss of equity method investments, gain on deconsolidation and certain non-recurring expenses.
During the year ended December 31, 2022 we repaid $28.0 million of principal payments against the historical facilities provided by Foundry, Celsius, Marshall, W Capital and the convertible notes.
This offering closed on May 8, 2023. The net amount raised was $4.60 million. During the year ended December 31, 2023, we repaid $12.46 million of principal payments against the historical facilities provided by Celsius, Marshall and W Capital Advisors Pty Ltd.
In addition, the Company has access to equity financing through the ATM offering facility entered in May 2022. For our business to grow it is expected we will continue investing in mining equipment, but we are likely to require additional capital in either the short-term or long-term.
These are expected to be adequate to fund our operations over the next twelve months. For our business to grow it is expected, we may continue investing in mining equipment and infrastructure and will require additional working capital in the short-term and long-term.
On February 23, 2022, Luna Squares LLC entered into the Co-Location Agreement with Celsius Mining LLC, in connection with this agreement, Celsius Mining loaned Luna Squares LLC a principal amount of US$20,000,000, for the purpose of funding the infrastructure required to meet part of the obligations of the Co-Location Agreement.
On February 23, 2022, Luna Squares LLC entered into a Co-Location Agreement with Celsius Mining LLC.
Non-operating expense Non-operating expenses consist primarily of interest expense, losses on foreign currency transactions, impairment of financial assets, loss on write off of property and equipment, fair value loss on investments, and share of losses of equity accounted investments.
The loss on the derivative asset in the current year is due to the fall in the price of energy costs combined with less time remaining on the power supply agreement. Non-operating expense Non-operating expenses consist primarily of interest expense, losses on foreign currency transactions, impairment of financial assets, share of losses of equity accounted investments and other expenses.
Working Capital and Cash Flows As of December 31, 2022, and December 31, 2021, we had cash and cash equivalent balance of $0.95 million and $5.47 million in cash and cash equivalents, respectively. As of December 31, 2022, and December 31, 2021, the trade receivables balance was $10.46 million and $5.61 million respectively.
In addition, the Celsius deposit of $15.33 million is the subject of an ongoing legal dispute. 34 Working Capital and Cash Flows As of December 31, 2023 and 2022, we had a cash and cash equivalent balance of $4.48 million and $0.95 million, respectively.
The increase is primarily attributable to the new miners and MDCs which have been procured and have come into use by the Company in the year ended December 31, 2022 being greater than in the year ended December 31, 2021, and the application of a revised estimate of the of the useful life of miners with effect from December 1, 2022 to better reflect the pattern of consumption the change being effected by changing the method of depreciation from reducing balance to the straight line method from that date.
There was also a revised estimate of the useful life of miners effective on December 1, 2022, to better reflect the pattern of consumption, and the method of depreciation was changed from reducing balance to the straight line method from that date.
Wainwright & Co., LLC (“Wainwright”), to sell shares of our common stock, par value $0.001 per share, (the “Shares”) having an aggregate sales price of up to $100 million, from time to time, through an “at the market offering” program under which Wainwright will act as sales agent.
Wainwright & Co., LLC (“Wainwright”), and filed a prospectus supplement, to sell shares of our Common Stock through an “at the market offering” program as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.
There were losses recognized for the share of losses in relation to equity accounted investments of $1.25 million and $0.37 million for the year ended December 31, 2022 and 2021 respectively.
The gain on sales of marketable securities for the years ended December 31, 2023 and 2022, were $1.44 million and $0, respectively. The gain during the year ended December 31, 2023 was in relation to the sale of CleanSpark, Inc shares. During the year ended December 31, 2023, the Company recognized a deconsolidation gain of $9.47 million.
In exchange for powering down our systems and curtailing the power we get from the grid in response to instances of high electricity demand, we receive net energy benefits. We also have a contract with our energy provider where we can trade our energy to achieve net energy benefits.
The Company also has an energy markets program through which it can receive net energy benefits in exchange for curtailing the power we utilize from the grid in response to instances of high electricity demand. As of the date of this Annual Report, we operate two data center facilities in Pennsylvania, USA.
The remaining increase in expenses relates to the increase in the scale of business operations during the year. 31 Share based payments Share based payment expenses for the year ended December 31, 2022 and 2021 were $3.01 million and $22.49 million respectively.
Stock based compensation Stock based compensation expenses for the years ended December 31, 2023 and 2022, were $10.83 million and $3.01 million, respectively.
During the year ended December 31, 2022, there was profit of site of $8.28 million. This sale was in relation to the sale of our Georgia bitcoin mining site which was sold to CleanSpark on October 7, 2022.
The 2023 amounts related to the sale of the Luna Squares Texas LLC along with 59 transformers. Whereas the 2022 amount relates to the sale of our Georgia bitcoin mining site which was sold to CleanSpark Inc. on October 7, 2022.
The decrease in net cash provided by financing activities was primarily attributable to proceeds from the capital raises which occurred in the prior period. Recently Issued Accounting Pronouncements For information with respect to recent accounting pronouncements, see Note 2v to our audited consolidated financial statements for the year ended December 31, 2022.
Recently Issued Accounting Pronouncements For information with respect to recent accounting pronouncements, see Note 2 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for the year ended December 31, 2023. Critical Accounting Estimates The preparation of the financial statements in conformity with U.S.
The amounts due were repaid in full on October 17 2022; 3. On December 9, 2021, MIG No.1 Pty Ltd entered into a Secured Loan Facility Agreement with Marshall Investments MIG Pty Ltd (“Marshall”) with a total loan facility of AUD$20 million (USD$12.98 million). Principal repayments began in November 2022.
On September 2, 2022, Mawson AU entered into a Secured Loan Facility Agreement with W Capital Advisors Pty Ltd with a total loan facility of AUD $3.00 million (USD $1.9 million). This was amended on September 29, 2022, and the loan facility was increased to AUD$8.00 million (USD $5.2 million).
Removed
Overview Mawson is a ‘Digital Asset Infrastructure’ business, which owns and operates (through its subsidiaries) modular data centers (“MDCs”) in the United States. We are also developing technology to enable us to own and better operate MDCs. Our primary business is the ownership and operation of the digital infrastructure associated with the operation of blockchain applications.
Added
Business overview Mawson Infrastructure Group Inc. (the “Company” or “Mawson” or “we”) is a digital infrastructure company headquartered in the United States. The Company has 3 primary businesses – digital currency mining, co-location and related services, and energy markets. The Company develops and operates digital infrastructure for digital currency, such as bitcoin, mining activities on the Bitcoin blockchain network.
Removed
Application-Specific Integrated Circuit (“ASIC”) computers known as Miners enable the ‘mining’ of digital assets such as Bitcoin. We currently operate in one site located in Pennsylvania USA. The Miners we operate are predominately focused on the process of digital mining, specifically for Bitcoin.
Added
The Company also provides digital infrastructure services for its co-location services customers that use computational machines to mine bitcoin through our data centers and the Company charges for the use of its digital infrastructure and related services.
Removed
We have recognized a derivative asset on our balance sheet for the contract we have with our energy provider, which has been measured at fair value with any changes in fair value recognized in our statement of operations.
Added
The Company may also transact in digital currency mining, data center infrastructure and related equipment on a periodic basis, subject to prevailing market conditions. 28 The Company designs, develops, operates and manages its digital infrastructure to responsibly support the Bitcoin network by contributing to the scale, structure, and decentralization of the Bitcoin network and optimizing energy consumption.
Removed
We offer ‘hosting’ or ‘co-location’ facilities to other businesses in the digital asset infrastructure industry to have their Miners located within our MDCs. These businesses pay us a fee for the use of our facilities and related services (often based on power consumption).
Added
The Company helps contribute to the ecosystem and growth of digital currencies and commodities as there continues to be a global transition to the new digital economy. We strive to operate and invest in markets and communities that offer low or zero-carbon renewable energy sources and participate in energy management activities.
Removed
We also sell new and used crypto currency mining, and MDC equipment on a periodic basis, subject to prevailing market conditions and our surplus production capacity. 27 As of December 31, 2022 Existing Operations Online Order and Purchase Agreements Cumulative Fleet Fully Deployed Total miners online 8,792 - 8,792 Total miners on order - - Total miners in storage 15,010 - 15,010 Total miners 23,802 - 23,802 We continue to conduct research and development in relation to our MDCs which we are actively testing in several configurations and locations to determine the best configuration for both ASIC and alternate computing uses.
Added
We also invest in the communities in which we operate to support our broader ecosystem. Bitcoin mining and co-location power capacity Towards the close of 2023, Mawson’s two Pennsylvania sites, Midland and Bellefonte had approximately 109 MW of total power capacity capable of supporting 35,650 miners for either self-mining or co-location services.
Removed
Prior LO2A Business On March 9, 2021, the Company acquired the shares of Mawson AU in a stock for stock exchange (the “Cosmos Transaction”). Prior to the Cosmos Transaction our main business undertaking was as a clinical-stage biopharmaceutical company focused on the treatment of ophthalmic disorders, including dry eye syndrome (our “LO2A business”).
Added
The Midland facility had approximately 100 MW of total power and the capacity to support a total of approximately 32,930 miners for self-mining and/or co-location services. As of December 31, 2023, the Bellefonte facility was operating at approximately 8.8 MW of capacity and continues to be used entirely for self-mining purposes. Recent Developments.
Removed
However, as part of the Cosmos Transaction, substantially all of the economic benefits of any successful monetization of our LO2A business, if any, will benefit only the holders of the CVRs. Accordingly, we assessed that the fair value of this asset at the acquisition date was $0.
Added
On October 4, 2023, the Company received written notice from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company was not in compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”).
Removed
The asset was therefore assessed as impaired and the prior carrying amount of $23.96 million has been fully expensed in the consolidated statements of operations for the year ended December 31, 2021. Recent Developments.
Added
In accordance with Nasdaq Listing Rule 5810-2(c)(3)(A), the Company had a period of 180 calendar days, or until April 1, 2024, to regain compliance with the Bid Price Rule. To regain compliance, the closing bid price of the Company’s Common Stock had meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-day period.
Removed
On February 23, 2022, Luna Squares LLC entered into the Co-Location Agreement with Celsius Mining LLC (“Celsius Mining”), pursuant to which Luna Squares LLC provides a hosting facility, electrical power and internet access to Celsius Mining for the purposes of installing, maintaining and operating Celsius Mining’s ASIC machines (cryptocurrency mining equipment) for a monthly services fee based on power consumption, plus an infrastructure fee, plus a market margin.
Added
On December 19, 2023, the Company received formal written notice from Nasdaq indicating that the Company had regained compliance with the Bid Price Rule.
Removed
The Promissory Note includes customary events of default and remedies. In connection with the transaction, Mawson issued to Celsius Mining, warrants to purchase up to 3,850,000 shares of common stock, par value $0.001 per share, of Mawson at an exercise price of US$6.50 per share.
Added
On October 12, 2023, the Company entered into a new Service Framework Agreement with a wholly owned subsidiary of Consensus Technology Group, Consensus Colocation PA LLC, for co-location services for approximately 15,876 Bitmain Antminer S19 XP miners or approximately 50 MW at Mawson’s Midland, Pennsylvania facilities (the “Service Framework Agreement”).
Removed
The warrant may be exercised at any time after issuance and until the later to occur of the eighteen (18) month anniversary of issuance and the date on which the Promissory Note has been completely repaid. The outstanding loan balance as at December 31, 2022 is $14.0 million.
Added
The Service Framework Agreement has the Company providing co-location services to the customer for 12 months and the parties can extend further upon mutual agreement. On December 26, 2023, the Company entered into an additional Addendum to the Employment Agreement between the Company and Rahul Mewawalla, the Company’s Chief Executive Officer and President, dated May 22, 2023 (the “Addendum B”).
Removed
On March 16, 2022, Luna Squares LLC entered into a lease with respect to a property in the City of Sharon, Mercer County, Pennsylvania with Vertua Property, Inc, a subsidiary entity in which Vertua Ltd has a 100% ownership interest.
Added
The Addendum B is intended to reflect that the Company did not make certain equity grants and compensation per the terms and timelines it was obligated to Mr. Mewawalla and provides benefits to Mr. Mewawalla to compensate Mr. Mewawalla . The Addendum B provides for Mr.
Removed
James Manning, CEO, a director and a significant stockholder of the Company is also a director of Vertua Ltd and has a material interest in the Sharon lease as a large shareholder of Vertua Ltd.
Added
Mewawalla receiving fully vested restricted stock unit awards and compensation in calendar year 2024, but no later than October 31, 2024, as per the Addendum B. The Addendum B also updates certain provisions of the Employment Agreement as per the Addendum B.
Removed
The lease contains market standard legal terms, and has a 5 year term, and Luna Squares LLC has 2 options to extend the term for 5 years each.
Added
On February 2, 2024, the Company’s lease for property in Sharon, Pennsylvania was terminated, and as of March 2024 the Company has moved completely out of the facility, which was a non-operating site. Mr.
Removed
The Audit Committee of the Company has compared the rent and terms to other arms’ length leases the Company has entered into and formed the view the rent is in line with the market for similar properties. Rent is subject to annual increases equal to the CPI for the Northeast Region, or 4%, whichever is higher.
Added
James Manning, who stepped down as Chief Executive Officer of the Company effective May 22, 2023, had agreed with Mawson AU that he would be issued 1.35 million RSUs and his other RSU agreements and entitlements would be cancelled, as set forth in the Company’s Current Report on Form 8-K filed May 25, 2023.
Removed
The base rental amount in the first year is $0.24 million. Depending on power energization and usage, variable additional rent may be payable, with charges ranging from $500 to $10,000 per month, depending on power energized and whether it is available.
Added
The Company’s Audit Committee of the Board commenced an investigation in the third quarter of 2023 into potential related party transactions involving former Board member and CEO, Mr. James Manning, including but not limited to Mr.
Removed
Upon the recommendation from the Audit Committee, the directors of the Company, other than James Manning, were made aware of the material facts as to Mr. Manning’s interest in the lease and authorized the Company in good faith to enter the lease after determining the lease to be fair to the Company.
Added
Manning’s failure to appropriately disclose certain related party transactions, late or incomplete disclosure of certain transactions, and a failure to confirm to the Company’s satisfaction that the disclosures made about related party transactions were complete. Following the investigation, the Audit Committee reported its initial findings to the Board on February 15, 2024.
Removed
On May 12, 2022, Luna Squares Texas LLC (our wholly owned subsidiary) entered into an Option Agreement and Gross Profit Agreement with JAI TX, LLC and then signed or took and assignment of 4 leases for properties in Texas (all in close proximity) with the intent to develop MDC facilities for mining Bitcoin.
Added
Based on the information obtained to date and Mr. Manning’s repeated refusal to either provide a full and complete disclosure of his related party transactions (or confirm the accuracy of prior related party disclosures provided to the Company) the Audit Committee determined that there is a prima facie basis to conclude that Mr.
Removed
Luna Squares Texas LLC intended to execute relevant power agreements, with the expectation that the four locations could provide a combined 120MW of power. Rent under the leases ranges from $1,500 to $5,227.20 per acre per annum. The lessors include a substantial listed holder of land in Texas, and family groups.
Added
Manning did not fully and properly disclose his related party transactions to the Company. Based on this determination, the Board resolved on February 19, 2024, that certain RSUs and other equity grants provided for in Mr.
Removed
Under the Option Agreement, JAI TX, LLC has the option to receive an issue of up to 20% of the membership interests in Luna Squares Texas LLC.
Added
Manning’s May 2023 Separation Agreement should not be issued by the Company. 29 Results of Operations Revenues Digital currency revenues from self-mining of bitcoin for the year ended December 31, 2023 and 2022, were $21.59 million and $43.11 million respectively. This represented a decrease of $21.52 million or 50% over the prior year period.
Removed
The purchase prices will be a share of capital costs equal to the membership interest acquired by JAI TX, LLC, and an amount of Luna Squares Texas LLC’s debt financing in proportion to JAI TX, LLC’s shareholding.
Added
The decrease in self-mining revenue for 2023 was primarily attributable to a decrease in the total bitcoin produced given amongst other reasons, the change in the Company’s portfolio of operating facilities. During 2023, the Company had operations across its two Pennsylvania facilities, whereas 2022 included the operations of the Georgia facility, which was sold by the Company in October 2022.

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