UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 20222023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File No. 001-40849

Mawson Infrastructure Group Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: +61 2 8624 61301-412-515-0896

Securities Registered pursuant to Section 12(b) of the Act: 

Securities Registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes ☐  No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐  No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $62.35$28.14 million computed by reference to the price at which the common equity was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter.

As of March 17, 2023,26, 2024, there were 14,131,11016,644,711 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant’s definitive proxy statement to be delivered to stockholders in connection with its Annual Stockholders’ Meeting to be held in 20232024 are incorporated by reference into Part III of this Annual Report on Form 10-K. Only those portions of the definitive proxy statement that are specifically incorporated by reference herein shall constitute a part of this Annual Report on Form 10-K. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2022.2023. 

TABLE OF CONTENTS

INTRODUCTION

Throughout this Annual Report on Form 10-K (this “Annual Report”), unless otherwise designated, the terms “we”, “us”, “our”, the “Company”, “Mawson” and “our company” refer to Mawson Infrastructure Group Inc., a Delaware corporation headquartered in the United States of America, and its consolidated subsidiaries (unless otherwise indicated).

All dollar amounts refer to U.S. dollars unless otherwise indicated.

On February 9, 2023, we effected a reverse stock split of our Common Stock at a ratio of one for six (1:6) (the “Reverse Stock Split”). Unless otherwise indicated, all share and per share amounts included in this Annual Report reflect the effects of the Reverse Stock Split.

Statements made in this Annual Report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms.  If we filed any of these documents as an exhibit to this Annual Report or to any registration statement or annual report that we previously filed, you may read the document itself for a complete description of its terms, and the summary included herein is qualified by reference to the full text of the document which is incorporated by reference into this Annual Report.

Unless otherwise indicated, information contained in this Annual Report concerning our industry and the markets in which we operate, including our competitive position and market opportunity, is based on information from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. Our management estimates have not been verified by any independent source, and we have not independently verified any third-party information. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in Item 1A “Risk Factors” below.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements, about our expectations, beliefs or intentions regarding, among other things, our product development efforts, business, financial condition, results of operations, strategies or prospects. Forward-looking statements can be identified by the use of forward-looking words such as “believe”, “expect”, “intend”, “plan”, “may”, “should”, “could” or “anticipate” or their negatives or other variations of these words or other comparable words or by the fact that these statements do not relate strictly to historical or current matters. These forward-looking statements may be included in, but are not limited to, various filings made by us with the United States Securities and Exchange Commission (the “SEC”“SEC”), press releases or oral statements made by or with the approval of one of our authorized executive officers. Forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements, including, but not limited to, the factors summarized below.

This Annual Report identifies important factors which could cause our actual results to differ materially from those indicated by the forward-looking statements, particularly those set forth under Item 1A - “RISK FACTORS” below. The risk factors included in this Annual Report are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those expressed or implied in our forward-looking statements:

All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date of this Annual Report and are expressly qualified in their entirety by the cautionary statements included in this Annual Report. We undertake no obligation to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. In evaluating forward-looking statements, you should consider these risks and uncertainties.

PART I

ITEM 1. BUSINESS.

Overview

General

Mawson Infrastructure Group IncInc. (“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. Mawson was previously known as Wize Pharma Inc, and changed its name on March 17, 2021, after the acquisition of Mawson Infrastructure Group Pty Ltd (then known as Cosmos Capital Limited), a digital infrastructure provider.

Mawson is a ‘Digital Asset Infrastructure’ business,Company, 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. Because Mawson takes part in Bitcoin mining, it is often referred to as a Bitcoin miner. The Company has 3 primary businesses – digital currency or Bitcoin self-mining, customer co-location and related services, and energy markets.

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. As atof the date of this Annual Report, we operate onetwo data center facility locatedfacilities in Pennsylvania, USA, and are constructing a second. We are actively seeking out futurehave rights to develop other sites for additional data center facilities. The Miners we operate are focused on the process of digital mining, specifically for Bitcoin.various sizes in Ohio.

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. 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.

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. Mawson successfully ended its hosting contracts with a number of sub-scale hosting customers during 2022.

We seek to power our operations and facilities with renewable or sustainable power to further support our sustainability priorities.

We may also selloperate in related and adjacent businesses, including transacting in new and used crypto currencycrypto-currency mining and MDCmodular data centers (“MDCs”) equipment on a periodic basis, subject to prevailing market conditions and any surplus we may be experiencing.

As of December 31, 2022

Our Products and Services

Mawson’s business

Mawson has three main businesses through which it generates its revenue:

Bitcoin Self-Mining

At the core of Mawson’s operations is ‘Bitcoin mining’. Put very simply, 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. 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.

Mining hardware performsMiners perform computational operations to solve specific computing problems in support of the Bitcoin network. The computing power is called “hash rate” and is measured in “hashes per second.” A “hash” is the computation run by the mining hardware in support of the blockchain security; therefore, a Miner’s “hash rate” refers to the rate at which it is capable of solving such computations. 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)(“GPU”), which was in turn replaced by Application-Specific Integrated Circuit (“ASIC”) Miners. 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. Mawson’s hash rate is the sum total of its Miners’ hashrates.hash rates. Similarly, the sum total of all Miners actively trying to solve a block in the Bitcoin network is known as the “Network Hashrate”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.

If more competitors add hash rate to the Network Hash Rate, then Mawson must also increase its own hash rate if it wants to ensure that the amount of rewards it receives over time remains the same or similar. Mawson can increase its hash rate in a number of ways, including by acquiring and operating more Miners, ensuring that as many of its Miners are online and operational at all times, and by increasing the hashing capability of its Miners (for example, by providing optimal operating conditions and maintenance). By operating more Miners, Mawson will also most likely 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. 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.

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 aany potential transaction fee. 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 largelarger fleets of more efficient ASIC Miners. The expanding fleets of ASIC Miners generally require more electrical power. Increased use of electrical power increases the cost of solving a block and, therefore, the relative cost of mining for Bitcoin. This increase in network difficulty also means that it can become harder for individual mining operations to find a block and earning any reward or transaction fees for their mining efforts. Individual Bitcoin Miners risk going for extended periods of time without earning any Bitcoin rewards.

To smoothfacilitate 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 members of the mining pool then receive Bitcoin rewards on a pro rata basis based on total hashing capacity they contributed to the mining pool. This is intended to reduce the variance of our Bitcoin rewards, and therefore revenue, generation.

As atof the date of this Annual Report, Mawson operates its own MDCsminers in onetwo data center facilityfacilities located in Midland and Bellefonte Pennsylvania, USA, on land that we have been leased on long-term arrangements. The Midland site currently has a 100MW of capacity once fully developed. A second data center facilityavailable for both self-mining and co-location services and is being developed atcapable of further development. 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 USA. The Sharonwas terminated and Mawson has moved completely out of the facility, is scheduled to come online incrementally through 2023/24 commencing in Q2, 2023 starting with 12MW of self-mining operations. Sharon haswhich was a 120MW capacity once fully developed. Together the facilities will have a capacity of 220MW once fully developed.non-operating site.

Part of Mawson’s strategy is to identify and secure new development sites for future data center facilities which meet our investment criteria. 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.

Our coreWe generate revenue generating operation isthrough the mining of Bitcoin.Bitcoin and then selling the Bitcoin that we mine. During the year ended December 31, 2022,2023, we mined 1,342.59741.33 Bitcoin and sold 741.33 Bitcoin resulting in revenues totaling $43.11$21.59 million.

Mawson’s policy is to liquidateMawson at this time typically liquidates any mined Bitcoin within a reasonable time after receipt. 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.

Customer Co-location and Hosting Services

Due to our strategy of investing in digital asset infrastructure, including entering into site leases, power purchase agreementsMawson offers other businesses and acquiring MDCs and other equipment necessary for facilities designed for mining Bitcoin, we are able to offer other businessescustomers in the digital asset infrastructureassets industry the opportunity to have their ASIC Miners and other equipment located within our facilities. TheseMawson generates revenue from these customers who pay us a fee for thetheir use of our facilitiesco-location services and related servicesfacilities. The customer typically keeps all Bitcoin mined in this manner, while paying Mawson for the costs of mining, plus a margin.providing co-location services. This kind of arrangement is known as ‘hosting’ or ‘co-location’. These arrangements 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. Such fees can provide upfront benefits, which de-riskshelps decrease risk in the business, allowsand potentially enables Mawson to expand more quickly.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). Counter-party risk is a key issue when entering into hostingco-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 charges.fees.

Energy Markets Program

Mawson has developed an 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. If energy prices are too high,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. Mawson uses proprietary financial models, which it is constantly refining, whichthat highlight to Mawson when participation in the Energy Markets Program willshould create greater value than Bitcoin mining.operating is self-mining. Mawson then decides whether to mine and whetheror to curtail its energy usage, by switching off its ASIC miners.

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 mayreduced but should be available, Mawson has developed ansupplemented by the payments provided by the Energy Markets Program.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. 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.Mawson during times of higher energy prices.

Further, because Mawson can be flexible in the way it operates its Bitcoin mining data centers and how it uses energy, Mawson can increasecontribute 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.

Factors Affecting Profitability of Bitcoin Self-Mining business

The main factors affecting Mawson’s Self-Miningself-mining profitability are (in no particular order):

There is a risk that a change in any of these factors willcould have a detrimental effect on Mawson’s business. 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. It should also be noted thatIn addition, 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. 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 MarchApril 2024. This process will reoccurre-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. 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.

Factors Affecting Profitability of Customer Co-location Services business

The main factors affecting Mawson’s co-location profitability are (in no particular order):

Mawson has taken a halvingnumber of steps to halving basis.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. 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. 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. 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.

Factors Affecting Profitability of Energy markets business

The main factors affecting Mawson’s Energy management profitability are (in no particular order):

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. 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. At Mawson we recognize the important role digital asset mining can play in supporting the growth ofenergy grid and we seek to utilize and support renewable or sustainable energy sources. We seek to power our operations with renewable or sustainable power and in doing so we hope to support the introductiongrowth 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. Typically, this will occur when energy prices spike, and the mining of Bitcoin becomesmay become 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.

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. 

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. 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. 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”). 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. 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. 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. 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.

Suppliers

Mawson engages a range of suppliers for access to hardware and software required to mine Bitcoin.Bitcoin, provide co-location services and for its energy markets program. This includes the manufacturers of the Miners, MDCs, and transformers. Mawson enters into Power Purchase Agreements (“PPA”) with its power suppliers that set out the terms and duration of the supply or power. The Company currently has the following principal suppliers:

Government Regulation

Government regulation of blockchain and cryptocurrency is being actively considered by the United States (federalof America (both at the federal and state)state levels) and internationalby non-US governments, and their agencies and regulatory bodies.

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,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. 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.

Co-location customers

Mawson has three co-location customers that in total represent approximately 82 MW and approximately 25,284 miners. 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. 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 particulateparticular Bitcoin mining, is dynamic and global. The Bitcoin mining network is made up of a variety of competitors, from individual ‘sub-scale’’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. 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.

Publicly Listed companies operating comparable businesses include:

Human Capital

Our employees are critical to our success. As of March 11, 2023,1, 2024, we had 4030 plus full time and 3 part time employees based in the U.S. and Australia.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 an hourlya time basis, or on a project basis.

We want to attract a committedOur future success has significant dependence on the performance and talented workforce. We believe thatcontinued 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. Our competitors may offer higher compensation or better opportunities than we can. We may need to hire additional qualified personnel and any failure to attract, retain such a workforce is at leastor motivate key personnel could adversely affect our business and operating results. Currently we have limited personnel in part dependent on our abilityorganization to foster an environment that is sustainably safe, respectful, fair,meet our organizational, operating and inclusive of everyone and their ideas, and promotes diversity, equity and inclusion. In our view these aims are congruent with Mawson’s overall objective to create a team dynamic where we are focused on the success of Mawson, and therefore by extension Mawson’s various stakeholders, including our stockholders, our suppliers, our customers, our employees, and the communities we operate in.administrative demands.  

We are committed to providing a safe workplace for our employees. 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.security.

Any legislative changes regarding climate change or market interventions as a result of the Ukraine warenergy 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. Further, there could be reputational damage to our business caused by increased negative publicity surrounding cryptocurrency and the apparent effects on the environment. If power costs rise so high as to put certain industries at risk, legislators may intervene in energy markets to direct energy to certain industries. 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.insufficient or unreliable.

Corporate Information

Our principal place of business is 201 Clark Street, Sharon,950 Railroad Avenue, Midland, Pennsylvania 16146. Our Australian office is located at Level 5, 97 Pacific Highway, North Sydney New South Wales 2060.15059. Our contact email is info@mawsoninc.com, and our website is www.mawsoninc.com.

Shares of our common stockCommon 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 mawsoninc.com.www.mawsoninc.com. The information on, or that may be accessed from, our website is not a part of this Annual Report. Investors can find a range of information about us there. Available on this website, free of charge, are the reports that we file or furnish with the Securities and Exchange Commission (“SEC”), corporate governance information (including our Code of Business Conduct and Ethics), and select press releases and other relevant information.

ITEM 1A. RISK FACTORS.

RISK FACTORS

An investment in our securities involves a high degree of risk. You should consider carefully the following information about these risks, together with the other information contained in this Annual Report, including the matters addressed in the section entitled “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS” beginning on page iii of this Annual Report, before making an investment decision. Our business, prospects, financial condition, and results of operations may be materially and adversely affected as a result of any of the following risks. The value of our securities could decline as a result of any of these risks. You could lose all or part of your investment in our securities. Some of the statements in “RISK FACTORS” are forward-looking statements. The following risk factors are not the only risk factors facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business, prospects, financial condition, and results of operations and it is not possible to predict all risk factors, nor can we assess the impact of all factors on us or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in or implied by any forward-looking statements.

Summary of Risk Factors

Our business is subject to a number of risks, including risks that may adversely affect our business, financial condition, and results of operations. These risks are discussed more fully below and include, but are not limited to, risks related to:

Risks Relating to Our Business and Management

Risks Relating to Cryptocurrency Mining, Bitcoin Price and Technology

Risks Relating to Laws, Regulatory Frameworks, and Legal Action

Risks Relating to the Ownership of Our Common Stock and Other Common Risks

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 willmay likely increase as we pursue our growth strategy. 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 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.

We maywill need to raise substantial additional capital to continue our operations and execute our business strategy.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. Our inability to raise sufficient capital would have a material adverse effect on our financial condition and business.

We have a history of losses from operations, we expect that we may incur net lossesnegative cash flows from our operations to continue for the foreseeable future. Accordingly,future, and we expect that our net losses will continue for the foreseeable future as we seek to increase the efficiency of our operations, find new co-location customers, and grow the size of our self-mining operations. These circumstances raise substantial doubt about our ability to continue as a going concern. Our financial statements as of December 31, 2023, have been prepared on the basis that we will be able to continue as a going concern and executedo not include any adjustments that might result from the outcome of this uncertainty. At December 31, 2023, our business strategy depends onaccumulated deficit was $182.67 million, our abilitycash and cash equivalents were $4.48 million, we had negative working capital of $33.18 million, and we had an aggregate of $19.35 million of debt of which $16.87 million is overdue for repayment and the remaining is all required to raise additional capital through equity, debtbe repaid within two months of December 31, 2023 unless we refinance or structured financings, collaborations and strategic alliances or other similar typesrenegotiate the terms. In addition, the Celsius deposit of arrangements.$15.33 million is the subject of an ongoing legal dispute.

Our capital needs have depended on, andAdvancing our future plans will continue to depend on, many factors that are highly variable and difficult to predict, including:

We may never become profitable.require substantial additional investment. Based on some of 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 issuance of the accompanying consolidated financial statements.this report. We maywill need to raise substantial additional capital or significantly curtailin the near term to continue to fund our planned operations, meet our debt obligations and execute our current business strategy. The amount and timing of our capital needs have and will continue to remain a going concern.depend on many factors, as discussed further below as well as under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources.”

We have several notes in default which can subject collateral to seizure and otherwise impact our ability to use the collateral in our operations as well as affect our ability to raise capital. Additional capital may not be available to us, or even if it is, the cost of such capital may be high.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. 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.

Because of a Current Report on Form 8-K, which we filed after the filing deadline, we are currently not eligible to utilize Form S-3 registration statements, which prevents us from utilizing our ATM or otherwise raising capital using a Form S-3, until our eligibility is regained in August 2024, thus delaying our ability to raise funds through these methods and increasing the time and cost to raise funds until August 2024. After regaining eligibility to use Form S-3 registration statements, we still expect to be limited by General Instruction I.B.6 of Form S-3, which is referred to as the “baby shelf” rules.

Our management may devote significant time and we may incur substantial costs in pursuing, evaluating and negotiating potential strategic options or capital-raising transactions and those efforts may not prove successful on a timely basis, or at all. If we cannot raise adequate additional capital when needed, we may be forced to reorganize or merge with another entity, sell or monetize assets, file for bankruptcy, or cease operations. 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.

Listing on The Nasdaq Capital Market (“Nasdaq”)

Although our common stockCommon 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. On August 31, 2022, we received written notice from Nasdaq that we were not in compliance with the minimum bid price requirements for continued listing. The Nasdaq Listing Rules allow a period of 180 calendar days to regain compliance. On November 23, 2022, our Board of Directors approved the execution of a reverse stock split of all of our outstanding shares of common stock at a ratio of 1-6, in order to enable the Company to regain compliance with the Nasdaq’s minimum listing requirements. That reverse stock split took effect on February 9, 2023. As of the date of this annual report, Mawson is compliant with the Nasdaq minimum bid price requirements for continued listing.

On October 24, 2022, we received written notice from Nasdaq that we were not in compliance with Nasdaq’s audit committee requirements for continued listing due to the resignation of one of our directors. The Nasdaq Listing Rules provide a cure period in order to regain compliance as follows: (a) until the earlier of our next annual stockholders’ meeting or September 13, 2023; or (b) if our next annual stockholders’ meeting is held before March 13, 2023, then until March 13, 2023. On January 31, 2022, Mawson appointed a new member to its Board, Mr. Rahul Mewawalla, and also appointed him to each of the Company’s committees, including the audit committee. As of the date of this annual report, Mawson is compliant with the Nasdaq audit committee requirements for continued listing.

If we are unable to maintain listing on Nasdaq or if a liquid market for our common stockCommon Stock does not develop or is not sustained, our common stockCommon Stock may remain thinly traded. If, for any reason, Nasdaq should delist our securities from trading on its exchange and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our shareholders:

The Cryptocurrency Industry has experienced multiple downturnsand Bitcoin pricing can be volatile

Bitcoin pricespricing has proven to be volatile, characterized by periods of extreme upturns and downturns that have fallen substantiallylasted 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. 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 thatoften resulted in the major input cost to generate Bitcoin has increased.increasing.

The price of Bitcoin can fluctuate due to investment and trading sentiment amongst users, speculators, and investors for a range of reasons, including changes in interest rate settings, or negative or positive publicity (for example due to legal proceedings or losses to Bitcoin investors due to fraud or cyber attackscyber-attacks a cryptocurrency exchange or online wallet). 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. In addition, we operate in the U.S. and Australia and are exposed to fluctuations in fiat currency exchange rates. A fall in the price of Bitcoin will have a negative impact on our revenues. 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.

Corporate collapses of important companies in the Bitcoin ecosystem, (other than Bitcoin miners)such as exchanges, funds, lenders, wallet providers and so on, 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.

We are also exposed to the effect a falling price can have on our counterparties, including the exchanges we use.use and our co-location customers. In particular, in July of 2022, Celsius Networks, LLC and Celsius Mining LLC, filed for Chapter 11 bankruptcy. A subsidiary of Mawson remains an unsecured creditor of Celsius Mining LLC, is our only hosting customer and its failure to pay (or pay timely) amounts it owes to us when due could have a material adverse effect on our financial situation. Through Chapter 11 bankruptcy protection, Celsius has avoided payingwith two unpaid pre-petition invoices to our subsidiary Luna Squares LLC totaling in excess of $1.8million.$1.8 million.

Subsequent disputes have led to litigation between Celsius entities and Mawson entities, refer to Part 3. Legal Proceedings section for further discussion.

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. General inflation, including rising prices for energy, metals, components, and other inputs as well as rising wages negatively impact our business by increasing our operating costs. As a result of inflation, we have experienced and may continue to experience, cost increases. Although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, financial condition, results of operations, and liquidity could 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 USUnited States Federal Reserves, and the Reserve Bank of Australia)Reserves) have been increasing their interest rates. 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.

SupplyThe global supply chains were disruptedare increasingly risky and being realigned in 2022, due to a variety of shocks including COVID-19, the war in Ukraine and broadening of trade restrictions, and onshoring efforts of the USA, such as the Chips Act. We expect this uncertainty to continue in 2023.complex. Our business relies on certaincryptocurrency-specific hardware such as the Miners, and containers in which to storeoperate the Miners, and also more general plant and equipment such transformers, for electricity supply,breakers, power boards exhaust fans, deflectors, monitoring equipment and cooling technologies.many other parts. If we are unable to procure such hardware, or replacement parts (at commercial prices, or at all), or they are delayed, our operations may be adversely affected which would likely have a material adverse effect on our business, financial condition, results of operations and prospects. If the manufacturers of such hardware are unable to obtain materials or components themselves, they may experience manufacturing delays or have to cease manufacturing altogether. 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. This has meant that they are no longer acquiring new Miners and are selling unused miners. Miners (new and second hand) are, at the date of this annual report, easier to acquire already landed in the US and at lower prices than early 2022, however it can be expected that the price of Miners will rise, and they will become more difficult to source as the price of Bitcoin increases.

There are a small number of major suppliers of Miners globally, and Miner manufacturing is located primarily in China. If we, or our customers, were unable to source Miners from those suppliers (for example due to overwhelming global demand for Miners)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. 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). In addition, the terms of sale with the Miner suppliers are often in favor of the suppliers and may leave us with few or no commercial remedies.

The trade policies of the U.S. and China in particular are dynamic at the moment, and tradeTrade policies such as export/import restrictions, quotas or tariffs by either of these countries, or others, may reduce the ability of our suppliers to supply useus with Miners or create a shortage or lack of components necessary for their manufacture.manufacture or repair. 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 numerousvarious examples of government policies, decisions, laws and intervention into particular industries in recent times, including a ban on Bitcoin mining in China itself, which has been enforced, and crackdowns on the private sector, including large technology companies. 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.industries. 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.

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 commitmentsnot be able to supply us with the contracted power, or we may be unable to source extra power in the future to enable our growth. 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 fail.become obsolete.

Miners and related mining equipment used to mine digital assets are sophisticated machines and may be operated for long periods of time.over two years or longer. They are thus prone to breakdown and may not function at any given time. 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.role. This could occur during an accident on site, or during transportation of a large number of Miners. 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 wouldcould be a fire within a substation resulting in a total power outage for a mining facility for a period until the substation was rebuilt.rebuilt, or a blown fuse which may affect any part of our facility. Such widespread mechanical issues or critical failurefailures for any material duration would therefore decrease our revenue.

A number of factors drive the adoption of ever more efficient Miners in the Bitcoin mining industry, including the energy prices, the fact the Bitcoin algorithm was designed so that as more computing power is added to the network, the difficulty to mine for each block increases, and the halving. Over time older mining equipment becomes less and less profitable, and like most computing hardware, eventually becomes obsolete. Mawson’s fleet has not been materially renewed for a number of years, which means that a number of factors could render its self-mining fleet obsolete, including a significant increase in difficulty, the halving, or simply wear and tear on the machines rendering some or all of them uncommercial, or inoperable.

Any long-termextended outage or limitation of thean 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. Any extended downtime, bandwidth limitations or other constraints may reduce our ability to use our Miners support transactions on the Bitcoin network, and therefore reduce our ability to earn block rewards. The effects of any such events could have a material adverse effect on our operating results and financial condition.

Access to reliable electricity sources at reasonable prices is critical to our growth and profitability.

Our operations have requiredrequire significant amounts of electrical power and, as we continue to expand, we anticipate our demand for electrical power will continue to grow.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. 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.

Our Modular Data CentersInfrastructure require developed land, preferably close to sustainable and reasonably priced electricity sources. 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 the electricity would significantly impact the profitability and viability of our business.

Additionally, our operations could be materially adversely affected by prolonged power outages. Therefore, we may have to reduce or cease our operations in the event of an extended power outage, or as a result of the unavailability or increased cost of electrical power. If this were to occur, our business and results of operations could be materially and adversely affected.

Cyber-security threats pose a challenge to our business including the safekeeping of our digital assets, and a risk of reputational damage.

Mawson, like almost all businesses around the world, is subject to continuous malicious attempts to penetrate its systems. We take measures to protect our operations and our digital and physical assets from unauthorized access, damage or theft; however, it is possible that the security system may not prevent improper access to, or damage or theft of our assets. A security breach could harm our reputation or result in the loss of some or all of our assets, or an inability to operate. A resulting perception that our measures do not adequately protect our assets could adversely affect our business, financial condition, results of operations and prospects.

We promptly and frequently liquidate cryptocurrencies that we mine and keep a minimum number of cryptocurrencies in our possession so as to minimize our risks against theft, loss, destruction or other issues relating to hackers and technological attack. We have methods of monitoring and ensuring that our Miners are directing hashrate to the correct pools and that any Bitcoin produced is sent to the intended recipient. Nevertheless, this security system may still be penetrated and may not be free from defect or immune to acts of God, and any loss due to a security breach, software defect or act of God will be borne by us.

The security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee, or otherwise, and, as a result, an unauthorized party may obtain access to our private keys, data or Bitcoins. Additionally, outside parties may attempt to fraudulently induce employees of ours to disclose sensitive information in order to gain access to our infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our security system occurs, the market perception of the effectiveness of its security system could be harmed, which could adversely affect our business, financial condition, results of operations and prospects. 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.

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. Therefore, a loss may be suffered with respect to our digital assets which are not covered by insurance and for which no person is liable in damages which could adversely affect our business, financial condition, results of operations and prospects.

We do not hold our digital assets with a banking institution or a member of the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”) and, therefore, our digital assets are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions.

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. For example, as to a particular event of loss, the only source of recovery we have might be limited to the extent identifiable, other responsible third parties (e.g., a thief or terrorist), any of which mayOur digital assets are not have the financial resources (including liability insurance coverage) to satisfy a valid claim by us.insured.

The sale of our digital assets to pay expenses at a time of low digital asset prices could adversely affect our business.

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.

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 COO.CFO. 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.

In December 2019, the novel coronavirus, or COVID-19, surfaced globally. The World Health Organization declared a global emergency on January 30, 2020, with respect to the outbreak. Multiple variants (including Delta and Omicron) have become prominent since the initial outbreak. Although these types of restrictions have been lifted in most places around the world, and vaccination rates have improved the situation, there can be no assurance that governments will not re-introduce such restrictions in the future for COVID-19 or some other pandemic. If such restrictions are re-introduced, we may be required to substantially reduce or cease operations in response.

FailureIf 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.

Generally, a bitcoin miner’s chance of solving a block on the Bitcoin blockchain and earning a bitcoin reward is a function of the miner’s hash rate (i.e., the amount of computing power devoted to supporting the Bitcoin blockchain), relative to the global network hash rate. As greater adoption of Bitcoin occurs, we expect the demand for Bitcoin will increase further, drawing more mining companies into the industry and thereby increasing the global network hash rate. As new and more powerful miners are deployed, the global network hash rate will continue to increase, meaning a miner’s chance of earning bitcoin rewards will decline unless it deploys additional hash rate at pace with the industry.

Accordingly, to maintain our chances of earning new bitcoin rewards and remaining competitive in our industry, we must seek to continually add new miners to grow our hash rate at pace with the growth could place strains on its managerial, operationalin the Bitcoin global network hash rate. However, as demand has increased and scarcity in the supply of new miners has resulted, the price of new miners has increased sharply, and we expect this process to continue in the future as demand for bitcoin increases. Therefore, if the price of bitcoin is not sufficiently high to allow us to fund our hash rate growth through new miner acquisitions and if we are otherwise unable to access additional capital to acquire these miners, our hash rate may stagnate, and we may fall behind our competitors. If this happens, our chances of earning new bitcoin rewards would decline and, as such, our results of operations and financial resources and could adversely affect its business and operating results.condition may suffer.

As our digital asset infrastructure operations grow,assets reach the operational demands upon us will grow, andend of useful life (such as our success will depend upon our ability to meet those demands. Both the parent company and each of our subsidiaries require certain financial, managerial and other resources, which could create challenges to our ability to successfully manage our subsidiaries and operations and impact our ability to assure compliance with our policies, practices and procedures. These demands include, but are not limited to, increased executive, accounting, management, legal services, staff support and general office services. We may need to hire additional qualified personnel to meet these demands, the cost and quality of which is dependent in part upon market factors outside of our control. Further,miner fleet) we will need to effectively manageplan for their replacement. Replacing our mining fleet will require significant capital which the training and growth of our staff to maintain an efficient and effective workforce. Conversely, in times of contraction in the industry we will need to adjust our business and cut costs and sell or end unviable projects. Our failure to do so could adversely affect our business and operating results.

We have potential risks in connection with growth and acquisitions.

Our future growth may depend in part on our ability to acquire patented technologies or potential target companies that have synergies with our business activities. Such acquisitions are subject to numerous risks, including, butCompany does not limited to the following:

currently have. If we are unable to manageraise sufficient capital and replace or renew our mining fleet, we may not be able to mine for Bitcoin on a commercial basis. This may force us to consider other business options, such as to expand our co-location business, however, even if successful, these risks effectivelyalternative business options may not generate the same level of profit or income as part of any acquisition, our business could be adversely affected.self-mining.

Cryptocurrency mining is a highly competitive industry.

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. 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. Barriers to entry are relatively low in the sense that there is no requirement to obtain a license or permit to mine for Bitcoin (potential barriers to entry include the need to acquire, install and operate the capital intensive equipment, access to reasonably priced electricity, and other relevant technical knowledge). 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.

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.

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 potential physical effects of climate change on our operations, if any, are highly uncertain.

Extreme weather events may:

There has been recent commentary about cryptocurrency mining and its impact on the environment. Governments and related government bodies around the world are introducing or contemplating legislative and regulatory changes related to cryptocurrency mining in response to a variety of pressures.

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. Further, there could be reputational damage to our business caused by increased negative publicity surrounding cryptocurrency and the apparent effects on the environment.

CancellationWe are subject to a highly-evolving regulatory landscape and any adverse changes to, or withdrawal ofour failure to comply with, any laws and regulations could adversely affect our business, reputation, prospects or operations. Obtaining and complying with required operating and othergovernment permits and license.approvals may be time-consuming and costly.

We mustare required to obtain, variousand to comply with, numerous permits approvals and/and licenses from federal, state and local governmental agencies. The process of obtaining and renewing necessary permits and licenses can be lengthy and complex, requiring up to months or years for approval depending on the nature of the permit or license and such process could be further complicated or extended in the event regulations change. In addition, obtaining such permit or license can sometimes result in the establishment of conditions that create a significant ongoing impact to the nature or costs of operations or even make the project or activity for which the permit or license was sought unprofitable or otherwise unattractive. In addition, such permits or licenses in ordermay be subject to construct and operate our facilities. If suchdenial, revocation or modification under various circumstances. Failure to obtain or comply with the conditions of permits approvals and/or licenses, are not granted, or if they are lost, suspended, terminatedfailure to comply with applicable laws or revoked, itregulations, may result in delays in construction of our facilities, require us to halt allthe delay or parttemporary suspension of our operations and electricity sales or causethe curtailment of our delivery of electricity to our customers and may subject us to penalties and other sanctions. Although various regulators routinely renew existing permits and licenses, renewal of our existing permits or licenses could be exposeddenied or jeopardized by various factors, including failure to provide adequate financial assurance for closure, failure to comply with environmental, health and safety laws and regulations or permit conditions, local community, political or other penalties atopposition and executive, legislative or regulatory action. Our inability to procure and comply with the affected locations. Such circumstancespermits and licenses required for these operations, or the cost to us of such procurement or compliance, could have a material adverse effect on us. In addition, new environmental legislation or regulations, if enacted, or changed interpretations of existing laws, may cause activities at our business, financial conditionfacilities to need to be changed to avoid violating applicable laws and operating results.

We are subject to construction risks.

Each Modular Data Center facility we construct is subjectregulations or eliciting claims that historical activities at our facilities violated applicable laws and regulations. In addition to the usual risks associated with building infrastructure assets. Particular risks include slowpossible imposition of fines in the case of any such violations, we may be required to undertake significant capital investments and obtain additional operating permits or delayed planning approval processes and permitting and licensing requirements, issues with site condition or hazards, availability and cost of materials and labor, contractor and sub-contractor default, inability to enter into agreements with the design and build of the facilities, and inclement weather.licenses, which could have a material adverse effect on us.

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. 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 ASICminer suppliers) are unable to obtain banking services, this will cause material business disruption and loss and damage to our business. 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.

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.

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 BitcoinsBitcoin networks, a small group of individuals contribute to the Bitcoin Core project on GitHub.com. These individuals can propose refinements or improvements to the Bitcoin network’s source code through one or more software upgrades that alter the protocols and software that govern the Bitcoin network and the properties of Bitcoin, including the irreversibility of transactions and limitations on the mining of new Bitcoin. Proposals for upgrades and discussions relating thereto take place on online forums. For example, there is an ongoing debate regarding altering the blockchain by increasing the size of blocks to accommodate a larger volume of transactions. Although some proponents support an increase, other market participants oppose an increase to the block size as it may deter miners from confirming transactions and concentrate power into a smaller group of miners.

To the extent that a significant majority of the users and miners on the Bitcoin network install such software upgrade(s), the Bitcoin network would be subject to new protocols and software that could materially adversely affect our business, financial condition, results of operations and prospects. In the event a developer or group of developers proposes a modification to the Bitcoin network that is not accepted by a majority of miners and users, but that is nonetheless accepted by a substantial plurality of miners and users, two or more competing and incompatible blockchain implementations could result. This is known as a “hard fork.” In such a case, the “hard fork” in the blockchain could materially and adversely affect the perceived value of digital assets as reflected on one or both incompatible blockchains, which may materially adversely affect our business, financial condition, results of operations and prospects.

If a malicious actor or botnet obtains control in excess of 50% of the processing power active on any digital asset network, including the Bitcoin network, it is possible that such actor or botnet could manipulate the blockchain in a manner that adversely affects us.

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the processing power dedicated to mining on any digital asset network, including the Bitcoin network, it may be able to alter the blockchain by constructing alternate blocks if it is able to solve for such blocks faster than the remainder of the miners on the blockchain can add valid blocks. In such alternate blocks, the malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new digital assets or transactions using such control. Using alternate blocks, the malicious actor could “double-spend” its own digital assets (i.e., spend the same digital assets in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintains control. To the extent that such malicious actor or botnet does not yield its majority control of the processing power, or the digital asset community does not reject the fraudulent blocks as malicious, reversing any changes made to the blockchain may not be possible. Such changes could materially adversely affect our business, financial condition, results of operations and prospects.

A failure to properly monitor and upgrade the Bitcoin network protocol could damage the Bitcoin network and adversely affect us.

The open-source structure of the cryptocurrencies network protocols means that the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol. The Bitcoin network, for example, operates based on an open-source protocol maintained by contributors, largely on the Bitcoin Core project on GitHub. As an open-source project, Bitcoin is not represented by an official organization or authority. As the Bitcoin network protocol is not sold and its use does not generate revenues for contributors, contributors are generally not compensated for maintaining and updating the Bitcoin network protocol. The lack of guaranteed financial incentive for contributors to maintain or develop the Bitcoin network and the lack of guaranteed resources to adequately address emerging or latent issues with the Bitcoin network may reduce incentives to address the issues adequately or in a timely manner. Modification or changes to the Bitcoin protocol by a sufficient number of users (known as a “fork”) may lead to unforeseen bugs or other negative outcomes for Mawson and miners in general. Changes to our latent issues in a digital asset network which we are mining could materially adversely affect our business, financial condition, results of operations and prospects.

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. 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. The reward has decreased over the years and, to date, following the last halving event in May 2020, thecurrent 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. Although, atAt 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, 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.  

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.

The increasing network difficulty, plays a crucial role in determining the profitability of Bitcoin mining.

Essentially, network difficulty refers to the degree of effort required to solve the mathematical problems that validate transactions on the Bitcoin network. For cryptocurrencies that use a Proof-of-Work (PoW) validation system such as Bitcoin, creating new cryptocurrencies involves “miners” using their computers to solve complex mathematical puzzles. In the case of Bitcoin, miners’ computers, also called nodes, collect and bundle individual transactions into blocks every ten minutes, which is the fixed “block time” of Bitcoin. The computers then compete to solve a complex cryptographic puzzle to be the first to validate the new block for the blockchain. As a cryptocurrency like Bitcoin becomes more popular, the number of computers participating in this peer-to-peer validation network increases. With more participants and more computing power, the so-called “hashpower” of the entire network increases accordingly.

The higher the network difficulty, the more challenging it is to mine new Bitcoins. As a result, mining profitability is directly impacted by changes in difficulty levels. There are several other factors that can influence network difficulty, such as:

1. Network difficulty adjustments: The Bitcoin network adjusts difficulty every 2016 blocks or approximately every two weeks. The adjustment is based on the total network hash rate, which is the measure of computing power being used to mine on the network. If the hashing power on the network increases, the difficulty level also increases to maintain a consistent rate of new blocks being added to the blockchain. Conversely, if the hashing power decreases, the difficulty level decreases as well. This means that the profitability of mining can be impacted by changes in the number of miners on the network.

2. Block time: As mentioned earlier, the target block time for Bitcoin is 10 minutes. If blocks are being generated too quickly, the difficulty level will increase to slow down the rate of block creation. Conversely, if blocks are being generated too slowly, the difficulty level will decrease to speed up the rate of block creation.

3. Hardware efficiency: The efficiency of mining hardware can have a significant impact on mining difficulty. More efficient hardware can mine more hashes per second, which increases the hash rate and can cause the difficulty level to rise.

4. Electricity costs: Mining requires a lot of electricity, and the cost of electricity can have a significant impact on mining difficulty. If electricity costs are high, miners may need to shut down their operations or switch to more efficient hardware to remain profitable.

5. Market conditions: The price of Bitcoin can have a significant impact on mining difficulty. If the price of Bitcoin increases, more miners may join the network, causing the hash rate to increase and the difficulty level to rise. Conversely, if the price of Bitcoin decreases, some miners may exit the network, causing the hash rate to drop and the difficulty level to decrease.

6. The Halving: Bitcoin undergoes a halving event roughly every four years, where the reward for mining a new block is cut in half. This means that miners need to mine twice as many blocks to earn the same amount of bitcoin. This can lead to a drop in hash rate, as some miners may find it less profitable to continue mining.

An increase in transaction fees could reduce the price of digital assets.

If fees increase for recording transactions on the Bitcoin network, demand for cryptocurrencies may decrease and prevent the expansion of the network to retail merchants and commercial businesses, resulting in a reduction in the price of digital assets that could adversely affect our business, financial condition, results of operations and prospects.

Cryptocurrency firms may be forced to sell their Bitcoin or cryptocurrency holdings putting downward pressure on the Bitcoin price.

A professionalized mining operation may be more likely to sell a higher percentage of its newly mined digital assets rapidly if it is operating at a low profit margin. In a low profit margin environment, a higher percentage could be sold into the digital asset exchange market more rapidly, thereby potentially reducing digital asset prices. Lower digital asset prices could result in further tightening of profit margins, particularly for mining operations with higher costs and more limited capital reserves, creating a network effect that may further reduce the price of digital assets until mining operations with higher operating costs become unprofitable and remove mining power from the respective digital asset network. 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.

Political or economic crises may motivate large-scale sales of digital assets, which could result in a reduction in some or all digital assets’ values and adversely affect us.

As an alternative to fiat currencies that are backed by central governments, digital assets such as Bitcoins, which are relatively new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized asset that can act as a store of value, means of speculation or a payments system for buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of digital assets either globally or locally. Large-scale sales of digital assets would result in a reduction in their value and could adversely affect our business, financial condition, results of operations and prospects.

To the extent that the digital asset exchanges / custodians representing a substantial portion of the volume in digital asset trading are involved in fraud or experience security failures or other operational issues, such digital asset exchanges / custodians’ failures may result in a reduction in the price of some or all digital assets and can adversely affect us.

The digital asset exchanges / custodians on which the digital assets trade are relatively new (compared to actors in traditional financial services) and, in most cases, largely unregulated, or subject to little oversight. Furthermore, many digital asset exchanges / custodians (including several of the most prominent USD denominated digital asset exchanges) do not provide the public with significant information regarding their ownership structure, management teams, corporate practices or regulatory compliance. 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.

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. These potential consequences of a digital asset exchange’s failure could materially adversely affect our business, financial condition, results of operations and prospects.

The further development and acceptance of digital asset networks and other digital assets, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of digital asset systems may adversely affect us.

Currently, there is relatively small use of Bitcoins and other cryptocurrencies in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in us. Cryptocurrencies are a relatively new concept and asset class, so there is still some degree of uncertainty and skepticism about their use. Whether their popularity will gain further traction is difficult to predict. 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 changingevolving, and new digital assets are created regularly.can be created. New digital assets competing with the digital assets we specialize in (such as Bitcoin)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). Many governments around the world, and central banks are reportedly considering or studying the potential for CBCDs, including the Australian federal government and the Reserve Bank of Australia and the United States Federal Reserve.

The Bitcoin protocol currently relies on a proof-of-work verification for validating digital asset transactions. This type of validation consumes large amounts of computing power and electricity. Proof-of-stake validation is a more recent development, which involves the validator losing part of its cryptocurrency holdings if it fails to correctly validate a block. While there are some drawbacks to proof-of-stake, it requires far less energy than proof-of-work. Cryptocurrencies whose transactions are validated on a proof-of-stake basis do not require Miners. Future cryptocurrencies may utilize proof-of-stake rather than proof-of work, meaning that there will be less opportunity for miners to earn rewards.

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. The potential capability of quantum computers poses a potential threat to the underlying cryptographic protections that the Bitcoin blockchain protocol relies on, and therefore to the reliability of the blockchain, and may therefore undermine users’ trust in Bitcoin and digital currencies in general. For example, a quantum computer may provide the possibility of decrypting user private keys and forging transaction signatures, undermining the integrity of the blockchain. A loss of trust in the digital currencies due to the ability of quantum computing to undermine security protocols will likely have a material adverse effect on our business, results of operations and financial condition.

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 registrationsubject to conduct such activitiesongoing scrutiny by regulators and accumulate digital assets. Nevertheless itgovernment. It is likelypossible that regulation in the digital asset industry will increase. 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.

In addition, regulatory actions, as well as any other political developments in the regions with active cryptocurrency trading or mining, may increase our domestic competition as some of those cryptocurrency miners or new entrants in this market may move their cryptocurrency mining operations or establishing new operations in the United States. Furthermore, government scrutiny related to restrictions on cryptocurrency mining facilities and their energy consumption has increased over the past few years as cryptocurrency mining has become more widespread. The consumption of electricity by mining operators may also have a negative environmental impact, including contribution to climate change, which could set the public opinion against allowing the use of electricity for bitcoin mining activities or create a negative consumer sentiment and perception of bitcoin. State and federal regulators are increasingly focused on the energy and environmental impact of bitcoin mining activities. Additionally, if the regulatory and economic environment in Pennsylvania and Ohio were to become less favorable to bitcoin mining and hosting companies, including by way of increased taxes, means our business, financial condition and results of operations could be adversely affected.

Bitcoin isand Bitcoin mining are presently legal in Australia and the U.S.,; however, itthey may become illegal in the future, or subject to acquire, own, hold, sell, exchange, advise onregulation (such as caps, taxes or use Bitcoins in Australia and the U.S. or one or more other countries, and may currently be illegal in some countries.licensing regimes).

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 of our activities require us or any of our affiliates to register as a money services business (“MSB”) under the regulations promulgated by FinCEN

The U.S. Bank Secrecy Act (“BSA”) may require us to register and comply with it and its regulations. If regulatory changes or interpretations of our activities require the licensing or other registration as a money transmitter (or equivalent designation) under state law in any state in which we operate, we may be required to seek license or otherwise register and comply with such state law. In the event of any such requirement, to the extent we decide to continue, the required registrations, licenses and regulatory compliance steps may result in extraordinary, non-recurring expenses to us and even in a decision to cease our digital asset infrastructure operations.

To the extent that our activities cause us to be deemed a MSB under the regulations promulgated by the Financial Crimes Enforcement Network (“FinCEN”), a unit of the U.S. Treasury Department focused on money laundering under the authority of the U.S. Bank Secrecy Act, we may be required to comply with FinCEN regulations, including those that would mandate we implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records. In addition, to the extent that our activities cause us to be deemed a “money transmitter” (“MT”) or equivalent designation, under state law in any state in which we operate, we may be required to seek a license or otherwise register with a state regulator and comply with state regulations that may include the implementation of anti-money laundering programs, maintenance of certain records and other operational requirements. Currently, the New York State Department of Financial Services requires a “BitLicense” for businesses that conduct “virtual currency business activity,” and the Conference of State Bank Supervisors has proposed a model statute for state level “virtual currency” regulation, which may result in other states requiring virtual currency businesses to seek licenses as money transmitters. Several states have finalized, or are in the processes of finalizing, virtual currency regulatory regimes that require money transmitter licenses for virtual currency businesses.  Licensed money transmitters are subject to, among other things, the BSA, restrictions and requirements with respect to the investment of customer funds and use and safeguarding of customer funds and crypto assets, and bonding, net worth, customer notice and disclosure, reporting and recordkeeping requirements applicable to the company, as well as control persons and inspection and examination by state regulatory agencies. In July 2016, North Carolina updated the law to define “virtual currency” and the activities that trigger licensure in a business-friendly approach that encourages companies to use virtual currency and blockchain technology. Specifically, the North Carolina law does not require miners or software providers to obtain a license for multi-signature software, smart contract platforms, smart property, colored coins and non-hosted, non-custodial wallets. Starting January 1, 2016, New Hampshire requires anyone who exchanges a digital currency for another currency to become a licensed and bonded money transmitter. In numerous other states, including Connecticut and New Jersey, legislation is being proposed or has been introduced regarding the treatment of Bitcoin and other digital assets. We will continue to monitor for developments in such legislation, guidance or regulations.

Such additional federal or state regulatory obligations may cause us to incur extraordinary expenses, possibly adversely affecting our business, financial condition, results of operations and prospects. Furthermore, we and our service providers may not be capable of complying with certain federal or state regulatory obligations applicable to MSBs and MTs. If we are deemed to be subject to and determined not to comply with such additional regulatory and registration requirements, we may act to dissolve and liquidate our business. Any such action may materially adversely impact our business, financial condition, results of operations and prospects.

If regulatory changes or interpretations require the regulation of Bitcoins under the Securities Act and Investment Company Act by the SEC, we may be required to register and comply with such regulations.

Current and future legislation and the SEC rulemaking and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which Bitcoins are treated for classification and clearing purposes. As of the date of this report/information statement, we are not aware of any rules that have been proposed to regulate Bitcoins as securities, but we cannot be certain as to how future regulatory developments will impact the treatment of Bitcoins under the law. Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting our business, financial condition, results of operations and prospects. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations. Any such action may adversely affect our business, financial condition, results of operations and prospects.

To the extent that digital assets, including Bitcoins and other digital assets we may own, are deemed by the SEC to fall within the definition of a security, we may be required to register and comply with additional regulation under the Investment Company Act, including additional periodic reporting and disclosure standards and requirements and the registration of the combined company as an investment company. Additionally, one or more states may conclude Bitcoins and other digital assets we may own as a security under state securities laws which would require registration under state laws including merit review laws which would adversely impact us since we would likely not be able to comply. Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting our business, financial condition, results of operations and prospects. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease all or certain parts of its operations. Any such action would likely adversely affect our business, financial condition, results of operations and prospects and investors may suffer a complete loss of their investment.

We may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002.

We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”). Section 404 requires that our management maintain a system of internal control over financial reporting that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It also requires that our management annually evaluate whether our internal control over financial reporting is effective at providing reasonable assurance and to disclose its assessment to investors. Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2022,2023, 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 our internal control over financial reporting.reporting as described in Item 9A. “Controls and Procedures”. As a result of the material weaknesses in our internal control over financial reporting, described above, the Company’s management has concluded that, as December 31, 2022,2023, the Company’s internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework issued by COSO.

Mawson may not be able to implement adequate controls and procedures in time that adequately respond to the regulatory compliance and reporting requirements that are applicable to us. 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.  

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.

If we fail to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, the accuracy and timeliness of the filing of our annual and quarterly reports may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.Common Stock. In addition, we identified a material weakness in the effectiveness of our internal control over financial reporting which could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition.

Future developments regarding the treatment of digital assets for U.S. federal income and foreign tax purposes could adversely impact our business.

Globally, many taxation laws, rules and guidelines have not been developed with digital assets or cryptocurrencies in focus. For example, many significant aspects of the U.S. federal income and foreign tax treatment of transactions involving digital assets are uncertain, and it is unclear what guidance may be issued in the future on the treatment of digital asset transactions for U.S. federal income and foreign tax purposes.

There can be no assurance that the IRS or other foreign tax authorities will not alter their position or introduce new laws, regulations or guidance with respect to digital assets. Any such alteration of existing IRS and other foreign tax authority positions or additional guidance regarding digital asset products and transactions could result in adverse tax consequences for our business and could have an adverse effect on the value of digital asset and the broader digital assets markets. In addition, the IRS and other foreign tax authorities may disagree with tax positions that we have taken, which could result in increased tax liabilities. Future technological and operational developments that may arise with respect to digital currencies may increase the uncertainty with respect to the treatment of digital currencies for U.S. federal income and foreign tax purposes.

Another example of an adverse ruling would be if we were classified as a passive foreign investment company (a “PFIC”) for any taxable year. Based on the current and anticipated composition of our income, assets and operations, and our business generally, we do not expect to be treated as a PFIC for the current taxable year or in the foreseeable future. The application of the PFIC rules to digital assets and transactions related thereto is subject to uncertainty. There can be no assurance that Mawson will not be classified as a PFIC for the current taxable year or for any future taxable year. If Mawson is considered a PFIC then there may be negative tax consequences for U.S. holders of our ordinary shares, as well as being subject to annual information reporting requirements. 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.

Governments have and may take regulatory actions to restrict the right to acquire, own, hold, sell, exchange or use Bitcoin or other cryptocurrencies. For example, it may be, or may become, illegal to accept payment in Bitcoin for consumer transactions and banking institutions could be barred from accepting deposits of cryptocurrencies. Such restrictions would have a negative effect on the value and price of Bitcoin. On the other hand, some governments could decide to subsidize or support certain Bitcoin mining projects, thus adding hashratehash 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.

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.

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies; certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while in some jurisdictions, such as in the United States, subject the mining, ownership and exchange of cryptocurrencies to extensive, and in some cases overlapping, unclear and evolving regulatory requirements. We are subject to various federal, state, and local laws and regulations, including those relating to the generation of power, noise, storage, handling, and disposal of hazardous substances and wastes. Certain of these laws and regulations also impose joint and several liability, without regard to fault, for investigation and cleanup costs on current and former owners and operators of real property and persons who have disposed of or released hazardous substances into the environment. Electricity costs could also be affected due to existing or new regulations on greenhouse gas emissions, whether such regulations apply to all consumers of electricity or just to specified uses, such as Bitcoin mining. These regulations may be federal, state or local. There has been interest in the U.S. federal government and in some state governments in addressing climate change, including through regulation of Bitcoin mining. Past policy proposals to address climate change include measures ranging from taxes on carbon use or generation to energy consumption disclosure regimes to federally imposed limits on greenhouse gas emissions or energy use restrictions specific to Bitcoin mining. It is unclear how any such future legislation and regulation will affect our Pennsylvania and Ohio facilities. The course of future legislation and regulation in the United States remains difficult to predict, and potential increased costs associated with new legislation or regulation cannot be estimated at this time. Given the difficulty of predicting the outcomes of ongoing and future regulatory actions and legislative developments, it is possible that they could have a material adverse effect on our business, prospects or operations.

Legislative, regulatory, and litigation threats regarding climate change and energy conservation.

Changing environmental regulation and public energy policy may expose our business to new risks. Our Bitcoin co-location services and mining operations require a substantial amount of power and can only be successful, and ultimately profitable, if the costs we incur, including for electricity, are lower than the revenue we generate from our operations. As a result, our operations can only be successful if we can obtain sufficient electrical power for that mine on a cost-effective basis. For instance, our plans and strategic initiatives for our Pennsylvania and Ohio facilities are based, in part, on our understanding of current environmental and energy regulations, policies, and initiatives enacted by federal and state regulators. If new regulations are imposed, or if existing regulations are modified, the assumptions we made underlying our plans and strategic initiatives may be inaccurate, and we may incur additional costs to adapt our planned business, if we are able to adapt at all, to such regulations.

In addition, there continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty for our business because the cryptocurrency mining industry, with its high energy demand, may become a target for future environmental and energy regulation. New legislation and increased regulation regarding climate change could impose significant costs on us and our suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations. Further, any future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations. Moreover, we currently participate in energy demand response programs to curtail operations, return capacity to the electrical grid, and receive funds to offset foregone operational revenue when necessary, such as in extreme weather events. Given the political significance and uncertainty around the impact of climate change and how it should be addressed, and energy disclosure and use regulations, we cannot predict how legislation and regulation will affect our financial condition and results of operations in the future in the United States and the states of Pennsylvania and Ohio. Further, even without such regulation, increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change or energy use by us or other companies in our industry could harm our reputation. Any of the foregoing could result in a material adverse effect on our business and financial condition.

Changes to laws regarding the operation of Bitcoin mining and Bitcoin and cryptocurrency exchanges by third parties may make the business model unsustainable and may lead to an inability to exchange mined Bitcoin for fiat currency efficiently, or may be made illegal in certain jurisdictions, including the ones we operate in, which could adversely affect our business prospects and operations.

It is possible that state or federal regulators may seek to impose harsh restrictions or total bans on cryptocurrency mining which may make it impossible for us to do business without relocating our co-location and self-mining operations, which could be very costly and time consuming. Further, although Bitcoin and Bitcoin mining, as well as cryptocurrencies generally, are largely unregulated in most countries (including the United States), regulators could undertake new or intensify regulatory actions that could severely restrict the right to mine, acquire, own, hold, sell, or use cryptocurrency or to exchange it for traditional fiat currency such as the United States Dollar. Such restrictions may adversely affect us as the large-scale use of cryptocurrencies as a means of exchange is presently confined to certain regions globally. Such circumstances could have a material adverse effect on us, which could have a material adverse effect on our business, prospects, or operations and potentially the value of any Bitcoin or other cryptocurrencies we or our co-location customers mine, or otherwise acquire or hold, and thus harm investors. We are unable to predict the nature or extent of new and proposed legislation and regulation affecting the cryptocurrency industry, or the potential impact of the use of cryptocurrencies, which could have material adverse effects on our business and our industry more broadly.

We may be subject to material litigation (including with our lenders and counter-parties counterparties), investigations, or enforcement actions by regulators and governmental authorities.authorities that are expensive to support, and if resolved adversely, could harm our business, revenue, and financial results.

We may becomehave been the subject to certain claims, legal proceedings (including individual(See Item 3. Legal Proceedings section) and class actions) andmay 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. Regardless of the merit of particular claims, defending against litigation or responding to government investigations can be expensive, time-consuming, disruptive to operations and distracting to management. If Mawson is unable to successfully defend itself against such claims, then it may become liable to make substantial payments to satisfy judgments, fines or penalties, or alter, delay, limit or cease some or all its business practices. Mawson may suffer damage to our brand and reputation.

Because there has been limited precedent set for financial accounting for bitcoin and other cryptocurrency assets, the determinations that we have made for how to account for cryptocurrency assets transactions may be subject to change.

Because there has been limited precedent set for the financial accounting for bitcoin and other cryptocurrency assets and related revenue recognition and no official guidance has yet been provided by the Financial Accounting Standards Board or the SEC, it is unclear how companies may in the future be required to account for cryptocurrency transactions and assets and related revenue recognition. A change in regulatory or financial accounting standards could result in the necessity to change the accounting methods we currently intend to employ in respect of our anticipated revenues and assets and restate any financial statements produced based on those methods. Such a restatement could adversely affect our business, prospects, financial condition, and results of operation.

Risks Relating to the Ownership of Our Common Stock and Other Common Risks

The trading price of our common stockCommon Stock is likely to continue to be volatile.

The trading price of our common stockCommon 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 stockCommon Stock has experienced fluctuations due to market dynamics, and the Bitcoin downturn, and a Reverse Stock Split.downturn. 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. Our common stockCommon Stock may be traded by short sellers, which may put pressure on the supply and demand for our common stock,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 priceprice.

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. As a result of these factors, quarter-to-quarter comparisons of our financial results may not be useful, and that these comparisons cannot be relied upon as indicators of future performance. Moreover, our financial results may not meet the expectations of equity research analysts, ratings agencies or investors, who may be focused only on short-term quarterly financial results. If any of this occurs, the trading price of our stock could fall substantially, either suddenly or over time.

We may fail to meet our publicly announced guidance or other expectations about our business, which could cause our stock price to decline.

We may provide from time to timetime-to-time guidance regarding our expected financial and business performance. Correctly identifying key factors affecting business conditions and predicting future events is inherently an uncertain process, and our guidance may not ultimately be accurate and has in the past been inaccurate in certain respects, such as the timing of new exahash. Our guidance is based on certain assumptions, and may vary from actual results, Ifif our assumptions are not met or are impacted as a result of various risks and uncertainties, the market value of our common stockCommon Stock could decline significantly.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 1C. CYBERSECURITY.

We recognize the importance of assessing, identifying, and managing risks associated with cybersecurity threats. Accordingly, we address these risks by implementing and maintaining processes, and technologies designed to prevent, detect, and mitigate incidents that could pose cybersecurity risk. We are equally subject to various cybersecurity risks that could adversely affect our business, financial condition, and results of operations, including intellectual property theft; fraud; extortion; harm to employees or customers; interruption of business activities and activities of our customers, violation of privacy laws and other litigation and legal risk; and reputational risk. In adopting our risk assessment and management program, we are committed to safeguarding our systems and data.

We have implemented a risk-based approach, guided by Federal Information Processing Standards Publication 199, to identify, classify, and appropriately assess the range of cybersecurity threats that could affect our business and information systems. We also rely on information technology and third-party vendors to support our operations, including our secure processing of personal, confidential, sensitive, proprietary, and other types of information. Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.

Additionally, we monitor emerging laws, industry standards, and regulations related to information security and data protection. Although we have not experienced any cybersecurity incidents or threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition to date, and though we are actively monitoring our networks and access points by implementing security updates regularly, we cannot provide any assurance that there will not be incidents or threats in the future that may materially affect us, including our business strategy, results of operations, or financial condition.

Pursuant to our risk management policy, responsibility for the implementation of our risk management policy resides with the Chief Financial Officer. The Audit Committee receives an update on the Company’s risk management process, risk trends and any incidents at least annually from the management team. In the event of any incident, the Company expects to notify the Audit Committee immediately, or as soon as possible.

Our cybersecurity policies, standards, processes, and practices are regularly assessed. These assessments incorporate various activities including information security assessments and independent reviews of our information security control environment and operating effectiveness. We utilize managed detection and response systems, endpoint protection, content filtering aimed at blocking malware and software to eliminate phishing, ransomware, and fraud. We also utilize multi-factor authentication on all sensitive applications and information entry-points, review access to data regularly, and have failover-protected business disaster recovery and backup storage systems. The Company conducts cybersecurity training and testing programs regularly.

ITEM 2. PROPERTIES.

Our principal place of business is located at 201 Clark Street, Sharon,950 Railroad Avenue, Midland, Pennsylvania 16146 where we15059. 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.the following leases:

We have long termThe Company leases for each6-acres of our two mining facilities at two separate leased propertiesland in Midland, Pennsylvania, which began in October 2021 for thirty-six months with the option to exercise four additional three-year extensions.

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.

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 USA. Both are former regional industrial sites whichwith Vertua Property, Inc. The term of the lease was for 5 years, with 2 options to extend for 5 years each. 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. The term of the lease is bringing backfor four years, with an option 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].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. 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.

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. 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. 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. 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. 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. 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. 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.

On October 16, 2023, Mr. 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. 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. The proceedings against Michael Hughes and Tom Hughes have been settled.

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. 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.

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. 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. 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. 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. 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.

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.

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.

On October 30, 2023, the directors of the Australian subsidiary, Mawson Infrastructure Group Pty Ltd (“Mawson AU”) appointed voluntary administrators to Mawson AU. 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. 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.

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. 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.

Other than as described above, we are currently not, and have not been in the recent past, a party to any legal proceedingslitigation which may have or have had in the recent past significant effects on our financial position or profitability. However, we have been in the past, and may be from time to time in the future, named as a defendantmay be involved in certain routine litigation incidentalrelated to our business.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 4. MINE SAFETY DISCLOSURES.

Not applicable. 

PART II

ITEM 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, 2023,26, 2024, there were approximately 136118 stockholders on record.record of our common stock. The actual number of beneficial owners of our stock is greater than this number of record holders because there are beneficial owners whose shares are held in street name by brokers and other nominees.

Dividend Policy

We have not paid any cash dividends on our Common Stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements of our business. 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.

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 holdersDuring the option to elect for pre-payment (including accrued interest to maturity) subject to certain conditions. Payments of the interestyear ended December 31, 2023, there were permitted to be made partially in common stock of Mawson, at Mawson’s election. 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 104,178no other unregistered sharessales of our common stock to the holders of the Secured Convertible Promissory Notes during January 2023. 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.

We believesecurities 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. The offerings were not “public offerings” as definedreported 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. In addition, these security holders represented as to the necessary investment intent as required by Section 4(a)(2) and/a Current Report on Form 8-K or Regulation D. We did not employ an underwriter in connection with the issuance of the securities described above.our Quarterly Reports on Form 10-Q.

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.

Annual Report.

ITEM 6. [RESERVED]

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, 20222023 and 20212022, 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. This discussion and analysis containscontain 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.dollar unless otherwise stated.

Pursuant to that certain Certificate of Amendment to the Certificate of Incorporation of the Company dated February 6, 2023 Mawson executed at a ratio of 1-6 reverse stock split of its outstanding common stockCommon Stock and reduced its authorized common stock to 90,000,000 shares, as set forth in the Company’s Current Report on Form 8-K filed February 9, 2023. 

OverviewBusiness overview

Mawson Infrastructure Group Inc. (the “Company” or “Mawson” or “we”) is a ‘Digital Asset Infrastructure’ business, which owns and operates (through its subsidiaries) modular data centers (“MDCs”)digital infrastructure company headquartered in the United States. We are also developing technology to enable us to own and better operate MDCs.

OurThe Company has 3 primary business is the ownershipbusinesses – digital currency mining, co-location and operation of the digital infrastructure associated with the operation of blockchain applications. 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.related services, and energy markets.

InThe Company develops and operates digital infrastructure for digital currency, such as bitcoin, mining activities on the Bitcoin blockchain network. 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. The Company also has an energy markets program through which it can receive net energy benefits in exchange for powering down our systems and curtailing the power we getutilize from the grid in response to instances of high electricity demand,demand. As of the date of this Annual Report, 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. 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 changesoperate two data center facilities in fair value recognized in our statement of operations.Pennsylvania, USA.

 We offer ‘hosting’ or ‘co-location’ facilities to other businessesThe Company may also transact 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).

We also sell new and used crypto currency mining, data center infrastructure and MDCrelated equipment on a periodic basis, subject to prevailing market conditions and our surplus production capacity.conditions.

AsThe Company designs, develops, operates and manages its digital infrastructure to responsibly support the Bitcoin network by contributing to the scale, structure, and decentralization of December 31, 2022

We continuethe Bitcoin network and optimizing energy consumption. The Company helps contribute to conduct researchthe ecosystem and development in relationgrowth of digital currencies and commodities as there continues to our MDCs which we are actively testing in several configurations and locationsbe a global transition to determine the best configuration for both ASIC and alternate computing uses.new digital economy.

Prior LO2A BusinessWe strive to operate and invest in markets and communities that offer low or zero-carbon renewable energy sources and participate in energy management activities. We also invest in the communities in which we operate to support our broader ecosystem.

On March 9, 2021,Bitcoin mining and co-location power capacity

Towards the Company acquired the sharesclose of Mawson AU in a stock2023, Mawson’s two Pennsylvania sites, Midland and Bellefonte had approximately 109 MW of total power capacity capable of supporting 35,650 miners 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 treatmenteither self-mining or co-location services. The Midland facility had approximately 100 MW of ophthalmic disorders, including dry eye syndrome (our “LO2A business”). 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. The asset was therefore assessed as impairedtotal power and the prior carrying amountcapacity to support a total of $23.96 million has been fully expensed in the consolidated statementsapproximately 32,930 miners for self-mining and/or co-location services. As of operations for the year ended December 31, 2021.2023, the Bellefonte facility was operating at approximately 8.8 MW of capacity and continues to be used entirely for self-mining purposes.

Recent Developments.

On February 23, 2022, Luna SquaresOctober 4, 2023, the Company received written notice from The Nasdaq Stock Market LLC entered into(“Nasdaq”) indicating that the Co-Location AgreementCompany was not in compliance with Celsius Mining LLC (“Celsius Mining”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”). In accordance with Nasdaq Listing Rule 5810-2(c)(3)(A), pursuantthe Company had a period of 180 calendar days, or until April 1, 2024, to which Luna Squares LLC provides a hosting facility, electrical power and internet access to Celsius Mining forregain compliance with the purposesBid Price Rule. To regain compliance, the closing bid price of installing, maintaining and operating Celsius Mining’s ASIC machines (cryptocurrency mining equipment)the Company’s Common Stock had meet or exceed $1.00 per share for a monthly services fee based on power consumption, plus an infrastructure fee, plus a market margin. In addition, Celsius Mining loaned Luna Squares LLC a principal amountminimum of US$20,000,000 (“Principal”), forten consecutive business days during this 180-day period. On December 19, 2023, the purpose of fundingCompany received formal written notice from Nasdaq indicating that 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. 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 Promissory Note includes customary events of default and remedies. In connectionCompany had regained compliance 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. 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.

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. 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. 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. 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. 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. 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.

Bid Price Rule.

 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. 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. 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. 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. In return for certain services provided by JAI TX, LLC, JAI TX, LLC will be entitled to a share of all Electric Reliability Council of Texas program payments paid to Luna Squares Texas LLC (“ERCOT Payment”), as well as a share of the Bitcoin profit from the Texas locations less certain costs, including depreciation. Capital costs for Luna Squares Texas LLC are expected to exceed $4.19m. See further details regarding the sale of Luna Squares Texas LLC below.

On May 27, 2022, Mawson entered into an ATM Agreement with H.C. 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. We will pay Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of Shares and have agreed to provide Wainwright with customary indemnification and contribution rights. We will also reimburse Wainwright for certain specified expenses in connection with entering into the ATM Agreement. The ATM Agreement contains customary representations and warranties and conditions to the sale of the Shares pursuant thereto.

During June 2022 Mawson AU Limited entered into a share subscription and equipment sale deed with Tasmania Data Infrastructure Pty Ltd (“TDI”). TDI has a proposed 100% renewable energy Bitcoin Mining facility at the Que River Mine Site in Tasmania, Australia. Mawson AU Limited has agreed to exchange approximately 2,144 ASIC Bitcoin Miners for 107,042,254 fully paid issued shares in TDI.

On September 8, 2022, we entered into a (i) Purchase and Sale Agreement with CleanSpark (as amended, “Purchase Agreement”), and (ii) an Equipment Purchase and Sale Agreement. Pursuant to the Purchase Agreement, CleanSpark assumed from us a lease for approximately 16.35 acres of real property located in Sandersville, Washington County, Georgia, and all personal property situated on the (“Georgia Property”). This transaction closed on October 8, 2022, CleanSpark paid the following consideration to the Company pursuant to the Purchase Agreement: (i) $13.50 million in cash; (ii) 1,590,175 shares of common stock, par value $0.001 per share of CleanSpark (valued at $4.8 million October 7, 2022), and (iii) $6.5 million in Seller financing in the form of promissory notes. The Promissory Note was paid down in full on December 16, 2022. Pursuant to the Equipment Purchase Agreement, CleanSpark purchased from the Company, application-specific integrated circuit miners, and this transaction closed on October 8, 2022 for $9.48 million in cash (which was later reduced to $9.02 million upon reduction in the number of miners). Additional consideration of 1,100,890 shares of CleanSpark Common Stock was paid to the Company pursuant to the Purchase and Sale Agreement after it successfully emptied all required modular data centers on the Georgia Property and made them available for use by CleanSpark. We achieved this on December 30, 2022 and received the shares on January 13, 2023. Further potential consideration of $2 million in cash if CleanSpark is able to utilize at least an additional 150 MW of power on the property by the six month anniversary of the Closing Date.

On March 8,October 12, 2023, the Company entered into a Member Interest Purchasenew Service Framework Agreement (“MIPA”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”) as well as an Equipment Purchase and Sale. The Service Framework Agreement (“EPSA”) with BMF Holding GP PTE. LTD. (“BMF”). Pursuanthas the Company providing co-location services to the MIPA,customer for 12 months and the Company has agreed to sell all its member interests in Luna Squares Texas LLC, a Delaware limited liability company, which is a wholly-owned subsidiary of Company, and holds 4 leases in Texas, and various related contracts. Under the EPSA the Company will sell 59 transformers. Total consideration for this sale was $8.5 million and 400 Ethereum. As part of this transaction Luna Squares Texas LLC acquired all the memberships’ interests in an entity known as JAI TX LLC, which is party to some relevant contracts related to the Texas leases.parties can extend further upon mutual agreement.

Our legacy business was as a clinical-stage biopharmaceutical company focused on the treatment of ophthalmic disorders, including dry eye syndrome. All of the economic benefits of any successful monetization of our LO2A business, if any, would benefit only the holders of contingent value rights (“CVR”) and any contingent right holders. Accordingly we assessed that the fair value of this asset at the acquisition date was $nil. 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 endedOn December 31, 2021.On March 8, 2021, the Company entered into the Contingent Value Rights Agreement (“CVR Agreement”), pursuant to which certain holders of the CVRs had certain rights to any value created in respect of the LO2A business previously carried on by the Company. Despite the holders’ representative’s good faith endeavors, the holders’ representative was unable to procure a suitable transaction. On March 9, 2023, the CVR Agreement was terminated, and the rights of the CVR holders under that agreement expired at the same time. On February 7,26, 2023, the Company entered into a share purchase agreement with N.Danenberg Holding (2000) Ltdan additional Addendum to sellthe Employment Agreement between the Company and Rahul Mewawalla, the Company’s shares or interestsChief Executive Officer and President, dated May 22, 2023 (the “Addendum B”). 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. Mewawalla receiving fully vested restricted stock unit awards and compensation in Wize NC Inc, Occuwize Ltd and Wize Pharma Ltd (“Wize Entities”) effective Decembercalendar year 2024, but no later than October 31, 2022 in consideration for $10,000. This transaction closed on March 9, 2023. As a result2024, as per the Addendum B. The Addendum B also updates certain provisions of the sale transactionEmployment Agreement as per the Wize Entities were deconsolidated from the group effective December 31, 2022.Addendum B.

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.

COVID-19.Mr. 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. 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. 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. 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. 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. Manning’s May 2023 Separation Agreement should not be issued by the Company.

The COVID-19 global pandemic has been unpredictable and unprecedented. The Company relies on equipment supplied by third parties which, like many manufacturing businesses globally, are at risk of supply chain issues. While the effects of the COVID-19 pandemic have continued to recede, and we currently do not expect any material impact on our long-term development, operations, or liquidity, we continue to monitor the situation.

Regulation of Digital Assets

Digital assets and cryptocurrencies are constantly the subject of proposed regulatory oversight. In the USA most proposals relate to the issue of cryptocurrencies, and consumer protections. Some laws have been enacted in North America to limit Bitcoin mining activities in certain regions where the Company is not active, and no such laws are proposed in the areas where the Company is active, or plans to be active. China [reportedly] banned Bitcoin mining within its borders, which forced many local miners to commence mining activities in neighboring Kazakhstan, taking advantage of that country’s subsidized power. Due to the influx of mining activity, Kazakhstan was forced to import power from neighboring countries at great cost, however rather than ban mining activities the government has sought to minimize the negative effects of mining by issuing mining licenses and conditioning mining activity. We do not believe our mining activities require licensing or registration or any kind, including to conduct mining activities and selling of digital assets produced. Mawson does not accumulate or hold large amounts of digital assets for prolonged periods. It is likely that regulation in the digital asset industry will increase.

In the past it has also been noted that the SEC, the Commodity Futures Trading Commission (“CFTC”), Nasdaq or other governmental or quasi-governmental agency or organization (including similar authorities in other jurisdictions such as Australia) may conclude that our digital asset mining activities involve the offer or sale of “securities”, or ownership of “investment securities”, and we may face regulation under the Securities Act of 1933, as amended (the “Securities Act”) or the Investment Company Act of 1940. Such regulation or the inability to meet the requirements to continue operations, would have a material adverse effect on business, financial condition, results of operations and prospects of our business. The effect of any future regulatory change, including tax treatment, on digital assets or an entity dealing in or holding digital assets is impossible to predict, but such change could be substantial and adverse to our financial returns. 

Environment, Sustainability, Governance

Mawson has a strategy to source renewable or sustainable sources of energy, including carbon-neutral or low carbon emissions sources for the majority of its operations. This is a key criteria when analyzing a new site for acquisition, or selling an existing site. Mawson believes it can make a positive contribution towards lowering carbon emissions by supporting low-emissions power sources.

The Company can provide, and has provided, electricity grid stability by curtailing its power usage during times of high power prices through its Energy Markets Program, for example through its membership in the PJM Market, and various demand response programs where they are available.

The Company recognizes the challenges posed by climate change, including regulatory, increased costs, and adverse weather events, and seeks to mitigate these risks by for example ensuring that it is informed of regulatory changes, keeping involved with industry groups and thought leaders, and ensuring that physical mitigation steps are undertaken, such as during the process if selecting sites in lower risk climates and regions (i.e. cooler climates, less prone to flooding, cyclones or wildfires), and then ensuring that the construction of the sites takes into account potential climate or weather-related events.

Results of Operations

RevenueRevenues

Cryptocurrency miningDigital currency revenues from productionself-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. 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. The sale of the Georgia facility included the sale of 6,468 miners. Due to the change in portfolio of operating facilities, consequently less miners were deployed during 2023. Bitcoin produced in 2023 totaled 741.33 compared with 1,342.59 in the 2022 period, a decrease of 45% of bitcoin produced over the respective period. The average price of bitcoin during both the year ended December 31, 2023, and 2022 remained relatively consistent. During the year ended December 31, 2023, the average price of bitcoin was $28,893 whereas the average price of bitcoin during year ended December 31, 2022 was $28,205.

Co-location services revenue for the years ended December 31, 2023 and 2022, and 2021 were $43.11$16.36 million and $38.45$13.34 million, respectively. This represented an23% year over year increase of $4.65 million or 12% over the year. The increase in mining revenue for the year was primarily attributable to the increase in the Bitcoin produced, in total 1,342.59 were produced in 2022 compared with 808.88 in the 2021 period, or an increase of 66% of Bitcoin produced over the respective period. This increase is offset by an decrease in the in average price of Bitcoin, in the 2022 period the average price was $28,205 whereas in the 2021 period the average price was $47,390, or a 40% decrease in the average Bitcoin price over the respective period.

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 miners we co-located during 2023. The Company announced the Service Framework Agreement on October 19, 2023, providing co-location customers that we hosted duringservices to a subsidiary of Consensus Technology Group LLC for 50 MW. The Company also announced on December 19, 2023, it had signed another new customer co-location agreement with Krypton Technologies LLC for 6 MW, both these agreements replace the yearCustomer Equipment Co-Location Agreement the Company’s subsidiary, Luna Squares LLC, had with Celsius Mining LLC, which expired on August 23, 2023.

Net energy benefits for the years ended December 31, 2023 and 2022, were $5.35 million and $13.70 million, respectively. This represented a decrease of $8.35 million or a 61% decrease. This decrease is due to the Company participating less in the energy programs in 2023 because of lower power prices than in 2022.

Sales of crypto currencydigital mining equipment for the year ended December 31, 2022 and 2021 were $14.24 million and $2.16 million, respectively.

Net energy benefits (which comprises curtailment income and sale of excess energy to the grid) for the years ended December 31, 2023 and 2022, and 2021, were $13.70$0.26 million and $0$14.24 million, respectively. This increase is due to there being no income from energy contracts in the 2021 period because we did not offer this service at that time.

Operating costs and expenses

Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; sharestock based payments;compensation; change in fair value of derivative asset; and depreciation and amortization.

Cost of revenues

Our cost of revenue consists primarily of:of direct power costs related to cryptocurrencydigital currency mining and hosting,co-location services and cost of mining equipment sold.

Cost of revenuesrevenue for the yearyears ended December 31, 2023 and 2022, and 2021 were $47.72$28.56 million and $9.90$47.7 million, respectively. The increasedecrease in cost of revenue was primarily attributable to an increasea decrease in power costs related to energy costsused to operate our self-mining equipment and co-location services. This decrease is attributable to the mining equipment within our owned and hosting facilities.change in the Company’s portfolio of operating facilities in 2023, where the Company had operations across its two Pennsylvania facilities, whereas the prior period included the operations of the Georgia facility including 6,468 miners, which was sold by the Company in October 2022.

Selling, general and administrative

Our selling, general and administrative expenses consist primarily of professional and management fees relating to: accounting, payroll, audit, andemployee compensation, audit; legal; equipment repairs; marketing; freight; insurance; consultant fees; lease amortization and general office expenses.

Selling, general and administrative expenses for the years ended December 31, 2023 and 2022, were $19.18 million and 2021 were $25.85 million, and $16.06 million respectively. The increase inTotal selling, general and administrative expenses were attributablelower by $6.67 million in 2023. Some of the main factors contributing to a number of factors;the decrease in the expenses were lower payroll costs increasedthat decreased by $6.24 million due to an increase in employee numbers;$0.51 million; consultant fees that decreased by $0.73 million; marketing costs that decreased by $1.05 million; while contract labor costs decreased by $1.34 million; and equipment repairs increaseddecreased by $2.11 million; lease amortization increased by $1.18$2.30 million, due to new leases entered intoas a result of the cost reduction actions that the Company had undertaken during the year; marketing expense increased by $1.0 million and there was an increase in property business insurance by $0.8 million. These increases were partially offset by: a decrease in freight expenses by $1.37 million; a decrease in research and development expenses by $1.08 million; and a decrease in legal expenses by $0.8 million. The remaining increase in expenses relates to the increase in the scale of business operations during the year.

2023.

Share based payments

Stock based compensation

Share

Stock based paymentcompensation expenses for the years ended December 31, 2023 and 2022, were $10.83 million and $3.01 million, respectively. In the year ended December 31, 20222023, stock based compensation was largely attributable to costs recognized for warrants issued to Celsius Mining LLC amounting to $1.84 million, shares issued to W Capital Advisors Pty Ltd amounting to $0.31 million for consultancy and 2021 were $3.01advisory work and $9.60 million and $22.49 million respectively. Inin relation to the year toCompany’s employees’ long-term incentive plans. 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. Whereas in December 31, 2021 share based payments were largely attributable to HC Wainwright Warrants $6.18 million, W Capital Warrants of $5.78 million, $10.00 million for amounts related to the obligation of Mawson to issue RSU’s pursuant to the terms of the Bid Implementation Agreement for the Cosmos Transaction and $0.33 million costs recognized in relation long-term incentives for the leadership team.

Depreciation and amortization

Depreciation consists primarily of depreciation of cryptocurrencydigital currency mining hardware and modular data center (MDC)MDC equipment.

Depreciation and amortization for the yearyears ended December 31, 2023 and 2022, and 2021 were $63.20$38.08 million and $14.11$63.20 million, respectively. The increasedecrease is primarily attributable to the newCompany owning less miners and MDCs which have been procured and have come into use byin 2023 following the Companysale of its Georgia facilities in the year ended December 31, 2022 being greater than in the year ended December 31, 2021, and the application ofOctober 2022. There was also a revised estimate of the of the useful life of miners with effect fromeffective on December 1, 2022, to better reflect the pattern of consumption, the change being effected by changingand the method of depreciation was changed from reducing balance to the straight line method from that date.

Change in fair value of derivative asset

During the yearyears ended December 31, 2023 and 2022, there was a change inloss 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 pricingsupply arrangements. 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, loss on write off of property and equipment, fair value loss on investments, and share of losses of equity accounted investments.investments and other expenses.

Interest expense for years ended December 31, 2023 and 2022, were $3.05 million and $6.06 million, respectively. This was a decrease of $3.01 million, which was attributable to the paydown of debt during 2023.

During the year ended December 31, 2022,2023 the realized and unrealized loss on foreign currency transactions was $6.67Company recognized an impairment of $1.84 million and for the year ended December 31, 2021, thereequity accounted investment in Tasmania Data Infrastructure Pty Ltd (“TDI”). The impairment was recognized on the basis of TDI’s updates and its change in strategic direction, including changing from being a lossbitcoin miner to mine copper and gold and therefore the value of $0.93 million.

Interest expense forthe company was deemed much lower than our investment value. During the year ended December 31, 2022, and 2021 were $6.06 million and $1.64 million, respectively. This was an increase of $4.42 million which was attributable to the interest costs charged on the new loans taken out with Celsius Mining LLC, W Capital Advisors Pty Ltd and the Secured Convertible Promissory Notes issued in July of 2022. 

There was a loss from the write off of property and equipment for the years ended December 31, 2022 and 2021 of $1.56 million and $0.47 million respectively.

There wasCompany recognized an impairment of financial assets during the year to December 31, 2022$3.38 million of $3.38 million,which $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 was in relation to the deconsolidation of the Wize Entities.

There was fair value loss on investments of $1.69 million duringDuring the year to December 31, 2022, this was in relation to the decrease in the share price of the investment held in CleanSpark, a NASDAQ listed company.

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 yearyears ended December 31, 2023 and 2022, the realized and 2021unrealized loss on foreign currency transactions was $1.74 million and $6.67 million, respectively. The current year loss relatedThis movement was due to the equity accounted investmentmovement in TDI whereas the prior year loss related to the equity accounted investment Distributed Storage Solutions Pty Ltd (“DSS”).foreign exchange rates.

Non-operating income

Non-operating expenses consistincome consists primarily of profit on the sale of our Georgia site assets, gain on sales of marketable securities, gain on deconsolidation and other income.

DuringThe profit on sale of site for the yearyears ended December 31, 2023 and 2022, there was profitwere $3.35 million and $8.28 million, respectively. The 2023 amounts related to the sale of site of $8.28 million. This sale was in relationthe 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 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, 2022, there2023, the Company recognized a deconsolidation gain of $9.47 million. This gain was other income recognized which mainly consistedas a result of Mawson Infrastructure Group Pty Ltd going into voluntary administration and accordingly the licensesubsidiary was deconsolidated. The deconsolidation gain recorded was as a result of our intellectual propertyremoving the net assets and certain liabilities of $1.46 million and $0.53 millionthis subsidiary from the consolidated financial statements. See Note 3 Subsidiary Deconsolidation for curtailment income. The license of our intellectual property relates to consulting and advisory services to enable TDI to build a facility in Tasmania, Australia.further discussion.

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, and 2021 of $52.76$60.42 million and $44.96$52.76 million, respectively.

Non-GAAP Financial Measures

The Company utilizes a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing its overall business performance, for making operating decisions and for forecasting and planning future periods. The Company considers the use of non-GAAP financial measures helpful in assessing its current financial performance, ongoing operations and prospects for the future. While the Company uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, the Company does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, the Company believes that disclosing non-GAAP financial measures to the readers of its financial information provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. Investors are cautioned that there are inherent limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and many of the adjustments to the GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in the company’s financial results for the foreseeable future. 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.

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,income tax, depreciation, amortization, share-basedstock based compensation expense, LO2A write-back,change in fair value of derivative asset, impairment of financial assets, unrealized gains/losses, on share of associates,net loss of equity method investments, gain on deconsolidation and certain non-recurring expenses. We believe that adjusted EBITDA is useful to investors in comparing our performance across reporting periods on a consistent basis.basis where one-time, or non-recurring gains or losses or expenses unrelated to operating activities would otherwise mask the Company’s operating performance.

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. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures. For the year ended December 31, 2022,2023, we financed our operations primarily through:

During the year ended December 31, 20222023, we repaid $28.0$12.46 million of principal payments against the historical facilities provided by Foundry, Celsius, Marshall and W Capital and the convertible notes.Advisors Pty Ltd.

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, and further issuances of shares.shares, and other potential sources of capital, monetization or funds. These are expected to be adequate to fund our operations over the next twelve months. 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 willmay continue investing in mining equipment but we are likely toand infrastructure and will require additional working capital in either the short-term and long-term. As of December 31, 2023, we had an aggregate of $19.35 million of debt of which $16.87 million is overdue for repayment and the remaining is all required to be repaid within two months of December 31, 2023 unless we refinance or long-term.renegotiate the terms. In addition, the Celsius deposit of $15.33 million is the subject of an ongoing legal dispute.

Working Capital and Cash Flows

As of December 31, 2022,2023 and December 31, 2021,2022, we had a cash and cash equivalent balance of $4.48 million and $0.95 million, and $5.47 million inrespectively. The Company expects to continue to focus on improving its cash andflows through a number of various activities that should better position our future cash equivalents, respectively.position.

As of December 31, 2022,2023 and December 31, 2021,2022, the trade receivables balance was $10.46$12.11 million and $5.61$10.46 million, respectively.

As of December 31, 2022,2023, we had $23.61$19.35 million of outstanding short-term borrowings, and as of December 31, 2021,2022, we had $11.10$23.61 million of short-term borrowings. The short-term borrowings as of December 31, 2022,2023, relate to Celsius Mining LLC, W Capital Advisors Pty Ltd, the secured convertible promissory notes issued to investors and Marshall Investments MIG Pty Ltd.Ltd (these loans are currently in default, refer to Material Cash Requirements section below for more information). As of December 31, 2022,2023 and as of December 31, 2021,2022, we had $4.51 million$0 and $7.64$4.51 million, respectively, of outstanding long-term borrowings. The long-term borrowings as of December 31, 2022, relate to the secured loan facility with Marshall Investments MIG Pty Ltd.

As of December 31, 2023 and 2022, we had negative working capital of $33.18 million and $15.17 million, and as at December 31, 2021, we had negative working capital of $8.63 million. The decrease in working capital was primarily attributable to an increase in the Company’s short term and long-term borrowings during 2022, as compared to 2021.respectively.

The following table presents the major components of net cash flows (used in)/provided by operating, investing and financing activities for the yearyears ending December 31, 20222023 and 2021:2022:

For the year ended December 31, 2022,2023, net cash providedused by operating activities was $14,256,294$2.55 million and for the year ended December 31, 2021,2022, net cash usedprovided in operating activities was $22,953,792.$14.26 million. 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, 2022,2023, net cash provided by investing activities was $10.74 million and 2021,for the year ended December 31, 2022, net cash used in investing activities was $32,540,422 and $128,247,751, respectively.$32.54 million. The decrease in net cash used inprovided by investing activities during the year ended December 31, 2023, was primarily attributable to the decreaseproceeds from sale the subsidiary Luna Squares Texas LLC and the 59 transformers, as well as the proceeds from the sale of shares in the acquisition of cryptocurrency mining equipment.CleanSpark, Inc.

For the year ended December 31, 2022,2023, net cash used in financing activities was $4.65 million and 2021,for the year ended December 31, 2022, net cash provided by financing activities was $13,986,496 and $109,854,460, respectively.$13.99 million. The decreasecash used in net cash provided by financing activities during the year ended December 31, 2023, was primarily attributable to proceedsthe repayment of borrowings.

Material Cash Requirements

The following discussion summarizes our material cash requirements from contractual and other obligations. For more information on these matters, please see Item 3. Legal Proceedings section.

On December 9, 2021, 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) entered into a Secured Loan Facility Agreement with Marshall Investments MIG Pty Ltd. The loan matured in February 2024 and bears interest at a rate of 12% per annum (with an overdue rate provision of an additional 500bps), payable monthly with interest payments that commenced in December 2021. This loan facility is secured by direct assets of MIG No.1 Pty Ltd and a general security agreement given by the capital raisesCompany. Principal repayments began during November 2022. The outstanding balance is $9.10 million as of December 31, 2023, all of which occurredis classified as a current liability. MIG No. 1 Pty Ltd has not made a principal and interest payment since May 2023. MIG No. 1 is in receivership under Australian law. All relevant parties have reserved their respective rights.

On February 23, 2022, Luna Squares LLC entered into a Co-Location Agreement with Celsius Mining LLC. 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. 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. The Secured Promissory Note has a maturity date of August 23, 2023, the outstanding balance is $8.54 million as of December 31, 2023, all of which is classified as a current liability. Celsius Mining LLC transferred the benefit of the promissory note to Celsius Network Ltd. Celsius Mining LLC and Celsius Network Ltd filed for Chapter 11 bankruptcy protection on July 13, 2022. Under the Co-location Agreement, Celsius Mining LLC advanced $15.33 million to Luna Squares LLC that was held as a deposit. Whether that amount has been forfeited or must be returned to Celsius Mining LLC is the subject of a dispute between the parties.

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). 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 Secured Loan Facility expired in March 2023 and Mawson Infrastructure Group Pty Ltd and W Capital Advisors Pty Ltd are in ongoing discussions in respect of the facility. On October 30, 2023, Mawson AU appointed voluntary administrators, and the facility will be managed as part of the voluntary administration. Refer to note 3 subsidiary deconsolidation for further information.

On July 8, 2022, the Company issued secured convertible promissory notes to investors in the prior period.aggregate principal amount of $3.60 million (the “Secured Convertible Promissory Notes”) in exchange for an aggregate of $3.60 million in cash. On September 29, 2022, the Company entered into a letter variation relating to some of the 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. 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. The final convertible noteholder who was not a party to this variation opted to enter into an arrangement whereby it received pre-payment of interest but agreed that repayment of the principal was not required therefore the remaining $0.50 million has been classified as a current liability. The convertible note matured in July 2023 and the Company has not repaid the principal amount as of December 31, 2023. Interest has been accrued from July onwards and therefore the outstanding balance is $0.57 million as of December 31, 2023, all of which is classified as a current liability. During March 2024 the principal amount outstanding of $0.50 million was repaid to the investor.

Financial condition

As of December 31, 2023, and 2022, we had net current liabilities of $33.18 million and $15.17 million, respectively. As of December 31, 2023 and 2022, we had net assets of $30.38 million and $76.17 million, respectively. As of December 31, 2023, we had an accumulated deficit of $182.67 million compared to $122.26 million as of December 31, 2022. Our cash position of December 31, 2023, was $4.48 million in comparison to $0.95 million as of December 31, 2022. For the years ended December 31, 2023 and 2022 the Company incurred a loss after tax of $60.42 million and a loss after tax of $52.76 million, respectively. Included in trade and other receivables is a $2 million payment being the final payment due from CleanSpark, Inc for the sale of the Georgia facility. CleanSpark, Inc has disputed this payment. On December 22, 2023, the Company made formal demand on CleanSpark Inc. and CSRE Properties Sandersville, LLC for $2,000,000 for breach of contract on the debtors’ obligation to pay for an energy earnout provision contained in a Bill of Sale dated October 1, 2022 between the parties. 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.

Our primary requirements for liquidity and capital are working capital, capital expenditures, public company costs and general corporate needs. In particular, we have large power usage costs, and other significant costs include our lease, operational and employee costs. We expect these capital and liquidity needs to continue as we further develop and grow our business. Our principal sources of liquidity have been and are expected to be our cash and cash equivalents, external debt facilities available to us and further issuances of shares.

We require additional capital to respond to near-term debt repayment obligations, competitive pressure, market dynamics, new technologies, customer demands, business opportunities, challenges, potential acquisitions or unforeseen circumstances, and we will likely need to determine to engage in equity or debt financings in the short term. If we are unable to obtain adequate financing on terms satisfactory to us when we require it, our ability to continue to fund, grow or support our business model and to respond to business challenges could be significantly limited, our business, financial condition and results of operations could be adversely affected, and this may result in bankruptcy or our ceasing operations.

The Company is taking steps to preserve cash by optimizing costs and negotiating with suppliers to improve their terms of trade. The Company has been improving its revenue generation by improving the efficiency of its operations and adding co-location services customers. The Company will continue to seek to optimize its cashflows.

Recently Issued Accounting Pronouncements

For information with respect to recent accounting pronouncements, see Note 2v2 to our audited consolidated financial statementsConsolidated Financial Statements included in this Annual Report on Form 10-K for the year ended December 31, 2022.2023.

Critical Accounting Policies

Revenue Recognition – Digital asset mining revenue

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of ASC 606 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Five steps are required to be followed in evaluating revenue recognition: (i) identify the contract with the customer; (ii) identity the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfied a performance obligation.

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

There is currently no specific definitive guidance in U.S. GAAP or alternative accounting frameworks for the accounting of managing digital currencies and management has exercised significant judgement in determining appropriate accounting treatment for the recognition of revenue for such operations.

The Company has entered into a contract with mining pools and has undertaken the performance obligation of providing computing power in exchange for non-cash consideration in the form of cryptocurrency. The provision of computing power is the only performance obligation in the Company’s contract with its pool operators. Where the consideration received is variable (for example, due to payment only being made upon successful mining), it is recognized when it is highly probable that the variability is resolved, which is generally when the cryptocurrency is received.

The Company measures the non-cash consideration received at the fair market value of the cryptocurrency received. Management estimates fair value on a daily basis, as the quantity of cryptocurrency received multiplied by the price quoted on the crypto exchanges that the Company uses to dispose of cryptocurrency on the day it was received.

Property and equipment

Property and equipment are stated at cost, net of accumulated depreciation. The cost includes any cost of replacing part of the property and equipment with the original cost of the replaced part being derecognized. All other repair and maintenance costs are recognized in profit or loss incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. Property, plant and equipment transferred from customers is initially measured at the fair value at the date on which control is obtained.

The depreciable amount of fixed assets is depreciated on a straight-line or declining balance basis based on the asset classification, over their useful lives to the economic entity commencing from the time the assets arrive at their destination where they are ready for use. Low-cost assets are capitalized and immediately depreciated. Depreciation is calculated over the following estimated useful lives:

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognized.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

The Company changed its policy in relation to freight costs in relation to processing machines with effect from October 1, 2021. Prior to this date these costs were expensed to the statement of operations and profit and loss, and afterwards these costs are capitalized into processing machinery. This change resulted in an increase in processing machines in the balance sheet of $3,130,638 as at December 31, 2022, and an increase in the depreciation charge to the year to December 31, 2022 statement of operations and profit and loss of $84,735 over the prior treatment.

The Company’s long-lived assets are reviewed for impairment in accordance with Accounting Standards Codification (“ASC”) 360, “Property, Plant and Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Fair value of and recognition of revenue from financial instruments:

The Company accounts for financial instruments under FASB Accounting Standards Codification Topic (“ASC”) 820, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

Level 3 — assets and liabilities whose significant value drivers are unobservable. Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.

Level 1 Assets:Estimates

The Company held 50 million sharespreparation of the financial statements in DXN Limited (“DXN”), an Australian Securities Exchange (“ASX”) listed company as at December 31, 2021. This was recorded at fair valueconformity with changes in fair value recognizedU.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying unaudited condensed consolidated statementsnotes. The Company evaluates on an ongoing basis its assumptions. The Company’s management believes that the estimates, judgments, and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of operations. The fair valueassets and liabilities and disclosure of contingent assets and liabilities at the dates of the DXN investment isconsolidated financial statements, and the reported amounts of income and expenses during the reporting periods. Actual results could differ from those estimates. The Company has considered the following to be significant estimates made by management, including but not limited to, going concern assumptions, estimating the useful lives of fixed assets, realization of long-lived assets, unrealized tax positions and the realization of digital currencies, valuing the derivative asset classified inunder Level 1 of the3 fair value hierarchy, as it is quoted on an active market, that being the ASX. During the year ended December 31, 2022, the Company sold all its shares in DXN.

The Company holds 1.59 million shares in CleanSpark, as at December 31, 2022. This was recorded at fair value with changes in fair value recognized in the accompanying consolidated statements of operations. The fair value of the CleanSpark investment is classified in Level 1 of the fair value hierarchy as it is quoted on an active market, that being the Nasdaq.

Level 3 Assets:

Power Supply Agreement

In June 2022, the Company entered into a Power Supply Agreement with Energy Harbor LLC, the energy supplier to the Company’s Pennsylvania facility, to provide the delivery of a fixed portion of the total amount of electricity for a fixed price through to December 2026. If the Pennsylvania facility uses more electricity than contracted, the cost of the excess is incurred at a new price quoted by Energy Harbor LLC.

While the Company manages operating costs at the Pennsylvania facility in part by periodically selling unused or uneconomical power back to the market, the Company does not consider such actions trading activities. That is, the Company does not engage in speculation in the power market as part of its ordinary activities. Because the sale of any electricity under a curtailment program allows for net settlement, the Company has determined the Power Supply Agreement meets the definition of a derivative under ASC 815, Derivatives and Hedging, (“ASC 815”). However, because the Company has the ability to sell the power back to the grid rather than take physical delivery, physical delivery is not probable through the entirety of the contract and therefore, the Company does not believe the normal purchases and normal sales scope exception applies to the Power Supply Agreement. Accordingly, the Power Supply Agreement (the non-hedging derivative contract) is recorded at estimated fair value each reporting period with the change in the fair value recorded in change in fair value of derivative asset in the consolidated statements of operations (refer to fair value of financial instruments policy).

The Power Supply Agreement was classified as a derivative asset from the quarter ended 30 June 2022 and measured at fair value on the date of Power Supply Agreement, with changes in fair value recognized in the accompanying unaudited condensed consolidated statements of operations. The estimated fair value of the Company’s derivate asset is classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs utilized in the valuation. Specifically, the Company’s discounted cash flow estimation models contain quoted commodity exchange spot and forward prices and are adjusted for basis spreads for load zone-to-hub differentials through the term of the Power Supply Agreement, which ends in December 2026. In addition, the Company adopted a further discount rate of approximately 20% above the terminal value of the observable market inputs, but also includes unobservable inputs based on qualitative judgment related to company-specific risk factors. The terms of the Power Supply Agreement require pre-payment of collateral, calculated as forward cost based on the market cost rate of electricity versus the fixed price stated in the contract.

Share based payments

The Company follows FASB Codification Topic ASC 718-10 Compensation-Stock Compensation. The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards. The Company determines the grant date fair value of the restricted stock units (“RSUs”) and options using the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. These assumptions are the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility computes stock price volatility over expected terms based on its historical common stock trading prices. Risk–free interest rates are calculated based on the implied yield available on U. S. 10-year Treasury bond.contingent obligation with respect to future revenues.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

All information required by this item is included in Item 15 of Part IV of this Annual Report and is incorporated into this item by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.The Company previously announced on November 14, 2022, that LNP Audit and Assurance International Pty Ltd (“LNP”), the Company’s independent registered public accounting firm, had informed the Company that it would decline to stand for re-appointment after completion of the audit for the year ending December 31, 2022.

On April 5, 2023, on the recommendation of the Company’s Audit Committee, and the Board of Directors approval, the Company engaged Wolf & Company, P.C. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023.

The financial statements of the Company for the fiscal years ended December 31, 2022 and 2021, did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the Company’s fiscal year ended December 31, 2021, and through to the fiscal year ended December 31, 2022, there were no disagreements between the Company and LNP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of LNP, would have caused LNP to make reference to the subject matter of the disagreements in connection with its audit reports on the Company’s financial statements.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures 

Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e)) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Annual Report. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2022,2023, due to the material weaknesses in our internal control over financial reporting described below. Management’s assessment of the effectiveness of our disclosure controls and procedures is expressed at a level of reasonable assurance because management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives.  

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of our company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  

Management assessed our internal control over financial reporting as of December 31, 2022,2023, the end of our fiscal year. Management based its assessment on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.

The material weaknesses identified are described below.

Significant Reliance on Key Individuals.There is inadequate segregation of duties in place related to our financial reporting and other management review and oversight procedures due to the lack of sufficient accounting personnel. This is not inconsistent with similar small fast-growing organizations. This gives rise to the risk of lack of ability to react in a timely manner to operations issues and meet increased US GAAP/PCAOB/SOX/SEC registrant requirements. In addition, this poses the risk that compliance and other reporting obligations are not dealt with in an adequate manner. 

Controls over the financial statement close and reporting process. Controls were not adequately designed or implemented in the financial statement close and reporting process. This includes controls related to complex and judgmental accounting transactions including business acquisitions and divestures, derivatives, manual journal entries, account reconciliations and financial statement policies and disclosures. 

Information and Technology Controls. There are control deficiencies related to information technology (“IT”) general controls that aggregate into a material weakness. Deficiencies identified include lack of controls over access to programs and data, program changes, program development, program changes and general IT controls. 

Data from third parties. The Company did not properly execute its designed controls to ensure that data received from third parties is complete and accurate. Such data is relied on by the Company in determining amounts pertaining to mining and hosting revenue, net energy benefits, and cryptocurrency assets. 

Fixed asset verification. The Company did not properly execute its designed controls around physical asset verification at US mining sites. Together with system limitations, restricting tracking of fixed asset movements, there is a risk around the existence of fixed assets. The root cause is the lack of sufficient, capable personnel to perform physical asset inspections, combined with system limitations. 

Notwithstanding the identified material weaknesses and management’s assessment that our internal control over financial reporting was not effective as of December 31, 2022,2023, management believes that the consolidated financial statements included in this quarterlyannual Report on Form 10-Q10-K fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periodsyears presented in accordance with generally accepted accounting principles. We rely on the assistance of outside advisors with expertise in these matters in preparing the financial statements.  

Remediation 

Our Board of Directors and management take internal control over financial reporting and the integrity of our financial statements seriously. Our management continues to work to improve its controls related to our material weaknesses. With the oversight of senior management and our audit committee, we continue to remediate the underlying causes of the identified material weaknesses, primarily through the performance of a risk assessment process; the development and implementation of formal, documented policies and procedures, improved processes and control activities (including an assessment of the segregation of duties); as well as the hiring of additional finance personnel for specific roles such as financial reporting. During the year ended December 31, 2022,2023, we made the following changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting:  

TheWhilst controls have been implemented across all business processes and are operating, the material weaknesses in our internal control over financial reporting will not be considered remediated as controls did not operate effectively on a consistent basis or did not operate for a sufficient period of time up to the end of the financial year, to be tested for and concluded on for effectiveness.

Remediation efforts for upcoming financial year will be focused on refining and implementing the remainder of controls, uplifting the effectiveness of existing controls and validating the effectiveness of implemented controls using criteria set forth by Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control.COSO. We cannot provide any assurance that these remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts. In addition, we continue to evaluate and work to improve our internal control over financial reporting related to the identified material weaknesses, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above.  

Changes in internal control over financial reporting 

Except for the remedial measures described above, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 

Limitations on Effectiveness of Controls and Procedures and Internal Control over Financial Reporting 

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. 

ITEM 9B. OTHER INFORMATION.

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Information required to be disclosed by this Item with respect to our executive officers and directors is incorporated into this Annual Report on Form 10-K by reference from the section entitled “Directors, Named Executive Officers and Corporate Governance” contained in our definitive proxy statement for our 20232024 annual stockholder meeting, which we intend to file within 120 days of the end of our fiscal year ended December 31, 2022.2023.

ITEM 11. EXECUTIVE COMPENSATION.

Information required to be disclosed by this Item with respect to our executive officers is incorporated into this Annual Report on Form 10-K by reference from the section entitled “Executive Compensation” contained in our definitive proxy statement for our 20232024 annual stockholder meeting, which we intend to file within 120 days of the end of our fiscal year ended December 31, 2022.2023.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Information required to be disclosed by this Item with respect to our executive officersbeneficial owners and management is incorporated into this Annual Report on Form 10-K by reference from the section entitled “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” contained in our definitive proxy statement for our 20232024 annual stockholder meeting, which we intend to file within 120 days of the end of our fiscal year ended December 31, 2022.2023.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE.

Information required to be disclosed by this Item with respect to our executive officers and directors is incorporated into this Annual Report on Form 10-K by reference from the section entitled “Certain Relationships and Related Transactions, and Director Independence” contained in our definitive proxy statement for our 20232024 annual stockholder meeting, which we intend to file within 120 days of the end of our fiscal year ended December 31, 2022.2023. 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Information required to be disclosed by this Item with respect to our executive officers is incorporated into this Annual Report on Form 10-K by reference from the section entitled “Principal Accountant Fees and Services” contained in our definitive proxy statement for our 20232024 annual stockholder meeting, which we intend to file within 120 days of the end of our fiscal year ended December 31, 2022.2023.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Index to Exhibit and Financial Statement Schedules