See Accompanying Notes to Unaudited Condensed Interim Consolidated Financial Statements.

MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

See Accompanying Notes to Unaudited Condensed Interim Consolidated Financial Statements

MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

For the Three Months Ended March 31, 2022

For the Three Months Ended March 31, 2021

3See Accompanying Notes to Unaudited Condensed Interim Consolidated Financial Statements

MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITYCASH FLOWS

(Unaudited)

For the Three Months Ended March 31, 2020

See Accompanying Notes to Unaudited Condensed Interim Consolidated Financial Statements

MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – GENERAL

General

General

Mawson Infrastructure Group, Inc. (the “Company” or “Mawson” or “the Group”“we”), formerly known as Wize Pharma, Inc, and before that, known as OphthaliX Inc., was incorporated in the State of Delaware.Delaware on February 10, 2012.

The accompanying unaudited consolidated financial statements, including the accountsresults of the Company’s subsidiaries,subsidiaries; Mawson Infrastructure Group Pty Ltd (“Mawson AU” previously known as Cosmos Capital Limited and its subsidiaries:Limited), Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, Cosmos Grid TechMIG No.1 Pty Ltd, Cosmos Asset Management Pty Ltd, and Luna Squares LLC, (formerly known as InnovativeBITTD Pty Ltd, Luna Squares Repairs LLC, Luna Squares Property Management LLC)LLC and Mawson Mining LLC (collectively referred to as the “Group”), have been prepared by the Company, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC)(“SEC”) and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Wize NC Inc, Occuwize Ltd and Wize Pharma Ltd are subsidiaries of Mawson however these companies have not been consolidated into the financial statements as these are subject to contingent value rights (“CVR”), refer to note 9.

These consolidated, condensed interim financial statements should be read in conjunction with the audited consolidated financial statements of Mawson and subsidiaries as of December 31, 2021, and the notes thereto, included in the Company’s Annual Report on Form 10-K filed March 21, 2022. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. InThe results of the interim period are not necessarily indicative of the results to be expected for the full year ended December 31, 2022. These consolidated condensed interim financial statements reflect all adjustments which, in the opinion of management, all adjustments (consistingare necessary to present fairly the financial position, the results of normal recurring accruals) considered necessaryoperations and cash flows of the Company for a fair presentation have been included.  the periods presented.

Since Mawson acquired Cosmos on March 9, 2021, it has managed most of its activity through the Cosmos Capital Limited, an Australian incorporated company, and its subsidiaries, Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, Cosmos Grid Tech Pty Ltd, Cosmos Asset Management Pty Ltd, and Luna Squares LLC (formerly known as Innovative Property Management LLC).

Since the acquisition of Cosmos, Mawson has been treated as the acquiree, with Cosmos being the acquirer. The result of which is that these accounts are taken to be the Cosmos accounts, with Mawson incorporated within the acquisition. For discussion regarding this acquisition and treatment please refer to Note 2: Reverse asset acquisition.

Mawson, through its subsidiary Cosmos Capital Ltd, which is a company incorporated in Australia (“Cosmos”),Mawson AU, is a ‘Digital Asset Infrastructure’ business, which owns and operates modular data centers (MDCs)(“MDCs”) based in the United States.States and Australia. As at May 17,March 31, 2021 CosmosMawson AU currently owns and has ordered 18,332 Miners39,225 Application-Specific Integrated Circuit (“ASIC”) computers known as “Miners,” specifically focused on the SHA-256 algorithm, from a variety of manufacturers, including Bitmain Technology Holding Company (“Bitmain”), Canaan Creative (HK) Holdings Limited (“Canaan”) and Shenzhen MicroBT Electronics Technology Co., Ltd (“Whatsminer”). As at March 31, 2021, the operational Miners produce up to 200 Petahash of computing power, with a total capacity upon deployment of all ordered equipment to produce up to a total capacity upon deployment of all ordered equipment to produce up to 1,483 Petahash.

Going Concern

Based on internally prepared forecastforecasted cash flows, combined with the existing cash reserves, which take into consideration what management of the Group considers reasonable scenarios given the inherent risks and uncertainties described both in this 10Q and the Company’s CurrentQuarterly Report on Form 8-K/A filed May 13, 2021,10-Q, management believes that the Group will have adequate cash reserves to enable the Group to meet its obligations for at least one year from the date of approval of the consolidated financial statements, and on this basis the accounts have been prepared on a going concern basis.

6

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and basis of preparation

These consolidated, condensed financial statements should be read in conjunction with theThe accompanying consolidated financial statements for Cosmos Capital Limitedof the Company include the accounts of the Company and subsidiaries as of December 31, 2020,its wholly or majority owned and controlled subsidiaries. Intercompany investments, balances and transactions have been eliminated in consolidation. Non–controlling interests represents the notes thereto, includedminority equity investment in the Company’s Current Report on Form 8-K/A filed May 13, 2021. The resultssubsidiaries, plus the minority investors’ share of the interim periods are not necessarily indicativenet operating results and other components of equity relating to the results to be expected for the full year ended December 31, 2021. These consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position, the results of operations and cash flows of the Company for the periods presented.non–controlling interest.

Any changes in the Company’s ownership interest in a consolidated subsidiary, through additional equity issuances by the consolidated subsidiary or from the Company acquiring the shares from existing shareholders, in which the Company maintains control is recognized as an equity transaction, with appropriate adjustments to both the Company’s additional paid-in capital and the corresponding non-controlling interest.

References in these notes to the Company as of a date prior to March 9, 2021, are references to Cosmos Capital Limited and its subsidiaries, not Mawson Infrastructure Group Inc. and its subsidiaries. On March 9, 2021, Cosmos Capital LimitedMawson AU was acquired by the Company. For accounting purposes, this was accounted for as a reverse asset acquisition with Cosmos Capital LimitedMawson AU as the accounting acquirer (refer to significant accounting policies below). The result of which is that these financial statements are taken to be a continuation of Mawson AU’s financial statements, with the Company incorporated within the acquisition and therefore the historical financial information of Mawson AU (then known as Cosmos Capital Limited) prior to March 9, 2021, became the historical financial information of Mawson AU, which have been consolidated into the financial statements of the Company. 

Use of Estimates and Assumptions

The preparation of the consolidated financial statements in conformity with USU.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. 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 assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenuesincome and expenses during the reporting periods.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the dates of the consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual Actual results could differ significantly 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 patent assets and fixed assets, realization of long-lived assets, unrealized tax positions and the realization of digital currencies, Business Combinations, Reverse Asset Acquisition,business combinations, reverse asset acquisition, and the Contingentcontingent obligation with respect to future revenues.

Critical Accounting Policies

Critical accounting policies are described in the footnotes to the consolidated financial statements for Cosmos Capital Limited and subsidiaries as of December 31, 2020,Mawson included in the Company’s Current Report on Form 8-K/A10-K filed May 13, 2021.March 21, 2022. There have been no changes to critical accounting policies in the three months period ended March 31, 20212022, other than the reverse asset acquisition accounting policy which is no longer considered to be a critical accounting policy and has therefore been included in significant 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 result of changes to operations as described below.performance obligation.

Reverse Asset Acquisition

On March 9, 2021,In order to identify the Company acquired the shares of Cosmos Capital Limitedperformance obligations in a scrip for scrip exchange. This transaction has been accounted for ascontract with a reverse asset acquisition. Undercustomer, a company must assess the guidancepromised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 805, Cosmos Capital Limited was determined to be the accounting acquirer based on evaluation606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following factscriteria 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 circumstances: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 Group’s contract with its pool operators. In certain pools the amount of reward for computing power depends on the pool’s success in mining blocks. In other pools, the amount of reward includes no such contingency, although the fees payable to such pools are typically higher as a result. 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. Depreciation is calculated over the following estimated useful lives:

The applicationAn 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 initial screen testasset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in ASC 805 determinedthe 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 $2,040,387 at March 31, 2022, and an increase in the depreciation charge to the 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 LO2A IPR&Dcarrying 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 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. During the periods ended March 31, 2022, and 2021, no impairment losses have been identified.

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 options using the Black-Scholes option-pricing model. The assumptions used in Mawson International was a single asset and represented substantially all ofcalculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the gross assets acquired. As such,application of management’s judgment. These assumptions are the acquisition is treated as a reverse asset acquisition.

Acquired assets and liabilitiesexpected stock volatility, the risk–free interest rate, the expected life of the legal parent entityoption, 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 therefore measuredcalculated based on the implied yield available on U. S. 10-year Treasury bond.

Significant Accounting Policies

Revenue Recognition - Hosting Co-location revenue

The Company provides power for our co-location hosting customers on a variable basis which is received monthly from the customer based on the power usage at the rate outlined in each customer contract.

We recognize variable power revenue each month as the uncertainty related to the consideration is resolved, power is provided to our customers, and our customers utilize the power (the customer simultaneously receives and consumes the benefits of the Company’s performance).

The customer contracts contain performance obligations, variable consideration in such contracts to be allocated to and recognized in the period to which the consideration relates. Usually this is when it is invoiced, rather than obtaining an estimation of variable consideration at their relative fair values asthe beginning of the datecustomer contracts.

Customers also are invoiced a fixed monthly fee for maintenance services which include, cleaning, cabling and other services to maintain the customers’ equipment.

Revenue Recognition - Sale of crypto currency mining equipment

Crypto currency mining equipment sales revenue includes revenues related to the sale of Miners. This is recognized as revenue upon delivery to the customer, which is when the control of the transaction.

After a reverse asset acquisition, despite thatMiner transfers. Payments are typically received at the legal acquirer (the legal parent entity) survives as the legal parent entity and continues to issue financial statements, the financial statements reflect the accounting from the perspective of the accounting acquirer (the legal subsidiary) in that the consolidated entity reflects the accounting acquirer as the accounting parent entity, and the financial statements represent a continuation of those of the accounting acquirer, except for the legal capital, which is retroactively adjusted to reflect the capital of the legal acquirer (legal parent entity)point control transfers or in accordance with ASC 805-40-45-1.

The fair value of the consideration given for the acquisition is as follows.

The fair values of the net tangible assets acquired at the date of acquisition are as follows:

The difference between the consideration given and the fair values of the net tangible assets acquired of $23,963,050 arises as a result of the intangible asset in relation to In process research and development relating to LO2A. Duepayment terms customary to the stage of development of this asset significant risks exist in the absence of successful clinical results and regulatory approval for the asset and that there are no reasonably likely expected alternative future uses associated with the asset and combined with the effect of the CVR instrument at the date of acquisition, management has assessed that the fair value of this asset at the acquisition date was $zero. The asset was therefore assessed as impaired and has been fully expensed as such in the consolidated statements of operations for the period ended March 31, 2021.business.

Contingent obligation in relation to LO2A

Following the reverse asset acquisition upon consummation of the share exchange and the signing of the CVR agreement, the historical LO2A assets and liabilities of the Company, are to be managed with a view to disposal within two years. Only CVR holders have an entitlement to any net proceeds from the disposal, not to the post-combination shareholders of the Company. Accordingly, the Company has assessed that the fair value associated with any future benefits accruing to the company in relation to research and development (IPR&D) is nil, and the difference between the fair value of the tangible net assets acquired and the stock issued has been expensed in these financial statements as stated above.

Despite this, the LO2A contingent obligation remains, however given that there is now no entitlement to revenue on the company’s behalf, the fair value of the contingent obligation with respect to future revenues has been re-assessed as nil.

For further details please refer to the Management Discussion and Analysis.

Share based payments

Under the terms of the Cosmos Transaction Bid Implementation Agreement the Company was required to make Share based payments consisting of up to 40,000,000 shares required to be issued under a Incentive Compensation Program and warrants issued to HC Wainwright as a fee related to the acquisition by Mawson of Cosmos.

Share based payments expenses for the three months ended March 31, 2021 were $14.8 million. Share based payments were split between HC Wainwright $6.18 million and an accrual of $8.58 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, included in the Company’s Current Report on Form 8-K/A filed May 13, 2021. No expenses were recorded in the 2020 period

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies to those previously disclosed in the consolidated financial statements for Cosmos Capital Limited and subsidiaries as of December 31, 2020, and the notes thereto, included in the Company’s Current Report on Form 8-K/A filed May 13, 2021, other than as a result of changes to operations as described below.

Revenue recognition – equipment sales

In Q1 2021 theThe Company began to earnearned revenues from the sale of earlier generation cryptocurrency mining units and modular data centers that have been assembled or refurbished for resale.resale (collectively “Hardware”). Revenue from the sale of cryptocurrency mining unitsHardware is recognized when:when all of the following conditions are satisfied: (i) persuasive evidence of a sales arrangement exists, (ii) the sales terms are fixed or determinable, (iii) title and risk of loss have transferred, (iv) collectability is reasonably assured — generally when products are shipped to the customer and (v)(iv) payment is received. At the date of sale, the net book value is expensed in cost of revenues.

Cost of revenues:

Cost of revenue consists primarily of expenses that are directly related to providing the Company’s service to its paying customers. These primarily consist of costs associated with operating our co-location facilities such as direct power costs, energy costs (including any carbon offset acquired during the year), freight costs and material costs related to cryptocurrency mining.

Research and development expenses:

Research and development expenses are charged to the statement of comprehensive loss as incurred.

Income taxes:

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance may be established to reduce the deferred tax asset to the level at which it is “more likely than not” that the tax asset or benefits will be realized. Realization of tax benefits of deductible temporary differences and operating loss carryforwards depends on having sufficient taxable income of an appropriate character within the carryback or carryforward periods.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained upon review by the taxing authority. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Functional currency:

All subsidiaries of Company have a functional currency of United States dollar (“USD”) with the exceptions of Mawson Infrastructure Group Pty Ltd, MIG No.1 Pty Ltd, Cosmos Trading Pty Ltd, BITTD Pty Ltd and Cosmos Asset Management Pty Ltd whose functional currency is the Australian Dollar (“AUD”). The financial statements of foreign businesses have been translated into USD at current exchange rates for balance sheet items and at the average rate for income statement items. Translation of all the consolidated companies’ financial records into USD is required due to the reporting currency for these consolidated financial statements presented as USD and the functional currency of the parent company being that of AUD. Translation adjustments are accumulated in other comprehensive loss. Revenue and expense accounts are converted at prevailing rates throughout the year. Gains or losses on foreign currency transactions and translation adjustments in highly inflationary economies are recorded in income in the period in which they are incurred.

Segment Reporting:

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group in deciding how to allocate resources and in assessing performance. Our chief operating decision–making group is composed of the chief executive officer. We currently operate in one segment surrounding our cryptocurrency mining operation.

Cash and cash equivalents:

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, cash held with digital currency exchanges, and other short-term and highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.

Digital Currencies

Digital currencies are included in current assets in the consolidated balance sheets. Digital currencies are recorded at cost less impairment.classified as indefinite-lived intangible assets in accordance with ASC 350, Intangibles - Goodwill and Other, and are accounted for in connection with the Company’s revenue recognition policy detailed above.

An intangible asset with an indefinite useful lifeThe following table presents the Company’s digital currency (Bitcoin) activities for the quarter ended March 31, 2022, and 2021: 

Digital currency is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.

The Company’s policy is to dispose of production at the earliest opportunity, the holding period is minimal, usually no more than a few days. Due to the short period which Bitcoin are held prior to sale and the consequent small numbers held, the risk of impairment is not material.

Equipment deposits:

The following table presentsCompany records a prepaid expense for costs paid but not yet incurred. Those expected to be incurred within one year are recognized and shown as equipment deposits. Equipment deposits result from advance payments to suppliers for goods to be received in the activitiesfuture. Equipment deposits are initially recognized as assets at the date the amount is paid, and are subsequently recorded as equipment as the Company takes delivery and control of the digital currenciesequipment from the supplier. Amounts are recognized initially at the amount of the three months endedunconditional consideration. They are subsequently measured at cost, less loss allowance.

Reverse Asset Acquisition:

On March 31, 2021;

Investment in Distributed Storage Solutions9, 2021, the Company acquired the shares of Cosmos Capital Limited (now known as Mawson Infrastructure Group Pty Ltd (DSS)and referred to herein as Mawson AU) in a stock for stock exchange. This transaction has been accounted for as a reverse asset acquisition. This transaction reverse asset acquisition and the associated impact is referred to as the “Cosmos Transaction”.

Mawson subscribed for 500,000 shares at AUD$1.00 per share on March 1, 2020. As at March 31,2021, Mawson held 28.99%��

Under the terms of the Cosmos Transaction Bid Implementation Agreement, the Company was required to make share based payments consisting of up to 40,000,000 shares under an Incentive Compensation Program and warrants issued to HC Wainwright as a fee related to the acquisition by Mawson of Mawson AU. In addition, Mawson AU had an outstanding obligation to W Capital Advisors Pty Ltd (“W Capital”) for options over the equity of Mawson AU which was terminated for consideration of warrants over the Company’s shares being issued to W Capital.

Fair value of 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 DSS, an Australian private company operatinggenerally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a blockchainfair 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 decentralized storage business,on market data obtained from independent sources, while unobservable inputs are based on the IPFS protocol.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.

Of the Company’s financial instruments on the Company’s balance sheet as at March 31, 2022, the only item measured and recorded at fair value is the Marketable Securities of $336,897, which are categorized as Level 1.

Concentrations of credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, marketable securities. Cash and cash equivalents and restricted bank deposits are invested in banks in Australia and the U.S. If the counterparty completely failed to perform in accordance with the terms of the contract, is the maximum amount of loss the Company would be the balance. Management believes that the financial institutions that hold the Company’s investments are financially sound and, accordingly, minimal credit risk exists with respect to these investments. The business utilizes FilcoinCompany has no off-balance-sheet concentration of credit risk such as part offoreign exchange contracts, option contracts or other foreign hedging arrangements.

Legal and other contingencies: 

The Company accounts for its operations to generate revenue. This investmentcontingent liabilities in accordance with ASC 450 “Contingencies”. A provision is recorded when it is both probable that a liability has been equity accounted, asincurred and the company has assessed that it has significant influence over the operationsamount of the investee.loss can be reasonably estimated. With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Legal costs incurred in connection with loss contingencies are expensed as incurred. As of March 31, 2022, the Company is not a party to any litigation that could have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

9

Leases:

Basic

The Company accounts for its leases under ASC 842, Leases which was effective January 1, 2019. The Company determines if an arrangement is a lease at inception. Using ASC 842 leases are classified as operating or finance leases on the Balance Sheet as a right of use (“ROU”) assets and Diluted Net Loss per Sharelease liabilities within current liabilities and long-term liabilities on our consolidated balance sheet. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The Company’s lease does not provide an implicit rate and therefore the Company measured the ROU asset and lease obligation based upon the present value of future minimum lease payments. The Company’s incremental borrowing rate is estimated based on risk-free discount rate for the lease, determined using a period comparable with that of the lease term and in a similar economic environment. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. The Company does not record leases on the consolidated balance sheets with a term of one year or less. The Company does not separate lease and non-lease components but rather account for each separate component as a single lease component for all underlying classes of assets. Where leases contain escalation clauses, rent abatements, or concessions, such as rent holidays and landlord or tenant incentives or allowances, the Company applies them in the determination of straight-line operating lease cost over the lease term.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies and adopted by the Company as of the specified effective date. For information with respect to recent accounting pronouncements, see Note 2 to the consolidated financial statements for Mawson as of December 31, 2021, included in the Company’s Annual Report on Form 10-K filed March 21, 2022, recent accounting pronouncements since that date include:

In March 2022, the FSAB issued ASU update 2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. The adoption of ASU 2021-01 did not have a material impact on the Company’s financial statements or disclosures.

In March 2022, the FSAB issued ASU 2022-02—Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The adoption of ASU 2022-02 did not have a material impact on the Company’s financial statements or disclosures.

NOTE 3 – BASIC AND DILUTED NET LOSS PER SHARE

Net loss per common share is calculated in accordance with ASC Topic 260: Earnings Per Share (“ASC 260”). Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding, as they would be anti-dilutive.

Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share as at March 31, 20212022 and 20202021 are as follows:

The following table sets forth the computation of basic and diluted loss per share:

Comparative weighted average common shares have been revised by the ratio of Cosmos CapitalMawson AU to the Company shares exchanged in the reverse asset acquisition in March 2021.

Recently Issued Accounting Pronouncements

For information with respect Pursuant to recent accounting pronouncements, see Note 2that certain Certificate of Amendment to the consolidated financial statements for Cosmos Capital LimitedCertificate of Incorporation of the Company dated August 11, 2021, Mawson executed a 10-for-1 reverse stock split of its outstanding common stock and subsidiariesreduced its authorized common stock to 120,000,000 shares, as of December 31, 2020, and the notes thereto, includedset forth in the Company’s Current Report on Form 8-K/A8-K filed May 13,August 16, 2021. Recent accounting pronouncements include.

Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”)

Standard/Description– Issuance date: December 2019. This guidance simplifies various aspects of income tax accounting by removing certain exceptions to the general principle of the guidance and also clarifies and amends existing guidance to improve consistency in application.

Effective Date and Adoption Considerations– The guidance was effective January 1, 2021 and early adoption was permitted. The company adopted the guidance on a prospective basis as of the effective date.

Effect on Financial Statements or Other Significant Matters– The guidance did not have a material impact in the consolidated financial results.

Other new pronouncements not applicable to the Company:

Reference Rate Reform (“ASU 2021-01”) issued March 2020, with amendments in 2021; effective March 12, 2020 through December 31, 2022

Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) issued January 2017 effective January 1, 2020;

Financial Instruments - Credit Losses (“ASU 2016-13 / 2018-19 / 2019-04 / 2019-05 / 2019-10 / 2019-11”) issued June 2016 with amendments in 2018, 2019 and 2020; effective January 1, 2020

NOTE 34 – DEPOSIT, PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

On January 27, 2021, the Company purchased 500 next generation Micro BT M30S ASIC Miners from Foundry Digital LLC. The purchase price per unit was $2,640 giving rise to a total purchase price of $1,320,000. The miners arrived in February 2021.

On February 5, 2021, the CompanyCosmos Infrastructure LLC (“Infrastructure”) entered into a Long-Term Purchase Contract with Canaan Convey Co Ltd (“Canaan”) for the purchase of 11,760 next generation Avalon A1246 ASIC Miners (Avalon).Miners. The average purchase price per unit is $2,889.$2,889 for a total purchase price of $33,974,640 (the “Canaan Transaction”). The final shipment for contract was received during March 2022, there was a final adjustment to the purchase price based on the actual tera hash delivered, based on the agreed price per tera hash under the terms of the contract. The purchase price adjustment resulted in a $2.2 million reduction in the purchase price, this is due to be received in cash from Canaan.

On August 9, 2021, Infrastructure entered into a second Long-Term Purchase Contract with Canaan for the purchase of 15,000 next generation Avalon A1246 ASIC Miners. The average purchase price per unit is $4,908 for a total purchase price of $73,620,000. There will be a final adjustment to the purchase price in the last delivery due in MarchMay 2022 based on the actual tera hash delivered, based on the agreed price per tera hash under the terms of the contract.

The Canaan Transaction schedule of payments is as follows:

(1) Fifty percent (50%) of the total purchase price shall be paid on or before 20 February 2021.

(2) The Company shall pay the remaining fifty percent (50%) of the total purchase price in equal monthly instalments due not less than forty (40) days prior to the scheduled delivery of the Product(s) as follows:

As ofat March 31, 2021,2022 the Company had prepaid approximately $18.05 millionamount paid in advance for 11,760 Miners. The shipmentrelation to this contract is $54,180,000 of the first Miners was received in May, 2021. The Company will recognize these assets as Property and Equipment on the consolidated balance sheet when the transfer of risk and title occurs for each shipment (i.e., the Minerswhich 4,000 orders have been delivered by Canaan toduring the agreed-upon port of loading in China).quarter.

On March 26, 2021,During the Company acquired an additional 1,000 Avalon A1166 miners from Canaan in addition to the Canaan Transaction. The purchase price per unit is $6,237.00 for a total purchase price of $6,237,000.00. The Company subsequently re-sold 200 of these Avalon A1166 miners.

As ofthree months ended March 31, 2021, approximately $18.052022, $23.63 million cash paid for Minersequipment was recorded as a deposit on the balance sheet.

NOTE 5 – LEASES

Luna Squares LLC leases a 16.35-acre lot in Georgia from the Development Authority of Washington County. The lease term was originally for 1 acre from May 1, 2020, until April 30, 2023. An amendment to the lease and exercise of option to lease four additional acres was signed and became effective February 23, 2021. A further amendment to the lease and exercise of option to lease was signed and became effective August 24, 2021. The Lease Amendment covers an additional 11.35 acres of the property, bringing the total to 16.35 acres under the lease. It also includes 5, 3-year extension options bringing the total lease period to run until 2038.

The Company leases the headquarters of its business operations at Level 5, 97 Pacific Highway, North Sydney NSW 2060 Australia, being 1,076 square feet of office space held under a license agreement.

The Company leases 6-acres of land in Pennsylvania which began in October 2021 for thirty-six months with the option to execute four additional three-year extensions.

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 related entity – refer to note 12 for details). The term of the lease is for 5 years, and has 2 options to extend for 5 years each.

Other than the foregoing leases, the Company does not lease any material assets. The Company believes that these offices and facilities are suitable and adequate for its operations as currently conducted and as currently foreseen. In the event additional or substitute offices and facilities are required, the Company believes that it could obtain such offices and facilities at commercially reasonable rates.

The Company’s lease costs recognized in the Consolidated Statements of Income and Comprehensive Loss consist of the following:

NOTE 6 – PROPERTY AND EQUIPMENT

Property and equipment, net, consisted of the following:

The Company incurred depreciation and amortization expense in the amounts of $13,803,032 and $1,314,899 for the quarter ended March 31, 2022 and March 31, 2021, respectively. There were no impairment charges recognized for property and equipment for either the quarter ended March 31, 2022, or March 31, 2021. There were no disposals during the three months ended March 31, 2022.

The Company had additions of $39,400,349 during the three months ended March 31, 2022. This primarily consisted of $30,396,241 of Miners, $4,953,347 additions for MDC’s and $1,696,756 for plant and equipment.

NOTE 7 – INCOME TAXES

The Company's effective tax rates for the three months ended March 31, 2022 and 2021, were as follows:

The Company's effective tax rate is calculated by dividing total income tax expense by the sum of income before income tax expense and the net income attributable to noncontrolling interests. The Company has maintained a full valuation allowance for federal and the majority of its state jurisdictions.

NOTE 48 – STOCKHOLDERS EQUITY

Common Stock

On December 30, 2020, in connection with the transaction in which CosmosTraDigital Marketing Group LLC was acquired (the “Cosmos Transaction”) pursuantissued 5,000 shares of common stock during January 2022 for consultancy services provided to the Bid Implementation Agreement, as amended (the “Bid Agreement”), and as previously disclosed inCompany.

Under the Company’s Current Report on Form 8-K filed on January 5 2021, Mawson entered into Securities Purchase Agreements (“PIPE Agreements”) with existing Mawson shareholders to issue 25,000,000 shares in Mawson subject to the Closeterms of the Cosmos Transaction as well as a further 409,999 shares issued asBid Implementation Agreement the Company made share-based payments under an acceleration of outstanding RSU’s, which occurred postIncentive Compensation Program during September 2021 (refer to reverse acquisition accounting policy). Within the closing of the Cosmos Transaction on March 9, 2021.

On March 9 2021, as a part of closing the Cosmos Transaction, Mawson issued a total of 428,270,616 shares to Cosmos shareholders. There remains 50,558,133 shares that are to be issued once the approval of increase in authorized capital has been finalized, taking the total quantity of shares to be issued in the Cosmos Transaction to 478,828,749.

As a result of an adjustment to warrant’s exercise price in December 2020, an aggregate of 115,9022022 quarter, five employees converted these into 825,000 shares of common stock were issued to warrant holdersof Mawson.

During February 2022, Kyle Hoffman was paid $50,000 in conjunction with and as a resultshares of the exercise of the warrants, each on a cashless basis.

Restricted Stock

As at May 17 2021, making up the total 428,270,616 in shares issuedCompany’s common stock as a part of the compensation of the Cosmos Transaction, 156,492,928 are restricted in trading under the Restricted Stock Agreement with each shareholder until December 31 2021.

The remaining 50,558,133 shares to be issued post the authorized increase in capital of which 18,474,278 will be restricted.

Contingent Value Rights

Pursuant to the Bid Agreement, prior to the closing of the Cosmos Transaction, Mawson entered into a Contingent Value Rights Agreement (the “CVR Agreement”) with certain of Mawson’s subsidiaries (the “Mawson Subsidiaries”) with a person designated by Mawson prior to the Closing Date as the Holders’ Representative (as defined therein), and the Rights Agent (as defined therein).

Pursuant to the CVR Agreement, at the Closing Date, each Mawson pre-Closing securityholder received one non-transferable CVR for each outstanding share of common stock of Mawson and for each share of common stock of Mawson underlying other convertible securities and warrants, held as of 4:01 p.m. Eastern Time on the day immediately before the Effective Time (as defined in the CVR Agreement).

Each CVR represents the right to receive a pro rata share of anycontingent consideration that may be received by Mawson or the Mawson Subsidiaries in connection with the business of Mawon prior to the Cosmos Transaction, which was the treatment of ophthalmic disorders, including dry eye syndrome (“DES”), and which included in-licensed certain rights to purchase, market, sell and distribute a formula known as LO2A, a drug developed for the treatment of DES, and other ophthalmological illnesses, including Conjunctivochalasis (“CCH”) and Sjögren’s syndrome (“Sjögren’s”). In particular, CVR holders will be entitledMembership Interest Purchase Agreement to any consideration (whether cash, stock, assets or otherwise) that Mawson or the Mawson Subsidiaries (or any of its Affiliates or shareholders) receivesacquire shares in connection with an LO2A Transaction, which, as defined in the CVR Agreement, and which includes (i) a sale of any of the Mawson Subsidiaries to a third party and/or (ii) the partnering, licensing, sublicensing, distribution, reselling or sale of all or any part of the LO2A Technology or LO2A Products to a third party, less transaction expenses and customary deductions as detailed in the CVR agreement, including a deduction of up to $300,000 that the Mawson Subsidiaries undertook to incur in the development of the LO2A Technology at the request of the Holders’ Representative.Luna Squares LLC.

Restricted Stock

The CVRs do not confer to the holders thereof any voting or equity or ownership interest in Mawson. The CVRs are not transferable, except in limited circumstances such as by will or intestacy, and are not and will not be listed on any quotation system or traded on any securities exchange.