UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~March 31,~~June 30, 2023

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

For the transition period from ________________ to ________________

Commission ~~file number~~File Number: 001-40849

Mawson Infrastructure Group Inc.

(Exact name of registrant as specified in its charter)

Delaware		88-0445167
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

201 Clark Street, Sharon, Pennsylvania		16146
(Address of principal executive offices)		(Zip Code)

~~201 Clark Street, Sharon, Pennsylvania 16146~~+1-412 -515-0896

~~(Address of principal executive offices, including zip code)~~

+~~61 2 8624 6130~~

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		MIGI		The Nasdaq Stock Market LLC

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~~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”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

~~Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:~~

As of ~~May 8,~~August 18, 2023, the issuer had a total of ~~16,208,041~~16,518,043 shares of common stock, par value $0.001 per share, outstanding.

MAWSON INFRASTRUCTURE GROUP INC.

FORM 10-Q

FOR THE QUARTER ENDED ~~MARCH 31,~~JUNE 30, 2023

TABLE OF CONTENTS

Item Page
Number
Part I – Financial Information

1. Financial Statements 1
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
3. Quantitative and Qualitative Disclosures about Market Risks 31
4. Controls and Procedures 31

Part II – Other Information

1. Legal Proceedings 33
1A. Risk Factors 33
2. Unregistered Sales of Equity Securities and Use of Proceeds 33
3. Defaults Upon Senior Securities 33
4. Mine Safety Disclosure 33
5. Other Information 33
6. Exhibits 34
Signatures 35

Item		Page Number
Part I – Financial Information

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risks	39
Item 4.	Controls and Procedures	39

Part II – Other Information

Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosure	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
	Signatures	45

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

	March 31,			December 31,			June 30,			December 31,
	2023			2022			2023			2022
ASSETS	(unaudited)						(unaudited)
Current assets:
Cash and cash equivalents	$	1,387,326		$	946,265		$	5,607,254		$	946,265
Prepaid expenses		1,931,016			3,488,868			3,584,578			3,488,868
Trade and other receivables		7,950,146			10,458,076			6,403,552			10,458,076
Assets held for sale		5,446,059			5,446,059			-			5,446,059
Digital currencies		28,681			-
Total current assets		16,743,228			20,339,268			15,595,384			20,339,268
Property and equipment, net		84,564,180			91,016,498			78,529,474			91,016,498
Derivative asset		10,618,746			11,299,971			5,174,446			11,299,971
Investments, equity method		2,015,618			2,085,373			1,993,837			2,085,373
Marketable securities		-			3,243,957			-			3,243,957
Security deposits		224,064			2,524,065			424,064			2,524,065
Operating lease right-of-use asset		2,564,031			2,819,933			3,052,978			2,819,933

Total assets	$	116,729,867		$	133,329,065		$	104,770,183		$	133,329,065

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade and other payables	$	24,177,679		$	10,572,061		$	25,337,339		$	10,572,061
Current portion of operating lease liability		1,397,729			1,300,062			1,649,529			1,300,062
Current portion of finance lease liability		31,275			30,702			31,859			30,702
Current portion of long-term borrowings		22,943,525			23,610,583			20,873,805			23,610,583
Total current liabilities		48,550,208			35,513,408			47,892,532			35,513,408
Customer deposits		-			15,328,445			-			15,328,445
Operating lease liability, net of current portion		1,370,951			1,727,975			1,478,707			1,727,975
Finance lease liability, net of current portion		75,187			83,223			67,000			83,223
Long-term borrowings, net of current portion		-			4,509,894			-			4,509,894
Total liabilities		49,996,346			57,162,945			49,438,239			57,162,945
Commitments and Contingencies (note 10)
Commitments and Contingencies (Note 9)

Stockholders’ equity:
Series A preferred stock (1,000,000 authorized shares; nil issued and outstanding as of March 31, 2023 and December 2022)		-			-
Common stock (90,000,000 authorized, 14,131,110 and 13,625,882 issued and outstanding as of March 31, 2023, and December 31, 2022, respectively, $0.001 par value shares)		14,131			13,626
Series A preferred stock; 1,000,000 shares authorized, no shares issued and outstanding as of June 30, 2023 and December 31, 2022								-			-
Common stock, $0.001 par value per share; 90,000,000 shares authorized, 16,454,709 and 13,625,882 shares issued and outstanding as of June 30, 2023, and December 31, 2022, respectively								16,455			13,626
Additional paid-in capital		196,110,680			194,294,559			202,136,148			194,294,559
Accumulated other comprehensive income		5,112,159			5,021,467			5,321,282			5,021,467
Accumulated deficit		(133,359,653	)		(122,257,628	)		(150,703,559	)		(122,257,628	)
Total Mawson Infrastructure Group, Inc. stockholders’ equity		67,877,317			77,072,024			56,770,326			77,072,024
Non-controlling interest		(1,143,796	)		(905,904	)		(1,438,382	)		(905,904	)
Total stockholder’s equity		66,733,521			76,166,120			55,331,944			76,166,120
Total liabilities and stockholder’s equity	$	116,729,867		$	133,329,065		$	104,770,183		$	133,329,065

See ~~Accompanying Notes~~accompanying notes to ~~Unaudited Consolidated Condensed Financial Statements.~~unaudited consolidated condensed financial statements.

MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	For the three months ended June 30,						For the six months ended June 30,
	2023			2022			2023			2022
Revenues:
Digital currency mining revenue	$	4,896,521		$	16,212,525		$	7,652,521		$	34,996,368
Hosting co-location revenue		4,594,752			3,567,912			8,917,306			4,116,860
Net energy benefits		1,017,678			-			1,458,734			-
Sale of equipment		42,584			-			193,581			91,545
Total revenues		10,551,535			19,780,437			18,222,142			39,204,773
Less: Cost of revenues (excluding depreciation)		7,028,458			14,359,072			11,706,460			22,771,433
Gross profit		3,523,077			5,421,365			6,515,682			16,433,340
Selling, general and administrative		6,265,256			9,431,088			11,242,674			15,908,034
Stock based compensation		687,276			936,235			1,691,619			1,326,844
Depreciation and amortization		8,789,755			16,023,817			16,752,279			29,826,849
Change in fair value of derivative asset		5,444,300			(17,714,357	)		6,125,525			(17,714,357	)
Total operating expenses		21,186,587			8,676,783			35,812,097			29,347,370
Loss from operations		(17,663,510	)		(3,255,418	)		(29,296,415	)		(12,914,030	)
Non-operating income (expense):
Losses on foreign currency transactions		(397,165	)		1,657,055			(815,382	)		957,818
Interest expense		(647,062	)		(1,565,040	)		(1,546,114	)		(2,801,713	)
Impairment of financial assets		-			(1,107,197	)		-			(1,107,197	)
Profit on sale of site		2,562,283			-			3,353,130			-
Gain on sale of marketable securities		-			-			1,437,230			-
Other income		252,363			1,864,968			177,941			1,889,415
Share of net loss of equity method investments		-			-			(36,356	)		-
Total non-operating income (expense), net		1,770,419			849,786			2,570,449			(1,061,677	)
Loss before income taxes		(15,893,091	)		(2,405,632	)		(26,725,966	)		(13,975,707	)
Income tax expense		(1,756,371	)		-			(2,304,454	)		-
Net Loss		(17,649,462	)		(2,405,632	)		(29,030,420	)		(13,975,707	)
Less: Net loss attributable to non-controlling interests		(305,556	)		(288,229	)		(584,489	)		(522,648	)
Net Loss attributed to Mawson Infrastructure Group stockholders	$	(17,343,906	)	$	(2,117,403	)	$	(28,445,931	)		(13,453,059	)

Net Loss per share, basic and diluted	$	(1.12	)	$	(0.18	)	$	(1.93	)	$	(1.12	)
Weighted average number of shares outstanding		15,527,824			11,933,092			14,744,915			11,965,129

See accompanying notes to unaudited consolidated condensed financial statements.

MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF ~~OPERATIONS~~COMPREHENSIVE LOSS

(Unaudited)

    For the three months ended
March 31,
  2023 2022
Revenues:  
Digital currency mining revenue $ 2,756,000 $ 18,783,842
Hosting co-location revenue 4,322,553 548,948
Net energy benefits 441,055 -
Sale of equipment 150,997 91,545
Total revenues   7,670,605 19,424,335
Less: Cost of revenues (excluding depreciation)   4,678,002 8,412,360
Gross profit 2,992,603 11,011,975
Selling, general and administrative   4,977,417 6,476,945
Share based payments   1,068,288 390,609
Depreciation and amortization   7,962,523 13,803,032
Change in fair value of derivative asset 681,225 -
Total operating expenses   14,689,453 20,670,586
Loss from operations (11,696,850 ) (9,658,611 )
Non-operating income/(expense):
Losses on foreign currency transactions (418,216 ) (699,237 )
Interest expense (835,107 ) (1,236,673 )
Loss on write off property and equipment (118,933 ) -
Profit on sale of site 790,847 -
Gain on sale of marketable securities 1,437,230 -
Other income 44,510 24,447
Share of net loss of equity method investments (36,356 ) -
Total non-operating expense 863,975 (1,911,463 )
Loss before income taxes   (10,832,875 ) (11,570,074 )
Income tax expenses (548,083 ) -
Net Loss   (11,380,958 ) (11,570,074 )
Less: Net loss attributable to non-controlling interests   (278,933 ) (234,419 )

Net Loss attributed to Mawson Infrastructure Group, Inc. stockholders   $ (11,102,025 ) $ (11,335,655 )
   
Net Loss per share, basic & diluted $ (0.80 ) $ (0.96 )
Weighted average number of shares outstanding   13,953,308 11,854,946

	For the three months ended June 30,						For the six months ended June 30,
	2023			2022			2023			2022
Net Loss	$	(17,649,462	)	$	(2,405,632	)	$	(29,030,420	)	$	(13,975,707	)
Other comprehensive (income) loss
Foreign currency translation adjustment		220,093			(2,579,238	)		351,826			(1,995,930	)
Comprehensive loss		(17,429,369	)		(4,984,870	)		(28,678,594	)		(15,971,637	)
Less: Comprehensive loss attributable to non-controlling interests		(305,556	)		(288,229	)		(584,489	)		(522,648	)
Comprehensive loss attributable to common stockholders	$	(17,123,813	)	$	(4,696,641	)	$	(28,094,105	)	$	(15,448,989	)

See ~~Accompanying Notes~~accompanying notes to ~~Unaudited Consolidated Condensed Financial Statements.~~unaudited consolidated condensed financial statements.

MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

For the Three Months Ended June 30, 2023

	Common Stock (#)		Common Stock ($)		Additional Paid-in- Capital		Accumulated Other Comprehensive Income/(Loss)		Accumulated Deficit			Total Mawson Stockholders’ Equity			Non- controlling interest			Total Equity
Balance as of March 31, 2023		14,131,110	$	14,131	$	196,110,680	$	5,112,159	$	(133,359,653	)	$	67,877,317		$	(1,143,796	)	$	66,733,521
Issuance of warrants		-		-		500,500		-		-			500,500			-			500,500
Exercising of RSU’s and stock options		656		1		-		-		-			1			-			1
Issuance of RSU’s and stock options		-		-		186,775		-		-			186,775			-			186,775
Issuance of common stock, net of issuance costs		2,322,943		2,323		5,338,193		-		-			5,340,516			-			5,340,516
Net loss		-		-		-		-		(17,343,906	)		(17,343,906	)		(305,556	)		(17,649,462	)
Other comprehensive income		-		-		-		209,123		-			209,123			10,970			220,093
Balance as of June 30, 2023		16,454,709	$	16,455	$	202,136,148	$	5,321,282	$	(150,703,559	)	$	56,770,326		$	(1,438,382	)	$	55,331,944

See accompanying notes to unaudited consolidated condensed financial statements.

MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

For the Three Months Ended June 30, 2022

	Common Stock (#)		Common Stock ($)		Additional Paid-in- Capital			Accumulated Other Comprehensive Income/(Loss)			Accumulated Deficit			Total Mawson Stockholders’ Equity			Non- controlling interest			Total Equity
Balance as of March 31, 2022		11,930,883	$	11,931	$	186,712,936		$	62,214		$	(82,458,914	)	$	104,328,167		$	(399,045	)	$	103,929,122
Issuance of common stock, stock based compensation		833		1		435,733			-			-			435,734			-			435,734
Issuance of warrants		-		-		500,500			-			-			500,500			-			500,500
Issuance of RSU’s and stock options		150,167		150		746			-			-			896			-			896
Net loss		-		-		-			-			(2,117,403	)		(2,117,403	)		(288,229	)		(2,405,632	)
Other comprehensive income		-		-		-			(2,592,266	)		-			(2,592,266	)		13,028			(2,579,238	)
Non-controlling interest		-		-		(917,684	)		-			1,623,457			705,773			534,019			1,239,792
Balance as of June 30, 2022		12,081,883	$	12,082	$	186,732,231		$	(2,530,052	)	$	(82,952,860	)	$	101,261,401		$	(140,227	)	$	101,121,174

See accompanying notes to unaudited consolidated condensed financial statements.

MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF ~~COMPREHENSIVE LOSS~~STOCKHOLDERS’ EQUITY

(Unaudited)

For the Six Months Ended June 30, 2023

For the three months Ended
March 31,
  2023 2022
Net Loss $ (11,380,958 ) $ (11,570,074 )
Other comprehensive income/(loss)  
Foreign currency translation adjustment  131,733 583,309
Comprehensive loss   (11,249,225 ) (10,986,765 )
Less: Comprehensive loss attributable to non-controlling interests (278,933 ) (234,419 )
Comprehensive loss attributable to common stockholders $ (10,970,292 ) $ (10,752,346 )

	Common Stock (#)		Common Stock ($)		Additional Paid-in- Capital			Accumulated Other Comprehensive Income/(Loss)		Accumulated Deficit			Total Mawson Stockholders’ Equity			Non- controlling interest			Total Equity
Balance as of December 31, 2022		13,625,882	$	13,626	$	194,294,559		$	5,021,467	$	(122,257,628	)	$	77,072,024		$	(905,904	)	$	76,166,120
Conversion of notes payable into common stock		104,319		104		276,855			-		-			276,959			-			276,959
Issuance of common stock in lieu of interest on borrowings		18,807		19		63,926			-		-			63,945			-			63,945
Issuance of common stock for services		93,334		93		306,976			-		-			307,069			-			307,069
Issuance of warrants		-		-		1,001,000			-		-			1,001,000			-			1,001,000
Exercising of RSU’s and stock options		113,760		114		(114	)		-		-			-			-			-
Stock based compensation for RSUs		-		-		383,550			-		-			383,550			-			383,550
Issuance of common stock, net of issuance costs		2,498,607		2,499		5,809,396			-		-			5,811,895			-			5,811,895
Net loss		-		-		-			-		(28,445,931	)		(28,445,931	)		(584,489	)		(29,030,420	)
Other comprehensive income		-		-		-			299,815		-			299,815			52,011			351,826
Balance as of June 30, 2023		16,454,709	$	16,455	$	202,136,148		$	5,321,282	$	(150,703,559	)	$	56,770,326		$	(1,438,382	)	$	55,331,944

~~The~~See accompanying ~~Notes~~notes to ~~Unaudited Consolidated Condensed Financial Statements.~~unaudited consolidated condensed financial statements.

MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

For the Six Months Ended June 30, 2022

	Common Stock (#)		Common Stock ($)		Additional Paid-in- Capital			Accumulated Other Comprehensive Income/(Loss)			Accumulated Deficit			Total Mawson Stockholders’ Equity			Non- controlling interest			Total Equity
Balance as of December 31, 2021		11,791,085		11,791		186,377,777			(521,094	)		(71,123,259	)		114,745,215			(164,626	)		114,580,589
Issuance of common stock, stock based compensation		3,131		3		543,460			-			-			543,463			-			543,463
Issuance of warrants		-		-		667,333			-			-			667,333			-			667,333
Issuance of RSU’s and stock options		287,667		288		61,345			-			-			61,633			-			61,633
Net loss		-		-		-			-			(13,453,059	)		(13,453,059	)		(522,648	)		(13,975,707	)
Other comprehensive income		-		-		-			(2,008,958	)		-			(2,008,958	)		13,028			(1,995,930	)
Non-controlling interest		-		-		(917,684	)		-			1,623,458			705,774			534,019			1,239,793
Balance as of June 30, 2022		12,081,883	$	12,082	$	186,732,231			(2,530,052	)		(82,952,860	)		101,261,401			(140,227	)		101,121,174

~~For the Three Months Ended March 31, 2023~~

See accompanying notes to unaudited consolidated condensed financial statements.

Common Stock
(#) Common Stock
($) Additional
Paid-in-
Capital Accumulated
Other
Comprehensive
Income/(Loss) Accumulated
Deficit Total
Mawson
Stockholders’
Equity Non- controlling
interest Total
Equity
Balance as of December 31, 2022 13,625,882 $ 13,626 $ 194,294,559 $ 5,021,467 $ (122,257,628 ) $ 77,072,024 $ (905,904 ) $ 76,166,120
Issuance of common stock, share based compensation 216,460 216 647,757 - - 647,973 - 647,973
Issuance of warrants - - 500,500 - - 500,500 - 500,500
Exercising of RSU’s and stock options 113,104 113 196,661 - - 196,774 - 196,774
Issuance of common stock, net of offer costs 175,664 176 471,203 - - 471,379 - 471,379
Net loss - - - - (11,102,025 ) (11,102,025 ) (278,933 ) (11,380,958 )
Other comprehensive income - - - 90,692 - 90,692 41,041 131,733
Balance as of March 31, 2023 14,131,110 $ 14,131 $ 196,110,680 $ 5,112,159 $ (133,359,653 ) $ 67,877,317 $ (1,143,796 ) $ 66,733,521

~~See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.~~

MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~CASH FLOWS

(Unaudited)

	For the six months ended June 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(29,030,420	)	$	(13,975,707	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		16,752,279			29,826,849
Amortization of operating lease right-of-use asset		678,310			809,130
Foreign exchange gain		751,833			137,758
Sale of intellectual property		-			(1,465,829	)
Stock based compensation		1,691,619			1,326,844
Non-cash interest expense		866,691			138,293
Unrealized (gain) loss on derivative asset		6,125,525			(17,714,357	)
Non-controlling interest		-			1,239,793
Gain on sale of marketable securities		(1,437,230	)		-
Share of loss from equity method investments		36,122			-
Loss on sale of property and equipment		158,023			-
Loss on write off of property and equipment		73,243			-
Profit on sale of site		(3,353,130	)		-
Changes in assets and liabilities:					-
Trade and other receivables		1,808,709			1,394,878
Operating lease liabilities		(807,136	)		-
Other current assets		2,004,290			(7,869,996	)
Trade and other payables		(511,208	)		39,299,304
Net cash (used in) provided by operating activities		(4,192,480	)		33,146,960
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for the purchase of property and equipment		(4,851,771	)		(21,100,867	)
Proceeds from sale of site		8,107,508			-
Proceeds from sales of property and equipment		584,301			-
Proceeds from sale of marketable securities		6,927,003			-
Payment of property and equipment deposits		-			(32,054,326	)
Net cash provided by (used in) investing activities		10,767,041			(53,155,193	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common share issuances		6,192,845			51,524
Payments of stock issuance costs		(380,950	)		-
Proceeds from borrowings		1,986,870			26,581,467
Repayment of finance lease liabilities		(19,088	)		(937,008	)
Repayment of borrowings		(9,672,854	)		(6,182,245	)
Net cash (used in) provided by financing activities		(1,893,177	)		19,513,738
Effect of exchange rate changes on cash and cash equivalents		(20,395	)		(2,478,952	)
Net increase in cash and cash equivalents		4,660,989			(2,973,447	)
Cash and cash equivalents at beginning of period		946,265			5,467,273
Cash and cash equivalents at end of period	$	5,607,254		$	2,493,826
Supplemental disclosure of cash flow information
Non-cash transactions
Recognition of right of use operating asset and lease liability	$	911,356		$	-
Accrued interest on convertible notes settled in common stock	$	276,959		$	-

~~For the Three Months Ended March 31, 2022~~

Common
Stock
(#) Common
Stock
($) Additional
Paid-in-
Capital Accumulated
Other
Comprehensive
Income/(Loss) Accumulated
Deficit Total
Mawson
Stockholders’
Equity Non- controlling
interest Total
Equity
Balance as of December 31, 2021 11,791,085 $ 11,091 $ 186,378,477 $ (521,094 ) $ (71,123,259 ) $ 114,745,215 $ (164,626 ) $ 114,580,589
Issuance of common stock, share based compensation 2,298 15 107,734 - - 107,749 - 107,749
Issuance of warrants - - 166,833 - - 166,833 - 166,833
Issuance of RSU's and stock options 137,500 825 59,892 - - 60,717 - 60,717
Net loss - - - - (11,335,655 ) (11,335,655 ) (234,419 ) (11,570,074 )
Other comprehensive income - - - 583,308 - 583,308 - 583,308
Balance as of March 31, 2022 11,930,883 $ 11,931 $ 186,712,936 $ 62,214 $ (82,458,914 ) $ 104,328,167 $ (399,045 ) $ 103,929,122

See accompanying notes to unaudited consolidated condensed financial statements.

~~See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.~~

MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES

~~CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

    For the three months ended
March 31, 
    2023  2022
CASH FLOWS FROM OPERATING ACTIVITIES        
Net loss $ (11,380,958 ) $ (11,570,074 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:  
Depreciation and amortization   7,962,523 13,804,492
Amortization of operating lease right-of-use asset  338,781 367,135
Foreign exchange gain 386,952 -
Share based payments   1,068,288 390,609
Non-cash interest expense 439,635 -
Unrealized (gain) loss on derivative asset 681,225 249,861
Gain on sale of marketable securities (1,437,230 ) -
Loss from equity method investments 36,122 -
Loss on sale of property and equipment 77,603 -
Loss on write off of property and equipment 118,933 -
Changes in assets and liabilities:           
Trade and other receivables 981,569 562,626 )
Operating lease liabilities (340,156 )
Other current assets   3,829,172 (4,187,204 )
Trade and other payables (1,445,868 ) 6,248,314
Net cash provided by (used in) operating activities   1,316,591 5,865,759
CASH FLOWS FROM INVESTING ACTIVITIES  
Payment for the purchase of property and equipment  (3,148,946 ) (6,030,740 )
Proceeds from sales of property and equipment 1,010,692 -
Proceeds from sale of marketable securities 6,207,548 -
Payment of property and equipment deposits - (23,630,470 )
Net cash provided by (used in) investing activities   4,069,294 (29,661,210 )
CASH FLOWS FROM FINANCING ACTIVITIES  
Proceeds from common share issuances   471,379 50,628
Proceeds from borrowings   - 27,055,524
Repayment of finance lease liabilities (9,543 ) (379,026 )
Repayment of borrowings   (5,397,550 ) (3,242,194 )
Net cash provided by financing activities     (4,935,714 ) 23,484,932
Effect of exchange rate changes on cash and cash equivalents  (9,110 ) 648,104
Net increase in cash and cash equivalents   441,061 337,585
Cash and cash equivalents at beginning of period   946,265 5,467,273
Cash and cash equivalents at end of period     $ 1,387,326 $ 5,804,858
Supplemental disclosure of cash flow information 
Non-cash transactions
Recognition of right of use operating asset and lease liability 82,879 -
Accrued interest on convertible notes settled in common stock 276,959 -

~~See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.~~

~~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 “we”), was incorporated in the State of Delaware on February 10, 2012.

Mawson, through its subsidiaries, is a ‘Digital Asset Infrastructure’ business, which owns and operates data centers in the United States. As at June 30, 2023, Mawson owned 23,458 Application-Specific Integrated Circuit (“ASIC”) computers known as “Miners,” specifically focused on the SHA-256 algorithm.

The accompanying consolidated financial statements, including the results of the Company’s subsidiaries: Mawson Infrastructure Group Pty Ltd (“Mawson AU”), Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, MIG No.1 Pty Ltd, MIG No.1 LLC, ~~(formed February 3, 2023),~~ Mawson AU ~~Limited,~~Pty Ltd, Luna Squares LLC, ~~Luna Squares Texas~~Mawson Bellefonte LLC (formed May 5, 2023), Luna Squares Repairs LLC, Luna Squares Property LLC, Mawson Midland LLC, Mawson Hosting LLC, ~~(formed February 16, 2023),~~ Mawson Ohio LLC and Mawson Mining LLC (collectively referred to as the “Group”), have been prepared by the Company, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and in accordance with generally accepted accounting principles ~~generally accepted~~ in the United States (“U.S. GAAP”).

These consolidated, condensed unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements of the Group as of December 31, 2022, and the notes thereto, included in the Company’s Annual Report on Form 10-K filed with SEC on March 23, 2023. Accordingly, they do not include all the information and footnotes required by U.S GAAP for complete financial statements. The results of the interim period are not necessarily indicative of the results to be expected for the full year ending December 31, 2023. These consolidated, condensed interim 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.

Mawson, through its subsidiaries, is a ‘Digital Asset Infrastructure’ business, which owns and operates modular data centers (“MDCs”) based in the United States. As at March 31, 2023, Mawson owned 23,332 Application-Specific Integrated Circuit (“ASIC”) computers known as “Miners,” specifically focused on the SHA-256 algorithm.

Going Concern

For the period ended March 31, 2023, the Company incurred a loss after tax of $11.38 million, and as at March 31, 2023, had net current liabilities of $31.81 million, had total net assets of $66.73 million and had an accumulated deficit of $133.36 million. The ~~Company’s cash position as at March 31, 2023, was $1.39 million.~~

~~Management of the Company believes that there are reasonable grounds to conclude that~~accompanying unaudited consolidated condensed financial statements have been prepared assuming the Company will continue as a going concern basis and in accordance with generally accepted accounting principles in the United States of America. The going concern basis of presentation assumes that the company will continue in operation one year after ~~consideration~~the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

Pursuant to the requirements of the ~~following factors:~~Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

~~The Company’s plans include improving profitability and generating sufficient cash flow from operations.~~

~~Management of~~For the six month period ended June 30, 2023, the Company incurred a loss after tax of $29.03 million, and as at June 30, 2023, had net current liabilities of $32.30 million, had total net assets of $55.33 million and had an accumulated deficit of $150.70 million. The Company’s cash position as at June 30, 2023, was $5.61 million.

Bitcoin prices have recovered from their lows of approximately $16,000 in late 2022 to approximately $30,000 recently, however this price is still substantially less than the previous highs of approximately $67,000 in late 2021. In addition, the ~~opinion~~difficulty of earning Bitcoin is approximately 70% higher than the same time last year, and trending higher, which means the Company typically earns less Bitcoin for the same effort. In addition, the rewards that Bitcoin miners earn are expected to halve (not including transaction fees) in or about April or May 2024. The Company’s miners and other mining equipment will require replacement over time to ensure that the Company can continue to ~~access adequate debt~~competitively and ~~equity funding~~efficiently produce Bitcoin. These trend factors are outside the Company’s direct control, and the Company may not be able to ~~meet~~practically mitigate their impact. The Company cannot predict with any certainty whether these trends will reverse or persist.

On July 20, 2023 we received a notice from Celsius Mining LLC that Celsius Mining LLC does not intend to renew its ~~working~~Customer Equipment Co-Location Agreement (“Co-Location Agreement”), under which it receives hosting services from Luna Squares LLC (a subsidiary of the Company), and that it will expire in accordance with its terms. Celsius Mining LLC is currently the Company’s only hosting customer. The Company hosts approximately 20,000 miners for Celsius Mining LLC. In addition, Celsius Mining LLC has made certain allegations against Luna Squares LLC in respect of its performance under the Co-Location Agreement. Luna Squares LLC has made certain allegations against Celsius Mining LLC in respect of its performance under the Co-Location Agreement. There is a risk of a dispute or litigation arising out of these cross allegations, which also relate to the advanced deposit paid by Celsius Mining LLC to Luna Squares LLC valued at $15.33 million (the “Celsius Deposit”) and Luna Squares LLC’s and Celsius Mining LLC’s performance under the Co-Location Agreement. Luna Squares LLC claims, amongst other things, that the deposit, in full or in part, has been forfeited due to Celsius Mining LLC’s breaches and its other actions or inactions under the Co-Location Agreement. If Celsius Mining LLC prevails on the dispute, Luna Squares LLC could be required to return the deposit to Celsius Mining LLC. While this amount is included as a current liability within trade and other payables in the consolidated condensed Balance Sheet, the outcome of the dispute is uncertain. In addition, Celsius Mining LLC has failed to pay approximately $3.40 million worth of pre-petition and post-petition hosting invoices. Celsius Mining LLC and Luna Squares LLC have indicated a willingness to continue discussions for hosting services including related to the Co-Location Agreement, and the timing and outcome of such discussions are uncertain.

Hosting revenue accounts for a substantial part of the Company’s revenue. The Company is in active discussions with potential new customers for hosting services to replace Celsius, however there is no certainty that the Company will be able to enter into hosting agreements with new customers in a timely manner, or at all, or that the agreements with the new customers will replace all the revenue that Celsius Mining LLC generates for the Company. The Company may decide to use the hosting infrastructure’s capacity to self-mine or for other purposes, however it will need to raise a potentially significant amount of capital ~~requirements.~~ to finance and acquire further hardware (specifically miners) for self-mining and the potential timing and outcome of these other potential options are uncertain.

In addition to the Celsius Deposit, in connection with the Co-Location Agreement, Celsius Mining LLC loaned $20 million to Luna Squares LLC, through a Secured Promissory Note (the “Celsius Promissory Note”), which has a maturity date of August 23, 2023, and an outstanding balance as at June 30, 2023, of $11.33 million. On July 18, 2023 Luna Squares LLC paid to Celsius Mining LLC $3.33 million as principal and interest.

Celsius Mining LLC is currently in default on payments on the Co-Location Agreement to Luna Squares LLC, and the Company and Luna Squares LLC have reserved all rights.

Celsius Mining LLC filed for Chapter 11 bankruptcy protection on July 13, 2022. On July 25, 2023, Celsius Mining LLC filed a Debtors’ Ex Parte Motion for an Order Under Federal Rules of Bankruptcy for Subpoenas for Examination of, and Production of Documents from Mawson Infrastructure Group Inc., Luna Squares LLC, and Cosmos Infrastructure LLC, and the Bankruptcy Court entered an Order on July 26, 2023. Celsius Mining LLC has indicated it intends to use the process of discovery to evaluate the status of the liens securing the Celsius Promissory Note and other potential claims Celsius Mining LLC may have against Mawson and its related entities, including with respect to the Co-Location Agreement. The discovery process is ongoing.

The Company has ~~the ability through its At the Market Offering~~a Secured Loan Facility Agreement (the “ATM Agreement”), to sell shares of its common stock. Effective May 4, 2023, the Company filed a prospectus supplement to amend, supplement and supersede certain information contained in the earlier prospectus and prospectus supplement(collectively, the “May 2022 Prospectus”), which reduced the amount of shares of common stock the Company may offer and sell under the ATM Agreement to an aggregate offering price of up to $9,000,000 from time to time. Under the May 2022 Prospectus, the Company initially registered up to $100,000,000 of common stock for offer and sale. On March 23, 2023, the date the Company filed its Annual Report on Form 10-Kwith Marshall Investments GCP Pty Ltd ATF for the ~~year ended December 31, 2022,~~Marshall Investments MIG Trust (“Marshall”). The loan matures in February 2024 and the ~~offering limits set forth~~outstanding balance is $8.07 million as at June 30, 2023. On June 30, 2023, MIG No. 1 Pty Ltd did not make a principal and interest payment of $0.50 million. MIG No. 1 Pty Ltd and Marshall are in ~~General Instruction I.B.6 of Form S-3, which is referred~~ongoing discussions with respect to as the ~~“baby shelf” rules, began to apply~~payment, and ~~therefor~~ the amount to be offered under the ATM Agreement was reduced, in part to provide room under the baby shelf rules for a registered direct offering of securities for approximately $5,000,000, which closed on May 8, 2023.loan terms generally. Marshall and MIG No. 1 Pty Ltd have each reserved their rights.

~~For so long~~

A subsidiary of the Company, Mawson Infrastructure Group Pty Ltd (“MIG PL”) has a Secured Loan Facility Agreement for working capital with W Capital Advisors Pty Ltd with a total loan facility of AUD$8 million (USD$5.2 million) (“Working Capital Loan”). As at June 30, 2023, AUD$1.46 million (USD$0.97 million) has been drawn down from this facility. The Secured Loan Facility expired in March 2023 and the Company and W Capital Advisors Pty Ltd are in ongoing discussions regarding the terms and extension of the loan. W Capital Advisors Pty Ltd and MIG PL have each reserved their rights.

The Company has a Secured Convertible Promissory Note with W Capital Advisors Pty Ltd with an outstanding balance of $0.50 million as at June 30, 2023. The Convertible Note matured in July 2023 and the Company is in ongoing discussions with the noteholder. W Capital Advisors Pty Ltd and the Company have each reserved their rights.

The Company has not fulfilled specific payment obligations related to the Marshall loan, the Working Capital Loan and Secured Convertible Promissory Note mentioned above. Consequently, the creditors associated with these debt facilities may initiate actions as allowed by relevant grace periods. This includes the possibility of opting to expedite the repayment of the principal debt, pursuing legal action against the Company for payment default, raising interest rates to the default rate, or taking appropriate measures concerning collateral, if applicable.

The Company has evaluated the above conditions and concluded that these conditions raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these unaudited condensed consolidated financial statements.

To alleviate these conditions, the Company has explored various avenues to enhance liquidity, fund the Company’s public float is less than $75,000,000, it may not sell more than the equivalent of one-third of its public float during any twelve consecutive months pursuant to the baby shelf rules. As of May 8, 2023, the Company had the capacity to issue up to approximately$3.4 million worth of shares under the baby shelf rules. If the Company’s public float decreases, the amount of securitiesexpenditures, and meet debt servicing requirements. These strategies include, among others:

	●	Engage in discussions with new and existing lenders, including related to refinancing debt, raising additional debt, or modifying terms of existing debt.

	●	Considering equity issuances such as capital raises

	●	Assessing and evaluating corporate and strategic transactions including engaging an investment bank.

●

Assessing and evaluating monetizing specific assets, including potential sales of mining infrastructure equipment, miners, operational sites, or expansion locations under consideration.

●

Conducting assessments to identify and implement operational efficiencies, cost-cutting measures, and other actions aimed at enhancing revenue and optimizing expenses.

Although the Company may ~~sell under its Shelf Registration Statement will also decline.~~

~~Although alternative public~~have access to debt, equity and ~~private transaction structures are expected to be available,~~other sources of funding, these may require additional time and cost, may impose operational restrictions and other covenants on the Company, ~~and~~ may not be available on attractive ~~terms. To the extent~~terms, and may not be available at all. If the Company raises additional capital or debt, this could cause additional dilution to the Company’s current stockholders. The terms of any future capital raise or debt issuance and the costs of any financing are ~~uncertain. There are no assurances that~~uncertain and may be unfavorable to the Company. In addition, pursuant to terms and provisions of previous fundraising, the Company ~~would be able~~is subject to ~~raise additional financing when needed or~~certain restrictive covenants that ~~it would be able to do so~~put restrictions on ~~favorable terms. As part of~~ the ~~recent registered direct offering which closed on May 8, 2023, the Company agreed not to issue shares for 90 days, or issue shares under its ATM for 180 days.~~

Based on internally prepared forecast cash flows which take into consideration what management considers to be reasonable scenarios given the inherent risks and uncertainties, combined with existing cash balances, management believes that the Company will be able to meet its obligations as they become due for at least one year from the date of the issuance of these condensed consolidated financial statements.

~~Accordingly, management of the Company believes that it is appropriate to prepare the Group’s consolidated financial statements on a going concern basis. However, should~~Company. Should the Company be unable to source sufficient funding, ~~through the factors noted above,~~ the Company may not be able to realize assets at their recognized values and ~~extinguish~~fulfill its liabilities in the normal course of business at the amounts stated in these consolidated financial statements.

The Company has engaged Needham and Company, an investment bank, and is obtaining advice from outside legal counsel. It is important to note that strategic and other initiatives may not lead to any transaction or other outcome.

These condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and other commitments in the normal course of business. They do not include any adjustments relating to the recoverability and carrying amounts of assets and the amounts of liabilities should the Company be unable to continue as a going concern and meet its obligations and debts as and when they fall due.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Preparation

The accompanying consolidated financial statements of the Company include the accounts of the Company and its wholly or majority owned and controlled subsidiaries. Intercompany investments, balances and transactions have been eliminated in consolidation. Non–controlling interests ~~represents~~represent the minority equity investment in the Company’s subsidiaries, plus the minority investors’ share of the net operating results and other components of equity relating to the non–controlling interest.

Pursuant to a 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 stock at a ratio of 1:6 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. Unless otherwise indicated, all share and per share amounts included in this Annual Report reflect the effects of the ~~Reverse Stock Split.~~reverse stock split.

Any ~~changes~~change 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 stockholders, 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.

Use of Estimates and Assumptions

The preparation of the financial statements in conformity with U.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 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 under Level 3 fair value hierarchy, business combinations and the contingent obligation with respect to future revenues.

~~Reclassifications~~

Reclassifications

Certain reclassifications of prior period amounts have been made to conform to current period presentation.

Significant Accounting Policies

Revenue Recognition – Digital currency mining revenue

The Company recognizes revenue under Accounting Standards Codification (“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 satisfies 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~~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 digital currencies and management has exercised ~~judgement~~judgment 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 digital currency. 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 digital currency is received.

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

Hosting Co-location revenue

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

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

The customer contracts contain variable consideration 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 the beginning of the customer 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 – equipment sales

The Company earned revenues from the sale of earlier generation digital currency mining units and modular data centers that have been assembled or refurbished for resale (collectively “Hardware”). Revenue from the sale of Hardware is recognized upon transfer of control of the Hardware to the customer. At the date of sale, the net book value is expensed in cost of revenues.

Revenue recognition – net energy benefits

In exchange for powering down the Company’s systems and curtailing power, in response to instances of high electricity demand, the Company receives net energy benefits from the grid. The Company also has a power pricing arrangement pursuant to which it can trade energy to achieve net energy benefits.

Revenue for curtailing power is recognized over the period of time that the services are being provided. The Company estimates the amount of curtailable power and the expected payment for that power and recognizes revenue based on the proportion of the service that has been provided. In this arrangement the Company is considered the principal and revenue is recognized on a gross basis.

Revenue through the Company’s power pricing arrangement is recognized over the period of time that the services are being provided. The Company estimates the amount of energy available for sale and the expected payment for that energy, and recognizes revenue based on the proportion of the service that has been provided. In this arrangement the Company is considered the principal and revenue is recognized on a gross basis.

Property and equipment

Property and equipment are stated at cost, net of accumulated depreciation. All other repair and maintenance costs are charged to operating expenses as 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 and equipment transferred from customers is initially measured at the fair value at the date on which control is obtained.

Property and equipment are 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:

Asset class	Useful life	Depreciation method
Fixtures	5 years	Straight-Line
Plant and equipment	10 years	Straight-Line
Modular data center	5 years	Declining
Motor vehicles	5 years	Straight-Line
Computer equipment	3 years	Straight-Line
Processing machinery (Miners)	2 years	Straight-Line
Transformers	15 years	Straight-Line
Leasehold improvements	Shorter of useful life or lease term	Straight-Line

Property and equipment are 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 is included in the income ~~statement when the asset is derecognized.~~statement.

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

The Company’s long-lived assets are reviewed for impairment 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 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.

Fair value measured at March 31, 2023

Total fair
value as at
March 31,
2023
Quoted prices
in active
markets
(Level 1) Significant other
observable
inputs
(Level 2) Significant
unobservable
inputs
(Level 3)
Derivative asset $ 10,618,746 - - 10,618,746

Fair value measured at June 30, 2023

Total fair
value as at

June 30,
2023

Quoted prices
in active
markets
(Level 1)

Significant other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Derivative asset

5,174,446

	Fair value measured at December 31, 2022								Fair value measured at December 31, 2022
	Total fair value as at December 31, 2022		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total fair value as at December 31, 2022		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Derivative asset	$	11,299,971		-		-		11,299,971	$	11,299,971		-		-	$	11,299,971
Marketable securities	$	3,243,957	$	3,243,957	$	-	$	-	$	3,243,957	$	3,243,957	$	-	$	-

~~Level 1 Assets:~~

The Company held 1.59 million shares of common stock in CleanSpark Inc (“CleanSpark”), a Nasdaq listed company as at December 31, 2022. This was recorded at fair value with changes in fair value recognized in the accompanying unaudited condensed 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 Nasdaq. During the three month period ended March 31, 2023, the Company sold all of its shares in CleanSpark.

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 as 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. 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~~“change in fair value of derivative ~~asset~~asset” in the consolidated statements of operations.

The Power Supply Agreement was classified as a derivative asset beginning in the quarter ended June 30, 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~~expires in December 2026. In addition, the Company adopted a 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~~Stock based ~~payments~~compensation

The Company follows 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 a U. S. 10-year Treasury bond.

Digital currencies

Digital currencies are included in current assets in the consolidated condensed balance sheets. Digital currencies are 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.

The following table presents the Company’s digital currency (Bitcoin) activities for the ~~quarter~~three months and six months ended ~~March 31, 2023, and 2022:~~June 30, 2023:

	Three months to March 31,						Three months to June 30, 2023			Six months to June 30, 2023
	2023			2022

Opening number of Bitcoin held as at December 31, 2022 and 2021		0.00			0.92
Opening number of Bitcoin held as at March 31, 2023 and December 31, 2022								1.02			0
Number of Bitcoin received		121.11			458.68			181.62			302.73
Number of Bitcoin sold		(120.09	)		(459.60	)		(182.64	)		(302.73	)
Closing number of Bitcoin held as at March 31, 2023 and 2022		1.02			0.00
Closing number of Bitcoin held as at June 30, 2023								0			0

Digital currencies are 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 likely 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 Bitcoin received from mining operations at the earliest opportunity, therefore the holding period is minimal, usually no more than a few days. Due to the short period for which Bitcoin are held prior to sale and the consequent small numbers held, the risk of impairment is not material. No impairment charges have been recorded during the ~~quarters~~six month periods ended ~~March 31,~~June 30, 2023 and 2022.

Equity method investments

Equity investments are accounted for under the equity method if we are able to exercise significant influence, but not control, over an investee. Our share of the earnings or losses as reported by the investees is classified as income from equity investees on our consolidated condensed statements of operations. The investments are evaluated for impairment annually and when facts and circumstances indicate that the carrying value may not be recoverable. If a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in our consolidated condensed statements of operations.

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 the Company as of December 31, 2022, included in the Company’s Annual Report on Form 10-K filed with SEC on March 23, ~~2022.~~2023. Recent accounting pronouncements since that date include:

In March 2023, the FASB issued ASU update 2023-01—Leases (Topic 842): Common Control Arrangements. The Company early adopted ASU 2023-01, as allowed under the ASU. Adoption of this ASU did not have a material impact on the Company’s consolidated financial statements or disclosures.

In March 2023, the FASB issued ASU update 2023-02—Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force). The Company does not expect ASU 2023-02 to have a material impact on the Company’s consolidated financial statements or disclosures.

NOTE 3 – BASIC AND DILUTED NET LOSS PER SHARE

Net loss per common share is calculated in accordance with ASC 260, Earnings Per Share. 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,~~June 30, 2023 and 2022 are as follows:

As at March 31,
2023 2022
Warrants to purchase common stock 2,825,278 1,165,698
Options to purchase common stock 417 125,577
Restricted Stock-Units (“RSUs”) issued under a management equity plan 303,450 303,215
3,129,145 1,594,490

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

For the three months ended
March 31,
2023 2022
Net Loss attributable to Mawson Infrastructure Group, Inc. common stockholders $ (11,102,025 ) $ (11,335,655 )

Denominator:
Weighted average common shares - basic and diluted 13,953,308 11,854,946

Loss per common share - basic and diluted $ (0.80 ) $ (0.96 )

	As at June 30,
	2023		2022
Warrants to purchase common stock		5,546,122		1,065,278
Options to purchase common stock		1,750,417		4,910
Restricted Stock-Units (“RSUs”) issued under a management equity plan		4,443,516		408,288
		11,740,055		1,478,476

NOTE 4 – LEASES

~~The~~During the quarter ended June 30, 2023, the Company ~~leases corporate office space at Level 5, 97 Pacific Highway, North Sydney NSW 2060 Australia, being 1,076 square feet under a license agreement.~~entered into two new lease agreements, outlined below.

The Company leases 6-acres of land in Pennsylvania which began in October 2021 for thirty-six months with the option to exercise four additional three-year extensions. An amendment was signed during MarchEffective May 1, 2023 ~~to lease~~Mawson Ohio LLC took an ~~additional 3.12 acres~~assignment of ~~land.~~

~~On March 16, 2022, Luna Squares Property LLC entered into~~ a lease ~~with respect to~~agreement for approximately 64,600 square foot for a ~~property~~undeveloped site in ~~the City of Sharon, Mercer County, Pennsylvania with Vertua Property, Inc., a related party (see Note 12).~~Corning, Ohio. The term of the lease is for 5four years, with ~~2 options~~an option to extend for ~~5 years each.~~five years.

~~During~~Effective May ~~2022, Luna Square Texas~~24, 2023 Mawson Bellefonte LLC entered into ~~four~~a lease ~~agreements to lease 11 acres of land in Texas~~agreement for a ~~period~~9,918 square foot developed mining facility in Bellefonte, PA. The term of the lease is for two years and seven months, with an option to extend for five years. ~~This is reflected as an asset held for sale as of March 31, 2023 and was sold on April 18, 2023 (see Note 6).~~

Other than the foregoing leases, the Company does not lease any material assets during the quarter ended March 31, 2023. 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 rate.

The Company’s lease costs recognized in the Consolidated Condensed Statements of Operations consist of the following:

	For the three months ended March 31,
	2023		2022		For the three months ended June 30,				For the six months ended June 30,
					2023		2022		2023		2022
Operating lease charges ⁽¹⁾	$	407,212	$	367,135	$	404,778	$	434,977	$	811,991	$	802,112
Finance lease charges:
Amortization of right-of-use assets		8,143		4,302	$	8,143	$	8,094	$	16,287	$	12,396
Interest on lease obligations		2,080		1,478	$	1,310	$	2,468	$	4,021	$	3,946
	$	10,223	$	5,780

(1)	Included in selling, general and administrative expenses.

The following is a schedule of the Company’s lease liabilities by contractual maturity as of ~~March 31,~~June 30, 2023:

	Operating leases			Finance leases			Operating leases			Finance leases

2023	$	1,171,950		$	28,632		$	858,374		$	19,088
2024		1,261,338			38,176			1,548,388			38,176
2025		267,372			38,176			592,926			38,176
2026		278,064			15,016			434,033			15,016
2027		70,190			-			70,191			-
Total undiscounted lease obligations		3,048,914			120,000			3,503,912			110,456
Less imputed interest		(280,234	)		(13,538	)		(375,676	)		(11,597
Total present value of lease liabilities		2,768,680			106,462			3,128,236			98,859
Less current portion of lease liabilities		1,397,729			31,275			1,649,529			31,859
Non-current lease liabilities	$	1,370,951		$	75,187		$	1,478,707		$	67,000

Other lease information as of ~~and for the period ended March 31,~~June 30, 2023:

	Operating leases			Finance leases			Operating leases			Finance leases

Operating cash out flows from leases	$	100,000		$	9,543		$	728,837		$	19,088
Weighted-average remaining lease term (years)		2.29			3.14			2.33			2.89
Weighted-average discount rate (%)		8.0	%		7.5	%		8.9	%		7.5	%

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment, net, consisted of the following:

	March 31, 2023			December 31, 2022			June 30, 2023			December 31, 2022

Plant and equipment		4,118,491			4,263,662		$	4,672,674		$	4,263,662
Computer equipment		162,457			163,060			162,060			163,060
Furniture and fixtures		29,016			29,492			28,703			29,492
Processing machines (Miners)		102,381,318			103,337,719			102,164,610			103,337,719
Modular data center		21,323,426			19,713,534			24,935,634			19,713,534
Motor vehicles		326,704			326,704			357,704			326,704
Transformers		4,737,512			4,596,892			9,893,024			4,596,892
Low-cost assets		1,059,319			995,292			1,134,858			995,292
Assets under construction		11,737,313			11,592,582			5,183,049			11,592,582
Leasehold improvements		487,530			487,527			487,527			487,527
Total		146,363,086			145,506,464			149,019,843			145,506,464
Less: Accumulated depreciation		(61,798,906	)		(54,489,966	)		(70,490,369	)		(54,489,966	)
Property and equipment, net		84,564,180			91,016,498		$	78,529,474		$	91,016,498

The Company incurred depreciation and amortization ~~expense~~expenses in the amounts of ~~$7.96~~$8.79 million and ~~$13.80~~$16.02 million for the ~~quarters~~three month period ended ~~March 31,~~June 30, 2023 and ~~March 31,~~2022, respectively. The Company incurred depreciation and amortization expenses in the amounts of $16.75 million and $29.83 million for the six month periods ended June 30, 2023 and 2022, respectively. There were no impairment charges recognized for property and equipment for either the ~~quarter~~six month periods ended ~~March 31,~~June 30, 2023 ~~or March 31,~~and 2022.

~~The reclassification of property and equipment to assets held for sale is in relation to the sale of Luna Squares Texas LLC to M Turing VCC Oracle Phase 1 Fund (see Note 6).~~

~~NOTE 6 – ASSETS HELD FOR SALE~~

On April 18, 2023, the Company sold 100% of its membership interest in Luna Squares Texas LLC ~~a Delaware limited liability company, which held rights to 4 greenfield leases in Midland, TX, as well as related contracts.~~along with 59 transformers. The ~~sale~~total sales price was ~~$3.0m~~$8.5 million in cash and ~~$5.5m in stablecoins. In addition,~~stablecoins, the ~~Company sold 59 transformers which were earmarked for these Texas sites.~~

~~From November 9, 2022 these assets were classified as held for~~profit on sale ~~from~~of this ~~date depreciation and amortization on the property and equipment and the leases ceased. As at March 31, 2023 the assets~~site has been included in the ~~sale are stated at carrying value and comprised of the following assets.~~

March 31,
2023
Property and equipment $ 4,289,684
Security deposit 1,010,716
Operating lease right-of-use asset 145,659
Assets held for sale $ 5,446,059

~~NOTE 7 – EQUITY METHOD INVESTMENTS~~

Mawson AU Limited is a 34.9% shareholder of Tasmania Data Infrastructure Pty Ltd (“TDI”) from November 23, 2022 and therefore was accounted for as an equity method investment from this date under ASC 323 ~~Investments – Equity Method and Joint Ventures~~ ~~. Our share of income and losses from our equity method investments is included in share of net loss of equity method investment in our~~ consolidated ~~statements~~condensed statement of operations.

NOTE 86 – INCOME TAXES

For the three months ended
March 31,

2023 2022

Effective income tax rate 0.00 % 0.00 %

	For the three months ended June 30,
	2023			2022

Effective income tax rate		0.00	%		0.00	%

	For the six months ended June 30,
	2023			2022

Effective income tax rate		0.00	%		0.00	%

The Company’s effective tax rate is calculated by dividing the total income tax expense by the sum of income before the 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. Income tax expense of $548,083 during the three months ended March, 31 2023 relates to the recognition of previously unrecognized tax liability due for the December, 31, 2022 year. The company determined the impact of recording this adjustment during 2023 was not material to the financial statements or the opening balance of the accumulated deficit.

NOTE 97 – BORROWINGS

Marshall loan

In December 2021 MIG No. 1 Pty Ltd entered into a Secured Loan Facility Agreement with Marshall Investments MIG Pty Ltd. The loan matures in February 2024 and bears interest at a rate of ~~12.00%~~12% per annum, payable monthly with interest payments ~~commencing~~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 Company. Principal repayments began during November 2022.

The outstanding balance is ~~$9.08~~$8.07 million as at ~~March 31,~~June 30, 2023 all of which is classified as a current liability.

The loan matures in February 2024 and the outstanding balance is $8.07 million as at June 30, 2023. On June 30, 2023 MIG No. 1 Pty Ltd did not make a principal and interest payment of $0.50 million. MIG No. 1 Pty Ltd and Marshall are in ongoing discussions with respect to the payment, and the loan terms generally. Marshall has reserved its rights.

Celsius loan

On February 23, 2022, Luna Squares LLC entered into ~~a Co-Location~~the Co-location Agreement with Celsius Mining LLC. In connection with this agreement, Celsius Mining LLC loaned Luna Squares LLC a principal amount of ~~$20,000,000,~~$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.~~annum, and Luna Squares LLC is required to amortize the loan at a rate of 15% per ~~quarter,~~quarter. Repayments to the principal ~~repayments~~amount began at the end of September 2022. The Secured Promissory Note has a maturity date of August 23, 2023 and the outstanding balance ~~is $11.0 million~~ as at ~~March 31,~~June 30, 2023 ~~all of~~is $11.33 million, which is classified as a current liability. On July 18, 2023 Luna Squares LLC paid to Celsius Mining LLC $3.33 million as principal and interest. Celsius Mining LLC filed for Chapter 11 bankruptcy protection on July 13, 2022. ~~Celsius Mining LLC has proposed certain changes to the Secured Promissory Note and the related security agreement, however the parties have been unable to agree mutually satisfactory agree terms.~~

W Capital loan

On September 2, 2022, ~~Mawson Infrastructure Group Pty Ltd~~MIG PL entered into a Secured Loan Facility Agreement with W Capital Advisors Pty Ltd with a total loan facility of AUD$33.00 million (USD$1.9 million). This was amended on September 29, 2022 and the loan facility was increased to AUD$88.00 million (USD$5.2 million). During the six month period ending June 30, 2023, the Company received AUD$3.00 million (USD$1.99 million) from this loan facility. As at ~~March 31,~~June 30, 2023, AUD$~~3.53~~1.46 million (USD$~~2.36~~0.97 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 ~~began~~are paid ad hoc in line with the loan facility agreement. The Secured Loan Facility expired in March ~~2023.~~2023 and MIG PL and W Capital Advisors Pty Ltd are in ongoing discussions regarding the extension of the loan. W Capital Advisors Pty Ltd and MIG Pty Ltd have each reserved their rights.

Convertible notes

On July 8, 2022, the Company issued secured convertible promissory notes to investors in the aggregate principal amount of ~~$3,600,000~~$3.60 million (the “Secured Convertible Promissory Notes”) in exchange for an aggregate of ~~$3,600,000~~$3.6 million in cash. The Secured Convertible Promissory Notes are convertible at the option of the holder at a price of $5.10 per share of our common stock. The Secured Convertible Promissory Notes bear interest of twenty percent per annum. One-half of the interest that accrues each month on the Secured Convertible Promissory Notes must be paid monthly. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable under the Secured Convertible Promissory Notes, is due and payable if not converted pursuant to the terms and conditions of the Secured Convertible Promissory Note on the earlier of (i) one year after its issuance, or (ii) following an event of default. 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. ~~Payments of the interest could be made partially in common stock of the Company, at the Company’s election.~~ All of the investors included in this letter variation elected for the pre-payment option and therefore there were $3.1 million principal repayments made during November 2022. The final convertible noteholder (W Capital Advisors Pty Ltd) 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 amount of $0.50 million was not immediately required ~~until the originally agreed Repayment Date (June 2023) and therefore the remaining $0.50 million~~to be repaid. That principal amount has been classified as a current liability. The convertible note matured in July 2023 and the Company is in ongoing discussions with the noteholder regarding a resolution. W Capital Advisors Pty Ltd and MIG PL have each reserved their rights.

NOTE 108 – STOCKHOLDERS’ EQUITY

Stock-Based Compensation:

Equity plans

Under the 2018 Equity Plan, ~~which was approved by stockholders on February 22, 2018,~~ the aggregate number of Shares reserved under this Plan was originally 10,441,251. On August 15, 2018, the stockholders approved the First Amendment to the 2018 Equity Plan, which changed the total number of shares of the Company’s common stock to 2,500,000 shares. In addition, the number of shares issuable under the Plan on the first day of each fiscal year ~~beginning with the 2019 fiscal year, would~~ increase by an amount equal to the lower of (i) 100,000 shares (after a later 10 for 1 stock split) or (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year. As of ~~January 1, 2023, that meant there were a maximum of 574, 153 shares available. After the 6 for 1 reverse stock split in February~~June 30, 2023, there were ~~95,693~~no shares ~~available~~issuable under the 2018 ~~Plan. After an issue of 93,334 restricted stock units to a consultant (W Capital Advisors Pty Ltd) under the 2018~~Equity Plan ~~and taking into account all options that were issued under the 2018 Plan (after adjusting reverse stock splits), the 2018 Plan is essentially exhausted~~ until it automatically replenishes on January 1, 2024.

~~Under~~At the Company’s annual meeting on May 17, 2023, the stockholders approved an amendment to the 2021 Equity Plan ~~which was adopted by~~that, amongst other things, increased the ~~Company on August 3,~~number of the shares available under the 2021 ~~originally for an aggregate~~Equity Plan to 10,000,000 shares. As of ~~up to 70,000,000 Shares. Following a 10 for 1 reverse stock split on August 12, 2021, that number was reduced to 7,000,000. Following a 6 for 1 reverse stock split which took effect on February 9,~~June 30, 2023, the ~~aggregate~~ number of ~~Shares~~shares reserved under the 2021 Equity Plan was further reduced to 1,166,667. Stockholder consent is being sought at the May 17, 2023 annual meeting to increase this number to 10,000,000. As of March 31, 2023, the number of Shares reserved under this Plan was 383,315.4,133,322.

The Company’s stock-based compensation expenses recognized during the three months ended March 31, 2023 and 2022 were included in share based payments expenses in the accompanying unaudited condensed consolidated statements of operations.

The Company recognized stock-based compensation expense during the three and six months ended ~~March 31,~~June 30, 2023 and 2022 as follows:

	For the three months ended March 31,				For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022		2023		2022
Performance-based restricted stock awards	$	166,779	$	166,276	$	166,779	$	187,648	$	333,558	$	353,924
Service-based restricted stock awards		307,069		-		19,997		248,086		49,992		305,586
Stock issued to consultants						-		-		307,069		-
Common stock warrant expense						500,500		500,500		1,001,000		667,333
Total stock-based compensation	$	473,848	$	166,276	$	687,276	$	936,234	$	1,691,619	$	1,326,843

Number of
shares Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Life (in
years) Aggregate
Intrinsic
Value
Outstanding as of December 31, 2022 416,791 0.22 9.09
Issued 93,334 -
Exercised (206,438 ) - 609,806
Expired - -
Outstanding as of March 31, 2023 303,867 0 9.26
Exercisable as of March 31, 2023 191,702 0.30 5.50

Performance-based awards

Performance-based awards generally vest over a three-year performance period upon the successful completion of specified market and performance conditions.

The following table presents a summary of the Company’s performance-based awards restricted stock awards activity:

	Number of shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2022		342,310			-		8.33	$	472,388
Issued		-			-
Exercised		(100,000	)		-				318,000
Expired		-			-
Outstanding as of June 30, 2023		242,310			-		9.04	$	457,966
Exercisable as of June 30, 2023		144,327			-		4.97	$	272,778

~~Restricted Common Stock~~

~~The Company recognized an expense in relation~~As of June 30, 2023, there was approximately $0.70 million of unrecognized compensation cost related to the ~~restricted stock units during the three months ended March 31, 2023 and 2022 as follows:~~

For the three months ended
March 31,
2023 2022
Restricted stock unit expense $ 29,995 $ -
Total restricted stock unit expense $ 29,995 $ -

~~Future expense related to share-based payments~~performance-based awards, which is expected to ~~total~~be recognized over a remaining weighted-average vesting period of approximately ~~$0.15 million which will be expensed~~one year.

Service-based restricted stock awards

Service-based awards generally vest over ~~the next 1.29 years.~~a one year service period.

~~Common Stock~~The following table presents a summary of the Company’s service-based awards activity:

	Number of shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2022		74,246			-		8.42		102,459
Issued		4,140,720			-
Exercised		(13,760	)		-				43,744
Expired		-			-
Outstanding as of June 30, 2023		4,201,206			-		2.84		7,940,279
Exercisable as of June 30, 2023		60,486			-		0.13		114,319

~~On September 29, 2022,~~

As of June 30, 2023, there was approximately $7.83 million of unrecognized compensation cost related to the ~~Company entered into~~service-based restricted stock awards, which is expected to be recognized over a ~~letter variation relating to three out~~remaining weighted-average vesting period of four of the Secured Convertible Promissory Notes, where it gave those holders the option to elect for pre-payment (including accrued interest to maturity). Payments of the interest may be made partially in common stockapproximately one year. James Manning who stepped down as Chief Executive Officer of the Company, ~~at the Company’s election. All of the investors included in this letter variation elected for the pre-payment option and therefore there were 104,178 shares of common stock of~~effective May 22, 2023, had agreed with the Company that he would be issued as part of this letter variation. The final convertible noteholder who was not a party to this variation opted to enter into an arrangement on January 16, 2023 whereby it received pre-payment of interest which was also partially paid in shares. In total 18,807 shares of common stock of the Company were issued as part of this arrangement. The Company recognized an $0.061.35 million ~~expense in relation to 18,807 shares issued in the three months ended March 31, 2023 within in the share based payment expense.~~

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 stockRSUs and ~~reduced its authorized common stock to 90,000,000 shares,~~his other RSU agreements would be cancelled, as set forth in the Company’s Current Report on Form 8-K filed ~~February 9,~~May 22, 2023. ~~This reverse stock split meant there were an additional 141 shares~~However, these RSUs have not been issued ~~due to rounding, which~~and have not been included in the above table. Similarly, the existing RSUs have not been cancelled and therefore are included in the ~~issuance~~above table.

Stock options awards

Stock options awards vest upon the successful completion of ~~common stock, share based compensation within the consolidated condensed statements of stockholders’ equity.~~specified market conditions.

~~Under the terms~~The following table presents a summary of the ~~Cosmos Transaction Bid Implementation Agreement the Company made share-based~~Company’s Stock options awards under an Incentive Compensation Program during September 2021 (refer to reverse acquisition accounting policy). During the three-month period ended March 31, 2023, certain participants partially converted certain of these awards into 100,000 shares of common stock of the Company.activity:

The Company made share-based payments under an Incentive Compensation Program during December 2022. During the quarter ended March 31, 2023, certain participants partially exercised certain of these awards into 13,104 shares of common stock of the Company.

W Capital Advisors Pty Ltd was issued 93,334 shares of common stock during February 2023 for consultancy and advisory services provided to the Company, the fair value of these shares was $0.25 million.

	Number of shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2022		417	$	35.90		1.26
Issued		1,750,000		1.89
Exercised		-		-
Expired		-		-
Outstanding as of June 30, 2023		1,750,417	$	1.90		10.0
Exercisable as of June 30, 2023		417	$	35.90		1.26

On May 27, 2022, the Company entered into an ATM Agreement with Wainwright, to sell shares of our common stock, par value $0.001 per share, having an aggregate sales price of up to $100 million, from time to time, through an “at the market offering” program under which Wainwright acts as the sales agent. During the quarter ended March 31, 2023, 175,664 shares were issued as part of the ATM Agreement for net cash proceeds of $471,379.

~~Restricted Stock~~

~~As of March 31, 2023, the Company had no restricted stock outstanding.~~

Common Stock Warrants

A summary of the status of the Company’s outstanding stock warrants and changes during the ~~three~~six months ended ~~March 31,~~June 30, 2023, is as follows:

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2022		2,825,278		4.17		3.30		2,825,278
Issued		-		-		-		2,967,512			14.31		3.69
Exercised		-		-		-		(246,668	)		-		-
Expired		-		-		-		-			-		-
Outstanding as of March 31, 2023		2,825,278	$	4.17		3.30
Warrants exercisable as of March 31, 2023		2,825,278	$	4.17		3.30
Outstanding as of June 30, 2023								5,546,122		$	14.31		3.39
Warrants exercisable as of June 30, 2023								5,546,122		$	14.31		3.69

As of June 30, 2023, there was approximately $0.80 million of unrecognized compensation cost related to the warrants issued is expected to be recognized over a remaining weighted-average vesting period of approximately six months.

On May 3, 2023, the Company has entered into a definitive agreement with institutional investors for the issuance and sale of 2,083,336 shares of its common stock at a purchase price of $2.40 per share of common stock and 246,668 pre-funded warrants at an offering price of $2.399 and an exercise price of $0.001 per share in a registered direct offering. In relation to this agreement, the Company issued the institutional investors unregistered warrants to purchase up to 2,604,170 shares of its common stock with an exercise price of $3.23 per share. The underwriter was also issued warrants to purchase up to an aggregate of 116,667 shares of common stock at an exercise price of $3.00 per share. The Company determined that the warrants did not meet the criteria for a derivative and therefore, these warrants were recorded in stockholders’ equity as a stock issuance cost with no net effect on stockholders’ equity.

As a condition to the sale of 2,083,336 shares of common stock described above, the Company amended the warrants previously issued to one of the investors in that offering to purchase an aggregate of 1,666,667 shares of common stock for an exercise price of $6.06 per share, which were issued in July of 2022 (the “Existing Warrants”), effective upon the closing of the offering, such that the amended Existing Warrants have a reduced exercise price of $3.23 per share, are exercisable six months following the closing of the offering, and will expire five and one-half years following the closing of this offering. This modification has been accounted for in accordance with ASC 815 Derivatives and Hedging. The Company determined that the incremental fair value of the warrants subsequent to the warrant modification were not material and therefore, the Company did not record additional equity issuance costs and additional-paid-in capital as a result of the modification.

Common Stock

On May 3, 2023, the Company has entered into a definitive agreement with institutional investors for the issuance and sale of 2,083,336 shares of its common stock (or prefunded warrants in lieu thereof) at a purchase price of $2.40 per share of common stock in a registered direct offering for proceeds of $4.6 million, net of issuance costs.

The Company ~~recognized an expense in relation~~has the ability through its ATM Agreement to ~~warrants issued in 2022 during~~sell shares of its common stock. Effective May 4, 2023, the ~~three months ended March 31, 2023 within~~Company filed a prospectus supplement to amend, supplement and supersede certain information contained in the ~~share based payment expense~~earlier prospectus and prospectus supplement, which reduced the number of ~~$0.50 million.~~shares of common stock the Company may offer and sell under the ATM Agreement to an aggregate offering price of up to $9,000,000 from time to time. During the quarter ended June 30, 2023, 239,607 shares were issued as part of the ATM Agreement for cash proceeds of $721,460, net of issuance costs. The Company is contractually restricted from issuing any stock under its ATM Agreement until on or about November 7, 2023.

During the quarter ended June 30, 2023, there were exercises of restricted stock units and common stock options into 656 shares of common stock of the Company for proceeds totaling $186,776.

NOTE 119 – COMMITMENTS AND CONTINGENCIES

The Company is currently in the process of applying for sales tax registrations and exemptions in different states in the U.S. At this stage, the Company is unable to determine the financial impact of sales tax.

The determination of tax liabilities involves significant judgement as well as the application of complex tax laws and regulations. As of the reporting date, certain income tax matters are uncertain and cannot be reliable estimated primarily for the subsidiaries under the U.S. tax jurisdictions for the current and prior periods. The Company has not recorded any tax liabilities or benefits pertaining to these subsidiaries for the period.

NOTE 1210 – RELATED PARTY TRANSACTIONS

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 ~~shareholder~~stockholder of the Company, is also a director of Vertua Ltd and has a material interest in the Sharon lease as a large ~~shareholder~~stockholder of Vertua Ltd. The lease is for a term of 5five years, and Luna Squares LLC has 2two options to extend for 5five years each. Rent is subject to annual increases equal to the amount of the Consumer Price Index 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.

During the ~~quarter~~six month periods ended ~~March 31,~~June, 2023 and ~~the quarter ended March 31,~~ 2022, Mawson Infrastructure Group Pty Ltd paid Vertua Limited ~~$154,559~~$154,224 and ~~$43,873~~$102,750 respectively, for reimbursement for office ~~costs.~~costs charged with a mark-up. James Manning, ~~CEO,~~ a director and a significant ~~shareholder~~stockholder of the Company, is also a director of Vertua Ltd. Manning family members also own interests in Vertua Ltd.

During the six month periods ended June, 2023 and 2022, Mawson Infrastructure Group Pty Ltd paid First Equity Tax Pty Ltd $42,741 and $10,124 respectively, for tax advisory services. James Manning, a director and a significant stockholder of the Company, has interests in and is also a partner of First Equity Tax Pty Ltd.

During the six month periods ended June, 2023 and 2022, Mawson Infrastructure Group Pty Ltd paid First Equity Advisory Pty Ltd $48,223 and $25,167 respectively, for accounting labor services. James Manning, a director and a significant stockholder of the Company, has interests in First Equity Advisory Pty Ltd.

During the six month periods ended June, 2023 and 2022, Mawson Infrastructure Group Pty Ltd paid Defender Investment Management Pty Ltd $363,611 and $262,802 respectively, in lieu of paying Mr. Manning directly for his employment. These payments were disclosed in the Executive Summary Compensation table in the Company’s 2022 and 2023 Proxy Statements. Mr. James Manning, is a director and a significant stockholder of the Company, and is a director of Defender Investment Management Pty Ltd. Manning family members have equity interests in and control Defender Investment Management Pty Ltd.

During the six month periods ended June, 2023 and 2022, Mawson Infrastructure Group Pty Ltd paid Manning Motorsports Pty Ltd $35,495 and $41,525 respectively, for vehicle services. James Manning, a director and a significant stockholder of the Company, has direct interests in and is a director of Manning Motorsports Pty Ltd.

During the six month periods ended June, 2023 and 2022, Mawson Infrastructure Group Pty Ltd paid International Cargo Solutions, a division of Flynt ICS Pty Ltd, $841,042 and $4,464,097 respectively, for freight services. Manning Capital Holdings Pty Ltd, a company associated with Mr. Manning may have had debt interests in Flynt ICS Pty Ltd. Vertua Ltd entered into an agreement to acquire International Cargo Solutions, a division of Flynt ICS Pty Ltd in October 2022. The transaction closed on June 30, 2023. James Manning, a director and a significant stockholder of the Company, is also a director of Vertua Ltd. Manning family members own interests in Vertua Ltd.

There may be additional related party transactions. Mr. James Manning has not signed a declaration of related party transactions to the Company’s satisfaction at the time of this filing.

NOTE 1311 – SUBSEQUENT EVENTS

On ~~April~~July 18, 2023 Luna Squares LLC paid to Celsius Mining LLC $3.33 million as principal and interest related to the Celsius Promissory Note.

On July 20, 2023 we received a notice from Celsius Mining LLC that Celsius Mining LLC does not intend to renew its Co-Location Agreement, under which it receives hosting services from Luna Squares LLC (a subsidiary of the Company), and that it will expire in accordance with its terms. Celsius Mining LLC is the Company’s only hosting customer. The Company ~~sold 100%~~hosts approximately 20,000 miners for Celsius Mining LLC. Celsius Mining LLC has made certain allegations against Luna Squares LLC in respect of its ~~membership interest in~~performance under the Co-Location Agreement. Luna Squares ~~Texas~~ LLC ~~which held rights~~has made certain allegations again Celsius Mining LLC in respect of its performance under the Co-Location Agreement. There is a risk of dispute or litigation arising out of these allegations.

On July 25, 2023, a Debtors’ Ex Parte Motion for an Order Under Federal Rules of Bankruptcy Procedure 2004 and 9016 for Subpoenas for Examination of, and Production of Documents From, Mawson Infrastructure Group Inc., Luna Squares, and Cosmos Infrastructure LLC was filed, and the Bankruptcy Court entered an order on July 26, 2023, authorizing the Debtors to ~~4 greenfield leases in Midland, TX, as well as related revenue sharing contracts~~take discovery of the Mawson Entities . The Debtors intend to take discovery of the Mawson Entities to evaluate the status of the liens securing the Celsius Promissory Note and other potential claims the Debtors may have against the Mawson Entities, including with respect to the ~~landlords.~~Co-Location Agreement. The ~~sale price was $8.5m in cash and stablecoins. In addition, Mawson sold 59 transformers which were earmarked for these Texas sites.~~discovery process is ongoing.

Effective May 1, 2023 Mawson Ohio LLC took an assignment of a lease for a site in Corning, Ohio. The term of the lease is for 4 years, with 1 option to extend for 5 years. The site area has a capacity of up to 24MW, with a potential for a further 26MW (subject to the construction of a new substation). The site has not been accurately measured and is part of a much larger site of 118 acres, however the lease area is that are which Mawson Ohio LLC requires for the operation its data center facility comprising of 12 MDCs. 12 MDCs could house up to approximately 7,056 miners.

On May 3, 2023, the Company has entered into a definitive agreement with institutional investors for the issuance and sale of 2,083,336 shares of its common stock (or pre-funded warrants in lieu thereof) at a purchase price of $2.40 per share of common stock in a registered direct offering. In addition, in a concurrent private placement, the Company will issue to the institutional investors unregistered warrants to purchase up to 2,604,170 shares of its common stock with an exercise price of $3.23 per share and are exercisable six months following issuance for a period of five and one-half years following issuance. The shares of common stock and pre-funded warrants described above are being offered and sold by the Company pursuant to a “shelf” registration statement on Form S-3 (File No. 333-264062). The warrants to purchase common stock described above were offered and sold by the Company pursuant to Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder. This offering closed on May 8, 2022. The net amount raised was approximately $5.0 million.

Effective May 4, 2023, the Company filed a prospectus supplement to amend, supplement and supersede certain information contained in the prospectus supplement dated May 27, 2022, and its accompanying prospectus dated April 11, 2022 (collectively, the “May 2022 Prospectus”), relating to the offer and sale of common stock through H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, in “at the market offerings” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, pursuant to the At the Market Offering Agreement with Wainwright dated as of May 27, 2022 (the “ATM Agreement”). The prospectus supplement reduced the amount of shares of Common Stock The Company may offer and sell under the ATM Agreement to an aggregate offering price of up to $9,000,000 from time to time through Wainwright.

Under the May 2022 Prospectus, the Company initially registered up to $100,000,000 of our common stock for offer and sale pursuant to the ATM Agreement. However, on March 23, 2023, the date the Company filed its Annual Report on Form 10-K for the year ended December 31, 2022, the registration registering the shares being sold pursuant to the ATM Agreement became subject to the offering limits set forth in General Instruction I.B.6 of Form S-3. As of May 3, 2023, the aggregate market value of our outstanding common stock held by non-affiliates was approximately $45,720,757.33, which we calculated based on 14,371,373 shares of outstanding common stock as of May 3, 2023, of which 12,735,587 shares were held by non-affiliates, and a price per share of $3.59 which was the closing price of our common stock on March 23, 2023.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of our balance sheets, statements of operations and cash flows. The following discussion and analysis of our financial condition and results of operations should be read together with the interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. All amounts are in U.S. dollars.

Throughout this report, unless otherwise designated, the terms “we,” “us,” “our,” the “Company,” “Mawson,” “our company” and the “combined company” refer to Mawson Infrastructure Group Inc., a Delaware corporation, and its direct and indirect subsidiaries, including Mawson Infrastructure Group Pty Ltd, an Australian company (“Mawson AU”), Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, Cosmos MIG No.1 Pty Ltd, MIG No.1 LLC, Mawson AU Limited, ~~Luna Squares~~Mawson Bellefonte LLC, Luna Squares Texas, Luna Squares Repairs LLC, Luna Squares Property LLC, Mawson Midland LLC, Mawson Ohio LLC, Mawson Hosting LLC and Mawson Mining ~~LLC .~~

Forward-Looking Statement Notice

This Quarterly Report on Form 10-Q 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. In addition, from time to time, our representatives have made or may make forward-looking statements, orally or in writing. Forward-looking statements can be identified by the use of forward-looking words such as “believe,” “expect,” “intend,” “plan,” “may,” “should” 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 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 risk factors ~~set forth in our Annual Report on Form 10-K for the year ended December 31, 2022, and in Part II – Item 1A of this report.~~summarized below.

This 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” ~~as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.~~below .

Such risk factors 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, readers 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:

our need to, and difficulty in, raising additional capital;

downturns in the Cryptocurrency industry;

inflation;

increased interest rates;

the inability to procure needed hardware;

the failure or breakdown of mining equipment, or internet connection failure;

access to reliable and reasonably priced electricity sources;

Cyber-security threats;

our ability to obtain proper insurance;

construction risks;

banks and other financial institutions ceasing to provide services to our industry.

changes to the Bitcoin network’s protocols and software;

the decrease in the incentive to mine Bitcoin;

the increase of transaction fees related to digital assets:

the fraud or security failures of large digital asset exchanges;

future digital asset, technological and digital currency development; and

the regulation and taxation of digital assets like Bitcoin;

our ability to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002;

material litigation, investigations or enforcement actions by regulators and governmental authorities, as disclosed in the legal proceedings section and elsewhere.

Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited ~~to:~~to, the risk factors set out in Item 1A. Risk Factors.

~~our need to, and difficulty in, raising additional capital;~~

~~downturns in the digital currency industry;~~

~~inflation;~~

~~increased interest rates;~~

~~the inability to procure needed hardware;~~

~~the failure or breakdown of mining equipment, or internet connection failure;~~

~~access to reliable and reasonably priced electricity sources;~~

~~Cyber-security threats;~~

~~our ability to obtain proper insurance;~~

~~construction risks;~~

~~banks and other financial institutions ceasing to provide services to our industry.~~

~~changes to the Bitcoin network’s protocols and software;~~

~~the decrease in the incentive to mine Bitcoin;~~

~~the increase of transaction fees related to digital assets:~~

~~the fraud or security failures of large digital asset exchanges;~~

~~future digital asset, technological and digital currency development; and~~

~~the regulation and taxation of digital assets like Bitcoin;~~

~~our ability to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002;~~

~~material litigation, investigations or enforcement actions by regulators and governmental authorities.~~

All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date of this report and are expressly qualified in their entirety by the cautionary statements included in this report. Except as required by applicable law, we undertake no obligations 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.

Overview

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

Our ~~primary~~ business isincludes the ownership 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~~on two sites located in ~~Pennsylvania USA.~~Pennsylvania. The Miners we operate are predominately focused on the process of digital mining, specifically Bitcoin.

We offer hosting or co-location facilities to other businesses in the digital asset infrastructure industry to have their Miners located within our data centers. These businesses pay us for ~~Bitcoin.~~the use of our infrastructure and related services.

In exchange for ~~powering down our systems and~~ curtailing the power we ~~get~~utilize from the grid in response to instances of high electricity demand, we receive net energy benefits. We also have a contract with our energy provider where we can trade our energy to achieve net energy benefits. We have recognized a derivative asset on our balance sheet for the contract we have with our energy provider, which has been measured at fair value with any changes in fair value recognized in our statement of operations.

We offer ‘hosting’ or ‘co-location’ facilities to other businesses in the digital asset infrastructure industry to have their Miners located within our MDCs. These businesses pay us a fee for the use of our facilities and related services (often based on power consumption).

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

~~As of March 31, 2023~~

Existing
Operations
Online Order and
Purchase
Agreements Cumulative
Fleet Fully
Deployed
Total miners online 6,104 - 6,104
Total miners in transit - - -
Total miners on order - - -
Total miners in storage 17,228 - 17,228
Total miners 23,332 - 23,332

We continue to conduct research and development in relation to our ~~MDCs which we are actively testing in several configurations~~data centers, design, operations and ~~locations to determine the best configuration for both ASIC and alternate computing uses.~~technology.

Recent ~~Developments.~~Developments

~~On April 18,~~Effective July 14, 2023, the Company ~~sold 100%~~appointed Mr. William “Sandy” Harrison as its new Chief Financial Officer pursuant to the terms of ~~its membership interest~~an offer letter which is filed as Exhibit 10.4 hereto. Mr. Harrison has more than 27 years of experience as a senior finance executive primarily in ~~Luna Squares Texas LLC, which held rights to 4 greenfield leases~~semiconductor and communications-related technology companies. His roles have included senior research analyst, director of research, and a partner at two investment banking firms where he served as a principal and participated in ~~Midland, TX,~~several operating committee roles. He has also served as vice-president of investor relations as well as headed the financial planning and analysis and marketing communications teams at a multi-billion-dollar market-cap technology company. Mr. Harrison earned a B.A. degree from Washington and Lee University and a MBA in Finance from Loyola University Maryland. He is a previous holder of the Series 7, 24, 63, 86 and 87 licenses. There are no reportable family relationships or related ~~contracts. The sale price was $8.5 million in cash and stablecoins. In addition,~~person transactions involving the Company ~~sold 59 transformers which were earmarked for these Texas sites. The buyer was~~and Mr. Harrison. Mr. Harrison is not a ~~fund managed by Mainnet Capital, a Singapore-based fund manager, called M Turing VCC Oracle Phase 1 Fund.~~

Our legacy business was as a clinical-stage biopharmaceutical company focused on the treatment of ophthalmic disorders, including dry eye syndrome (the “LO2A” business). 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 ended 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~~party to any ~~value created in respect~~transaction that would require disclosure under Item 404(a) 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, 2023, the Company entered into a share purchase agreement with N.Danenberg Holding (2000) Ltd to sell the Company’s shares or interests in Wize NC Inc, Occuwize Ltd and Wize Pharma Ltd (~~“Wize Entities”~~) effective December 31, 2022 in consideration for $10,000. This transaction closed on March 9, 2023. As a result of the sale transaction the Wize Entities were deconsolidated from the group effective December 31, 2022.

On April 18, 2023, the Company sold 100% of its membership interest in Luna Squares Texas LLC, which held rights to 4 greenfield leases in Midland, TX, as well as related revenue sharing contracts with the landlords. The sale price was $8.5m in cash and stablecoins. In addition, Mawson sold 59 transformers which were earmarked for these Texas sites.

On May 3, 2023, the Company has entered into a definitive agreement with institutional investors for the issuance and sale of 2,083,336 shares of its common stock (or pre-funded warrants in lieu thereof) at a purchase price of $2.40 per share of common stock in a registered direct offering. In addition, in a concurrent private placement, the Company will issue to the institutional investors unregistered warrants to purchase up to 2,604,170 shares of its common stock with an exercise price of $3.23 per share and are exercisable six months following issuance for a period of five and one-half years following issuance. The shares of common stock and pre-funded warrants described above are being offered and sold by the Company pursuant to a “shelf” registration statement on Form S-3 (File No. 333-264062). The warrants to purchase common stock described above were offered and sold by the Company pursuant to Section 4(a)(2) of the Securities Act and Regulation ~~D promulgated thereunder. This offering closed on May 8, 2022. The net amount raised was approximately $5.0 million.~~

From August 9, 2022, Mr. Ariel Sivikofsky provided Chief Financial Officer services to the AtCompany. Pursuant to the ~~Market Offering~~appointment of Mr. Harrison as Chief Financial Officer, Mr. Sivikofsky ceased providing those services. Mr. Sivikofsky has made certain claims for compensation against the Company which the Company disputes. In addition, the Company announced the departure of Mr. Liam Wilson as the Company’s Chief Operating Officer effective July 14, 2023. The Company does not at this time expect to seek a replacement for the Chief Operating Officer position as such responsibilities will be absorbed by the Chief Executive Officer and President and other members of the leadership team.

On July 19, 2023, the Company entered into an Addendum to the Employment Agreement ~~with Wainwright~~between the Company and Rahul Mewawalla, dated ~~as of~~ May ~~27, 2022~~22, 2023 (the ~~“ATM Agreement”~~“Addendum”). The ~~prospectus supplement reduced the amount~~Addendum is intended to provide management continuity related to a potential or actual change-in-control event of ~~shares of Common Stock The Company may offer and sell under the ATM Agreement to an aggregate offering price of up to $9,000,000 from time to time through Wainwright.~~

~~Under the May 2022 Prospectus,~~ the Company ~~initially registered up~~and to ~~$100,000,000~~align with shareholder interests in support of ~~our common stock~~corporate transactions. The Addendum provides for ~~offer~~double (200%) severance related payments and ~~sale pursuant~~benefits if Mr. Mewawalla’s employment is terminated (actually or constructively, or by Mr. Mewawalla for Good Reason) upon or after a change-in-control of the Company. The increase in payments and benefits provided to Mr. Mewawalla following a qualifying termination is the same for all change-in-control events. The description set forth above is qualified in its entirety by reference to the ~~ATM Agreement. However, on March 23, 2023,~~full text of the ~~date the Company~~Addendum, which is filed its Annual Report on Form 10-K for the year ended December 31, 2022, the registration registering the shares being sold pursuant to the ATM Agreement became subject to the offering limits set forth in General Instruction I.B.6 of Form S-3. As of May 3, 2023, the aggregate market value of our outstanding common stock held by non-affiliates was approximately $45,720,757.33, which we calculated based on 14,371,373 shares of outstanding common stock as ~~of May 3, 2023, of which 12,735,587 shares were held by non-affiliates, and a price per share of $3.59 which was the closing price of our common stock on March 23, 2023.~~Exhibit 10.5 hereto.

On July 20, 2023 we received a notice from Celsius Mining LLC that Celsius Mining LLC does not intend to renew its Co-Location Agreement, under which it receives hosting services from Luna Squares LLC (a subsidiary of the Company), and that it will expire in accordance with its terms. Celsius Mining LLC is the Company’s only hosting customer. The Company hosts approximately 20,000 miners for Celsius Mining LLC. Celsius Mining LLC has made certain allegations against Luna Squares LLC in respect of its performance under the Co-Location Agreement. Luna Squares LLC has made certain allegations against Celsius Mining LLC in respect of its performance under the Co-Location Agreement. There is a risk of dispute or litigation arising out of these allegations.

The Company is in active discussions with potential new customers for hosting services to replace Celsius, however there is no guarantee that the Company will be able to enter into hosting agreements with new customers in a timely manner, or at all, or that the agreements with the new customers will replace the revenue that Celsius Mining LLC generates for the Company. Celsius Mining LLC and Luna Squares LLC tare in discussions related to Co-Location Agreement, however the outcome of these discussions is uncertain. The Company may decide to use the hosting infrastructure’s capacity to self-mine or for other purposes, however it will need to raise a potentially significant amount of capital to finance and acquire further hardware (specifically miners) for self-mining and the potential timing and outcome of these other potential options are uncertain.

Environment, Sustainability, Governance

The Company 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~~These are key criteria when analyzing a new site for acquisition, lease or selling an existing site. The Company believes it can make a positive contribution towards lowering carbon emissions by supporting carbon neutral or 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~~high-power demand through its Energy Markets Program, for example through its membership in the PJM Market, and various demand response programs as and 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 – Three months Ended ~~March 31,~~June 30, 2023 compared to the three months ended ~~March 31,~~June 30, 2022

	For the three months ended
	March 31,						For the three months ended June 30,
	2023			2022			2023			2022
Revenues:
Digital currency mining revenue		2,756,000			18,783,842		$	4,896,521		$	16,212,525
Hosting co-location revenue		4,322,553			548,948			4,594,752			3,567,912
Net energy benefits		441,055			-			1,017,678			-
Sale of equipment		150,997			91,545			42,584			-
Total revenues		7,670,605			19,424,335			10,551,535			19,780,437
Less: Cost of revenues (excluding depreciation)		4,678,002			8,412,360			7,028,458			14,359,072
Gross profit		2,992,603			11,011,975			3,523,077			5,421,365
Selling, general and administrative		4,977,417			6,476,945			6,265,256			9,431,088
Share based payments		1,068,288			390,609
Stock based compensation								687,276			936,235
Depreciation and amortization		7,962,523			13,803,032			8,789,755			16,023,817
Change in fair value of derivative asset		681,225			-			5,444,300			(17,714,357	)
Total operating expenses		14,689,453			20,670,586			21,186,587			8,676,783
Loss from operations		(11,696,850	)		(9,658,611	)		(17,663,510	)		(3,255,418	)
Non-operating income/(expense):
Non-operating income (expense):
Losses on foreign currency transactions		(418,216	)		(699,237	)		(397,165	)		1,657,055
Interest expense		(835,107	)		(1,236,673	)		(647,062	)		(1,565,040	)
Loss on write off property and equipment		(118,933	)		-
Impairment of financial assets								-			(1,107,197	)
Profit on sale of site		790,847			-			2,562,283			-
Gain on sale of marketable securities		1,437,230			-			-			-
Other income		44,510			24,447			252,363			1,864,968
Share of net loss of equity method investments		(36,356	)		-			-			-
Total non-operating expense		863,975			(1,911,463	)
Total non-operating income (expense), net								1,770,419			849,786
Loss before income taxes		(10,832,875	)		(11,570,074	)		(15,893,091	)		(2,405,632	)
Income tax expenses		(548,083	)		-
Income tax expense								(1,756,371	)		-
Net Loss		(11,380,958	)		(11,570,074	)		(17,649,462	)		(2,405,632	)
Less: Net loss attributable to non-controlling interests		(278,933	)		(234,419	)		(305,556	)		(288,229	)
Net Loss attributed to Mawson Infrastructure Group stockholders							$	(17,343,906	)	$	(2,117,403	)

Net Loss attributed to Mawson Infrastructure Group, Inc. stockholders	$	(11,102,025	)	$	(11,335,655	)

Net Loss per share, basic & diluted	$	(0.80	)	$	(0.96	)
Net Loss per share, basic and diluted							$	(1.12	)	$	(0.18	)
Weighted average number of shares outstanding		13,953,308			11,854,946			15,527,824			11,933,092

Revenues

Digital currency mining revenues from production of Bitcoin for the three months ended ~~March 31,~~June 30, 2023 and 2022 were ~~$2.76~~$4.90 million and ~~$18.78~~$16.21 million respectively. This represented a decrease of ~~$16.02~~$11.31 million or ~~85%~~70%. The decrease in mining revenue for the period was primarily attributable to a decrease in the total Bitcoin produced. Bitcoin produced totaled ~~121.11~~181.62 in 2023 compared with ~~458.68~~489.60 in the 2022 period, a decrease of ~~74%~~63% of Bitcoin produced over the respective period. The ~~reason for this~~ decrease is due to less miners being deployed during the current period ~~due~~as a result of the transition of mining to the Pennsylvania sites following the sale of the Georgia site, which occurred during October ~~2022, in addition to this~~2022. Additionally, the difficulty to mine Bitcoin ~~was also higher~~ during the current ~~quarter. Another reason for~~quarter increased significantly over the prior period, and there was a decrease in ~~digital currency mining revenue is due to~~ the average price of Bitcoin. During the quarter ended ~~March 31, 2023,~~June 30, 2022, the average price of Bitcoin was ~~$22,721~~$32,790, whereas the average price of Bitcoin during the quarter ended ~~March 31, 2022~~June 30, 2023 was ~~$41,256,~~$27,986, a ~~45%~~15% decrease in the average price.

Hosting co-location revenue for the three months ended ~~March 31,~~June 30, 2023 and 2022 were ~~$4.32~~$4.59 million and ~~$0.55~~$3.57 million respectively. This increase is due to an increase in the number of miners we hosted during the period ended in ~~March~~June 2023.

Net energy benefits for the three months ended ~~March 31,~~June 30, 2023 and 2022, were ~~$0.44~~$1.02 million and $0 respectively. This increase is due to usthe fact we did not ~~offering~~participate in this ~~service at in~~program during the three months ended ~~March 31,~~June 30, 2022.

Sales of digital mining equipment for the three months ended ~~March 31,~~June 30, 2023 and 2022, were ~~$0.15~~$0.04 million and ~~$0.09 million,~~$0 respectively.

Operating Cost and Expenses

Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; ~~share based payments;~~stock-based compensation; and depreciation and amortization.

Cost of ~~revenues.~~revenue

Our cost of revenue consists primarily of direct power costs related to digital currency mining, cost of energy sold and cost of mining equipment sold.

Cost of ~~revenues~~revenue for the three months ended ~~March 31,~~June 30, 2023 and 2022 were ~~$4.68~~$7.03 million and ~~$8.41~~$14.36 million, respectively. The decrease in cost of revenue was primarily attributable to a decrease in power costs related to energy to operate the mining equipment within our owned and hosting facilities. This decrease is attributable to less miners being used in operations during the current quarter due to the sale of the Georgia site.

Selling, general and ~~administrative.~~administrative

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

Selling, general and administrative expenses for the three months ended ~~March 31,~~June 30, 2023 and 2022 were ~~$4.98~~$6.27 million and ~~$6.48~~$9.43 million ~~respectively. Total selling, general and administrative expenses reduced by $1.51~~respectively, which is a reduction of $3.16 million in the period. The ~~main reasons for~~decrease in these expenses is primarily attributable to personal property tax decreasing by $1.29 million in relation to the ~~decrease the expenses were due to equipment repair~~Georgia site (which was sold during 2022); marketing costs decreasing by ~~$0.83~~$0.38 million; ~~information technology expenses decreased~~contact labor costs decreasing by ~~$0.37~~$0.47 million; ~~freight~~legal costs ~~decreased~~decreasing by ~~$0.22~~$0.43 million and ~~marketing costs decreased~~equipment repairs decreasing by ~~$0.22~~$0.59 million. This is offset by an increase in ~~property tax~~freight of ~~$0.32 million in relation to the Georgia site which was sold during 2022 and an increase in business and property insurance by $0.14~~$0.75 million.

~~Share~~Stock based ~~payments.~~compensation

~~Share~~Stock based ~~payments~~compensation expenses for the three months ended ~~March 31,~~June 30, 2023 and 2022 were ~~$1.07~~$0.69 million and ~~$0.39~~$0.94 million respectively. In the three months ended ~~March 31,~~June 30, 2023, ~~share~~stock based ~~payments were~~compensation was largely attributable to costs recognized for warrants issued to Celsius Mining LLC amounting to $0.50 million, ~~shares issued to W Capital Advisors Pty Ltd amounting to $0.31 million~~ and ~~$0.20~~$0.19 million in relation to long-term incentives for the Company’s ~~leadership team.~~management.

Depreciation and ~~amortization.~~amortization

Depreciation consists primarily of depreciation of digital currency mining hardware and MDC equipment.

Depreciation and amortization for the three months ended ~~March 31,~~June 30, 2023 and 2022 were ~~$7.96~~$8.79 million and ~~$13.80~~$16.02 million, respectively. The decrease is primarily attributable to the Company owning less miners in the quarter ended ~~March 31,~~June 30, 2023. At June 30 2023 ~~as at March 31 2023 there were 23,332~~we owned 23,458 miners whereas as at June 30, 2022 we owned 35,329 miners. We also revised our estimate of the useful life of miners with effect from December 1, 2022 to better reflect the pattern of consumption. The change was effected by updating the method of depreciation from reducing balance to the straight-line method from that date.

Change in fair value of derivative asset

During the three months ended June 30, 2023 and 2022, there was an adverse change in the fair value of the derivative asset by $5.44 million and a gain of $17.71 million, respectively in relation to our power supply arrangements. The reason for the adverse change in the derivative asset is due to the fall in the price of energy costs combined with less time left on the power supply agreement.

Non-operating expenses

Non-operating expenses consist primarily of interest expenses and losses on foreign currency transactions.

Interest expenses for the three months ended June 30, 2023 and 2022 were $0.65 million and $1.57 million, respectively. This decrease of $0.92 million was attributable to the paydown of debt during 2022 and the current quarter, resulting in lower interest charges.

During the three months ended June 30, 2023, the realized and unrealized loss on foreign currency transactions was $0.40 million, in contrast to the three months ended June 30, 2022, where there was a gain of $1.66 million due to the movement in foreign exchange rates.

Non-operating income

Non-operating income consists primarily of sale of site assets and other income.

The profit on sale of site assets for the three months ended June 30, 2023 and 2022 were $2.56 million and $0, respectively. This profit is in relation to the sale of the Luna Squares Texas LLC, including 59 transformers.

Net loss attributable to Mawson Infrastructure Group, Inc. stockholders

As a result of the foregoing, the Company recognized a net loss of $17.65 million for the three months ended June 30, 2023, compared to a net loss of $2.41 million for the three months ended June 30, 2022.

Results of Operations – Six months Ended June 30, 2023 compared to the six months ended June 30, 2022

	For the six months ended June 30,
	2023			2022
Revenues:
Digital currency mining revenue	$	7,652,521		$	34,996,368
Hosting co-location revenue		8,917,306			4,116,860
Net energy benefits		1,458,734			-
Sale of equipment		193,581			91,545
Total revenues		18,222,142			39,204,773
Less: Cost of revenues (excluding depreciation)		11,706,460			22,771,433
Gross profit		6,515,682			16,433,340
Selling, general and administrative		11,242,674			15,908,034
Stock based compensation		1,691,619			1,326,844
Depreciation and amortization		16,752,279			29,826,849
Change in fair value of derivative asset		6,125,525			(17,714,357	)
Total operating expenses		35,812,097			29,347,370
Loss from operations		(29,296,415	)		(12,914,030	)
Non-operating income (expense):
Losses on foreign currency transactions		(815,382	)		957,818
Interest expense		(1,546,114	)		(2,801,713	)
Impairment of financial assets		-			(1,107,197	)
Profit on sale of site		3,353,130			-
Gain on sale of marketable securities		1,437,230			-
Other income		177,941			1,889,415
Share of net loss of equity method investments		(36,356	)		-
Total non-operating income (expense), net		2,570,449			(1,061,677	)
Loss before income taxes		(26,725,966	)		(13,975,707	)
Income tax expense		(2,304,454	)		-
Net Loss		(29,030,420	)		(13,975,707	)
Less: Net loss attributable to non-controlling interests		(584,489	)		(522,648	)
Net Loss attributed to Mawson Infrastructure Group stockholders	$	(28,445,931	)		(13,453,059	)

Net Loss per share, basic and diluted	$	(1.93	)	$	(1.12	)
Weighted average number of shares outstanding		14,744,915			11,965,129

Revenues

Digital currency mining revenues from production for the six months ended June 30, 2023 and 2022 were $7.65 million and $35.0 million respectively. This represented a decrease of $27.35 million or 78%. The decrease in mining revenue for the period was primarily attributable to a decrease in the total Bitcoin produced. Bitcoin produced totaled 302.73 in 2023 compared with 948.27 in the 2022 period, a decrease of 68% of Bitcoin produced over the respective period. The reason for this decrease is due to less miners being deployed during the current period due to the sale of the Georgia site which occurred during October 2022, in addition to this the difficulty to mine Bitcoin was also higher during the current six month period. Another reason for the decrease in digital currency mining revenue is due to the average price of Bitcoin. During the six month period ended June 30, 2023, the average price of Bitcoin was $25,368 whereas the average price of Bitcoin during the six month period ended June 30, 2022 was $37,011, a 31% decrease in the average price.

Hosting co-location revenue for the six months ended June 30, 2023 and 2022 were $8.92 million and $4.12 million respectively. This increase is due to an increase in the number of miners we hosted during the period ended in March 312023.

Net energy benefits for the six months ended June 30, 2023 and 2022, were $1.46 million and $0 respectively. This increase is due to the fact we did not participate in this program during the six months ended June 30, 2022.

Sales of digital mining equipment for the six months ended June 30, 2023 and 2022, were $0.19 million and $0.09 million, respectively.

Operating Cost and Expenses

Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; stock based compensation; and depreciation and amortization.

Cost of revenues.

Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; stock based compensation; and depreciation and amortization.

Cost of revenues for the six months ended June 30, 2023 and 2022 were $11.71 million and $22.77 million, respectively. The decrease in cost of revenue was primarily attributable to a decrease in power costs related to energy to operate our mining equipment and hosting facilities. This decrease is attributable to less miners being used in operations during the current six month period due to the sale of the Georgia site.

Selling, general and administrative.

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

Selling, general and administrative expenses for the six months ended June 30, 2023 and 2022 were $11.24 million and $15.91 million respectively. Total selling, general and administrative expenses reduced by $4.67 million in the period. Some of the main factors impacting the decrease the expenses were due to personal property tax decreasing by $1.34 million in relation to the Georgia site which was sold during 2022; marketing costs decreased by $0.60 million; contact labor costs decreased by $0.88 million; legal costs decreased by $0.57 million; recruitment costs decreased by $0.35 million and equipment repairs decreased by $1.0 million. This is offset by an increase in freight of $0.53 million and an increase in payroll costs of $0.44 million.

Stock based compensation

Stock based compensation expenses for the six months ended June 30, 2023 and 2022 were $1.69 million and $1.33 million respectively. In the six months ended June 30, 2023, stock based compensation was largely attributable to costs recognized for warrants issued to Celsius Mining LLC amounting to $1.0 million, shares issued to W Capital Advisors Pty Ltd amounting to $0.31 million for consultancy and advisory work and $0.38 million in relation to long-term incentives for the Company’s leadership team.

Depreciation and amortization

Depreciation consists primarily of depreciation of digital currency mining hardware and MDC equipment.

Depreciation and amortization for the six months ended June 30, 2023 and 2022 were $16.75 million and $29.83 million, respectively. The decrease is primarily attributable to the Company owning less miners in the six month period ended June 30, 2023, as at June 30 2023 there were 23,458 miners whereas as at June 30, 2022 there were ~~39,225~~35,329 miners. There was also a revised estimate of the useful life of miners with effect from December 1, 2022 to better reflect the pattern of consumption the change being effected by changing the method of depreciation from reducing balance to the straight line method from that date.

Change in fair value of derivative asset

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, there was an adverse change in the fair value of the derivative asset by ~~$0.68~~$6.13million and a gain of $17.71 million, respectively in relation to our power supply arrangements. The reason for the adverse change in the derivative asset is due to the fall in the price of energy costs combined with less time left on the power supply agreement.

Non-operating expense

Non-operating expenses consist primarily of interest expense, losses on foreign currency transactions, loss on write off property, plant and equipment, and share of net loss of associates accounted for using the equity method.

Interest expense for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 were ~~$0.84~~$1.55 million and ~~$1.24~~$2.80 million, respectively. This was a decrease of ~~$0.39~~$1.32 million which was attributable to the paydown of debt during 2022 and the current ~~quarter~~six month period resulting in a lower interest charge.

During the ~~three~~six months ended ~~March 31,~~June 30, 2023, the realized and unrealized loss on foreign currency transactions was ~~$0.42~~$0.82 million, and for the ~~three~~six months ended ~~March 31,~~June 30, 2022 there was a ~~loss~~gain of ~~$0.70~~$0.96 million due to the movement in foreign exchange rates.

Non-operating income

Non-operating income consists primarily of, ~~a gain on the sale of investments,~~ profit on sale of site assets, gain on sales of marketable securities and other income.

The gain on sales of marketable securities for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 were $1.44 million and $0, respectively. The gain during the ~~quarter~~six month period was in relation to the sale of CleanSpark, Inc shares.

The profit on sale of site assets for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 were ~~$0.79~~$3.35 million and $0, respectively. This is mainly in relation to the sale of the Luna Squares Texas LLC and the 59 transformers. However, $0.79 million of this gain on sale relates to an accounting adjustment relating to the sale of the Georgia site to ~~CleanSpark.~~CleanSpark, Inc during 2022. The ~~company~~Company determined the impact of recording this adjustment during 2023 was not material to the financial statements or the opening balance of the accumulated deficit.

Net loss attributable to Mawson Infrastructure Group, Inc. stockholders

As a result of the foregoing, the Company recognized a net loss of ~~$11.10~~$29.03 million for the ~~three~~six months ended ~~March 31,~~June 30, 2023, compared to a net loss of ~~$11.34~~$13.98 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022.

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 ~~three~~six month period ended ~~March 31,~~June 30, 2023, we financed our operations primarily through:

	1.	Net cash ~~provided~~used by operating activities of ~~$1.22~~$4.19 million;

	2.	On December 9, 2021, MIG No.1 Pty Ltd entered into a Secured Loan Facility Agreement with Marshall Investments MIG Pty Ltd (“Marshall”) with a total loan facility of AUD$20 million (USD$12.98 million). Principal repayments began in November 2022, the outstanding balance as at March 31, 2023 is $9.08 million.
	3.	On February 23, 2022, Luna Squares LLC entered into the Co-Location Agreement with Celsius Mining LLC, in connection with this agreement, Celsius Mining loaned Luna Squares LLC a principal amount of US$20,000,000, for the purpose of funding the infrastructure required to meet part of the obligations of the Co-Location Agreement. The outstanding balance as at March 31, 2023 is $11 million.
	4.	On July 8, 2022, the Company issued secured convertible promissory notes to investors in the aggregate principal amount of $3,600,000 in exchange for an aggregate of $3,600,000. The outstanding loan balance as at March 31, 2023 is $0.5 million.

	5.	On July 17, 2022, the Company entered into a Securities Purchase Agreement with an institutional investor providing for the issuance and sale by the Company of 1.33 million shares of the Company’s common stock, at a price of $4.80 per share, accompanied by warrants to purchase 1.67 million shares of the Company’s common stock in a registered direct offering pursuant to a “shelf” registration statement on Form S-3 (File No. 333-264062). The warrants issued in this offering have an exercise price of $6.06 per share of our common stock, are exercisable 6 months after issuance and will expire five and one-half years following issuance. This offering closed on July 20, 2022. The net amount raised was $5.62 million.

On September 2, 2022, Mawson Infrastructure Group Pty Ltd entered into a Secured Loan Facility Agreement with W Capital Advisors Pty Ltd with a total loan facility of AUD$8 million (USD$5.2 million). During the six month period ending June 30, 2023, the Company received AUD$3 million (USD$1.99 million) from this loan facility. As at June 30, 2023, AUD$1.46 million (USD$0.97 million) has been drawn down from this facility. The Secured Loan Facility expired in March 2023 and the Company and W Capital Advisors Pty Ltd are in ongoing discussions regarding the terms and extension of the loan. W Capital Advisors Pty Ltd and MIG PL have each reserved their rights.

The Company has the ability through its ATM Agreement to sell shares of its common stock. Effective May 4, 2023, the Company filed a prospectus supplement to amend, supplement and supersede certain information contained in the earlier prospectus and prospectus supplement, which reduced the amount of shares of common stock the Company may offer and sell under the ATM Agreement to an aggregate offering price of up to $9,000,000 from time to time. During the six months ended June 30, 2023, 415,271 shares were issued as part of the ATM Agreement for cash proceeds of $1.19 million, net of issuance costs. However, the Company is currently contractually restricted from issuing any stock under its ATM Agreement until on or about November 7, 2023.

During the ~~three~~six months ending ~~March 31,~~June 30, 2023 we repaid ~~$5.40~~$9.67 million of principal payments against the historical facilities provided by Celsius, Marshall and W Capital 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~~shall have access to equity financing through the ATM offering facility ~~entered in May 2022, however,~~post the Company’s access to its ATM facility is currently limited by the Instruction I.B.6 to Form S-3, known as the “baby shelf” rules because of the Company’s public float being less than $75 million. Because of the “baby shelf” rules limitation and the Company’s recent offer and sale of approximately $5 million of shares of common stock and pre-funded warrants (along with a concurrent private offering of warrants to purchase common stock), the Company reduced the amount available to be sold through it ATM facility to $9 million.contractually restricted period. For our business to grow it is expected, we ~~will~~may continue investing in mining equipment and infrastructure and will require additional working capital in the ~~short-term. We have~~short-term and long-term. As at June 30, 2023 we had an aggregate of ~~$22.94~~$20.87 million of debt ~~and 15.33 million of customer deposits~~ that is required to be repaid within ~~eleven~~eight months unless we refinance or renegotiate the terms, $3.33 million of this debt was paid during July 2023, a further $11.06 million is required to be repaid on or before August 31, 2023, unless we refinance or renegotiate the terms. In addition, the Celsius deposit of $15.33 million is the subject of a dispute.

Please see our Risk Factor entitled “We may need to raise additional capital to continue our operations and execute our business strategy” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Working Capital and Cash Flows

As of ~~March 31,~~June 30, 2023, and December 31, 2022, we had cash and cash equivalents balance of ~~$1.39~~$5.61 million and $0.95 million, respectively.

As of ~~March 31,~~June 30, 2023, and December 31, 2022, our trade receivables balance was ~~$7.95~~$6.40 million and $10.46 million, respectively.

As of ~~March 31,~~June 30, 2023, we had ~~$22.94~~$20.87 million of outstanding short-term borrowings, and as of December 31, 2022, we had $23.61 million of short-term borrowings. The short-term borrowings as of ~~March 31,~~June 30, 2023, relate to the to the secured loan facilities with Celsius Mining LLC, W Capital Advisors Pty Ltd, the secured convertible promissory notes issued to investors and Marshall Investments MIG Pty Ltd. As of ~~March 31,~~June 30, 2023, and as of December 31, 2022, we had $0 and $4.51 million, respectively, of outstanding long-term borrowings.

As of ~~March 31,~~June 30, 2023, we had negative working capital of ~~$31.81~~$32.30 million and as at December 31, 2022, we had negative working capital of $15.17 million.

The following table presents the major components of net cash flows (used in) provided by operating, investing and financing activities for the three months ending ~~March 31,~~June 30, 2023 and 2022:

	Three Months Ended March 31,						Six Months Ended June 30,
	2023			2022			2023			2022

Net cash provided by operating activities	$	1,316,592		$	5,865,759
Net cash (used in)/provided by operating activities							$	(4,192,480	)	$	33,146,960
Net cash provided by/(used in) investing activities	$	4,069,294		$	(29,661,210	)	$	10,767,041		$	(53,155,193	)
Net cash (used in)/provided by financing activities	$	(4,935,714	)	$	23,484,932		$	(1,893,177	)	$	19,513,738

For the ~~three~~six months ended ~~March 31,~~June 30, 2023, net cash ~~provided~~used by operating activities was ~~$1,316,592~~$4,192,480 and for the ~~three~~six months ended ~~March 31,~~June 30, 2022, net cash provided by operating activities was ~~$5,865,759.~~$33,146,960. 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 ~~three~~six months ended ~~March 31,~~June 30, 2023, net cash provided by investing activities was ~~$4,069,294~~$10,767,041 and for the ~~three~~six months ended ~~March 31,~~June 30, 2022, net cash used in investing activities was ~~$29,661,210.~~$53,155,193. The net cash provided by investing activities during ~~March 31,~~June 30, 2023 was primarily attributable the proceeds from sale of investment shares in ~~CleanSpark.~~CleanSpark, Inc.

For the ~~three~~six months ended ~~March 31,~~June 30, 2023, net cash used in financing activities was ~~$4,935,714~~1,893,177 and for the ~~three~~six months ended ~~March 31,~~June 30, 2022, net provided by financing activities was ~~$23,484,932.~~$19,513,738. The cash used in financing activities during ~~March 31,~~June 30, 2023 was primarily attributable to the repayment of borrowings.

~~Financial condition~~Material Cash Requirements

The following discussion summarizes our material cash requirements from contractual and other obligations.

In December 2021 MIG No. 1 Pty Ltd entered into a Secured Loan Facility Agreement with Marshall. The loan matures in February 2024 and bears interest at a rate of 12% per annum, payable monthly with interest payments commencing 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 Company. Principal repayments began during November 2022. The outstanding balance is $8.07 million as at June 30, 2023, all of which is classified as a current liability. On June 30, 2023 MIG No. 1 Pty Ltd did not make a principal and interest payment of $0.50 million. MIG No. 1 Pty Ltd and Marshall are in ongoing discussions with respect to the payment, and the loan terms generally. Marshall and MIG No. 1 Pty Ltd have each reserved their 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. 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 $11.33 million as of June 30, 2023, all of which is classified as a current liability. Celsius Mining LLC filed for Chapter 11 bankruptcy protection on July 13, 2022. Under the Co-location Agreement, Celsius Mining LLC advanced deposits of $15.33 million to Luna Squares LLC. The deposits are the subject of a commercial dispute between the parties.

On September 2, 2022, Mawson Infrastructure Group Pty Ltd entered into a Secured Loan Facility Agreement with W Capital Advisors Pty Ltd with a total loan facility of AUD$3.00 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 at June 30, 2023, AUD$1.46 million (USD$0.97 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 ~~31,~~2023 and Mawson Infrastructure Group Pty Ltd and W Capital Advisors Pty Ltd are in ongoing discussions. W Capital Advisors Pty Ltd and MIG PL have each reserved their rights.

On July 8, 2022, the Company issued secured convertible promissory notes to investors in the aggregate principal amount of $3.60 million (the “Secured Convertible Promissory Notes”) in exchange for an aggregate of $3.60 million in cash. 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 final convertible note matured in July 2023 and the Company is in ongoing discussions with the noteholder.

Financial condition

As at June 30, 2023 and December 31, 2022, we had net current liabilities of ~~$31.81~~$32.30 million and $15.17 million respectively. As at ~~March 31,~~June 30, 2023 and December 31, 2022, we had net assets of ~~$66.73~~$55.33 million and $76.17 million respectively. As at ~~March 31,~~June 30, 2023 we had an accumulated deficit of ~~$133.36~~$150.70 million compared to $122.26 million as at December 31, 2022. Our cash position at ~~March 31,~~June 30, 2023, was ~~$1.39~~$5.61 million in comparison to $0.95 million at December 31, 2022. For the ~~three~~six month period ending ~~March 31~~June 30, 2023 and ~~March 31,~~June 30, 2022 the Company incurred a loss after tax of ~~$11.38~~$29.03 million and a loss after tax of ~~$11.57~~$13.98 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 and there is uncertainty as to whether the Company can recover this amount in part or full.

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.

~~In the event that we~~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, ~~in either the short-term or long-term,~~and we ~~may~~will likely need to determine to engage in equity or debt financings ~~or enter into credit facilities for other reasons.~~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. In particular, rising inflation and interest rates, and the conflict between Russia and Ukraine have resulted in, and may continue to result in, significant disruption and volatility in the global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when or on the terms desired,limited, our business, financial condition and results of operations could be adversely ~~affected.~~affected, and this may result in bankruptcy or our ceasing operations.

~~On May 4, 2023, the~~The Company is taking steps to preserve cash by optimizing costs and negotiating with suppliers to improve their terms of trade. The Company has ~~entered into a definitive agreement with institutional investors for~~been improving its revenue generation by improving the ~~issuance and sale of 2,083,336 shares~~efficiency of its ~~common stock at a purchase price of $2.40 per share of common stock in a registered direct offering. In addition, in a concurrent private placement, the~~operations. The Company will ~~issue~~continue to ~~the institutional investors unregistered warrants~~seek to ~~purchase up to 2,604,170 shares of~~optimize its common stock with an exercise price of $3.23 per share and are exercisable six months following issuance for a period of five and one-half years following issuance. The closing of the registered direct offering and the concurrent private placement is expected to occur on or about May 8, 2023, subject to the satisfaction of customary closing conditions.cashflows.

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, depreciation, amortization, share-based compensation expense, ~~LO2A write-back,~~ unrealized gains/losses on share of associates, 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.

	For the three months Ended March 31,						For the three months ended June 30,						For the six months ended June 30,
	2023			2022			2023			2022			2023			2022
Reconciliation of non-GAAP adjusted EBITDA:
Net loss:	$	(11,380,958	)	$	(11,570,074	)	$	(17,649,462	)	$	(2,405,632	)	$	(29,030,420	)	$	(13,975,707	)
Impairment of financial assets								-			1,107,197			-			1,107,197
Share of net loss of equity method investments		36,356			-			-			-			36,356			-
Depreciation and amortization		7,962,523			13,803,032			8,789,755			16,023,817			16,752,279			29,826,849
Share based payments		1,068,288			390,609
Stock based compensation								687,276			936,235			1,691,619			1,326,844
Unrealized and realized losses/(gain)		418,216			699,237			397,165			(1,657,055	)		815,382			(957,818	)
Other non-operating income		(44,510	)		(24,447	)		(252,363	)		(1,864,968	)		(177,941	)		(1,889,415	)
Other non-operating expenses		954,040			1,236,673			647,062			1,565,040			1,546,114			2,801,713
Income tax		548,083			-			1,756,371			-			2,304,454			-
Adjusted EBITDA (non-GAAP)	$	(437,962	)	$	4,535,030
EBITDA (non-GAAP)							$	(5,624,196	)	$	13,704,634		$	(6,062,157	)	$	18,239,663

Critical accounting estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. 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 income and expenses during the reporting periods. Actual results could differ from those estimates. There have been no material changes to our critical accounting policies and estimates as set forth in Item 7, ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 3. Quantitative and Qualitative Disclosures about Market Risks

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

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Our Board of Directors and 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 Quarterly Report. Our Board of Directors and 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 ~~March 31,~~June 30, 2023, ~~due to~~including 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.

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.

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.

Significant Reliance on ~~Key~~Certain 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 to meet ~~increased US GAAP/SOX/~~the requirements of the SEC, ~~registrant requirements.~~U.S. GAAP and the Sarbanes-Oxley Act of 2002. 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 in the aggregate ~~into~~constitute 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 iswas complete and accurate. Such data is relied on by the Company in determining amounts pertaining to mining and hosting revenue, net energy benefits, and digital currency assets.

Fixed asset verification. The Company did not properly execute its designed controls around physical asset ~~verification at US mining sites.~~verification. 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~~disclosure controls and procedures were not effective as of ~~March 31,2023,~~June 30, 2023, management believes that the consolidated condensed financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods 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. With the oversight of senior management and our audit committee, we continue to remediate the underlying causes of the identified material weaknesses, such that the controls are designed, implemented and ~~operating effectively.~~operate better.

Our remediation efforts commenced in ~~the prior financial~~fiscal year ~~where~~2022, when we performed a risk assessment, designed controls, and gradually implemented controls for all business processes. In the current financial year, management updated the initial risk assessment, refined control designs, continued the implementation of controls and performed ongoing remediation efforts to uplift the quality and effectiveness of existing controls. Remediation efforts further included the implementation of new IT systems and applications with robust controls, segregating duties through implementing system workflows and the hiring of qualified personnel in financial reporting and IT. A number of controls remain to be implemented in the upcoming quarters.

~~The~~Whilst controls have been implemented across all business processes, the material weaknesses in our internal control over financial reporting and information technology will not be considered remediated until controls are operated for a sufficient period of time and have been tested for and concluded on for effectiveness. ~~Formal management~~Further testing of the effectiveness of controls is planned ~~for the third and fourth quarters of this financial year.~~in subsequent quarters.

Remediation efforts for upcoming quarters will be focused on implementing the remainder of controls, refining existing controls and validating the effectiveness of implemented controls using criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control. We cannot provide any assurance that our remediation efforts will be successful or that our internal control over financial reporting and other business processes will be effective as a result of these efforts. In addition, as 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.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are currently not, and have not been in the recent past, a party to any ~~legal proceedings~~litigation 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 defendant~~be involved in certain ~~routine~~ litigation ~~incidental~~related to our ~~business.~~businesses. The Company and some of its subsidiaries are currently in commercial disputes, including with Celsius Mining LLC, whereby Celsius Mining LLC, the Company and/or its subsidiaries and affiliates have made certain allegations and claims against each other. The Company is also in a commercial dispute with CleanSpark, Inc. related to payments due by CleanSpark, Inc. to the Company. If the Company and those subsidiaries are unable to resolve these issues with Celsius Mining LLC and/or CleanSpark, Inc, these disputes may lead to litigation. Mr. Sivikofsky, who previously provided CFO services to the Company, has made certain compensation related claims against the Company which the Company disputes.

Item 1A. Risk Factors

The Company’s risk factors were disclosed in (i) Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 which was filed on March 23, 2023 and (ii) Part II, Item 1A of our Quarterly Report on form 10-Q for the quarter ended March 31, 2023. ~~The~~In addition, the Company ~~does not have any~~includes the additional risk factors and updates to ~~disclose.~~existing risk factors below:

Listing on The Nasdaq Capital Market (“Nasdaq”)

On May 24, 2023 the Company notified Nasdaq that we had fallen out of compliance with Nasdaq’s Listing Rules regarding Majority Independent Board and Audit Committee Composition due to an independent director becoming an executive of the company. The Nasdaq Listing Rules provide a cure period to regain compliance, which is until our next annual stockholders’ meeting. The Company plans to add a new independent Board director and to the Audit Committee and looks forward to subsequently regaining compliance with the Nasdaq Listing Rules within the cure period allowed by the Nasdaq.

There is a risk that the Company may be de-listed if it fails to maintain compliance with any of the other Nasdaq Listing Rules.

We will need to raise substantial additional capital to continue our operations 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.

We have a history of losses from operations, we expect negative cash flows from our operations to continue for the foreseeable 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 hosting 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 June 30, 2023, have been prepared on the basis that we will be able to continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. At June 30, 2023, our accumulated deficit was $150.70 million, our cash and cash equivalents were $5.61 million, and we had negative working capital of $32.30 million. Advancing our future plans will require substantial additional investment. Based on our current operating plan estimates, we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over the next 12 months from the date of this report. We will need to raise substantial additional capital in the near term to continue to fund our operations and execute our current business strategy. The amount and timing of our capital needs have and will continue to depend on many factors, as discussed further below as well as under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources.”

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

●

working capital,

●

capital expenditures,

●

public company costs and

●

general corporate needs.

We are seeking to raise additional capital through a variety of means, including equity, equity-linked or debt securities offerings, or other types of arrangements or sources of capital, monetization or funds. Our past success in raising capital through equity offerings should not be viewed as an indication we will be successful in raising capital through those or any other means in the future. We expect that our ability to raise additional capital and the amount of capital available to us will depend not only on our operations, assets and progress effecting our business plan, but also on several factors outside of our control, such as macroeconomic and financial market conditions.

Unstable and unfavorable market and economic conditions may harm our ability to raise additional capital. An economic downturn, recession or recessionary concerns, delay or failure of the U.S. government to raise the federal debt ceiling, increased inflation, rising interest rates, adverse developments affecting financial institutions or the financial services industry, or the occurrence or continued occurrence of events similar to those in recent years, such as a fall in the price of Bitcoin, the COVID-19 pandemic or other public health emergencies, geopolitical conflict (such as the war in Ukraine), natural/environmental disasters, supply-chain disruptions, terrorist attacks, strained relations between the U.S. and a number of other countries, social and political discord and unrest in the U.S. and other countries, and government shutdowns, among others, increase market volatility and have long-term adverse effects on the U.S. and global economies and financial markets. Volatility and deterioration in the financial markets and liquidity constraints or other adverse developments affecting financial institutions may make equity or debt financings more difficult, more costly or more dilutive and may increase competition for, or limit the availability of, funding from other third-party sources, such as from strategic collaborations and government and other grants.

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.

We will need to raise capital to meet our debt service obligations on or before August 23, 2023, and to fund our working capital needs. Our inability to raise sufficient capital would have a material adverse effect on our financial condition and business.

As of June 30, 2023, we had cash and cash equivalents of approximately $5.61 million. As of June 30, 2023, approximately $20.87 million of loans and other borrowings and payables is due of which $3.33 million of this debt was paid during July 2023. We need to raise capital to meet our debt service obligations and fund our working capital needs. We currently have no arrangements for such capital and no assurances can be given that we will be able to raise such capital when needed, on acceptable terms, or at all. If we are unable to raise or source sufficient capital, we will need to implement additional measures to reduce operating expenses and to preserve capital, any of which may further adversely affect our operations. If we fail to comply with our debt service obligations, our lenders could declare a default, which could lead to all or a number of payment obligations becoming immediately due and payable and have a material adverse effect on our financial condition and business.

On July 20, 2023 we received a notice from Celsius Mining LLC that Celsius Mining LLC does not intend to renew its Co-Location Agreement, under which it receives hosting services from Luna Squares LLC (a subsidiary of the Company), and that it will expire in accordance with its terms. Celsius Mining LLC is the Company’s only hosting customer. The Company hosts approximately 20,000 miners for Celsius Mining LLC. In addition, Celsius Mining LLC has made certain allegations against Luna Squares LLC in respect of its performance under the Co-Location Agreement. Luna Squares LLC has made certain allegations against Celsius Mining LLC in respect of its performance under the Co-Location Agreement. There is a risk of litigation arising out of these allegations.

The Company is in discussions with potential new customers for hosting services to replace Celsius, however there is no guarantee that the Company will be able to enter into hosting agreements with new customers in a timely manner, or at all, or that the agreements with the new customers will replace the revenue that Celsius Mining LLC generated for the Company. Celsius Mining LLC has indicated a desire to continue working with Luna Squares LLC to discuss a new Co-Location Agreement, however the outcome of this discussion is uncertain. The Company may decide to use the hosting infrastructure’s capacity to self-mine or for other purposes, however it will need to raise a potentially significant amount of capital to finance and acquire further hardware (specifically miners) for self-mining and the potential timing and outcome of these and other potential options are uncertain.

On July 25, 2023, a Debtors’ Ex Parte Motion for an Order Under Federal Rules of Bankruptcy Procedure 2004 and 9016 for Subpoenas for Examination of, and Production of Documents From, Mawson Infrastructure Group Inc., Luna Squares, and Cosmos Infrastructure LLC [Docket No. 3088] was filed, and the Bankruptcy Court entered an order on July 26, 2023, authorizing the Debtors to take discovery of the Mawson Entities [Docket No. 3091]. The Debtors intend to take discovery of the Mawson Entities to evaluate the status of the liens securing the Promissory Note and other potential claims the Debtors may have against the Mawson Entities, including with respect to the Co-Location Agreement. The discovery process is ongoing.

The Company requires capital to invest in new hardware. Bitcoin mining hardware becomes obsolete over time, and the difficulty to mine for Bitcoin increases as the total hashrate of the Bitcoin network increases. This means that if competitors continue to increase their hashing power relative to the Company, the Company will tend to earn less Bitcoin if its hashing power does not increase in a similar manner.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On January 16, 2023, the Company entered into an arrangement with the holder of a convertible promissory note whereby the holder received pre-payment of interest to become due under the convertible promissory note by means of the Company issuing 18,807 shares of common stock to the holder. The shares issued were valued at $0.06 million on the date of issuance and represented a partial payment of the interest on the debt.

On February 10, 2023, the Company issued to W Capital Advisors Pty Ltd 93,334 shares of the Company’s common stock valued at $0.31 million on the date of issuance for consultancy and advisory services provided to the Company.

We believe that the foregoing sales qualified for exemption under Section 4(a)(2) of the Securities Act and/or Regulation D, as promulgated under the Securities Act, since the issuance of the securities by us did not involve a public offering. The offerings were not “public offerings” as defined in Section 4(a)(2) due to the type of investors, the insubstantial number of investors involved in the offering, the size of the offering, the manner of the offering and number of securities offered. In addition, these security holders represented as to the necessary investment intent as required by Section 4(a)(2) and/or Regulation D. We did not employ an underwriter in connection with the issuance of the securities described above.None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None~~None.

Item 6. Exhibits

2.1†		Bid Implementation Agreement between Wize Pharma, Inc. and Cosmos Capital Limited, dated December 30, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 5, 2021)
2.2†		Deed of Amendment, dated January 18, 2021, of the Bid Implementation Agreement between Wize Pharma, Inc. and Cosmos Capital Limited, dated December 30, 2020 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on January 19, 2021)
3.1		Certificate of Incorporation (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on April 5, 2012)
3.2		Certificate of Amendment to Certificate of Incorporation (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on July 18, 2013)
3.3		Certificate of Amendment to Certificate of Incorporation dated November 15, 2017 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on November 21, 2017)
3.4		Certificate of Amendment to Certificate of Incorporation dated March 1, 2018 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on March 5, 2018)
3.5		Certificate of Amendment to Certificate of Incorporation dated March 17, 2021 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on March 23, 2021)
3.6		Certificate of Amendment to Certificate of Incorporation dated June 9, 2021 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on June 14, 2021)
3.7		Certificate of Amendment to Certificate of Incorporation dated August 11, 2021 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on August 16, 2021)
3.8*		Certificate of Amendment to Certificate of Incorporation dated February 6, ~~2022~~2023
3.9		Certificate of Registration of a Company of Cosmos Capital Limited ACN 636 458 912 (Incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-256947) filed with the SEC on June 9, 2021)
3.10		Constitution of Cosmos Capital Limited (Incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-256947) filed with the SEC on June 9, 2021)
3.11		Bylaws (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on May 10, 2013)
4.1		Form of Common Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on May 8, 2023)
4.2		Form of Pre-Funded Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on May 8, 2023)
4.3		Form of Placement Agent Warrant (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on May 8, 2023)
4.4		Form of Warrant Amendment Agreement dated May 3, 2023 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on May 8, 2023)
10.1		Form of Securities Purchase Agreement ~~Director Appointment Letter~~(Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on May 8, 2023)
10.2		Employment Agreement by and between ~~the Company~~Mawson Infrastructure Group Inc. and Rahul Mewawalla, dated ~~January 31,~~May 22, 2023 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on ~~January 31,~~May 25, 2023)
10.3		Letter Deed of Departure by and between Mawson Infrastructure Group Pty Ltd and James Manning, dated May 22, 2023 (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on May 25, 2023)
10.4		Chief Financial Officer Offer Letter and Exhibit A (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 14, 2023)
10.5		Addendum dated July 19, 2023 to Employment Agreement between Mawson Infrastructure Group, Inc. and Rahul Mewawalla (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 21, 2023)
31.1*		Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32**		Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
99.1*		~~Press Release~~
99.2*		~~Investor Presentation~~
101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2023, formatted in Inline XBRL (eXtensible Business Reporting Language): includes: (i) Consolidated Balance Sheets as of ~~March 31,~~June 30, 2023 and December 31, 2022, (ii) Consolidated Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2023 and 2022, (iii) Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2023, and 2022, (iv) Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022, (v) Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022, and ~~(iv)~~(vi) Notes to Consolidated Financial Statements
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.

**	Furnished herewith.

†	Exhibits and schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. We will furnish the omitted exhibits and schedules to the Securities and Exchange Commission upon request by the Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Mawson Infrastructure Group Inc.

Date: ~~May 15,~~August 21, 2023	By:	/s/ ~~James Manning~~Rahul Mewawalla
		~~James Manning,~~ Rahul Mewawalla Chief Executive Officer and President
		(Principal Executive Officer)

Date: ~~May 15,~~August 21, 2023	By:	/s/ ~~Ariel Sivikofsky~~William Harrison
		~~Principal~~ William Harrison Chief Financial Officer
		(Principal Financial and Accounting Officer)

3545

	For the three months ended March 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(11,380,958	)	$	(11,570,074	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		7,962,523			13,804,492
Amortization of operating lease right-of-use asset		338,781			367,135
Foreign exchange gain		386,952			-
Share based payments		1,068,288			390,609
Non-cash interest expense		439,635			-
Unrealized (gain) loss on derivative asset		681,225			249,861
Gain on sale of marketable securities		(1,437,230	)		-
Loss from equity method investments		36,122			-
Loss on sale of property and equipment		77,603			-
Loss on write off of property and equipment		118,933			-
Changes in assets and liabilities:
Trade and other receivables		981,569			562,626	)
Operating lease liabilities		(340,156	)
Other current assets		3,829,172			(4,187,204	)
Trade and other payables		(1,445,868	)		6,248,314
Net cash provided by (used in) operating activities		1,316,591			5,865,759
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for the purchase of property and equipment		(3,148,946	)		(6,030,740	)
Proceeds from sales of property and equipment		1,010,692			-
Proceeds from sale of marketable securities		6,207,548			-
Payment of property and equipment deposits		-			(23,630,470	)
Net cash provided by (used in) investing activities		4,069,294			(29,661,210	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common share issuances		471,379			50,628
Proceeds from borrowings		-			27,055,524
Repayment of finance lease liabilities		(9,543	)		(379,026	)
Repayment of borrowings		(5,397,550	)		(3,242,194	)
Net cash provided by financing activities		(4,935,714	)		23,484,932
Effect of exchange rate changes on cash and cash equivalents		(9,110	)		648,104
Net increase in cash and cash equivalents		441,061			337,585
Cash and cash equivalents at beginning of period		946,265			5,467,273
Cash and cash equivalents at end of period	$	1,387,326		$	5,804,858
Supplemental disclosure of cash flow information
Non-cash transactions
Recognition of right of use operating asset and lease liability		82,879			-
Accrued interest on convertible notes settled in common stock		276,959			-

	As at March 31,
	2023		2022
Warrants to purchase common stock		2,825,278		1,165,698
Options to purchase common stock		417		125,577
Restricted Stock-Units (“RSUs”) issued under a management equity plan		303,450		303,215
		3,129,145		1,594,490

	March 31, 2023
Property and equipment	$	4,289,684
Security deposit		1,010,716
Operating lease right-of-use asset		145,659
Assets held for sale	$	5,446,059

	Existing Operations Online		Order and Purchase Agreements		Cumulative Fleet Fully Deployed
Total miners online		6,104		-		6,104
Total miners in transit		-		-		-
Total miners on order		-		-		-
Total miners in storage		17,228		-		17,228
Total miners		23,332		-		23,332