Mawson Infrastructure Group Inc

Previous wording

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” below.

Current wording

This report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, identify important factors which could cause our actual results to differ materially from those indicated by the forward-looking statements, particularly those set forth herein under Item 1A. “Risk Factors” below, and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Previous wording

The risk factors included in this Quarterly Report on Form 10-Q are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those expressed or implied in our forward-looking statements:

Current wording

The risk factors included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those expressed or implied in our forward-looking statements:

Previous wording

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, the risk factors set out in Item 1A. Risk Factors**.**

Current wording

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, the risk factors set out herein in Item 1A. Risk Factors and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023**.**

Previous wording

The Company develops and operates digital infrastructure for digital currency, such as bitcoin, mining activities on the Bitcoin blockchain network. The Company also provides digital infrastructure services for its co-location customers that use computational machines to mine bitcoin through our data centers and the Company charges for the use of its digital infrastructure and related services. The Company also has an energy markets program through which it can receive net energy benefits in exchange for curtailing the power the Company utilizes from the grid in response to instances of high electricity demand.

Current wording

The Company develops and operates next generation digital infrastructure platforms for digital colocation services, and digital assets mining activities including on the Bitcoin blockchain network. The Company also provides digital infrastructure services for its colocation customers that use computational machines through our digital infrastructure platforms. The Company also has an energy management program through which it can receive net energy benefits in exchange for curtailing the power the Company utilizes from the grid in response to instances of high electricity demand.

Previous wording

The Company may also transact in digital currency mining, data center infrastructure and related equipment on a periodic basis, subject to prevailing market conditions. The Company designs, develops, operates, and manages its digital infrastructure to responsibly support the Bitcoin network by contributing to the scale, structure, and decentralization of the Bitcoin network and optimizing energy consumption. The Company helps contribute to the ecosystem and growth of digital currencies and commodities as there continues to be a global transition to the new digital economy.

Current wording

The Company may also transact in digital assets mining, data center infrastructure and related equipment periodically, subject to prevailing market conditions. The Company designs, develops, operates, and manages its next generation digital infrastructure platforms to responsibly support digital assets such as the Bitcoin network and other digital assets by contributing to the scale, structure, and decentralization of these networks and optimizing energy consumption. The Company contributes to the ecosystem and growth of digital assets as there continues to be a global transition to the new digital economy.

Previous wording

The Company strives to operate and invest in markets and communities that offer low or zero carbon renewable energy sources and participate in energy management activities. The Company invests in the communities in which the Company operates and also support our broader ecosystem.

Current wording

The Company strives to operate and invest in markets and communities that offer low or zero carbon renewable energy sources and participate in energy management activities. The Company invests in the communities in which it operates and supports our broader ecosystem.

Previous wording

The Company may also operate in related and adjacent businesses, including transacting in new and used crypto-currency mining and modular data centers (“MDCs”) or other equipment on a periodic basis, subject to prevailing market conditions and any surplus the Company may be experiencing.

Current wording

The Company may also operate in related and adjacent businesses, including transacting in new and used digital asset mining and modular data centers (“MDCs”) or other equipment on a periodic basis, subject to prevailing market conditions and any surplus the Company may be experiencing.

Previous wording

On April 19, 2024, a civil suit entitled “Blockware Solutions, LLC v. Mawson Bellefonte LLC and Mawson Infrastructure Group, Inc.” was filed in the US District Court, Southern District of New York under Civil Action No. 1:24-cv-02976 with the Plaintiff claiming alleged merchandise price and incidental damages of $115,500, alleged consequential damages due to lost profits of $358,689, and other alleged, non-specified damages, for alleged claims of non-payment. Mawson Bellefonte, LLC is a Delaware subsidiary of the Company. Mawson Bellefonte and the Company intend to defend against alleged claims made related to this matter.

Current wording

On April 19, 2024, a civil suit entitled “Blockware Solutions, LLC v. Mawson Bellefonte LLC and Mawson Infrastructure Group, Inc.” was filed in the US District Court, Southern District of New York under Civil Action No. 1:24-cv-02976 with the Plaintiff claiming alleged merchandise price and incidental damages of $115,500, alleged consequential damages due to lost profits of $358,689, and other alleged, non-specified damages, for alleged claims of non-payment. Mawson Bellefonte, LLC is a Delaware subsidiary of the Company. Mawson Bellefonte and the Company intends to defend against all alleged claims made related to this matter. The company also reserves and retains all rights against Blockware Solutions, LLC.

Previous wording

Digital currency mining revenues from production of bitcoin for the three months ended March 31, 2024, and 2023, were $7.51 million and $2.76 million, respectively. This represented an increase of $4.75 million or 172%. The increase for the 3 months ended March 31, 2024 was due in part to the Company transitioning from its self- mining operations at its Georgia facilities to its Pennsylvania facilities during 2023, which it had completed in 2024. The increase in mining revenue for the period was also driven by the average price of bitcoin increasing. During the quarter ended March 31, 2023, the average price of Bitcoin was $22,721, whereas the average price of bitcoin during the quarter ended March 31, 2024, was $54,468, a 140% increase in the average price, that was offset by a higher network difficulty rate in 2024. In addition, the increase in mining revenue is also partially due to the total bitcoin produced in the 2024 period versus the 2023 period. Bitcoin produced totaled 140.20 in the 2024 period compared with 121.11 in the 2023 period, an increase of 16% of bitcoin produced over the respective period.

Current wording

Digital assets self-mining revenues from the production of bitcoin for the three-months ended June 30, 2024, and 2023, were $3.25 million and $4.90 million, respectively, and represented a decrease of $1.65 million or 34%. The decrease for the three-months ended June 30, 2024, was due in large part to the impact of the April 2024 halving event, and a higher global network difficulty rate in the three-months ended June 30, 2024 compared to the same period in 2023, which led to lower bitcoin production from self-mining. The total bitcoin produced in the three-months ended June 30, 2024 period totaled 49 bitcoin versus 182 bitcoin in the three-months ended June 30, 2023 period; a decrease of 73% bitcoin produced over the respective period. In the three-months ended June 30, 24 period, the Company also expanded its colocation services business absorbing some of its digital asset self-mining capacity. The decrease in digital asset self-mining revenue for the period was slightly offset by the average price of bitcoin increasing. During the three-months ended June 30, 2023, the average price of bitcoin was $28,027, whereas the average price of bitcoin during the three-months ended June 30, 2024, was $65,657. The Company believes its digital assets self-mining revenue may continue to fluctuate with bitcoin pricing and market conditions as the bitcoin industry works through the expected volatility associated with and post the April 2024 halving event.

Previous wording

Net energy benefits revenues for the three months ended March 31, 2024 and 2023, were $2.47 million and $0.44 million, respectively. This represented an increase of $2.03 million or a 461% increase. This increase is due to the Company participating more in the energy programs in the 2024 period than in the 2023 period due to higher power costs in the current period.

Current wording

Net energy benefits revenues for the three-months ended June 30, 2024 and 2023, were $1.73 million and $1.02 million, respectively. This represented an increase of $0.71 million or a 70% increase. This increase is due to the Company participating more in energy management programs in the three-months ended June 30, 2024 than in the 2023 period. The revenue opportunity from net energy benefits is expected to be impacted by seasonal patterns and other weather-related events as well as the dynamic nature of power prices.

Previous wording

Selling, general and administrative expenses for the three months ended March 31, 2024 and 2023 were $3.46 million and $4.98 million, respectively, which is a reduction of $1.52 million from period to period. The decrease in these expenses is primarily attributable to payroll costs decreasing by $0.24 million; property tax decreasing by $0.32 million; freight decreasing by $0.13 million; marketing expense decreasing by $0.21 million; rent costs decreasing by $0.16 million and contract labor decreasing by $0.14 million, due to cost reduction and optimization actions that the Company had previously undertaken.

Current wording

Selling, general and administrative expenses for the three-months ended June 30, 2024 and 2023 were $3.64 million and $6.27 million, respectively, which is a reduction of $2.62 million from period to period. The decrease in these expenses is primarily attributable to reduced freight costs, lower marketing and travel expenses and lower employee compensation expenses including payroll costs; due to cost reduction and optimization actions that the Company had previously undertaken.

Previous wording

Stock based compensation expenses for the three months ended March 31, 2024 and 2023 were $3.46 million and $1.07 million, respectively. In the three months ended March 31, 2024, stock based compensation was attributable to costs recognized in relation to long-term incentives for the Company’s directors, management, and employees and to align incentives with long-term stockholder value creation. Whereas in the three months ended March 31, 2023, share based payments were 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 million in relation to long-term incentives for the Company’s directors and management.

Current wording

Stock based compensation expenses for the three-months ended June 30, 2024 and 2023 were $1.05 million and $0.69 million, respectively. In the three-months ended June 30, 2024, stockbased compensation expense was attributable to the costs recognized in relation to long-term incentives for the Company’s directors, management, and employees and to align incentives with long-term stockholder value creation.

Previous wording

During the three months ended March 31, 2024 and 2023, the realized and unrealized gain on foreign currency transactions was $0.17 million and a loss of $0.42 million, respectively. This difference was due mostly to the movement in foreign exchange rates.

Current wording

During the three-months ended June 30, 2024 and 2023, the realized and unrealized gain on foreign currency transactions was a loss of $0.29 million and a loss of $0.40 million, respectively. This difference was due mostly to the movement in foreign exchange rates.

Previous wording

As a result of the foregoing, the Company recognized a net loss of $19.76 million for the three months ended March 31, 2024, compared to a net loss of $11.10 million for the three months ended March 31, 2023.

Current wording

As a result of the foregoing, the Company recognized a net loss of $9.62 million for the three-months ended June 30, 2024, compared to a net loss of $17.34 million for the three-months ended June 30, 2023.

Previous wording

Sales of digital mining equipment for the three months ended March 31, 2024 and 2023, were $0.55 million and $0.15 million, respectively.

Current wording

Sales of digital mining and other equipment for the six-months ended June 30, 2024 and 2023, were $0.55 million and $0.19 million, respectively.

Previous wording

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

Current wording

Our cost of revenue consists primarily of direct power costs related to digital assets mining and colocation services and cost of mining equipment sold.

Previous wording

Cost of revenue for the three months ended March 31, 2024 and 2023, were $11.79 million and $4.68 million, respectively. The increase in cost of revenue was primarily attributable to an increase in power costs related to the energy used to operate the Company mining equipment and co-located mining equipment within our facilities.

Current wording

Cost of revenue for the six-months ended June 30, 2024 and 2023, were $20.58 million and $11.71 million, respectively. The increase in cost of revenue was primarily attributable to an increase in power costs related to the energy used to operate the Company’s mining equipment and customer colocated mining equipment within our facilities.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Depreciation and amortization for the three months ended March 31, 2024 and 2023, were $7.99 million and $7.96 million, respectively.

Current wording

Depreciation and amortization for the six-months ended June 30, 2024 and 2023, were $12.60 million and $16.75 million, respectively.

Previous wording

During the three months ended March 31, 2024 and 2023, there was a gain on the fair value of the derivative asset by $1.69 million and a loss of $0.68 million, respectively, in relation to our power supply arrangements. The gain on the derivative asset was due to the increase in the price of energy costs in 2024.

Current wording

During the six-months ended June 30, 2024 and 2023, there was a loss on the fair value of the derivative asset by $0.09 million and a loss of $6.13 million, respectively, in relation to our power supply arrangements. The loss on the derivative asset was due to the passage of time offset by an increase in the price of energy costs in 2024.

Previous wording

Interest expenses for the three months ended March 31, 2024 and 2023, were $0.73 million and $0.84 million, respectively. This decrease of $0.11 million was attributable to the paydown of debt during 2023 and 2024.

Current wording

Interest expenses for the six-months ended June 30, 2024 and 2023, were $1.49 million and $1.55 million, respectively. This decrease of $0.06 million was attributable to the paydown of debt during 2023 and 2024.

Previous wording

During the three months ended March 31, 2024, the Company recognized a deconsolidation loss of $11.93 million. This loss was as a result of an Australian entity and subsidiary, MIG No.1 Pty Ltd, going into Australian court appointed liquidation and accordingly this subsidiary was deconsolidated. The deconsolidation loss recorded was due to the removal the net assets and certain liabilities of this subsidiary from the condensed consolidated financial statements. See Note 3 - Subsidiary Deconsolidation to the Consolidated Condensed Financial Statements (Unaudited) in Item 1. Financial Statements, for further discussion.

Current wording

During the six-months ended June 30, 2024, the Company recognized a deconsolidation loss of $12.01 million. This loss was as a result of three Australian entities and subsidiaries, MIG No.1 Pty Ltd, Mawson AU Pty Ltd and Mawson Services Pty Ltd going into Australian court appointed liquidation and accordingly these subsidiaries were deconsolidated. The deconsolidation loss recorded was due to the removal of the net assets and certain liabilities of this subsidiary from the condensed consolidated financial statements. See Note 3 - Subsidiary Deconsolidation to the Consolidated Condensed Financial Statements (Unaudited) in Item 1. Financial Statements, for further discussion.

Previous wording

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 expenditure. For the three-month period ended March 31, 2024, we financed our operations primarily through net cash provided by operating activities of $1.88 million and other cash reserves. During the three months ending March 31, 2024, the Company repaid $0.50 million of principal payments against previous facilities provided by W Capital Advisors Pty Ltd.

Current wording

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 expenditure. For the six-month period ended June 30, 2024, we financed our operations primarily through net cash provided by operating activities of $4.34 million and other cash reserves. During the six-months ending June 30, 2024, the Company repaid $0.50 million of principal payments against previous facilities provided by W Capital Advisors Pty Ltd.

Previous wording

On May 27, 2022, the Company entered an At the Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”), and filed a prospectus supplement, to sell shares of our Common Stock through an “at the market offering” program as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. 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 number of shares of Common Stock the Company may offer and sell under the ATM Agreement to an aggregate offering price of up to $9 million from time to time. Sales of shares of Common Stock pursuant to the ATM Agreement are currently inactive, have been inactive since May 3, 2023, and are not currently expected until at the earliest August 2024, when the Company is expected to have eligibility to use Form S-3 registration statements. After the Company has eligibility to use Form S-3 registration statements, the Company still expects limitations related to General Instruction I.B.6 of Form S-3, which is referred to as the “baby shelf” rules.

Current wording

On May 27, 2022, the Company entered an At the Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”), and filed a prospectus supplement, to sell shares of our Common Stock through an “at the market offering” program as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. 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 number of shares of Common Stock the Company may offer and sell under the ATM Agreement to an aggregate offering price of up to $9.00 million from time to time. Sales of shares of Common Stock pursuant to the ATM Agreement are currently inactive and have been inactive since May 3, 2023. If and when the Company reactivates sales under the ATM Agreement, the Company still expects limitations related to General Instruction I.B.6 of Form S-3, which is referred to as the “baby shelf” rules.

Previous wording

We believe our near-term working capital requirements will continue to be funded through a combination of the cash we expect to generate from future operations, our existing funds, external debt facilities that may be available to us, further issuances of shares, and other potential sources of capital, monetization, or funds. We believe a combination of these opportunities are expected to be adequate to fund our longer-term operations needed over the next twelve months. For our business growth, it is expected we may continue investing in expanding our infrastructure, expanding and/or upgrading our miners, and/or other equipment and will require additional working capital in the short-term and long-term. As of March 31, 2024, we had an aggregate of $19.13 million of debt all of which is overdue for repayment unless we refinance or renegotiate the terms. In addition, the Celsius deposit of $15.33 million is the subject of an ongoing legal dispute.

Current wording

We believe our near-term working capital requirements will continue to be funded through a combination of the cash we expect to generate from future operations, our existing funds, external debt facilities that may be available to us, further issuances of shares, and other potential sources of capital, monetization, or funds. We believe a combination of these opportunities are expected to be adequate to fund our longer-term operations needed over the next twelve-months. For our business growth, it is expected we may continue investing in expanding our infrastructure, expanding and/or upgrading our miners, and/or other equipment and will require additional working capital in the short-term and long-term. As of June 30, 2024, we had an aggregate of $20.15 million of debt all of which is overdue for repayment unless we refinance or renegotiate the terms. In addition, the Celsius deposit of $15.33 million is the subject of an ongoing legal dispute. The Company reserves and retains all its legal rights and remedies under applicable law related to the debt, deposit and other related matters.

Previous wording

As of March 31, 2024 and December 31, 2023, we had a cash and cash equivalent balance of $6.37 million and $4.48 million, respectively. As of March 31, 2024 and December 31, 2023, the trade receivables balance was $13.24 million and $12.11 million, respectively. As of March 31, 2024, we had $19.13 million of outstanding short-term borrowings, and as of December 31, 2023, we had $19.35 million of short-term borrowings. The short-term borrowings as of March 31, 2024, relate to Celsius Mining LLC, W Capital Advisors Pty Ltd, the secured convertible promissory notes issued to investors and Marshall Investments MIG Pty Ltd (these loans are currently in default, refer to Material Cash Requirements section below for more information*)*. As of March 31, 2024 and December 31, 2023, we had negative working capital of $30.39 million and $33.18 million, respectively.

Current wording

As of June 30, 2024 and December 31, 2023, we had a cash and cash equivalent balance of $6.78 million and $4.48 million, respectively, representing an increase of 52% in our cash and cash equivalent balance. As of June 30, 2024 and December 31, 2023, the trade receivables balance was $11.19 million and $12.11 million, respectively. As of June 30, 2024, we had $20.12 million of outstanding short-term borrowings, and as of December 31, 2023, we had $19.35 million of short-term borrowings. The short-term borrowings as of June 30, 2024, relate to Celsius Mining LLC, W Capital Advisors Pty Ltd, the secured convertible promissory notes issued to investors and Marshall Investments MIG Pty Ltd (these loans are currently in default, refer to Material Cash Requirements section below for more information*)*. As of June 30, 2024 and December 31, 2023, we had negative working capital of $34.50 million and $33.18 million, respectively.

Previous wording

For the three months ended March 31, 2024, net cash provided by operating activities was $1.88 million and for the three months ended March 31, 2023, net cash provided by operating activities was $1.32 million. The increase in net cash provided by operating activities was attributable to operations and timing differences in trade and other receivables and trade and other payables amongst other factors.

Current wording

For the six-month period ended June 30, 2024, net cash provided by operating activities was $4.34 million and for the six-months period ended June 30, 2023, net cash used operating activities was $4.19 million. The increase in net cash provided by operating activities was attributable to operations and timing differences in trade and other receivables and trade and other payables amongst other factors.

Previous wording

For the three months ended March 31, 2024, net cash provided by investing activities was $0.53 million and for the three months ended March 31, 2023, net cash provided by investing activities was $4.07 million. The net cash provided by investing activities during the year ended March 31, 2024, was primarily attributable to the proceeds from sale of certain non-utilized equipment. The net cash provided by investing activities during the year ended March 31, 2023, was primarily attributable to the proceeds from the sale of CleanSpark, Inc. shares held offset by the purchase of equipment.

Current wording

For the six-month period ended June 30, 2024, net cash used in investing activities was $1.42 million and for the six-month period ended June 30, 2023, net cash provided by investing activities was $10.77 million. The net cash used in investing activities during the six-months ended June 30, 2024, was primarily attributable to the proceeds from sale of certain non-utilized equipment. The net cash provided by investing activities during the six-month period to June 30, 2023 was primarily attributable to the proceeds from sale of investment shares in CleanSpark, Inc.

Previous wording

For the three months ended March 31, 2024, net cash used in financing activities was $0.51 million and for the three months ended March 31, 2023, net cash used in financing activities was $4.94 million. The cash used in financing activities during the three months ended March 31, 2024, was primarily attributable to the repayment of borrowings.

Current wording

For the six-month period ended June 30, 2024, net cash used in financing activities was $0.62 million and for the six-month period ended June 30, 2023, net cash used in financing activities was $1.89 million. The cash used in financing activities during the six-month period ended June 30, 2024, was primarily attributable to the repayment of borrowings.

Previous wording

In December 2021, the Company’s subsidiary and Australian entity MIG No. 1 Pty Ltd entered into a Secured Loan Facility Agreement with Marshall Investments MIG Pty Ltd (“Marshall”). The loan matured in February 2024 and bears interest at a rate of 12% per annum (with an overdue rate provision of an additional 500bps), payable monthly with interest payments that commenced in December 2021. This loan facility is secured by direct assets of MIG No.1 Pty Ltd and a general security agreement given by the Company. Principal repayments began during November 2022. The outstanding balance includes interest of $9.09 million as of March 31, 2024, all of which is classified as a current liability. MIG No. 1 Pty Ltd has not made a principal and interest payment since May 2023. Marshall and MIG No. 1 Pty Ltd have each reserved their rights. On March 19, 2024, Mig No.1 Pty Ltd, which is an Australian entity, was placed into an Australian court appointed liquidation and wind-up process and was from the Company’s group as of this date. See Note 3 - Subsidiary Deconsolidation to the Consolidated Condensed Financial Statements (Unaudited) in Item 1. Financial Statements, for further discussion. On March 19, 2024, Marshall appointed receivers and managers in Australia under the terms of their security relating to their secured loan facility. The assets securing this loan include 5,372 miners and 8 modular data centers (“MDCs”) these assets are held by the MIG No.1 and therefore were included in the deconsolidation. The receiver’s statutory duty includes the obligation to sell the secured assets at market value or, if market value is not known, at the best price reasonably obtainable to maximize the prospects of there being sufficient proceeds available to satisfy the balance of the outstanding secured debt. It is therefore expected that this loan balance will be offset in the future by the amount received from the sale of the miners and MDCs.

Current wording

The Company is the guarantor on a Secured Loan Facility Agreement by MIG No. 1 with Marshall. The loan matured in February 2024 and bears interest at a rate of 12% per annum (with an overdue rate provision of an additional 500bps), payable monthly with interest payments 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 including interest is $9.71 million as of June 30, 2024, all of which is classified as a current liability. There has been no principal and interest payments made since May 2023. This Secured Loan Facility Agreement was entered into with an Australian entity MIG No.1, this company was placed into a court appointed liquidation and wind-up process and was deconsolidated from the group on March 19, 2024. On March 19, 2024, Marshall appointed receivers and managers in Australia under the terms of their security relating to their secured loan facility. The direct assets that secure this loan include 5,372 miners and 8 modular data centers (“MDCs”), these assets are held by the MIG No.1 and therefore were included in the deconsolidation. The receiver’s statutory duty includes the obligation to sell the secured assets at market value or, if market value is not known, at the best price reasonably obtainable to maximize the prospects of there being sufficient proceeds available to satisfy the balance of the outstanding secured debt. It is therefore expected that this loan balance will be offset in the future by the amount received from the sale of these miners and MDCs. The Company also reserves and retains all rights against Marshall.

Previous wording

On February 23, 2022, the Company’s subsidiary Luna Squares LLC entered into a Co-Location Agreement with Celsius Mining LLC. In connection with this agreement, Celsius Mining LLC loaned Luna Squares LLC a principal amount of $20 million, for the purpose of funding the infrastructure required to meet the obligations of the Co-Location Agreement, for which Luna Squares LLC issued a Secured Promissory Note for repayment of such amount. The Secured Promissory Note accrues interest daily at a rate of 12% per annum (with an overdue rate provision of an additional 200bps). Luna Squares LLC is required to amortize the loan at a rate of 15% per quarter, principal repayments began at the end of September 2022. The Secured Promissory Note has a maturity date of August 23, 2023, and the outstanding balance including interest is $8.82 million as of March 31, 2024, all of which is classified as a current liability. Celsius Mining LLC transferred the benefit of the promissory note to Celsius Network Ltd. Celsius Mining LLC and Celsius Network Ltd filed for Chapter 11 bankruptcy protection on July 13, 2022. Under the Co-location Agreement, Celsius Mining LLC advanced $15.33 million to Luna Squares LLC that was held as a deposit. Whether that amount has been forfeited or must be returned to Celsius Mining LLC is the subject of a dispute between the parties. As of May 1, 2024 and pursuant to a court order dated April 22, 2024, the Celsius civil lawsuit against Luna Squares and Mawson has been dismissed pursuant to the Company’s successful motion to compel arbitration. Currently, no arbitration proceedings or further appeals have been filed by either party.

Current wording

On February 23, 2022, Luna entered into a Colocation Agreement with Celsius Mining LLC. In connection with this agreement, Celsius Mining LLC loaned Luna a principal amount of $20.00 million, for the purpose of funding the infrastructure required to meet the obligations of the Colocation Agreement, for which Luna issued a Secured Promissory Note for repayment of such amount. The Secured Promissory Note accrues interest daily at a rate of 12% per annum (with an overdue rate provision of an additional 200bps). Luna 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 had a maturity date of August 23, 2023, the outstanding balance including interest is $9.10 million as of June 30, 2024, all of which is classified as a current liability. Celsius Mining LLC transferred the benefit of the promissory note to Celsius Network Ltd. Celsius Mining LLC and Celsius Network Ltd filed for Chapter 11 bankruptcy protection on July 13, 2022. Under the Colocation Agreement, Celsius Mining LLC advanced $15.33 million to Luna that were held as a deposit. Whether that amount has been forfeited or must be returned to Celsius Mining LLC is the subject of a dispute between the parties. On July 18, 2024, Celsius Network, LLC filed for arbitration of its claims against the Company with the American Arbitration Association in the matter entitled, “Celsius Network Ltd., Celsius Mining LLC and Ionic Digital Mining LLC v. Mawson Infrastructure Group, Luna Squares LLC and Cosmos Infrastructure LLC - Case 01-24-0006-4462”. The Company opposes the claim in arbitration and on August 12, 2024, has filed responsive pleadings denying the claims and asserting affirmative defenses, including set off against theclaims, and asserted cross claims against Celsius for sums due to the Company in excess of $115.00 million. This includes counter claims asserted by the Company against Celsius Network Ltd., Celsius Mining LLC and Ionic Digital Mining LLC in excess of $115.00 million for damages due to the Company, including for breach of the Colocation Agreement by Celsius. The matter is proceeding through the arbitration process.

Previous wording

The Company is the guarantor of a Secured Loan Facility Agreement for working capital by the Company’s subsidiary Mawson Infrastructure Group Pty Ltd with W Capital Advisors Pty Ltd. As of March 31, 2024, AUD $1.77 million (USD $1.13 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 (with an overdue rate provision of an additional 800bps) and is paid monthly. Principal repayments are paid ad hoc in line with the loan facility agreement. The Secured Loan Facility expired in March 2023. On October 30, 2023 Mawson Infrastructure Group Pty Ltd, which is an Australian entity, was placed into voluntary administration in Australia, and on November 3, 2023, W Capital Advisors appointed receivers and managers in Australia under the terms of their security relating to their working capital facility.

Current wording

The Company is the guarantor on a Secured Loan Facility Agreement for working capital by an Australian entity Mawson Infrastructure Group Pty Ltd with W Capital Advisors Pty Ltd. As of June 30, 2024, AUD $1.86 million (USD $1.24 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 (with an overdue rate provision of an additional 800bps) and is paid monthly. Principal repayments are paid ad hoc in line with the loan facility agreement. The Secured Loan Facility expired in March 2023. This Secured Loan Facility Agreement was originally with Mawson Infrastructure Group Pty Ltd and this Australian entity was placed into Australian voluntary administration on October 30, 2023 and on November 3, 2023, W Capital Advisors appointed receivers and managers in Australia under the terms of their security relating to their working capital facility. The receiverships of these two Australian companies are proceeding, and the Company is dependent on the appointed receivers and managers to send information on their respective status.

Previous wording

On July 8, 2022, the Company issued secured convertible promissory notes to investors in exchange for cash. The outstanding balance relates to the interest on the convertible note which has been accrued from July onwards and therefore the outstanding balance is $0.91 million as of March 31, 2024, all of which is classified as a current liability.

Current wording

On July 8, 2022, the Company issued secured convertible promissory notes to investors in exchange for cash. The outstanding balance relates to the interest on the convertible note which has been accrued from July 2022 onwards and therefore the outstanding balance is $0.10 million as of June 30, 2024, all of which is classified as a current liability. On March 28, 2024, the Company was made a defendant in a civil suit before the Supreme Court of NSW in Sydney Australia, in the matter entitled “W Capital Advisors Pty Ltd in its capacity as trustee for the W Capital Advisors Fund v. Mawson Infrastructure Group, Inc.”, Docket No. 2024/00117331, alleging a claim to seek USD $0.17 million as unpaid interest for the convertible note and AUD $0.30 million under the loan deed, plus interest and costs. The Company sought dismissal of the Australian proceedings arguing jurisdiction of any claims against the Company was in the United States as set forth in the agreements between the parties. Despite its objections, the Australian court ruled in favor of the Australian claimant and rendered a judgment against the Company under Australian law for US $0.17 million as unpaid interest under a convertible note after the Company paid in full the principal of $0.50 million, and AUD $0.30 million under a loan deed, plus interest and costs for sums due. The Company continues to believe that jurisdiction and adjudication of this matter has to be pursuant to U.S law and has to occur in the United States and the Company retain all rights and shall pursue all remedies as available under U.S. jurisdictions.

Previous wording

As of March 31, 2024, and December 31, 2023, we had net current liabilities of $30.39 million and $33.18 million, respectively. As of March 31, 2024, and December 31, 2023, we had net assets of $13.01 million and $30.38 million, respectively. As of March 31, 2024, we had an accumulated deficit of $202.43 million compared to $182.67 million as of December 31, 2023. Our cash position of March 31, 2024, was $6.37 million in comparison to $4.48 million as of December 31, 2023. For the three-month period ended March 31, 2024 and 2023 the Company incurred a loss after tax of $19.97 million and $11.38 million, respectively. Included in trade and other receivables is a $2 million payment due and pending from CleanSpark, Inc. for the sale of the Georgia facility. CleanSpark, Inc has disputed the obligation to make this payment. On December 22, 2023, the Company made formal demand on CleanSpark Inc. and CSRE Properties Sandersville, LLC for at least $2 million for breach of contract on the debtors’ obligation to pay for an energy earnout provision contained in a Purchase and Sale Agreement dated October 1, 2022, between the parties. Subsequently, on January 12, 2024, Mawson and Luna filed notice of its claim for formal arbitration before the American Arbitration Association. On February 5, 2024, CleanSpark and CSRE filed a motion objecting to jurisdiction of the arbitration proceedings. An arbitrator was appointed to hear the matter and on May 1, 2024, ruled that the arbitration proceedings be dismissed for lack of jurisdiction on the grounds of conflicting language contained in the purchase and sale agreement. The ruling did not address the merits of the Company’s claims, and the Company intends to pursue its claims against Cleanspark, Inc. by civil lawsuit through a filing with the court.

Current wording

As of June 30, 2024, and December 31, 2023, we had negative working capital of $34.50 million and $33.18 million, respectively. As of June 30, 2024, and December 31, 2023, we had net assets of $4.40 million and $30.38 million, respectively. As of June 30, 2024, we had an accumulated deficit of $212.05 million compared to $182.67 million as of December 31, 2023. Our cash position of June 30, 2024, was $6.78 million in comparison to $4.48 million as of December 31, 2023. For the six-month period ended June 30, 2024 and 2023 the Company incurred a loss after tax of $29.38 million and $29.03 million, respectively. Included in trade and other receivables is a $2.00 million payment due and pending from CleanSpark, Inc. for the sale of the Georgia facility. CleanSpark, Inc has disputed the obligation to make this payment. On July 16, 2024, the Company filed a civil lawsuit for its claims against CleanSpark, Inc and CSRE with the United States District Court for the Southern District of New York in the matter entitled, “Mawson Infrastructure Group, Inc. and Luna Squares, LLC v. CleanSpark, Inc. and CSRE Properties Sandersville, LLC” under Civil Action Number 1:24-cv-5379 for claims and payments due to the Company in excess of $2.00 million. The matter is proceeding through the court system.

Previous wording

The Company continues to take steps to preserve cash by optimizing costs and negotiating with its suppliers to improve or extend their terms of trade. The Company has been improving its revenue generation by improving the efficiency of its operations and adding multiple, institutional co-location services customers. The Company will continue to seek to optimize its cashflows through these and other initiatives.

Current wording

The Company continues to take steps to preserve cash by optimizing costs and negotiating with its suppliers to improve or extend their terms of trade. The Company has been improving its revenue generation by improving the efficiency of its operations and adding multiple, institutional colocation services customers. The Company will continue to seek to optimize its cashflows through these and other initiatives.