Mawson Infrastructure Group Inc

We have been made a defendant in certain legal proceedings which may have in the future or have had in the recent past significant effects on our financial position or profitability. On July 13, 2022, Celsius Mining LLC and Celsius Network LLC and other related entities (collectively, “Celsius”), filed for bankruptcy relief under Chapter 11. On November 23, 2023, Celsius filed an adversary proceeding in its Chapter 11 bankruptcy proceedings in the United States Bankruptcy Court for the Southern District of New York (the “Court”), Case No. 22-10964 against Mawson, and Mawson’s subsidiaries Luna Squares LLC and Cosmos Infrastructure LLC, asserting various claims related to the alleged breach of a Colocation Agreement and Secured Promissory Note. Adv. Case No. 23-01202, claiming it is owed approximately $8.00 million under the promissory note and claiming entitlement to return of $15.33 million paid as deposit. Mawson denied that Celsius is entitled to the relief it seeks in the adversary proceeding and sought to have the matter removed from the adversary proceeding to arbitration based on the arbitration clause contained in one of the transaction’s agreements. Pursuant to court order dated April 22, 2024, the Celsius adversarial proceedings against Luna Squares and Mawson was dismissed pursuant to the Company’s successful motion to compel arbitration. 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.

On December 22, 2023, Mawson Infrastructure Group Inc. and Luna Squares LLC made formal demand on CleanSpark Inc. and CSRE Properties Sandersville, LLC for $2.00 million for breach of contract for failing to pay for an energy earnout provision contained in the Purchase and Sale Agreement dated September 8, 2022, between the parties. CleanSpark, Inc has disputed the obligation to make this payment. On January 12, 2024, the Company filed formal arbitration before the American Arbitration Association. On February 5, 2024, CleanSpark, Inc and CSRE filed a motion objecting to jurisdiction of the arbitration proceedings. On May 1, 2024, the appointed arbitrator ruled that it did not have jurisdiction to hear the matter, referring any disputes to the appropriate civil court. The ruling did not address the merits of the Company’s claims. 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.

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 US $0.167 million as unpaid interest under a convertible note after the Company paid in full the principal of US $0.50 million, and AUD $0.30 million under a loan deed, plus interest and costs for sums due claiming corporate guarantee by the Company for a “Variation Deed to Loan Deed” dated September 29, 2022, executed by its Australian entity, Mawson Infrastructure Group Pty Ltd. 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 to jurisdiction, the Australian court ruled in favor of the Australian claimant and rendered a judgment against the Company under Australian law for US $0.167 million as unpaid interest under a convertible note after the Company paid in full the principal of US $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. The Company has also corresponded with W Capital Advisory Pty Ltd and/or its representatives, the Company’s ongoing concerns about W Capital Advisory Ptv Ltd and James Manning being related parties. W Capital Advisory Pty has not responded to the Company’s concerns in a manner satisfactory to the Company.

The Company and some of its subsidiaries or entities including Australian entities, are currently in disputes, as outlined below. These disputes may be in or may lead to litigation.

On January 8, 2024, a commercial demand was made Flynt ICS Pty Ltd to the Company’s subsidiary and an Australian entity, MIG No. 1 Pty Ltd, for $0.13 million, for alleged claimed sums due under a service agreement. As determined by the Audit Committee’s investigation into Mr. James Manning, Flynt ICS Pty Ltd is a party related to Mr. James Manning, a former director and executive of the Company. On March 19, 2024, MIG No.1 Pty Ltd was placed into an Australian court appointed liquidation and wind-up process. See Note 3 - Subsidiary Deconsolidation to the Consolidated Condensed Financial Statements (Unaudited) in Item 1. Financial Statements, for further discussion. The Company has ongoing concerns about Flynt ICS Pty Ltd and James Manning being related parties. Flynt ICS Pty Ltd has not responded to the Company’s concerns in a manner satisfactory to the Company.

On February 1, 2024, a former independent contractor, Noam Danenberg, through his professional company, N. Danenberg Holding (2000) Ltd, apparently filed a civil suit in Tel Aviv Israel against the Company for an alleged US $0.01 million in alleged fees and other benefits. The Company has never been formally served nor has it submitted to jurisdiction in Israel.

On October 30, 2023, the directors of the Company’s Australian subsidiary, Mawson Infrastructure Group Pty Ltd (“Mawson AU”) appointed voluntary administrators in Australia to Mawson AU. Voluntary administration is a process under Australian corporate law where an external administrator is appointed to take control of the relevant entity, investigate and report to creditors about the relevant entity’s business, property, affairs and financial circumstances, and report on the options available to creditors. It is not a court process. On November 3, 2023, W Capital Advisors appointed receivers and managers in Australia under the terms of their security relating to their working capital facility.

On January 3, 2024, W Capital put Mawson on notice of its intent to collect what it asserts are past due amounts for the following claims as of December 31, 2023: (a) principal and interest payable on the Loan Amount advanced to Mawson under a variation deed, amounting to $1.30 million (AU $1.90 million); (b) the principal amount advanced under convertible note, amounting to US $0.50 million; and (c) interest payable on the principal amount advanced under a convertible note, amounting to $0.07 million. W Capital is also claiming issuance of an alleged 1,500,000 shares of the Company. The Company paid to W Capital US $0.50 million on March 6, 2024, and is reserving all of its rights and remedies as they pertain to W Capital’s alleged claims for additional AU $1.30 million and 1,500,000 shares which the Company disputes. 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 US $0.17 million as alleged unpaid interest under a convertible note after the Company paid in full the principal of US $0.50 million, and an alleged AUD $0.30 million under a loan deed, plus interest and costs for sums allegedly due claiming corporate guarantee by the Company for a “Variation Deed to Loan Deed” dated September 29, 2022, executed by Australian entity, Mawson Infrastructure Group Pty Ltd. As noted previously in the Company’s Current Report on Form 8-K filed on March 29, 2024, the Company, pursuant to Australian law, on March 28, 2024, sent a preliminary discovery notice to W Capital to obtain documents and materials to investigate and ascertain if W Capital is a related party to Mr. James Manning, the Company’s former director and executive, and to investigate and ascertain if transactions between W Capital Advisors Pty Ltd and the Company were related party transactions. The Company has also corresponded with W Capital Advisory Pty Ltd and/or its representatives, the Company’s ongoing concerns about W Capital Advisory Ptv Ltd and James Manning being related parties. W Capital Advisory Pty has not responded to the Company’s concerns in a manner satisfactory to the Company.

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, Blockware Solutions, LLC, claiming alleged merchandise price and incidental damages of $0.12 million, alleged consequential damages due to lost profits of $0.36 million, 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 these alleged claims. The company also reserves and retains all rights against Blockware Solutions, LLC.

On April 23, 2024, the Company’s subsidiary and an Australian entity, Mawson AU Pty Ltd, was placed into an Australian court appointed liquidation and wind-up process.

On April 29, 2024, the Company’s subsidiary and an Australian entity, Mawson Services Pty Ltd, was placed into an Australian court appointed liquidation and wind-up process.

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. v. Mawson Infrastructure Group; Luna Squares 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.

Regarding the Company’s lease of the property and premises in Sharon, Pennsylvania, the Company has conducted further analysis and believes it has the legal right to possess the Sharon property. As such, the Company is now pursuing its legal rights and remedies against the landlord, Vertua Property Inc, which is a related party of James Manning, for the Company to assert its legal rights and obtain clear and unencumbered possession to the property. The Company also believes that it was overcharged by Vertua Property Inc. and the Company is due a refund or a credit to offset any future expenses. The Company has provided written communication to the landlord Vertua Property Inc. of its rights and its intent to regain possession of the leased property, while reserving all of its claims, rights and remedies against Vertua Property Inc. under applicable law, including for damages caused by Vertua Property Inc. towards the Company. The Company has provided a copy of such correspondence to Bitfarms, Ltd. so all parties are notified of the Company’s legal rights and remedies, and the Company asserting its legal rights to obtain clear and unencumbered possession to the Sharon property.

The Company and its subsidiaries have been in the past, and from time to time in the future may be involved in certain litigation related to our businesses. For example, the Company and its subsidiaries receive letters of demand for payments or other correspondence from time to time which could lead to legal proceedings.