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Summary of Significant Accounting Policies | 9 Months Ended
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Sep. 30, 2021
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and basis of preparation Pursuant to that certain Certificate of Amendment to the Certificate of Incorporation of the Company dated August 11, 2021, Mawson executed a 10-for-1 reverse stock split of its outstanding common stock and reduced its authorized common stock to 120,000,000 shares, as set forth in the Company’s Current Report on Form 8-K/A filed August 16, 2021. Unless otherwise specified, all Mawson share numbers in the Financial Statements and Notes in this Quarterly Report on Form 10-Q reflect post-reverse stock split numbers. These consolidated, condensed interim financial statements should be read in conjunction with the audited consolidated financial statements for Cosmos Capital Limited (now known as Mawson Infrastructure Group Pty Ltd) and subsidiaries as of December 31, 2020, and the notes thereto, included in the Company’s Current Report on Form 8-K/A filed May 13, 2021. The results of the interim periods are not necessarily indicative of the results to be expected for the full year ended December 31, 2021. 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. Any changes in the Company’s ownership interest in a consolidated subsidiary, through additional equity issuances by the consolidated subsidiary or from the Company acquiring the shares from existing shareholders, in which the Company maintains control is recognized as an equity transaction, with appropriate adjustments to both the Company’s additional paid-in capital and the corresponding non-controlling interest. On March 9, 2021, Cosmos Capital Limited (now known as Mawson Infrastructure Group Pty Ltd) was acquired by the Company. For accounting purposes, this was accounted for as a reverse asset acquisition with Cosmos Capital Limited (now known as Mawson Infrastructure Group Pty) as the accounting acquirer (refer to significant accounting policies below) and therefore the historical financial information of Cosmos Capital Limited prior to March 9, 2021 became the historical financial information of Mawson Infrastructure Group Pty, which have been consolidated into the financial statements of the Company. The consolidated results of the Company are reported in U.S. Dollars and include the operations of all its subsidiaries. All intercompany balances and transactions have been eliminated in the consolidation. Use of Estimates and Assumptions The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the dates of the consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. The Company has considered the following to be significant estimates made by management, including but not limited to, going concern assumptions, estimating the useful lives of patent assets and fixed assets, realization of long-lived assets, unrealized tax positions and the realization of digital currencies, Business Combinations, Reverse Asset Acquisition, and the Contingent obligation with respect to future revenues. Critical Accounting Policies Critical accounting policies are described in the footnotes to the consolidated financial statements for Cosmos Capital Limited (now known as Mawson Infrastructure Group Pty Ltd) and subsidiaries as of December 31, 2020, included in the Company’s Current Report on Form 8-K/A filed May 13, 2021. There have been no changes to critical accounting policies in the three months period ended September 30, 2021 other than as a result of changes to operations as described below. Reverse Asset Acquisition On March 9, 2021, the Company acquired the shares of Cosmos Capital Limited (now known as Mawson Infrastructure Group Pty Ltd) in a scrip for scrip exchange. This transaction has been accounted for as a reverse asset acquisition. Full details of the transaction and the impact are included in the Company’s Quarterly Report on Form 10-Q filed on May 19, 2021. This transaction reverse asset acquisition and the associated impact is referred to as the Cosmos Transaction. Share based payments Under the terms of the Cosmos Transaction Bid Implementation Agreement, the Company was required to make share based payments consisting of up to 40,000,000 shares under an Incentive Compensation Program and warrants issued to HC Wainwright as a fee related to the acquisition by Mawson of Mawson AU. In addition, Mawson AU had an outstanding obligation to W Capital Advisors Pty Ltd (“W Capital”) for options over the equity of Mawson AU which was terminated for consideration of warrants over the Company’s shares being issued to W Capital. Share based payments expenses for the nine months ended September 30, 2021 and 2020 were $21.78 million and $nil respectively. In the nine-month period to September 30, 2021, share based payments were largely attributable to HC Wainwright of $6.18 million, W Capital Warrants of $5.56 million and an accrual of $10.00 million for amounts related to the obligation of Mawson to issue RSU’s pursuant to the terms of the Bid Implementation Agreement for the Cosmos Transaction, included in the Company’s Current Report on Form 8-K/A filed May 13, 2021. No share-based payments expenses were recorded in the 2020 period. Equity accounted investments Mawson subscribed for 500,000 shares in Distributed Storage Solutions Pty Ltd (DSS) at AUD$1.00 per share on March 1, 2020. As at September 30, 2021, Mawson held 20.06% of the equity in DSS, an Australian private company operating a blockchain based decentralized storage business, based on the IPFS protocol. This investment has been equity accounted, as Mawson has assessed that it has significant influence over the operations of the investee. Significant Accounting Policies There have been no material changes to the Company’s significant accounting policies to those previously disclosed in the consolidated financial statements as of December 31, 2020, and the notes thereto, included in the Company’s Current Report on Form 8-K/A filed May 13, 2021, other than as a result of changes to operations as described below. Revenue recognition – equipment sales In Q3 2021, the Company earned revenues from the sale of earlier generation cryptocurrency mining units and modular data centers that have been assembled or refurbished for resale (collectively “Hardware”). Revenue from the sale of Hardware is recognized when all of the following conditions are satisfied: (i) persuasive evidence of a sales arrangement exists, (ii) the sales terms are fixed or determinable, (iii) title and risk of loss have transferred, (iv) payment is received. At the date of sale, the net book value is expensed in cost of revenues. Digital Currencies Digital currencies are included in current assets in the consolidated balance sheets. Digital currencies are recorded at cost less impairment. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. The following table presents the activities of the digital currencies of the three months and nine months ended September 30, 2021:
Number of BTC Held |  | Three months to September 30, 2021 |  |  | Nine months to September 30, 2021 |
Opening Digital currencies held (represented as number of Bitcoin) |  |  | 0.01 |  |  |  | 0.52 |
Additions of digital currencies (number of Bitcoin added) |  |  | 251.52 |  |  |  | 501.74 |
Sale of digital currencies (number of Bitcoin sold) |  |  | (249.77 | ) |  |  | (500.50 | )
Digital currencies at September 30, 2021 (represented as a number of Bitcoin) |  |  | 1.76 |  |  |  | 1.76 |
Basic and Diluted Net Loss per Share Net loss per common share is calculated in accordance with ASC Topic 260: Earnings Per Share (“ASC 260”). Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding, as they would be anti-dilutive. Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at September 30, 2021 and 2020 are as follows:
|  | As at September 30, |
|  | 2021 |  |  | 2020 |
Warrants to purchase common stock |  |  | 4,222,910 |  |  |  | - |
Restricted Stock-Units (“RSUs”) issued under a management equity plan |  |  | 4,000,000 |  |  |  | - |
|  |  | 8,222,910 |  |  |  | - |
The following table sets forth the computation of basic and diluted loss per share:
|  | For the three months ended September 30, |  |  | For the nine months ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Net Loss attributable to common shareholders |  | $ | (3,097,875 | ) |  | $ | (3,548,240 | ) |  | $ | (47,923,670 | ) |  | $ | (6,131,591 | )
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average common shares - basic and diluted |  |  | 72,952,466 |  |  |  | 7,178,833 |  |  |  | 174,470,310 |  |  |  | 6,868,323 |
Loss per common share - basic and diluted |  | $ | (0.042 | ) |  | $ | (0.494 | ) |  | $ | (0.275 | ) |  | $ | (0.893 | )
Comparative weighted average common shares have been revised by the ratio of Mawson AU to the Company shares exchanged in the reverse asset acquisition in March 2021. Pursuant to that certain Certificate of Amendment to the Certificate of Incorporation of the Company dated August 11, 2021, Mawson executed a 10-for-1 reverse stock split of its outstanding common stock and reduced its authorized common stock to 120,000,000 shares, as set forth in the Company’s Current Report on Form 8-K/A filed August 16, 2021. Recently Issued Accounting Pronouncements For information with respect to recent accounting pronouncements, see Note 2 to the consolidated financial statements for Cosmos Capital Limited (now knows as Mawson Infrastructure Group Pty Ltd) and subsidiaries as of December 31, 2020, and the notes thereto, included in the Company’s Current Report on Form 8-K/A filed May 13, 2021. Recent accounting pronouncements include. Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) Standard/Description– Issuance date: December 2019. This guidance simplifies various aspects of income tax accounting by removing certain exceptions to the general principle of the guidance and also clarifies and amends existing guidance to improve consistency in application. Effective Date and Adoption Considerations– The guidance was effective January 1, 2021 and early adoption was permitted. The company adopted the guidance on a prospective basis as of the effective date. Effect on Financial Statements or Other Significant Matters– The guidance did not have a material impact in the consolidated financial results. Other new pronouncements not applicable to the Company: Reference Rate Reform (“ASU 2021-01”) issued March 2020, with amendments in 2021; effective March 12, 2020 through December 31, 2022 Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) issued January 2017 effective January 1, 2020; Financial Instruments - Credit Losses (“ASU 2016-13 / 2018-19 / 2019-04 / 2019-05 / 2019-10 / 2019-11”) issued June 2016 with amendments in 2018, 2019 and 2020; effective January 1, 2020

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