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General | 3 Months Ended
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Mar. 31, 2024
General [Abstract] |
GENERAL | NOTE 1 – GENERAL Nature of Operations Mawson Infrastructure Group Inc. (“Mawson,” the “Company,” “we,” “us,” and “our”) is a digital infrastructure company headquartered in the United States. Mawson is a corporation incorporated in Delaware in 2012. On March 9, 2021, the Company acquired the shares of Cosmos Capital Limited in a stock for stock exchange. This transaction has been accounted for as a reverse asset acquisition. Mawson was previously known as Wize Pharma Inc, and changed its name on March 17, 2021. Shares of Mawson’s common stock, par value $0.001 per share (“Common Stock”) have been listed on The Nasdaq Capital Market since September 29, 2021. The Company has 3 primary businesses – digital currency or Bitcoin self-mining, co-location and related services, and energy markets. Throughout this filing, we use the term Bitcoin (with a capital “B”) to represent the overall concept of Bitcoin, including the technology, protocol, and the entire ecosystem. The term bitcoin (with a lower case “b”) refers to the digital bitcoin currency or token. 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. 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. 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. We invest in the communities in which we operate and also support our broader ecosystem. The Company manages and operates data centers delivering a current capacity of approximately 109 MW with its current operational sites in the United States of America. The Company has previously reported through an 8-K filing on March 29, 2024 that the Company may seek to exit certain or all of its entities and holdings in Australia. The accompanying consolidated condensed unaudited interim financial statements, including the results of a number of the Company’s Australian subsidiaries: Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, MIG No.1 Pty Ltd (on March 19, 2024, an Australian entity MIG No.1 Pty Ltd was placed into a Australian court appointed liquidation and wind-up process, as disclosed in note 3), MIG No.1 LLC, Mawson AU Pty Ltd (on April 23, 2024, an Australian entity Mawson AU Pty Ltd was placed into a Australian court appointed liquidation and wind-up process, as disclosed in note 10 subsequent events), an Australian entity Mawson Services Pty Ltd (on April 29, 2024, Mawson Services Pty Ltd was placed into a Australian court appointed liquidation and wind-up process, as disclosed in note 10 subsequent events), Luna Squares LLC, Mawson Bellefonte LLC, Luna Squares Repairs LLC, Luna Squares Property LLC, Mawson Midland LLC, Mawson Hosting LLC, 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 in the United States (“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, 2023, and the notes thereto, included in the Company’s Annual Report on Form 10-K filed with SEC on April 1, 2024. Accordingly, they do not include all the information and footnotes required by 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, 2024. These consolidated, condensed unaudited 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. Going Concern The accompanying consolidated, condensed unaudited interim financial statements have been prepared assuming the Company will continue as a going concern basis and in accordance with GAAP. The going concern basis of presentation assumes that the Company will continue in operation one year after 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 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. For the three months ended March 31, 2024, the Company incurred a loss after tax of $19.76 million, and as of March 31, 2024, had negative working capital of $30.39 million, had total net assets of $13.01 million and had an accumulated deficit of $202.43 million. The Company’s cash position as of March 31, 2024, was $6.37 million. Bitcoin prices can be volatile and the difficulty of earning bitcoin has typically trended higher over time, which means the Company typically earns less bitcoin for the same effort. In addition, the rewards that bitcoin miners earn halved (not including transaction fees) during April 2024. These factors are outside the Company’s direct control, and the Company may not be able to practically mitigate their impact. The Company cannot predict with any certainty whether these trends will reverse or persist. In addition, the Company’s miners and other mining equipment will require replacement over time as they come to the end of their useful lives to ensure that the Company can continue to competitively and efficiently produce bitcoin. The Customer Equipment Co-Location Agreement the Company’s subsidiary, Luna Squares LLC (“Luna”), had with Celsius Mining LLC (the “Co-Location Agreement”), expired on August 23, 2023. Celsius Mining LLC is currently in default on payments under the Co-Location Agreement to Luna. On July 13, 2022, Celsius Mining LLC and its other affiliated debtors (collectively here “Celsius”) filed for bankruptcy relief under Chapter 11 in the United States Bankruptcy Court. Celsius has failed to pay approximately $6.95 million of unpaid co-location invoices, but due to Celsius’s Ch. 11 bankruptcy, $1.84 million of that $6.95 million are considered pre-petition amounts, for which Luna is a general unsecured creditor, and $5.11 million of that $6.95 million are considered post-petition amounts due and payable to Luna for which Luna has filed a proof of claim. Celsius has commenced the process of making distributions under its plan approved by the Court on January 31, 2024. Luna expects payment of its claims and continues to monitor the status of this matter. In addition, Celsius and Luna have made certain allegations and counter-allegations against each other claiming it is owed approximately $8 million under the promissory note and claiming entitlement to return of $15.33 million paid as deposit. Mawson denies that Celsius is entitled to the relief it seeks in the adversary proceeding and is actively defending the matter. As of May 1, 2024 and pursuant to a court order dated April 22, 2024, the Celsius civil lawsuit against Luna and Mawson has been dismissed pursuant to the Company’s successful motion to compete arbitration. Currently, no arbitration proceedings or further appeals have been filed by either party. A subsidiary of the Company, MIG No. 1 Pty Ltd (“MIG No.1”) has a Secured Loan Facility Agreement with Marshall Investments GCP Pty Ltd ATF for the Marshall Investments MIG Trust (“Marshall”). The loan matured in February 2024 and the total outstanding balance is $9.09 million as of March 31, 2024. MIG No. 1 Pty Ltd, an Australian entity, 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 18, 2024, MIG No.1 Pty Ltd was placed into a court appointed liquidation and wind-up process and was deconsolidated from the group on this date, see Note 3. The Company is the guarantor on a Secured Loan Facility Agreement for working capital by 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. The Secured Loan Facility expired in March 2023. This Secured Loan Facility Agreement was entered into with an Australian entity Mawson Infrastructure Group Pty Ltd, this company 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 Company, or its subsidiaries, have not fulfilled specific payment obligations related to the Celsius Promissory Note, Marshall loan and the W Capital Working Capital Loan 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 or its subsidiaries for payment default, raising interest rates to the default or overdue rate, or taking appropriate measures concerning collateral (including appointing a receiver), 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 consolidated financial statements. To mitigate these conditions, the Company has explored various avenues to enhance liquidity, fund the Company’s expenditures, and meet debt servicing requirements. These strategies include, among others:
| ● | Executing and implementing further new customer co-location service agreements;
| ● | Engaging 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 engagement of an investment bank;
| ● | Assessing and evaluating monetizing specific assets, including potential sales of mining infrastructure equipment, miners, operational sites, or expansion locations under consideration; and
| ● | 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 have access to debt, equity, and other sources of funding, these may require additional time and cost, may impose operational restrictions and other covenants on the Company, may not be available on attractive 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 and may be unfavorable to the Company and the Company’s current stockholders. Should the Company be unable to source sufficient funding, the Company may not be able to realize assets at their recognized values and fulfill its liabilities in the normal course of business at the amounts stated in these consolidated financial statements. As previously reported, 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 consolidated, condensed unaudited interim 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.

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