Big Digital Energy, Inc.: Form 10-Q for the period ended Jun 30, 2024

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, 2023. 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, Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, MIG No.1 Pty Ltd (on March 19, 2024, MIG No.1 Pty Ltd was placed into a court appointed liquidation and wind-up process), MIG No.1 LLC, Mawson AU Pty Limited (on April 23, 2024, Mawson AU Pty Ltd was placed into a court appointed liquidation and wind-up process), Mawson Services Pty Ltd (on April 29, 2024, Mawson Services Pty Ltd was placed into a court appointed liquidation and wind-up process), Mawson Bellefonte LLC, Luna Squares LLC, Luna Squares Repairs LLC, Luna Squares Property LLC, Mawson Midland LLC, Mawson Ohio LLC, Mawson Hosting LLC and Mawson Mining LLC.

Cautionary Note Regarding Forward-Looking Statements

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. Forward-looking statements can be identified by the use of forward-looking words such as “believe”, “expect”, “intend”, “plan”, “may”, “should”, “could” 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 United States Securities and Exchange Commission (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 factors summarized below.

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.

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:

• continued evolution and uncertainty related to growth in blockchain and bitcoin usage;
• high volatility in bitcoin and other digital assets’ prices and in value attributable to our business;
• our need to, and difficulty in, raising additional debt or equity capital and the availability of financing opportunities;
• the evolution of AI and HPC market and changing technologies;
• the slower than expected growth in demand for AI, HPC and other accelerated computing technologies than expected;
• the ability to timely implement and execute on AI and HPC digital infrastructure;
• the ability to timely complete the digital infrastructure build-out in order to achieve its revenue expectations for the periods mentioned;
• failure to maintain required compliance to remain eligible for the most cost-effective forms of raising additional equity capital;
• downturns in the digital assets 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;
• our reliance on key management personnel and employees;
• cyber-security threats;
• operational, maintenance, repair, safety, and construction risks;
• our ability to obtain proper insurance;
• banks and other financial institutions ceasing to provide services to our industry;
• counterparty risks related to our customers, agreements and/or contracts;
• adverse actions by creditors, debt providers, or other parties;
• changes to the Bitcoin and/or other network’s protocols and software;
• the decrease in the incentive or increased difficulty 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 asset development;
• our ability to develop and execute on our business strategy and plans;
• 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; and
• material litigation, investigations, or enforcement actions, including by regulators and governmental authorities.

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.

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. We undertake no obligation 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.

Company Overview

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 lines of business – its digital co-location business, digital assets self-mining business, and energy management business.

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 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.

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.

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.

The Company seeks to power our operations and facilities with renewable or sustainable power to further support our sustainability priorities.

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.

Recent Developments

On April 15, 2024, the Company announced that the Board had appointed Ryan Costello, a former U.S. Congressman, as the Chair of the Company’s Board of Directors effective April 9, 2024.

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

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

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.

On June 12, 2024, the Company held its 2024 annual meeting of stockholders. At the Annual Meeting, among other things, the stockholders also adopted and approved the Company’s new 2024 Omnibus Equity Incentive Plan

On July 1, 2024, the Board approved the following equity compensation awards to the following named executive officers:

(1) RSUs and Option awards were made under and subject to the Company’s 2024 Omnibus Equity Incentive Plan (the “2024 Plan”).

(2) Stock option grants were made on the form of Stock Option Grant Notice and Option Agreement filed as Exhibit 99.2 to the Company’s Registration Statement on Form S-8 filed June 21, 2024.

(3) Restricted stock units vest in four equal installments on August 26, 2025, August 25, 2026, August 24, 2027 and August 23, 2028.

(4) Restricted stock units vest fully on July 1, 2024.

(5) Stock Option vests in the following amounts when fair market value of Company’s share (as measured on each trading day) averaged over the preceding ten trading days has reached or exceeded the corresponding price as follow: 500,000 Shares vest at price of $1.89, 400,000 Shares vest at price of $2.30, 300,000 Shares vest at $3.60, 200,000 Shares vest at price of $4.70, 100,000 Shares vest at price of $6.00, 100,000 Shares vest at price of $7.10, 100,000 Shares vest at price of $8.20, and 50,000 Shares vest at price of $9.40. Provided that if the corresponding price vesting condition is met prior to January 1, 2025, such portion of the option shall vest on January 1, 2025. In addition, if the Company undergoes or upon a change in control, all Options shall be fully and immediately accelerated.

(6) Restricted stock units vest fully on July 1, 2024.

On July 1, 2024, Mawson Hosting, LLC (the “Service Provider”), and Krypton Technologies LLC (the “Customer”), executed a Service Framework Agreement for the provision of certain colocation services (the “Agreement”). In accordance with the terms of the Agreement, Service Provider will provide Customer with colocation services for approximately 20MW at Service Provider’s Midland PA site. The Agreement provides for Service Provider to provide colocation services to Customer.

Results of Operations – Three-months Ended June 30, 2024 compared to the three-months ended June 30, 2023

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Revenues

Digital colocation services revenues for the three-months ended June 30, 2024 and 2023, were $8.13 million and $4.59 million, respectively. This represented an increase of $3.54 million or 77%. The increase in revenue was due to the Company providing colocation services to multiple colocation customers. For the same period of 2023, the Company only provided colocation services to a single customer. The Company expects to continue to diversify its colocation services customer base to manage its exposure or dependance to any specific customer, as well as to expand its agreements to potentially include enterprise customers mining digital assets other than bitcoin or for other compute purposes.

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.

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.

Operating Cost and Expenses

Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; stock-based compensation; change in fair value of derivative asset; and depreciation and amortization.

Cost of revenue

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

Cost of revenue for the three-months ended June 30, 2024 and 2023, were $8.79 million and $7.03 million, respectively. The increase in cost of revenue was primarily attributable to an increase in power costs related to the increase in energy used to operate the colocated mining equipment for our enterprise colocation customers within our facilities.

Selling, general and administrative

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

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.

Stock based compensation

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.

Depreciation and amortization

Depreciation consists primarily of depreciation of digital asset mining hardware, MDC equipment and other data center infrastructure.

Depreciation and amortization for the three-months ended June 30, 2024 and 2023, were $4.60 million and $8.79 million, respectively. The lower depreciation and amortization expense is the result of an increased number of the Company’s digital asset mining hardware being fully depreciated and lower number of digital asset miners for the three-months ended June 30, 2024 following the deconsolidation of MIG No. 1 Pty Ltd during the three-months ended March 31, 2024.

Change in fair value of derivative asset

During the three-months ended June 30, 2024 and 2023, there was a loss on the fair value of the derivative asset by $1.78 million and a loss of $5.44 million, respectively, in relation to our power supply arrangements. The loss on the derivative asset was due to a decrease expected in the price of energy costs in 2024 and decrease in the amount of time remaining for the derivative asset.

Non-operating expenses

Non-operating expenses consist primarily of interest expenses, loss on deconsolidation and other expenses.

Interest expenses for the three-months ended June 30, 2024 and 2023, were $0.75 million and $0.65 million, respectively.

During the three-months ended June 30, 2024, the Company recognized a deconsolidation loss of $0.08 million. This loss was as a result of two Australian entities and subsidiaries, Mawson AU Pty Ltd and Mawson Services Pty Ltd proceeding through 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 the subsidiaries 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.

Non-operating income

Non-operating income consists primarily of gain on foreign currency transactions and other income.

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.

Net loss attributable to Mawson Infrastructure Group, Inc. stockholders

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.

Results of Operations – Six-months Ended June 30, 2024 compared to the six-months ended June 30, 2023

37

Revenues

Digital colocation services revenues for six-months ended June 30, 2024 and 2023, were $16.37 million and $8.92 million, respectively, representing an increase of $7.45 million or 84%. The increase in revenue was due to the significant increase in the colocation business during the six-months ended June 30, 2024, where the Company provided colocation services to multiple colocation customers, whereas for the six-months ended June 30, 2023 the Company provided colocation services to a single customer and began transitioning those services to its Pennsylvania facilities in early 2023 from its prior Georgia facilities that it exited in late 2022.

Digital assets self-mining revenues from production of bitcoin for the six-months ended June 30, 2024, and 2023, were $10.76 million and $7.63 million, respectively, representing an increase of $3.11 million or 41% over the prior period.

Net energy benefits revenues for the six-months ended June 30, 2024 and 2023, were $4.21 million and $1.46 million, respectively, representing an increase of $2.75 million or an 188% increase. This increase is due to the Company’s greater participation in energy management programs.

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.

Operating Cost and Expenses

Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; stock-based compensation; change in fair value of derivative asset; and depreciation and amortization.

Cost of revenue

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

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.

Selling, general and administrative

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.

Selling, general and administrative expenses for the six-months ended June 30, 2024 and 2023 were $7.11 million and $11.24 million, respectively, which is a reduction of $4.14 or 37% million from period to period. The decrease is primarily attributable to lower employee compensation expenses including payroll costs, lower doubtful debt expense, reduced freight costs, lower marketing and travel expenses also driven by the cost reduction and optimization actions that the Company had previously undertaken.

Stock-based compensation

Stock-based compensation expenses for the six-months ended June 30, 2024 and 2023 were $5.95 million and $1.69 million, respectively. In the six-months ended June 30, 2024, stock-based compensation was attributable to costs recognized in relation to long-term incentives for the Company’s directors and employees and to align incentives with long-term stockholder value creation.

Depreciation and amortization

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

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

Change in fair value of derivative asset

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.

Non-operating expenses

Non-operating expenses consist primarily of interest expenses, loss on deconsolidation and other expenses.

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.

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.

Non-operating income

Non-operating income consists primarily of gain on foreign currency transactions and other income.

During the six-months ended June 30, 2024 and 2023, the realized and unrealized loss on foreign currency transactions was a loss of $0.12 million and a loss of $0.82 million, respectively. This difference was due mostly to the movement in foreign exchange rates.

Net loss attributable to Mawson Infrastructure Group, Inc. stockholders

As a result of the foregoing, the Company recognized a net loss of $29.38 million for the six-months ended June 30, 2024, compared to a net loss of $28.45 million for the six-months ended June 30, 2023.

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 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.

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.

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.

Please see our Risk Factor entitled “We will need to raise substantial additional capital to continue our operations and execute our business strategy, meet our debt service obligations 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. Our inability to raise sufficient capital would have a material adverse effect on our financial condition and business.” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Working Capital and Cash Flows

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.

The following table presents the major components of net cash flows (used in) provided by operating, investing and financing activities for the years ending June 30, 2024 and 2023:

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.

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.

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.

Material Cash Requirements

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

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.

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 the claims, 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.

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.

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.

Financial condition

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.

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, general costs 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.

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, and we will likely need to determine to engage in equity or debt financings 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, our business, financial condition and results of operations could be adversely affected, and this may result in bankruptcy or our ceasing operations.

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.

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, income tax, depreciation, amortization, stock-based compensation expense, change in fair value of derivative asset, impairment of financial assets, unrealized gains/losses, share of net loss of equity method investments, loss on deconsolidation 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 where one-time, or non-recurring gains or losses or expenses unrelated to operating activities would otherwise mask the Company’s operating performance.

Critical accounting estimates

The preparation of the financial statements in conformity with 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 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, 2023.

Celsius Mining LLC loaned $20.00 million to Luna Squares LLC, through a Secured Promissory Note (the “Celsius Promissory Note”), which had a maturity date of August 23, 2023, and a total outstanding balance as of June 30, 2024, of $9.10 million. Luna Squares LLC has not repaid the loan as required on the maturity date and is claimed by Celsius to be in default. Celsius Mining LLC transferred to benefit of the Celsius Promissory Note to Celsius Network Ltd. Celsius Network Ltd has notified Luna Squares the default interest is payable. On November 23, 2023, Celsius filed an adversary proceeding against Mawson, its 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 is actively defending the matter. Many of the related claims and disputes between Celsius and Mawson have been disclosed in more detail in Mawson’s previous filings with the SEC. As part of its defense, Mawson 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. Celsius opposed the removal and the matter was heard before the Court. On February 27, 2024, the Court ruled in part that the claims regarding the Colocation Agreement could be arbitrated, but the claims for the promissory note would stay before the Court. The Court appointed a litigation administrator to handle the claims arising out of the promissory note. Mawson appealed this decision to the District Court for the Southern District of New York and ultimately prevailed. 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. 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 the claims, 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.

The Company 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 $9.71 million as of June 30, 2024. MIG No. 1 Pty Ltd, an Australian entity, has not made a principal and interest payment since May 2023, despite such payments falling due, and is therefore in default. MIG No. 1 Pty Ltd is also in default of a number of other covenants under the terms of the loan. On March 19, 2024, Mig No.1 Pty Ltd was placed into an Australian court appointed liquidation and wind-up process and was deconsolidated for the group from this date.

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. On June 25, Marshall inspected and inventoried the miners and MDCs located at the Company’s Midland facilities but has taken no further action on the collateral at this time. The company is currently not utilizing these miners or MDCs for its operations and has asked Marshall to take these assets out of the Company’s storage. Marshall has not responded to the Company’s ask for these miners and MDCs to be removed from the Company’s storage. The Company also reserves and retains all rights against Marshall.

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 June 30, 2024, AUD $1.86 million (USD $1.24 million) has been drawn down from this facility. The Secured Loan Facility expired in March 2023 and the Company did not extend the maturity date, and has not repaid the loan amount, and is therefore in default. This Secured Loan Facility Agreement was originally with Mawson Infrastructure Group Pty Ltd, an Australian entity which was placed into voluntary administration under Australian law 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 has a Secured Convertible Promissory Note with W Capital Advisors Pty Ltd with an outstanding balance of $0.10 million as of June 30, 2024. The Convertible Note matured in July 2023. W Capital Advisors did not convert the note, and the Company has repaid the principal balance of the note Convertible Note, however there is outstanding interest claimed which is claimed by W Capital Advisors Pty Ltd to be in default. 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 (AUD $1.90 million); (b) the principal amount advanced under convertible note, amounting to $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 $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 AUD $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 USD $166,219 as alleged unpaid interest under a convertible note after the Company paid in full the principal of $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.

The Company, or its subsidiaries, have not fulfilled specific payment obligations related to the Celsius Promissory Note, Marshall loan, the W Capital 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 or overdue rate, or taking appropriate measures concerning collateral (including appointing a receiver), if applicable. The company reserves and retains all its rights under all applicable laws.

Evaluation of disclosure controls and procedures

Our Board of Directors, the Board Committee(s) and management team, including our Chief Executive Officer and President (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 President and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2024, 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.

Whilst remediation actions are ongoing and controls have been implemented across multiple business processes, the material weaknesses in our internal control over financial reporting and information technology will not be considered remediated, until controls have operated for a sufficient period of time and have been tested for and concluded to be operating effectively. As operating effectiveness testing has not been concluded as of the date of this report, we continue to disclose the following material weaknesses.

Significant Reliance on Certain Individuals. There is inadequate segregation of duties in place related to our financial reporting and other review and oversight procedures due to the lack of sufficient accounting and other personnel. This is not inconsistent with similar sized and small organizations. This gives rise to the risk of lack of ability to react in a timely manner to operations issues and to fully meet the requirements of the SEC, 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 constitute a material weakness. Deficiencies identified include lack of controls over access to programs and data, program changes, program development and general IT controls.

Data from third parties. The Company does not have the resources and personnel to fully execute its designed controls to ensure that data received from third parties was validated, complete and accurate. Such data is relied on by the Company in determining amounts pertaining to mining and colocation revenue, net energy benefits, and digital asset assets.

Fixed asset verification. The Company does not have the resources and personnel to fully execute its designed controls around physical asset verification. Together with system limitations, restricting tracking of fixed asset movements, there is a risk around the existence of fixed assets.

Notwithstanding the identified material weaknesses and management’s assessment that our disclosure controls and procedures were not effective as of June 30, 2024, 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. Our management continues to work to find ways to improve its controls related to our material weaknesses. With the oversight of the Board of Directors, the Board Committee(s) and management, the Company plans to continue to progress the remediation of the underlying causes of the identified material weaknesses, primarily through the performance of a risk assessment process; the development and implementation of formal, documented policies and procedures, improved processes and control activities (including an assessment of the segregation of duties); as well as the hiring of additional finance and other personnel for specific roles including financial reporting.

Whilst controls have been implemented across all business processes and are operating, the material weaknesses in our internal control over financial reporting and information technology will not be considered remediated until controls have operated for a sufficient period of time and have been tested for and concluded on for effectiveness. As operating effectiveness testing has not been concluded as of the date of this report, we continue to disclose the material weaknesses.

Remediation efforts for upcoming quarters will be focused on progressing the implementation of 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 or update 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, the 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 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 the Board of Directors and management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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, 2023, which was filed on April 1, 2024 and (ii) as disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, which was filed on May 15, 2024, and (iii) as disclosed in our 8-K filing on March 29, 2024. In addition, the Company is subject to risks related to:

The impact of the Bitcoin halving, which took place in April 2024 has introduced uncertainly that could materially impact our self-mining revenue or our colocation services customers businesses

The bitcoin block reward halved on April 19, 2024, reducing the number of bitcoins earned for each block mined from 6.25 to 3.125. If the bitcoin price does not appreciate sufficiently to offset this 50% reduction in mining rewards, our and/or our colocation services customers revenues, cash flows, and operating results could be materially and adversely impacted. There can be no assurance that the market price of bitcoin will increase in the near term nor that our operating costs will decrease proportionally to mitigate the halving’s adverse impact on our self-mining profitability. As a result, the halving has introduced significant uncertainty to our near-term financial prospects and could require us to modify our operating plans and growth strategies.