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To obtain a copy of this transcript, contact the Court Reporter/Transcriber Reliable Companies, Telephone number 3026548080 (RE: related document(s) 20). (Reliable Companies) (Entered: 01/22/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/414460704/","id":414460704,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69555415/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/428108862/","id":428108862,"tags":[],"absolute_url":"/docket/69555415/31/mawson-infrastructure-group-inc-and-celsius-network-ltd-and-celsius/","date_created":"2025-01-24T07:01:32.044285-08:00","date_modified":"2025-03-31T09:20:11.638389-07:00","sha1":"bdf235cfc2224958156eeb3893914fd8faa2d3f1","page_count":3,"file_size":150367,"filepath_local":"recap/gov.uscourts.deb.195290/gov.uscourts.deb.195290.31.0_2.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.deb.195290/gov.uscourts.deb.195290.31.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 25-50008-MFW Doc 31 Filed 01/24/25 Page 1 of 3\n\n\n\n\n IN THE UNITED STATES BANKRUPTCY COURT\n FOR THE DISTRICT OF DELAWARE\n\n\n In re:\n Chapter 11\n\n Mawson Infrastructure Group, Inc., Case No. 24-12726 (MFW)\n\n\n Alleged Debtor.\n\n\n Mawson Infrastructure Group, Inc.,\n\n\n Plaintiff, Adv. Pro. No. 25-50008 (MFW)\n\n v.\n\n Celsius Network Ltd., Celsius Mining LLC, and\n Ionic Digital Mining LLC,\n\n Defendants.\n\n\n\n ORDER (I) DENYING EMERGENCY MOTION FOR A\n TEMPORARY RESTRAINING ORDER AND PRELIMINARY\n INJUNCTION EXTENDING THE AUTOMATIC STAY PURSUANT TO\n 11 U.S.C. \u00a7 105 AND (II) DISMISSING ADVERSARY PROCEEDING\n\n Upon the Emergency Motion for Temporary Restraining Order and Preliminary\n\nInjunction Extend the Automatic Stay Pursuant to 11 U.S.C.\u00a7 105 [Adv. Docket No. 4] (the\n\n\u201cMotion\u201d) filed by Mawson Infrastructure Group, Inc. (the \u201cAlleged Debtor\u201d); and the\n\nCourt having reviewed the Motion and the Declaration of Bill Regan in support thereof\n\n[Adv. Docket No. 5]; and the Court having reviewed the Alleged Debtor\u2019s Adversary\n\nComplaint for Injunctive Relief Pursuant to 11 U.S.C. \u00a7 105 [Adv. Docket No. 2] (the\n\n\u201cAdversary Complaint\u201d); and the Court having reviewed the Opposition of Celsius\n\nNetwork Ltd. and Celsius Mining LLC to the Alleged Debtor\u2019s Emergency Motion for\n\n\n167282077.2\n\f Case 25-50008-MFW Doc 31 Filed 01/24/25 Page 2 of 3\n\n\n\n\nTemporary Restraining Order and Preliminary Injunction Extend the Automatic Stay\n\nPursuant to 11 U.S.C.\u00a7 105 [Adv. Docket No. 15] (the \u201cOpposition\u201d) and the Declaration\n\nof Keith H. Wofford in support thereof [Adv. Docket No. 16]; and the Court having\n\nreviewed the joinder of Ionic Digital Mining LLC to the Opposition [Adv. Docket No. 17];\n\nand the Court having held a hearing on the Motion on January 22, 2025 (the \u201cHearing\u201d);\n\nand the Court having jurisdiction to consider the Motion and the relief requested therein in\n\naccordance with 28 U.S.C. \u00a7\u00a7 1334 and 157 and the Amended Standing Order of Reference\n\nfrom the United States District Court for the District of Delaware, dated February 29, 2012;\n\nand the Court having found that this is a core proceeding pursuant to 28 U.S.C. \u00a7 157(b)(2)\n\nand that this Court may enter an order consistent with Article III of the United States\n\nConstitution; and the Court having found that venue of this proceeding and the Motion in\n\nthis District is proper pursuant to 28 U.S.C. \u00a7\u00a7 1408 and 1409; and it appearing that proper\n\nand adequate notice of the Motion has been given and that no other or further notice is\n\nnecessary; and upon the record in the above-captioned adversary proceeding; and after due\n\ndeliberation and sufficient cause appearing therefor; and for the reasons stated on the record\n\nat the Hearing,\n\n\n IT HEREBY ORDERED, ADJUDGED AND DECREED THAT:\n\n\n 1. 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Pro. No. 25-50008 (MFW)\n Plaintiff,\n Re: D.I. 4\n v.\n\n CELSIUS NETWORK LTD., CELSIUS\n MINING LLC, and IONIC DIGITAL\n MINING LLC,\n\n Defendants.\n\n\n JOINDER OF IONIC DIGITAL MINING LLC TO THE\n OPPOSITION OF CELSIUS NETWORK LTD. AND CELSIUS MINING LLC\n TO THE ALLEGED DEBTOR\u2019S EMERGENCY MOTION FOR A\n TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION\n EXTENDING THE AUTOMATIC STAY PURSUANT TO 11 U.S.C. \u00a7 105\n\n Ionic Digital Mining LLC (\u201cIonic\u201d or the \u201cDefendant\u201d), by and through its undersigned\n\ncounsel, hereby joins (the \u201cJoinder\u201d) in, incorporates by reference, and adopts the Opposition of\n\nCelsius Network Ltd. and Celsius Mining LLC [Adv. D.I. 15] (the \u201cObjection\u201d) to the Alleged\n\nDebtor\u2019s Emergency Motion for a Temporary Restraining Order and Preliminary Injunction\n\nExtending the Automatic Stay Pursuant to 11 U.S.C. \u00a7 105 [Adv. D.I. 4] (the \u201cMotion\u201d). For the\n\nreasons set forth in the Objection to the extent not otherwise inconsistent with this Joinder, and for\n\nthe reasons set forth below, Ionic respectfully requests that this Court deny the Motion:\n\f Case 25-50008-MFW Doc 17 Filed 01/21/25 Page 2 of 3\n\n\n\n\n JOINDER AND RESERVATION OF RIGHTS\n\n 1. Ionic joins in, incorporates by reference, and adopts as its own the Objection filed\n\nby Defendants Celsius Network Ltd. and Celsius Mining LLC (collectively, \u201cCelsius\u201d). For the\n\nreasons set forth more fully in the Objection, Ionic respectfully submits that the Motion should be\n\ndenied.\n\n 2. Additionally, Ionic notes that on December 17, 2024, after submissions and\n\nargument to the Tribunal, the arbitrator deferred Ionic\u2019s request to file a dispositive motion to\n\ndismiss the Counterclaims that have been asserted jointly by Mawson, Luna Squares, and Cosmos.\n\nAccordingly, the arbitrator has already stayed Ionic claims and the relief requested by Plaintiff in\n\nits Motion and in its Complaint are unnecessarily duplicative of the arbitrator\u2019s ruling.\n\nNevertheless, the Motion should be denied with respect to Ionic so that if the arbitrator changes\n\nhis view that Ionic\u2019s claims can proceed in arbitration against Luna Squares, Ionic should not\n\nprevented from doing so based upon an order of this Court.\n\n 3. Nothing in this Joinder is intended to be, nor should be construed as, a waiver by\n\nIonic of any of its rights under the Bankruptcy Code or applicable law. Ionic expressly reserves\n\nall such rights, including, without limitation, the right to supplement and/or amend this Joinder\n\nand assert any further arguments as this Court deems necessary or appropriate.\n\n CONCLUSION\n\n WHEREFORE, for the reasons set forth above, Ionic respectfully requests that this Court\n\nenter an order denying the TRO Motion, dismissing the adversary proceeding seeking to extend\n\n\n\n\n -2-\n\f Case 25-50008-MFW Doc 17 Filed 01/21/25 Page 3 of 3\n\n\n\n\nthe automatic stay to non-debtor subsidiaries, Luna Squares and Cosmos, and granting such other\n\nand further relief as the Court deems just and proper.\n\nDated: January 21, 2025\n Wilmington, Delaware CHIPMAN BROWN CICERO & COLE, LLP\n\n /s/ William E. Chipman, Jr.\n William E. Chipman, Jr. (No. 3818)\n Bryan J. Hall (No. 6285)\n Hercules Plaza\n 1313 North Market Street, Suite 5400\n Wilmington, Delaware 19801\n Telephone: (302) 295-0191\n Email: chipman@chipmanbrown.com\n hall@chipmanbrown.com\n\n \u2014and\u2014\n\n Denver G. Edwards (pro hac vice Pending)\n BRADFORD EDWARDS LLP\n 575 Fifth Avenue, 14th Floor\n New York, New York 10017\n Telephone: (917) 671-9407\n Email: dedwards@bradfordedwards.com\n\n Counsel to Ionic Digital Mining LLC\n\n\n\n\n -3-\n\f","ocr_status":2,"date_upload":"2025-02-26T11:04:25.718489-08:00","document_number":"17","attachment_number":null,"pacer_doc_id":"042022057720","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Objection","acms_document_guid":""}],"date_created":"2025-01-21T17:49:51.064899-08:00","date_modified":"2025-03-31T09:20:10.564581-07:00","date_filed":"2025-01-21","time_filed":"19:24:11","entry_number":17,"recap_sequence_number":"2025-01-21.011","pacer_sequence_number":61,"description":"Objection // Joinder of Ionic Digital Mining LLC to the Opposition of Celsius Network LTD. and Celsius Mining LLC to the Alleged Debtor's Emergency Motion for a Temporary Restraining Order and Preliminary Injunction Extending the Automatic Stay Pursuant to 11 U.S.C. Section 105 (related document(s)4, 15) Filed by Ionic Digital Mining LLC (Chipman, William) (Entered: 01/21/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/414153508/","id":414153508,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69555415/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/427781712/","id":427781712,"tags":[],"absolute_url":"/docket/69555415/15/mawson-infrastructure-group-inc-and-celsius-network-ltd-and-celsius/","date_created":"2025-01-21T16:02:58.739626-08:00","date_modified":"2025-03-31T09:20:10.471990-07:00","sha1":"ccd157b10cf945d6c03b96ee7adb45cf300efb4f","page_count":21,"file_size":447998,"filepath_local":"recap/gov.uscourts.deb.195290/gov.uscourts.deb.195290.15.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.deb.195290/gov.uscourts.deb.195290.15.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 1 of 21\n\n\n\n\n IN THE UNITED STATES BANKRUPTCY COURT\n FOR THE DISTRICT OF DELAWARE\n\n\n In re:\n Chapter 11\n\n Mawson Infrastructure Group, Inc., Case No. 24-12726 (MFW)\n\n\n Alleged Debtor.\n\n\n Mawson Infrastructure Group, Inc.,\n\n\n Plaintiff, Adv. Pro. No. 25-50008 (MFW)\n\n v.\n\n Celsius Network Ltd., Celsius Mining LLC, and\n Ionic Digital Mining LLC,\n\n Defendants.\n\n\n\n OPPOSITION OF CELSIUS NETWORK LTD. AND CELSIUS MINING LLC\n TO THE ALLEGED DEBTOR\u2019S EMERGENCY MOTION FOR A\n TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION\n EXTENDING THE AUTOMATIC STAY PURSUANT TO 11 U.S.C. \u00a7 105\n\n Celsius Network Limited (\u201cCelsius\u201d) and Celsius Mining LLC (\u201cCelsius Mining\u201d\n\nand, together with Celsius, the \u201cCelsius Parties\u201d), acting by and through the Blockchain\n\nRecovery Investment Consortium LLC, in its capacity as Complex Asset Recovery\n\nManager and Litigation Administrator for Celsius Network LLC and its affiliated Post-\n\nEffective Date Debtors (the \u201cARM Administrator\u201d), hereby oppose (the \u201cOpposition\u201d)\n\nthe Emergency Motion for Temporary Restraining Order and Preliminary Injunction\n\nExtending the Automatic Stay Pursuant to 11 U.S.C. \u00a7 105 (the \u201cTRO Motion\u201d) filed by\n\nalleged debtor Mawson Infrastructure Group, Inc. (\u201cMawson\u201d), which seeks an order\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 2 of 21\n\n\n\n\nextending the automatic stay in Mawson\u2019s involuntary chapter 11 case (the \u201cInvoluntary\n\nCase\u201d) to the continued prosecution of an arbitration against its non-debtor subsidiaries\n\nLuna Squares LLC (\u201cLuna\u201d) and Cosmos Infrastructure LLC (\u201cCosmos\u201d and, together\n\nwith Mawson and Luna, the \u201cMawson Parties\u201d).1 In support of the Opposition, the Celsius\n\nParties respectfully state as follows:\n\n\n PRELIMINARY STATEMENT\n\n 1. The TRO Motion seeks to extend a stay that Mawson contends is unjustified\n\nand never should have existed. In the Alleged Debtor\u2019s Answer to Involuntary Petition\n\n[Docket # 16] (the \u201cAnswer\u201d), Mawson \u201cinsists that the petition was filed in bad faith with\n\nthe improper purpose to harass and intimidate Mawson.\u201d Answer, \u00b6 1. Mawson describes\n\nthe involuntary petition as \u201can extension of ongoing disputes with Mawson\u2019s former Board\n\nDirector and Chief Executive Officer, James Manning.\u201d Id. Mawson further declares that\n\nthe Involuntary Case \u201cmust be dismissed both procedurally and substantively as a bad faith\n\nfiling.\u201d Id., \u00b6 8. Mawson asserts multiple affirmative defenses, including that \u201cthe relief\n\nsought in this proposed chapter 11 case is barred by the doctrine of laches, waiver, and\n\nestoppel.\u201d Id., \u00b6 50. Not least of all, Mawson reserves the right to seek costs, attorneys\u2019\n\nfees, damages and sanctions against the petitioning creditors. Id., \u00b6\u00b6 51-53.\n\n 2. Mawson\u2019s demand for a dismissal of the involuntary petition and its\n\nobjection to the proposed chapter 11 case are fatal to the TRO Motion.2 In light of these\n\n\n1\n The Celsius Parties note that Mawson filed the adversary complaint, the TRO Motion and a\nsupporting declaration under seal. The Celsius Parties\u2019 are not aware of any basis for sealing those pleadings\nor any response thereto. Accordingly, the Celsius Parties are not seeking to seal the Opposition or the\nDeclaration of Keith H. Wofford in support of the Opposition (the \u201cWofford Declaration\u201d).\n2\n Mawson\u2019s opposition to the Involuntary Case is incompatible with any effort to enforce the\nautomatic stay, much less to extend it. The TRO Motion is also inconsistent with Mawson\u2019s prior contention\nthat arbitration of all disputes between the Celsius Parties and the Mawson Parties was mandatory. Further,\n\n 2\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 3 of 21\n\n\n\n\npositions, Mawson simply cannot satisfy the legal standards for a temporary restraining\n\norder or preliminary injunction. The governing case law on the extension of the automatic\n\nstay requires that the Court apply the preliminary injunction test in light of the\n\nreorganizational purposes of chapter 11. For example, courts assess the likelihood of\n\nsuccess on the merits based on the likelihood that the debtor will successfully reorganize\n\nand assess irreparable harm based on harm to the debtor\u2019s reorganization. The Answer\n\nclearly demonstrates that Mawson has no reorganizational purpose or plans. Mawson\u2019s\n\nAnswer seeks to depart the jurisdiction of this Court and to face its creditors in the field,\n\nwithout the protection of the automatic stay. Mawson has not \u2013 and cannot \u2013 satisfy any\n\nof the required elements for a temporary restraining order or a preliminary injunction.\n\n 3. Further, the motives behind the TRO Motion are dubious. The TRO Motion\n\nis a last-ditch effort by Mawson to evade the consequences of an arbitration that it\n\ncompelled the Celsius Parties to undertake. Most immediately, Mawson wishes to forestall\n\nan impending ruling on the Celsius\u2019s (now fully briefed) dispositive motion to enforce a\n\npromissory note issued by non-debtor Luna in consideration for a secured loan in the\n\noriginal principal amount of $20 million (the \u201cPromissory Note\u201d). When the petitioning\n\ncreditors commenced the Involuntary Case, Celsius was preparing to submit a dispositive\n\nmotion in the arbitration for final awards on both the Promissory Note and a related\n\nguaranty issued by Mawson (the \u201cGuaranty\u201d). Prior to the filing of the Involuntary Case,\n\nthe arbitrator jointly nominated by the parties (the \u201cArbitrator\u201d) had authorized the filing\n\nof that dispositive motion based on his determination in accordance with the applicable\n\n\n\nthe TRO Motion wastes judicial resources and undermines arbitration\u2019s promise of efficiency. Accordingly,\nthe Celsius Parties reserve the right to file and prosecute a motion to lift or modify the stay, whether or not\nthe Court enters a temporary restraining order or preliminary injunction.\n\n 3\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 4 of 21\n\n\n\n\narbitration rules (and over Mawson\u2019s objection) that Celsius had a likelihood of success on\n\nthe merits of those claims. At a scheduling conference convened after the commencement\n\nof the Involuntary Case, the Arbitrator deferred all dispositive motions involving Mawson,\n\nbut ruled that Celsius\u2019s dispositive motion against Luna on the Promissory Note should go\n\nforward as scheduled, given Luna\u2019s non-debtor status. More than three weeks after that\n\nruling, on January 10, 2025, the Mawson Parties requested a stay of all activity in the\n\narbitration, including briefing on the Promissory Note claim against non-debtor Luna. The\n\nArbitrator declined. The Mawson Parties promptly renewed their request for a stay, and\n\nthe Arbitrator again declined. In the face of an impending adverse decision in its chosen\n\nforum, Mawson has rushed to this Court with a hypocritical and futile request to extend the\n\nautomatic stay.3\n\n 4. For these reasons, and for the other reasons set forth below, Mawson\u2019s\n\nrequest for a temporary restraining order and preliminary injunction prohibiting further\n\nprosecution of the arbitration against non-debtors Luna and Cosmos is without merit, and\n\nthis Court should promptly enter an order denying the TRO Motion.\n\n BACKGROUND\n\nA. The Promissory Note and the Guaranty\n\n 5. On February 23, 2022, Luna executed the Promissory Note in favor of\n\nCelsius Mining, evidencing a loan to Luna of $20 million. On the same day, Celsius\n\nMining assigned the Promissory Note to Celsius, which acceded to the rights of the Holder\n\n\n\n3\n Briefing in the Arbitration has continued in accordance with the Arbitrator\u2019s ruling. Luna filed its\nopposition to Celsius\u2019s Rule 34 Dispositive Motion on January 20, 2025, and Celsius submitted its reply\nearlier today.\n\n 4\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 5 of 21\n\n\n\n\nof the Promissory Note. Interest on the Promissory Note accrued at a rate of 12%, and the\n\nPromissory Note specified terms for the quarterly payment of interest and amortization.\n\nThe entire outstanding principal balance, together with accrued and unpaid interest, was\n\ndue on August 23, 2023 (the \u201cMaturity Date\u201d).\n\n 6. Contemporaneously with Luna\u2019s issuance of the Promissory Note, Mawson,\n\nLuna and Cosmos entered into a Guaranty and Security Agreement, governed on its terms\n\nby New York law, pursuant to which Mawson undertook the Guaranty of Luna\u2019s\n\nobligations under the Promissory Note and Luna and Cosmos (but not Mawson) each\n\npledged certain assets as security for the Promissory Note.\n\n 7. Also on February 23, 2022, Luna (but not Mawson or Cosmos) entered into\n\na Co-Location Agreement with Celsius Mining (the \u201cCo-Location Agreement\u201d),\n\ngoverned on its terms by Delaware law, pursuant to which Luna agreed to provide hosting\n\ncapacity and services for Celsius Mining\u2019s cryptocurrency mining rigs. Pursuant to the\n\nchapter 11 plan of reorganization of Celsius, Celsius Mining and their affiliated debtors\n\n(the \u201cCelsius Plan\u201d), most of Celsius Mining\u2019s remaining mining-related assets (including\n\nclaims under the Co-Location Agreement) became property of Ionic Digital Mining LLC\n\n(\u201cIonic\u201d), which is also a defendant in this adversary proceeding.4\n\n 8. Luna never disputed the obligations under the Promissory Note, and\n\nMawson never disputed its obligations under the Guaranty, until after the Maturity Date.\n\nTo the contrary, Luna timely paid interest and amortization through the end of the first\n\nfiscal quarter of 2023, notwithstanding that Celsius, Celsius Mining and certain of their\n\n\n\n4\n Ionic is an entity formed in accordance with the Celsius Plan to effectuate the reorganization of\ncertain assets of Celsius Mining.\n\n 5\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 6 of 21\n\n\n\n\naffiliates filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code on\n\nJuly 13, 2022. Interest and amortization payments for the second fiscal quarter of 2023\n\nwere tendered late, on July 18, 2023. See Mawson Infrastructure Group, Inc. Form 10-Q\n\ndated May 15, 2023, a copy of which is attached as Exhibit A to the Wofford Declaration,\n\nand Mawson Infrastructure Group, Inc. Form 10-Q dated August 21, 2023, a copy of which\n\nis attached as Exhibit B to the Wofford Declaration. Luna defaulted on the Luna Note by\n\nfailing to pay principal and accrued interest in the amount of $8,144,000 on the Maturity\n\nDate. In a recent form 10-Q filed with the Securities Exchange Commission, Mawson and\n\nLuna admit that Luna has \u201cnot fulfilled specific payment obligations related to the Celsius\n\nPromissory Note.\u201d It also admits that the Luna Note \u201chad a maturity date of August 23,\n\n2023\u201d and that \u201cthe outstanding balance including interest is $9.38 million as of September\n\n30, 2024, all of which is classified as a current liability.\u201d See Mawson Infrastructure\n\nGroup, Inc. 10-Q dated November 14, 2024, a copy of which is attached as Exhibit C to\n\nthe Wofford Declaration.\n\nB. The Arbitration\n\n 9. Mawson\u2019s description of the background of Celsius\u2019s claims and the path\n\nto the pending proceedings before the Arbitrator is, at best, incomplete. Celsius and Celsius\n\nMining initially sought redress for their claims under the Promissory Note, the Guaranty\n\nand Security Agreement, and the Co-Location Agreement through an adversary proceeding\n\nfiled in the United States Bankruptcy Court for the Southern District of New York (the\n\n\n\n\n 6\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 7 of 21\n\n\n\n\n\u201cCelsius Bankruptcy Court\u201d) in November 2023 (the \u201cMawson Adversary\n\nProceeding\u201d).5\n\n 10. The Mawson Parties, undoubtedly aware of the prompt disposition of the\n\nPromissory Note and Guaranty that could occur in court,6 moved to compel arbitration of\n\nthe Celsius Parties\u2019 claims (the \u201cMotion to Compel\u201d). In the memorandum of law\n\nsupporting the Motion to Compel, a copy of which is attached as Exhibit D to the Wofford\n\nDeclaration, the Mawson Parties argued that arbitration of the disputes under all three\n\nagreements was mandatory, emphasizing both the \u201c\u2018liberal federal policy favoring\n\narbitration\u2019\u201d and the requirement for courts to \u201c\u2018rigorously enforce\u2019\u201d arbitration clauses.\n\nSee Motion to Compel at 9-10. The Celsius Bankruptcy Court granted Mawson\u2019s motion\n\nto compel arbitration only in part, holding that claims under the Co-Location Agreement\n\n(which had an express arbitration clause) were subject to arbitration, while claims related\n\nto the Promissory Note and Guaranty (which had no arbitration clause) were not. On appeal\n\nby Mawson, the United States District Court for the Southern District of New York vacated\n\nthe Celsius Bankruptcy Court\u2019s order on April 24, 2024, holding that all of Celsius\u2019s claims\n\nmust be sent to arbitration, including claims relating to the Promissory Note and Guaranty,\n\nif only to address the threshold question of the arbitrability. Ultimately, Celsius consented\n\nto the arbitration of the Promissory Note and Guaranty claims to avoid further delay in\n\ncollecting the outstanding balance it was owed.\n\n\n\n\n5\n Ionic was not a party to that adversary proceeding because it did not obtain its interest in the Co-\nLocation Agreement until January 31, 2024.\n6\n Under New York law, pursuant to CPLR 3213, the holder of an instrument for the payment of money\nmay seek an accelerated determination by filing a motion for summary judgment in lieu of a complaint. New\nYork law also holds that parol evidence is not admissible in the face of a clearly drafted instrument, such as\nthe Promissory Note and the Guaranty.\n\n 7\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 8 of 21\n\n\n\n\n 11. Celsius, Celsius Mining and Ionic jointly commenced the arbitration against\n\nthe Mawson Parties on July 12, 2024.7 The arbitration is being administered by the\n\nInternational Centre for Dispute Resolution of the American Arbitration Association\n\n(\u201cAAA\u201d) under Case No. 1-24-0006-4462 (the \u201cArbitration\u201d) under the AAA\u2019s\n\nCommercial Arbitration Rules, including the Procedures for Large, Complex Commercial\n\nDisputes (the \u201cCommercial Rules\u201d). In their arbitration demand, the Celsius Parties and\n\nIonic sought awards for breach of the Promissory Note, the Guaranty and Security\n\nAgreement and the Co-Location Agreement, as well as for certain related claims.\n\n 12. On November 15, 2024, in accordance with a procedural and scheduling\n\norder approved by the Arbitrator, Celsius submitted a request to file a Commercial Rule 34\n\ndispositive motion on its claims under the Promissory Note and the Guaranty (the \u201cRule\n\n34 Request\u201d). On November 20, 2024, the Mawson Parties filed an opposition to the Rule\n\n34 Request, and Celsius duly submitted a reply to the opposition on November 22, 2024.\n\nPursuant to Commercial Rule 34, a copy of which is attached as Exhibit E to the Wofford\n\nDeclaration, the Arbitrator is only permitted to authorize the filing of dispositive motions\n\nand to rule on such motions if \u201cthe moving party has shown that the motion is likely to\n\nsucceed.\u201d The Arbitrator granted Celsius\u2019s Rule 34 Request on November 23, 2024 and\n\nset a deadline of December 4, 2024 for Celsius to file its dispositive motion (the \u201cRule 34\n\nDispositive Motion\u201d) on the Promissory Note claim and the Guaranty claim.\n\n\n\n\n7\n In the two and a half months between the District Court\u2019s decision on Mawson\u2019s appeal and the\ncommencement of the arbitration, the ARM Administrator and other representatives of the Post-Effective\nDate Celsius debtors were engaged in the preparation and filing of thousands of lawsuits in advance of the\nJuly 15, 2024 statutory deadline under sections 108(a)(2) and 546(a)(1)(A) of the Bankruptcy Code, including\nthe demand for the arbitration and an amended adversary complaint against the Mawson Parties.\n\n 8\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 9 of 21\n\n\n\n\n 13. On the morning of December 4, 2024, Celsius learned that an involuntary\n\npetition had been filed in this Court against Mawson. Celsius promptly notified the\n\nArbitrator of the involuntary petition and requested a nine-day extension of time to file its\n\nRule 34 Dispositive Motion, so that it could assess the impact of the involuntary case on\n\nthe arbitration proceedings.8 The Arbitrator responded by setting a scheduling conference\n\nfor December 17, 2024 to hear the parties\u2019 positions on that issue (the \u201cScheduling\n\nConference\u201d).\n\n 14. At the Scheduling Conference, the parties presented their positions to the\n\nArbitrator, and the Arbitrator ruled that: (i) in light of the stay in the Involuntary Case, the\n\nRule 34 dispositive motions would be deferred with respect to Celsius\u2019s claim against\n\nMawson on the Guaranty and Ionic\u2019s request for dismissal of counterclaims jointly asserted\n\nby Mawson, Luna and Cosmos against Ionic; (ii) Celsius\u2019s Rule 34 Dispositive Motion\n\ncould go forward imminently against non-debtor Luna; and (iii) the parties should meet\n\nand confer regarding the modification of the arbitration schedule to accommodate the\n\nlimited, reasonable delays arising from Mawson\u2019s involuntary bankruptcy filing with the\n\naim of preserving a hearing date at the end of September 2025.9\n\n 15. Mawson\u2019s bankruptcy counsel did not appear at the meet and confer held\n\non December 16, 2024 in advance of the Scheduling Conference (despite being expressly\n\ninvited by counsel for Celsius) or at the Scheduling Conference itself. At no time in the\n\nthree and a half weeks after the Scheduling Conference did Mawson assert that the\n\n\n8\n Mawson had just appointed new arbitration counsel that same day, and Mawson\u2019s newly selected\ncounsel was evidently unaware of the involuntary filing made hours before it sent introductory emails to the\nArbitrator and counsel for Celsius and Ionic.\n9\n A copy of the Arbitrator\u2019s ruling on matters considered at the Scheduling Conference is attached as\nExhibit F to the Wofford Declaration.\n\n 9\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 10 of 21\n\n\n\n\nautomatic stay prevented, or should be extended to prevent, the Rule 34 Dispositive Motion\n\nagainst Luna from going forward.\n\n 16. On January 10, 2025, Mawson filed its Answer, in which it objected to the\n\ninvoluntary petition, alleged bad faith of the petitioning creditors and argued for immediate\n\ndismissal of the Involuntary Case.\n\n 17. At 10:45 p.m. that Friday evening, Mawson\u2019s bankruptcy counsel sent a\n\nletter to the Arbitrator and Celsius, which for the first time asserted that the Rule 34\n\nDispositive Motion against Luna was incompatible with the automatic stay in Mawson\u2019s\n\ninvoluntary case and requested that the Arbitrator reverse its prior ruling and impose a\n\ncomplete stay of the arbitration proceedings.10 Celsius opposed the request by letter dated\n\nJanuary 13, 2025, and the Arbitrator rejected Mawson\u2019s request for a stay of Celsius\u2019s Rule\n\n34 Dispositive Motion against Luna.11 Mawson repeated its request for a stay by letter\n\ndated January 13, 2025, and the Arbitrator also rejected this renewed request.12\n\n 18. In response to the Arbitrator\u2019s ruling, Mawson filed the instant adversary\n\nproceeding and the TRO Motion on January 17, 2025.\n\n 19. On January 20, 2025, Luna filed its opposition to Celsius\u2019s Rule 34\n\nDispositive Motion. On January 21, 2025, Celsius filed its reply, and briefing on the Rule\n\n34 Dispositive Motion against Luna is now complete.\n\n\n\n\n10\n A copy of the letter from Mawson\u2019s counsel to the Arbitrator is attached as Exhibit G to the Wofford\nDeclaration.\n11\n A copy of Celsius\u2019s opposition is attached as Exhibit H to the Wofford Declaration, and a copy of\nthe Arbitrator\u2019s ruling is attached as Exhibit I to the Wofford Declaration.\n12\n A copy of Mawson\u2019s second request for a stay is attached as Exhibit J to the Wofford Declaration,\nand a copy of the Arbitrator\u2019s ruling is attached as Exhibit K to the Wofford Declaration.\n\n 10\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 11 of 21\n\n\n\n\n ARGUMENT\n\n 20. It is black-letter law that the automatic stay does not apply to non-debtors\n\nsuch as Luna and Cosmos. See, e.g., In re Forever 21, Inc., 623 B.R. 53, 63 (Bankr. D.\n\nDel. 2020) (\u201cThe automatic stay only protects debtors, not non-debtor parties\u201d) (citing\n\nBrown v. Jevic, 575 F.3d 322, 328 (3d Cir. 2009); McCartney v. Integra Nat\u2019l Bank N., 106\n\nF.3d 506, 510 (3d Cir. 1997)). Binding authority holds that this fundamental principle\n\napplies to a debtor\u2019s non-debtor subsidiaries. As the Third Circuit Court of Appeals\n\nexplained in Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194 (3d Cir. 1991),\n\n\u201cformal distinctions between debtor-affiliated entities are maintained when applying the\n\nstay. A proceeding against a non-bankrupt corporation is not automatically stayed by the\n\nbankruptcy of its principal, and section 362 does not bar an action against the principal of\n\na debtor-corporation.\u201d Id. at 1205 (citations omitted). To extend the extend the injunctive\n\nforce of the automatic stay to non-debtors, a party must (i) satisfy the legal requirements\n\nfor preliminary injunctive relief and (ii) demonstrate that \u201cunusual circumstances\u201d justify\n\na departure from the foundational rule that the automatic stay is only available to debtors.\n\nA. Mawson Has Not Satisfied \u2013 and Cannot Satisfy \u2013 the Legal Standards for a\n Temporary Restraining Order or Preliminary Injunctive Relief.\n\n 21. \u201c[C]ourts generally apply the traditional preliminary injunction test when\n\ndeciding whether to issue an injunction pursuant to section 105(a).\u201d In re Forever 21, Inc.\n\n563 B.R. 53, 64 (Bankr. D. Del. 2020). In other words, a debtor seeking to obtain an\n\ninjunction \u201cextending\u201d the automatic stay must show a \u201c\u2018substantial likelihood of success\n\non the merits, irreparable harm to the movant, harm to the movant outweighs harm to the\n\nnonmovant, and injunctive relief would not violate the public interest.\u2019\u201d Id. Courts\n\n\n\n 11\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 12 of 21\n\n\n\n\ngenerally look to the same factors when determining whether to issue a temporary\n\nrestraining order, but this Court has, in at least one case, elevated the standard for likelihood\n\nof success to a \u201c\u2018strong probability of success on the merits.\u2019\u201d See, In re Advanced\n\nMarketing Svcs., Inc., 360 B.R. 421, 426 (Bankr. D. Del. 2007) (quoting Philips Petroleum\n\nCo. v. U.S. Steel Corp., 616 F.Supp. 335, 337 (D. Del. 1985). As this Court has observed,\n\nany order extending the automatic stay \u201cmust be consistent with the purpose of the stay\n\nitself, that is, to \u2018suspend actions that pose a serious threat to a corporate debtor\u2019s\n\nreorganization efforts.\u2019\u201d In re Uni-Marts, LLC, 405 B.R. 113, 127 (Bankr. D. Del. 2009)\n\n(citing Ochs v. Lipson (In re First Cent. Fin. Corp.), 238 B.R. 9, 18 (Bankr. E.D.N.Y.\n\n1999)).\n\n 22. First, Mawson has not shown \u2013 and cannot show \u2013that it has a strong\n\nprobability of success on the merits. The \u201clikelihood of success under the first prong is\n\ninterpreted by bankruptcy courts as the equivalent of the debtor's ability to successfully\n\nreorganize.\u201d In re Philadelphia Newspapers, LLC, 423 B.R. 98, 106 (E.D. Pa. 2010)\n\n(emphasis added). Mawson is in this Court involuntarily, and by the admissions and\n\narguments in its Answer, Mawson has demonstrated that it has no reorganizational purpose\n\nand has not made any reorganizational efforts. Thus, the relief Mawson seeks would\n\nrequire that the Court assume both the validity of the chapter 11 case and Mawson\u2019s intent\n\nto reorganize in chapter 11. Mawson cannot be found to have a \u201cstrong probability of\n\nsuccess\u201d with a non-existent reorganization in a case that Mawson itself says is a product\n\nof bad faith.\n\n 23. Even if this Court were to ignore the reorganizational framework for\n\nextending the automatic stay \u2013 and it should not \u2013 Mawson also cannot demonstrate that\n\n\n 12\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 13 of 21\n\n\n\n\nLuna has a strong probability of success on the merits in the Rule 34 Dispositive Motion.\n\nCommercial Rule 34(a) provides that the Arbitrator \u201cmay allow the filing of and make\n\nrulings upon a dispositive motion only if the arbitrator determines the moving party has\n\nshown that the motion is likely to succeed and to dispose of narrow issues in the case\u201d\n\n(emphasis added). Thus, when the Arbitrator considered Celsius\u2019s request for to file a\n\ndispositive motion on the Promissory Note claim, it necessarily determined that Celsius\n\nwas likely to succeed. This determination by the Arbitrator in Mawson\u2019s chosen forum\n\nprecludes any argument that Luna has a strong probability of success on the merits.\n\n 24. Second, Mawson has failed to demonstrate any harm \u2013 much less any\n\nirreparable harm \u2013 that will come from the resolution of the Rule 34 Dispositive Motion\n\nand the continuation of the Arbitration against its non-debtor subsidiaries. Again, Courts\n\nview the irreparable harm prong through the lens of a debtor\u2019s reorganizational efforts.\n\nThey assess whether the continuation of a legal action will harm the debtor\u2019s\n\nreorganization, for example, by diverting management resources or delaying the\n\nreorganization. See, e.g., In re Continental Airlines, Inc., 177 B.R. 475, 481n.6 (D. Del.\n\n1993); In re Philadelphia Newspapers, LLC, 407 B.R. 606, 617 (Bankr. E.D. Pa. 2009).\n\nMawson\u2019s absolute lack of any reorganizational purpose in the Involuntary Case precludes\n\nit from demonstrating any irreparable harm that would support an extension of the\n\nautomatic stay. Outside of the reorganizational context, Mawson\u2019s argument that the\n\ncontinuation of the Arbitration constitutes irreparable harm lacks all credibility. Mawson\n\nforced the dispute into arbitration precisely to avoid a determination of liability under the\n\nPromissory Note and Guaranty in the courts.\n\n\n\n\n 13\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 14 of 21\n\n\n\n\n 25. Third, the balance of harms clearly weighs in favor of the Celsius Parties.\n\nAs post-effective date debtors established by the Celsius Plan, the Celsius Parties represent\n\nthe interests of thousands of creditors \u2013 many of them retail investors who lost substantial\n\nsums and who have been waiting eagerly to receive distributions on their claims. The\n\nCelsius Parties are pursuing the claims in the Arbitration for the benefit of these creditors.\n\nThe Mawson Parties have repeatedly hindered and delayed the Celsius Parties\u2019 efforts to\n\ncollect on the Promissory Note and the Guaranty, and now nearly eighteen months have\n\npassed since the Maturity Date. The costs of further delay in the arbitration will be borne\n\nby the Celsius Parties\u2019 creditors and that delay will only aggravate the substantial losses\n\nthey have suffered. In contrast, Mawson will suffer no legally cognizable harm from a\n\ncontinuation of the Arbitration, given that the relief it seeks \u2013 the dismissal of the\n\nInvoluntary Case \u2013 would achieve that very result.\n\n 26. Fourth, granting the TRO Motion to suspend the Arbitration would violate\n\nthe public interest. Here, again, the reorganizational framework for extending the\n\nautomatic stay is paramount. \u201cIn the context of bankruptcy proceedings, the \u2018public\n\ninterest\u2019 element means \u2018the promoting of a successful reorganization.\u2019\u201d In re American\n\nFilm Techs., Inc. 175 B.R. 847, 849 (Bankr. D. Del. 1994) (quoting Gathering Restr., Inc.\n\nv. First National Bank of Valparaiso (In re Gathering Restr., Inc.), 79 B.R. 992, 999\n\n(Bankr. N.D. Ind. 1986)). Extending the stay here would not promote any reorganization\n\nand therefore would not be in the public interest. Further, allowing Mawson to exploit the\n\njurisdiction of this Court to escape the consequences of an arbitration it compelled the\n\nCelsius Parties to pursue would undermine the liberal federal policy favoring arbitration\n\nand the judicial policy of rigorously enforcing arbitration clauses. This would also be\n\n\n\n 14\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 15 of 21\n\n\n\n\ncontrary to the public interest. Finally, entangling this Court in a pending arbitration that\n\nMawson demanded (and continues to seek the benefit of), would be a waste of judicial\n\nresources.\n\nB. Mawson Has Failed to Demonstrate the Existence of \u201cUnusual\n Circumstances\u201d that Would Justify Extension of the Automatic Stay.\n\n 27. Mawson\u2019s failure to satisfy any prong of the test for a temporary restraining\n\norder or preliminary injunction is fatal to the TRO Motion, and the Court should deny the\n\nTRO Motion solely on those grounds. Nevertheless, the TRO Motion also fails, separately\n\nand independently, because Mawson has not demonstrated that \u201cunusual circumstances\u201d\n\njustify extending the automatic stay.\n\n 28. The Third Circuit has acknowledged the power of courts to extend the\n\nautomatic stay to non-debtor co-defendants in \u201cunusual circumstances.\u201d McCartney v.\n\nIntegra Nat\u2019l Bank North, 106 F.3d 506, 510 (3d Cir. 1997). One such unusual\n\ncircumstance arises when \u201cstay protection is essential to the debtor\u2019s efforts of\n\nreorganization.\u201d Id. (citations omitted). No such circumstance exists here, because\n\nMawson is not currently pursuing \u2013 and has no intention of pursuing \u2013 a reorganization in\n\nchapter 11. Mawson contends that that policy behind the automatic stay justifies an\n\nextension of the stay to its non-debtor subsidiaries notwithstanding its lack of a\n\nreorganizational purpose. This position does not square with either the facts or the law.\n\nCelsius is not \u201cgaining a preference\u201d for its claims in the Arbitration beyond any preference\n\nthat it already has: Celsius is a structurally senior secured creditor at non-debtors Luna and\n\nCosmos, and, thus, already has priority over all claims at Mawson with respect to those\n\nsubsidiaries. Further, Courts have made clear that the automatic stay does not prohibit\n\n\n\n 15\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 16 of 21\n\n\n\n\nclaims against a non-debtor subsidiary, even if that claim could have an adverse impact on\n\nthe stock of the subsidiary. See, e.g., Kreisler v. Goldberg, 478 F.3d 209, 215 (4th Cir.\n\n2007) (holding that the automatic stay did not prevent a landlord from pursuing an\n\nejectment action against the debtor\u2019s wholly-owned non-debtor subsidiary); In re Winer,\n\n158 B.R. 736, 743 (Bankr. N.D. Ill. 1993) (noting that \u201cthe debtor cannot invoke\n\nthe automatic stay just because the action against the non-debtor subsidiary will impact on\n\nthe value of the debtor's stock\u201d).\n\n 29. Relying the Fourth Circuit\u2019s decision in A.H. Robins v. Piccinin, the Third\n\nCircuit and courts elsewhere have also found \u201cunusual circumstances\u201d where \u201c\u2018there is\n\nsuch an identity between the debtor and the third-party defendant that a judgment against\n\nthe defendant will in effect be a judgment or finding against the debtor.\u2019\u201d Id. (quoting A.H.\n\nRobins v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986).\n\n 30. Taken on its face, the oft-quoted phrase from the A.H. Robins case about\n\nidentity of interests would suggest that the \u201cunusual circumstances\u201d exception could\n\nswallow the \u201cuniversally acknowledged\u201d rule that \u201can automatic stay of proceedings\n\naccorded by \u00a7 362 may not be invoked by entities such as sureties, guarantors, co-obligors\n\nor others with a similar legal or factual nexus\u201d to the debtor. McCartney, 106 F.3d at 509-\n\n10 (quoting Maritime, 959 F.2d at 1205) (citations omitted). However, shortly after the\n\nA.H. Robins decision, the Fourth Circuit clarified that the mere existence of a contractual\n\nguaranty relationship was not sufficient to establish \u201cunusual circumstances\u201d warranting\n\nextension of the automatic stay. In Credit Alliance Corp. v. Williams, 851 F.2d 119 (4th\n\nCir. 1988), the Fourth Circuit addressed an appeal lodged by the guarantor of a promissory\n\nnote, who argued that the default judgment against him was rendered void by the\n\n\n 16\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 17 of 21\n\n\n\n\nborrower\u2019s bankruptcy petition. The Fourth Circuit held that \u201c[t]here is nothing \u2018unusual\u2019\n\nabout this guaranty agreement that would permit the guarantor . . . to invoke the statutory\n\nprotection of \u00a7 362 or that would permit us to stay enforcement of the New York judgment\n\nagainst him on equitable grounds. . . . [N]either Penn Hook [the debtor] nor its estate is\n\njeopardized by the judgment against Williams. The purpose of the guaranty would be\n\nfrustrated by interpreting \u00a7 362 so as to stay [the Lender\u2019s] action against the non-bankrupt\n\nguarantor when the defaulting debtor petitioned for bankruptcy.\u201d Id. at 121-22.\n\n 31. Other courts have affirmed the basic principle that the existence of a\n\nguaranty or indemnity agreement between a debtor and a non-debtor is not sufficient to\n\ncreate \u201cunusual circumstances.\u201d See, e.g., In re Brier Creek Corp. Ctr. Assocs. Ltd., 486\n\nB.R. 681, 690 (Bankr. E.D.N.C. 2013) (holding that \u201ca suit against a debtor's guarantor\n\ndoes not in and of itself constitute \u201cunusual circumstances\u201d and that \u201cother circumstances\u201d\n\nmust be present to bring the guarantor within the scope of the exception); Chicago Title\n\nIns. Co. v. Lerner, 435 B.R. 732, 736-37 (S.D. Fla. 2010) (holding that there was no adverse\n\neffect on a debtor by the enforcement of a non-debtor guaranty, when \u201cenforcing the\n\nguaranty would only replace one creditor with another\u201d); In re Veeco Inv. Co., L.P., 157\n\nB.R. 452, 454 (Bankr. W.D. Mo. 1993) (holding that the \u201cunusual circumstances\u201d\n\nexception does not apply to a non-debtor surety whose obligations are independent and\n\nprimary and not derivative of those of the debtor); Algemene Bank Nederland, N.V. v.\n\nHallwood Indus. Inc., 133 B.R. 176, 180 (Bankr. W.D. Pa. 1991) (holding that the\n\nexistence of an indemnity agreement alone did not create the identity of interest necessary\n\nto extend the stay). Further, at least one bankruptcy court has held that the \u201cunusual\n\ncircumstances\u201d exception simply does not apply where, as here, the guarantor is the debtor,\n\n\n\n 17\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 18 of 21\n\n\n\n\nand the creditor is seeking to recover from a non-debtor primary obligor. In In re Strak,\n\nCase No. 18-22185, 2018 WL 6566622 (Bankr. D.N.J. Dec. 11, 2018), the United States\n\nBankruptcy Court for the District of New Jersey addressed a request by a debtor guarantor\n\nto extend the stay to his non-debtor majority-owned limited liability company, the primary\n\nobligor on a mortgage note. The court rejected the debtor\u2019s request, stating: \u201cUnlike\n\nin A.H. Robins and its progeny, no unusual circumstances are alleged here. In this situation,\n\nif the court were to extend the automatic stay to a primary obligor when the case was filed\n\nby a mere guarantor it would flip the reasoning of those cases on their heads.\u201d Id. at *2.\n\n 32. The TRO Motion does not allege any \u201cother circumstances\u201d beyond an\n\nalleged identity of interest between Mawson and its subsidiaries that would justify an\n\nextension of the automatic stay. The sole argument Mawson makes for an identity of\n\ninterest are the Celsius Parties\u2019 assertion of alter ego claims. But the case law has\n\nestablished \u2013 including the seminal A.H. Robins decision \u2013 that alter ego claims are\n\nprecisely the types of claims that do not establish a unity of interest under the \u201cunusual\n\ncircumstances\u201d standard. Courts have expressly declined to extend the automatic stay\n\nwhere the liability of the non-debtor co-defendant is separate and independent of the\n\nliability of the debtor, for example, in the case of joint and several liability. See, e.g., A.H.\n\nRobins, 788 F.2d at 999 (noting that the automatic stay would not extend to a non-debtor\n\nthat is \u201cindependently liable as, for example, where the debtor and another are joint tort\n\nfeasors or where the non-debtor's liability rests upon his own breach of duty\u201d) (quoting In\n\nre Metal Center, 31 B.R. 458, 462 (D. Conn. 1983)); Mardice v. Ebony Media Ops., LLC,\n\n19-CV-8910 (VSB), 2021 WL 146358 (S.D.N.Y. Jan. 15, 2021). Following this line of\n\ncases, the United States District Court for the Southern District of New York declined to\n\n\n\n 18\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 19 of 21\n\n\n\n\nextend the automatic stay to a debtor\u2019s co-defendants on the grounds that they would be\n\njointly and severally liable under an alter ego theory. See, Variable-Parameter Fixture\n\nDev. Corp. v. Morpheus Lights, Inc., 945 F.Supp. 603, 609 (S.D.N.Y. 1996).\n\nC. Mawson Should Be Judicially Estopped from Seeking a Stay of the\n Arbitration.\n\n 33. The Court should also deny the TRO Motion and dismiss the adversary\n\nproceeding on the grounds of judicial estoppel. In the Mawson Adversary Proceeding in\n\nthe Celsius Bankruptcy Court, Mawson argued that arbitration of the claims under the\n\nPromissory Note, the Guaranty and the Co-Location Agreement was mandatory. Motion\n\nto Compel at 9-10. On appeal, the District Court adopted Mawson\u2019s position, and, in\n\ncompliance with that decision, the Celsius Parties commenced the Arbitration. In the TRO\n\nMotion, Mawson is taking the opposite position. Unhappy with the progress of the\n\nArbitration and the impending ruling on the Promissory Note, Mawson is asking this Court\n\nto stay an arbitration that it successfully argued was mandatory. These positions are\n\nirreconcilably inconsistent, satisfying the first prong of the judicial estoppel analysis.\n\nMontrose Med. Grp. Participating Sav. Plan v. Bulger, 243 F.3d 773, 779 (3d. Cir. 2001).\n\n 34. The second element of judicial estoppel is that the party must have changed\n\nits position \u201cin bad faith\u2014i.e., with intent to play fast and loose with the court.\u201d Id. (citing\n\nRyan Operations G.P. v. Santiam\u2013Midwest Lumber Co., 81 F.3d 355, 361 (3d Cir.1996).\n\nThe TRO Motion clearly demonstrates bad faith, not only for Mawson\u2019s attempt to evade\n\n\u2013 or, at the very least, hinder and delay \u2013 a ruling in an arbitration that it demanded, but\n\nalso for its request to extend a stay that it contends was improperly imposed on it.\n\n\n\n\n 19\n\f Case 25-50008-MFW Doc 15 Filed 01/21/25 Page 20 of 21\n\n\n\n\n 35. As a remedy, the Celsius Parties request that the Court enter an order\n\ndenying the TRO Motion and dismissing the adversary proceeding. Such an order is\n\ncertainly a remedy tailored to address the harm identified. Id. No lesser remedy would\n\nadequately address Mawson\u2019s conduct in this adversary proceeding.\n\n CONCLUSION\n\n 36. For the foregoing reasons, this Court should promptly enter an order\n\ndenying the TRO Motion, dismissing this adversary proceeding, and granting such other\n\nand further relief to the Celsius Parties as the Court deems just and proper.\n\n\nDated: January 21, 2025\n Wilmington, Delaware\n VENABLE LLP\n\n /s/ Daniel A. O\u2019Brien\n Daniel A. O\u2019Brien (No. 4897)\n 1201 North Market Street, Suite 1400\n Wilmington, DE 19801\n Tel: 302.298.3535\n Fax: 302.298.3550\n daobrien@venable.com\n\n and\n\n Jeffrey S. Sabin\n VENABLE LLP\n 151 West 42nd St.\n New York, New York 10036\n Tel: (212) 307-5500\n jssabin@venable.com\n\n and\n\n Andrew J. Currie\n VENABLE LLP\n 600 Massachusetts Avenue, NW\n Washington, DC 20001\n Tel: (202) 344-4000\n ajcurrie@venable.com\n\n and\n\n\n\n 20\n\fCase 25-50008-MFW Doc 15 Filed 01/21/25 Page 21 of 21\n\n\n\n Stephen Moeller-Sally\n WHITE & CASE LLP\n 75 State Street\n Boston, MA 02109\n Tel: (617) 979-9300\n ssally@whitecase.com\n\n and\n\n Keith H. Wofford\n WHITE & CASE LLP\n Southeast Financial Center\n 200 S. Biscayne Blvd., Suite 4900\n Miami, Florida 33131-2352\n Tel: (305) 371-2700\n kwofford@whitecase.com\n\n Counsel for Celsius Network Limited and\n Celsius Mining LLC\n\n\n\n\n 21\n\f","ocr_status":2,"date_upload":"2025-02-26T11:05:09.235891-08:00","document_number":"15","attachment_number":null,"pacer_doc_id":"042022057420","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Memorandum of Law","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/431393569/","id":431393569,"tags":[],"absolute_url":"/docket/69555415/15/1/mawson-infrastructure-group-inc-and-celsius-network-ltd-and-celsius/","date_created":"2025-02-26T11:04:11.898473-08:00","date_modified":"2025-02-26T11:04:11.898484-08:00","sha1":"","page_count":2,"file_size":125629,"filepath_local":null,"filepath_ia":"","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"","ocr_status":null,"date_upload":null,"document_number":"15","attachment_number":1,"pacer_doc_id":"042022057421","is_available":false,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Certificate of Service","acms_document_guid":""}],"date_created":"2025-01-21T16:02:58.721032-08:00","date_modified":"2025-03-31T09:20:10.441998-07:00","date_filed":"2025-01-21","time_filed":"17:46:11","entry_number":15,"recap_sequence_number":"2025-01-21.009","pacer_sequence_number":55,"description":"Memorandum of Law - Opposition of Celsius Network LTD. and Celsius Mining LLC to the Alleged Debtor's Emergency Motion for a Temporary Restraining Order and Preliminary Injunction Extending the Automatic Stay Pursuant to 11 U.S.C. 105 (related document(s)4) Filed by Celsius Mining LLC, Celsius Network Ltd.. (Attachments: # 1 Certificate of Service) (O'Brien, Daniel) (Entered: 01/21/2025)","tags":[]},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/docket-entries/414153504/","id":414153504,"docket":"https://www.courtlistener.com/api/rest/v4/dockets/69555415/","recap_documents":[{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/427781708/","id":427781708,"tags":[],"absolute_url":"/docket/69555415/16/mawson-infrastructure-group-inc-and-celsius-network-ltd-and-celsius/","date_created":"2025-01-21T16:02:58.466835-08:00","date_modified":"2025-03-31T09:20:10.533507-07:00","sha1":"d0a79b7de19c5cd6d6c1322321700ba801a12b80","page_count":3,"file_size":142447,"filepath_local":"recap/gov.uscourts.deb.195290/gov.uscourts.deb.195290.16.0.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.deb.195290/gov.uscourts.deb.195290.16.0.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 25-50008-MFW Doc 16 Filed 01/21/25 Page 1 of 3\n\n\n\n\n IN THE UNITED STATES BANKRUPTCY COURT\n FOR THE DISTRICT OF DELAWARE\n\n\n In re:\n Chapter 11\n\n Mawson Infrastructure Group, Inc., Case No. 24-12726 (MFW)\n\n\n Alleged Debtor.\n\n\n Mawson Infrastructure Group, Inc.,\n\n\n Plaintiff, Adv. Pro. No. 25-50008 (MFW)\n\n v.\n\n Celsius Network Ltd., Celsius Mining LLC, and\n Ionic Digital Mining LLC,\n\n Defendants.\n\n\n\n DECLARATION OF KEITH H. WOFFORD IN SUPPORT OF\n OPPOSITION OF CELSIUS NETWORK LTD. AND CELSIUS MINING LLC\n TO THE ALLEGED DEBTOR\u2019S EMERGENCY MOTION FOR A\n TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION\n EXTENDING THE AUTOMATIC STAY PURSUANT TO 11 U.S.C. \u00a7 105\n\nI, Keith H. Wofford, hereby declare:\n\n\n 1. I am a partner at the law firm of White & Case LLP and counsel to Celsius\n\nNetwork Limited and Celsius Mining LLC in the above-captioned matter. I respectfully\n\nsubmit this declaration in support of the Opposition of Celsius Network Limited and\n\nCelsius Mining LLC to the Alleged Debtor\u2019s Emergency Motion for a Temporary\n\f Case 25-50008-MFW Doc 16 Filed 01/21/25 Page 2 of 3\n\n\n\n\nRestraining Order and Preliminary Injunction Extending the Automatic Stay Pursuant to\n\n11 U.S.C. \u00a7 105 (the \u201cOpposition\u201d).1\n\n 2. Exhibit A to this declaration is a true and correct copy of Mawson\n\nInfrastructure Group, Inc.\u2019s Form 10-Q dated May 15, 2023 (without exhibits).\n\n 3. Exhibit B to this declaration is a true and correct copy of Mawson\n\nInfrastructure Group, Inc.\u2019s Form 10-Q dated August 21, 2023 (without exhibits).\n\n 4. Exhibit C to this declaration is a true and correct copy of Mawson\n\nInfrastructure Group, Inc.\u2019s Form 10-Q dated November 14, 2024 (without exhibits).\n\n 5. Exhibit D to this declaration is a true and correct copy of the Memorandum\n\nof Law in Support of Defendant\u2019s Motion to Compel Arbitration and Dismiss or Stay\n\nAdversary Proceeding filed by Mawson Infrastructure Group, Inc., Luna Squares LLC and\n\nCosmos Infrastructure LLC in Adv. Pro. 23-01202 in the United States Bankruptcy Court\n\nfor the Southern District of New York.\n\n 6. Exhibit E to this declaration is a true and correct copy of AAA Commercial\n\nRule 34.\n\n 7. Exhibit F to this declaration is a true and correct copy of the Arbitrator\u2019s\n\nDecember 17, 2024 ruling following the Scheduling Conference.\n\n 8. Exhibit G to this declaration is a true and correct copy of the January 10,\n\n2025 letter from the Mawson Parties\u2019 counsel to the Arbitrator requesting a stay of the\n\nArbitration.\n\n\n\n1\n All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the\nOpposition.\n\n 2\n\f Case 25-50008-MFW Doc 16 Filed 01/21/25 Page 3 of 3\n\n\n\n\n 9. Exhibit H to this declaration is a true and correct copy of the January 13,\n\n2025 letter from the Celsius Parties\u2019 counsel to the Arbitrator.\n\n 10. Exhibit I to this declaration is a true and correct copy of the Arbitrator\u2019s\n\nruling on the Mawson Parties\u2019 January 10, 2025 stay request.\n\n 11. Exhibit J to this declaration is a true and correct copy of the January 13,\n\n2025 letter from the Mawson Parties\u2019 counsel to the Arbitrator renewing their request for\n\na stay.\n\n 12. Exhibit K to this declaration is a true and correct copy of the Arbitrator\u2019s\n\nruling on the Mawson Parties\u2019 January 13, 2025 stay request.\n\n 13. On January 20, 2025, Luna filed its opposition to Celsius\u2019s Rule 34\n\nDispositive Motion. On January 21, 2025, Celsius filed its reply, and briefing on the Rule\n\n34 Dispositive Motion against Luna is now complete.\n\n I declare, under penalty of perjury, that the foregoing is true and correct to the best\n\nof my knowledge, information and belief.\n\nExecuted in Miami, Florida\n\n\n\n\n Dated: January 21, 2025 /s/ Keith H. Wofford\n Keith H. Wofford\n\n\n\n\n 3\n\f","ocr_status":2,"date_upload":"2025-02-10T09:27:09.034092-08:00","document_number":"16","attachment_number":null,"pacer_doc_id":"042022057424","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":1,"description":"Declaration in Support","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/429813237/","id":429813237,"tags":[],"absolute_url":"/docket/69555415/16/1/mawson-infrastructure-group-inc-and-celsius-network-ltd-and-celsius/","date_created":"2025-02-10T09:26:22.856181-08:00","date_modified":"2025-02-11T02:21:11.754299-08:00","sha1":"e700f38e605e8618b8987b0ea8e11ed416875a7d","page_count":220,"file_size":11139246,"filepath_local":"recap/gov.uscourts.deb.195290/gov.uscourts.deb.195290.16.1.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.deb.195290/gov.uscourts.deb.195290.16.1.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":"Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 1 of 220\n\n\n\n\n EXHIBIT A\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 2 of 220\n UNITED STATES\n SECURITIES AND EXCHANGE COMMISSION\n Washington, D.C. 20549\n\n FORM 10-Q\n\n (Mark One)\n \u2612 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n For the quarterly period ended March 31, 2023\n\n or\n\n \u2610 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n For the transition period from ________________ to ________________\n\n Commission file number 001-40849\n\n Mawson Infrastructure Group Inc.\n (Exact name of registrant as specified in its charter)\n\n Delaware XX-XXXXXXX\n (State or other jurisdiction of (I.R.S. Employer\n incorporation or organization) Identification No.)\n\n 201 Clark Street, Sharon, Pennsylvania 16146\n (Address of principal executive offices, including zip code)\n\n +61 2 8624 6130\n (Registrant\u2019s telephone number, including area code)\n\n\n (Former name, former address and former fiscal year, if changed since last report)\n\nSecurities registered pursuant to Section 12(b) of the Act:\n\n Title of each class Trading symbol(s) Name of each exchange on which registered\n Common Stock, par value $0.001 per share MIGI The Nasdaq Stock Market LLC\n\nIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding\n12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes \u2612\nNo \u2610\n\nIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T\n(\u00a7232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes \u2612 No \u2610\n\nIndicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth\ncompany. See the definitions of \u201clarge accelerated filer,\u201d \u201caccelerated filer,\u201d \u201csmaller reporting company\u201d and \u201cemerging growth company\u201d in Rule 12b-2 of the Exchange Act.\n\nLarge accelerated filer \u2610 Accelerated filer \u2610\nNon-accelerated filer \u2612 Smaller reporting company \u2612 Emerging growth company \u2610\n\nIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial\naccounting standards provided pursuant to Section 13(a) of the Exchange Act. \u2610\n\nIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes \u2610 No \u2612\n\nIndicate the number of shares outstanding of each of the issuer\u2019s classes of common stock, as of the latest practicable date:\n\nAs of May 8, 2023, the issuer had a total of 16,208,041 shares of common stock, par value $0.001 per share, outstanding.\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 3 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC.\n FORM 10-Q\n FOR THE QUARTER ENDED MARCH 31, 2023\n\n TABLE OF CONTENTS\n\n Page\nItem Number\n Part I \u2013 Financial Information\n\n1. Financial Statements 1\n2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations 22\n3. Quantitative and Qualitative Disclosures about Market Risks 31\n4. Controls and Procedures 31\n\n Part II \u2013 Other Information\n\n1. Legal Proceedings 33\n1A. Risk Factors 33\n2. Unregistered Sales of Equity Securities and Use of Proceeds 33\n3. Defaults Upon Senior Securities 33\n4. Mine Safety Disclosure 33\n5. Other Information 33\n6. Exhibits 34\n Signatures 35\n\n\n i\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 4 of 220\n\n PART I. FINANCIAL INFORMATION\n\nItem 1. Financial Statements\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED BALANCE SHEETS\n\n March 31, December 31,\n 2023 2022\nASSETS (unaudited)\nCurrent assets:\n Cash and cash equivalents $ 1,387,326 $ 946,265\n Prepaid expenses 1,931,016 3,488,868\n Trade and other receivables 7,950,146 10,458,076\n Assets held for sale 5,446,059 5,446,059\n Digital currencies 28,681 -\nTotal current assets 16,743,228 20,339,268\nProperty and equipment, net 84,564,180 91,016,498\nDerivative asset 10,618,746 11,299,971\nInvestments, equity method 2,015,618 2,085,373\nMarketable securities - 3,243,957\nSecurity deposits 224,064 2,524,065\nOperating lease right-of-use asset 2,564,031 2,819,933\n\nTotal assets $ 116,729,867 $ 133,329,065\n\nLIABILITIES AND STOCKHOLDERS\u2019 EQUITY\nCurrent liabilities:\n Trade and other payables $ 24,177,679 $ 10,572,061\n Current portion of operating lease liability 1,397,729 1,300,062\n Current portion of finance lease liability 31,275 30,702\n Current portion of long-term borrowings 22,943,525 23,610,583\nTotal current liabilities 48,550,208 35,513,408\nCustomer deposits - 15,328,445\nOperating lease liability, net of current portion 1,370,951 1,727,975\nFinance lease liability, net of current portion 75,187 83,223\nLong-term borrowings, net of current portion - 4,509,894\nTotal liabilities 49,996,346 57,162,945\nCommitments and Contingencies (note 10)\n\nStockholders\u2019 equity:\nSeries A preferred stock (1,000,000 authorized shares; nil issued and outstanding as of March 31, 2023 and December 2022) - -\nCommon stock (90,000,000 authorized, 14,131,110 and 13,625,882 issued and outstanding as of March 31, 2023, and December 31, 2022,\n respectively, $0.001 par value shares) 14,131 13,626\n Additional paid-in capital 196,110,680 194,294,559\n Accumulated other comprehensive income 5,112,159 5,021,467\n Accumulated deficit (133,359,653) (122,257,628)\nTotal Mawson Infrastructure Group, Inc. stockholders\u2019 equity 67,877,317 77,072,024\nNon-controlling interest (1,143,796) (905,904)\nTotal stockholder\u2019s equity 66,733,521 76,166,120\nTotal liabilities and stockholder\u2019s equity $ 116,729,867 $ 133,329,065\n\n See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.\n\n\n 1\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 5 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS\n (Unaudited)\n\n For the three months ended\n March 31,\n 2023 2022\nRevenues:\n Digital currency mining revenue $ 2,756,000 $ 18,783,842\n Hosting co-location revenue 4,322,553 548,948\n Net energy benefits 441,055 -\n Sale of equipment 150,997 91,545\nTotal revenues 7,670,605 19,424,335\n Less: Cost of revenues (excluding depreciation) 4,678,002 8,412,360\nGross profit 2,992,603 11,011,975\n Selling, general and administrative 4,977,417 6,476,945\n Share based payments 1,068,288 390,609\n Depreciation and amortization 7,962,523 13,803,032\n Change in fair value of derivative asset 681,225 -\n Total operating expenses 14,689,453 20,670,586\nLoss from operations (11,696,850) (9,658,611)\n Non-operating income/(expense):\n Losses on foreign currency transactions (418,216) (699,237)\n Interest expense (835,107) (1,236,673)\n Loss on write off property and equipment (118,933) -\n Profit on sale of site 790,847 -\n Gain on sale of marketable securities 1,437,230 -\n Other income 44,510 24,447\n Share of net loss of equity method investments (36,356) -\n Total non-operating expense 863,975 (1,911,463)\nLoss before income taxes (10,832,875) (11,570,074)\n Income tax expenses (548,083) -\nNet Loss (11,380,958) (11,570,074)\nLess: Net loss attributable to non-controlling interests (278,933) (234,419)\n\nNet Loss attributed to Mawson Infrastructure Group, Inc. stockholders $ (11,102,025) $ (11,335,655)\n\nNet Loss per share, basic & diluted $ (0.80) $ (0.96)\nWeighted average number of shares outstanding 13,953,308 11,854,946\n\n See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.\n\n\n 2\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 6 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS\n (Unaudited)\n\n For the three months Ended\n March 31,\n 2023 2022\nNet Loss $ (11,380,958) $ (11,570,074)\nOther comprehensive income/(loss)\nForeign currency translation adjustment 131,733 583,309\nComprehensive loss (11,249,225) (10,986,765)\nLess: Comprehensive loss attributable to non-controlling interests (278,933) (234,419)\nComprehensive loss attributable to common stockholders $ (10,970,292) $ (10,752,346)\n\n The accompanying Notes to Unaudited Consolidated Condensed Financial Statements.\n\n\n 3\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 7 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS\u2019 EQUITY\n (Unaudited)\n\n For the Three Months Ended March 31, 2023\n\n Accumulated Total\n Common Common Additional Other Mawson Non-\n Stock Stock Paid-in- Comprehensive Accumulated Stockholders\u2019 controlling Total\n (#) ($) Capital Income/(Loss) Deficit Equity interest Equity\nBalance as of December 31, 2022 13,625,882 $ 13,626 $ 194,294,559 $ 5,021,467 $ (122,257,628) $ 77,072,024 $ (905,904) $ 76,166,120\nIssuance of common stock, share based\n compensation 216,460 216 647,757 - - 647,973 - 647,973\nIssuance of warrants - - 500,500 - - 500,500 - 500,500\nExercising of RSU\u2019s and stock options 113,104 113 196,661 - - 196,774 - 196,774\nIssuance of common stock, net of offer\n costs 175,664 176 471,203 - - 471,379 - 471,379\nNet loss - - - - (11,102,025) (11,102,025) (278,933) (11,380,958)\nOther comprehensive income - - - 90,692 - 90,692 41,041 131,733\nBalance as of March 31, 2023 14,131,110 $ 14,131 $ 196,110,680 $ 5,112,159 $ (133,359,653) $ 67,877,317 $ (1,143,796) $ 66,733,521\n\n See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.\n\n\n 4\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 8 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS\u2019 EQUITY\n (Unaudited)\n\n For the Three Months Ended March 31, 2022\n\n Accumulated Total\n Common Common Additional Other Mawson Non-\n Stock Stock Paid-in- Comprehensive Accumulated Stockholders\u2019 controlling Total\n (#) ($) Capital Income/(Loss) Deficit Equity interest Equity\nBalance as of December 31, 2021 11,791,085 $ 11,091 $ 186,378,477 $ (521,094) $ (71,123,259) $ 114,745,215 $ (164,626) $ 114,580,589\nIssuance of common stock, share based\n compensation 2,298 15 107,734 - - 107,749 - 107,749\nIssuance of warrants - - 166,833 - - 166,833 - 166,833\nIssuance of RSU's and stock options 137,500 825 59,892 - - 60,717 - 60,717\nNet loss - - - - (11,335,655) (11,335,655) (234,419) (11,570,074)\nOther comprehensive income - - - 583,308 - 583,308 - 583,308\nBalance as of March 31, 2022 11,930,883 $ 11,931 $ 186,712,936 $ 62,214 $ (82,458,914) $ 104,328,167 $ (399,045) $ 103,929,122\n\n See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.\n\n\n 5\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 9 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS\n (Unaudited)\n\n For the three months ended\n March 31,\n 2023 2022\nCASH FLOWS FROM OPERATING ACTIVITIES\n Net loss $ (11,380,958) $ (11,570,074)\n Adjustments to reconcile net loss to net cash provided by (used in) operating activities:\n Depreciation and amortization 7,962,523 13,804,492\n Amortization of operating lease right-of-use asset 338,781 367,135\n Foreign exchange gain 386,952 -\n Share based payments 1,068,288 390,609\n Non-cash interest expense 439,635 -\n Unrealized (gain) loss on derivative asset 681,225 249,861\n Gain on sale of marketable securities (1,437,230) -\n Loss from equity method investments 36,122 -\n Loss on sale of property and equipment 77,603 -\n Loss on write off of property and equipment 118,933 -\nChanges in assets and liabilities:\n Trade and other receivables 981,569 562,626)\n Operating lease liabilities (340,156)\n Other current assets 3,829,172 (4,187,204)\n Trade and other payables (1,445,868) 6,248,314\nNet cash provided by (used in) operating activities 1,316,591 5,865,759\nCASH FLOWS FROM INVESTING ACTIVITIES\n Payment for the purchase of property and equipment (3,148,946) (6,030,740)\n Proceeds from sales of property and equipment 1,010,692 -\n Proceeds from sale of marketable securities 6,207,548 -\n Payment of property and equipment deposits - (23,630,470)\nNet cash provided by (used in) investing activities 4,069,294 (29,661,210)\nCASH FLOWS FROM FINANCING ACTIVITIES\n Proceeds from common share issuances 471,379 50,628\n Proceeds from borrowings - 27,055,524\n Repayment of finance lease liabilities (9,543) (379,026)\n Repayment of borrowings (5,397,550) (3,242,194)\nNet cash provided by financing activities (4,935,714) 23,484,932\nEffect of exchange rate changes on cash and cash equivalents (9,110) 648,104\nNet increase in cash and cash equivalents 441,061 337,585\nCash and cash equivalents at beginning of period 946,265 5,467,273\nCash and cash equivalents at end of period $ 1,387,326 $ 5,804,858\nSupplemental disclosure of cash flow information\nNon-cash transactions\nRecognition of right of use operating asset and lease liability 82,879 -\nAccrued interest on convertible notes settled in common stock 276,959 -\n\n See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.\n\n\n 6\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 10 of 220\n\n MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES\n NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS\n (Unaudited)\n\nNOTE 1 \u2013 GENERAL\n\nGeneral\n\nMawson Infrastructure Group, Inc. (the \u201cCompany\u201d or \u201cMawson\u201d or \u201cwe\u201d), was incorporated in the State of Delaware on February 10, 2012.\n\nThe accompanying consolidated financial statements, including the results of the Company\u2019s subsidiaries: Mawson Infrastructure Group Pty Ltd (\u201cMawson AU\u201d), Cosmos\nTrading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, MIG No.1 Pty Ltd, MIG No.1 LLC (formed February 3, 2023), Mawson AU Limited, Luna Squares LLC,\nLuna Squares Texas LLC, Luna Squares Repairs LLC, Luna Squares Property LLC, Mawson Midland LLC, Mawson Hosting LLC (formed February 16, 2023), Mawson Ohio\nLLC and Mawson Mining LLC (collectively referred to as the \u201cGroup\u201d), have been prepared by the Company, pursuant to the rules and regulations of the U.S. Securities and\nExchange Commission (\u201cSEC\u201d) and in accordance with accounting principles generally accepted in the United States (\u201cU.S. GAAP\u201d).\n\nThese consolidated, condensed unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements of the Group as of\nDecember 31, 2022, and the notes thereto, included in the Company\u2019s Annual Report on Form 10-K filed with SEC on March 23, 2023. Accordingly, they do not include all the\ninformation and footnotes required by U.S GAAP for complete financial statements. The results of the interim period are not necessarily indicative of the results to be expected\nfor the full year ending December 31, 2023. These consolidated, condensed interim financial statements reflect all adjustments which, in the opinion of management, are\nnecessary to present fairly the financial position, the results of operations and cash flows of the Company for the periods presented.\n\nMawson, through its subsidiaries, is a \u2018Digital Asset Infrastructure\u2019 business, which owns and operates modular data centers (\u201cMDCs\u201d) based in the United States. As at March\n31, 2023, Mawson owned 23,332 Application-Specific Integrated Circuit (\u201cASIC\u201d) computers known as \u201cMiners,\u201d specifically focused on the SHA-256 algorithm.\n\nGoing Concern\n\nFor the period ended March 31, 2023, the Company incurred a loss after tax of $11.38 million, and as at March 31, 2023, had net current liabilities of $31.81 million, had total\nnet assets of $66.73 million and had an accumulated deficit of $133.36 million. The Company\u2019s cash position as at March 31, 2023, was $1.39 million.\n\nManagement of the Company believes that there are reasonable grounds to conclude that the Company will continue as a going concern after consideration of the following\nfactors:\n\nThe Company\u2019s plans include improving profitability and generating sufficient cash flow from operations.\n\n\n 7\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 11 of 220\n\nManagement of the Company is of the opinion that the Company can continue to access adequate debt and equity funding to meet its working capital requirements. The\nCompany has the ability through its At the Market Offering Agreement (the \u201cATM Agreement\u201d), to sell shares of its common stock. Effective May 4, 2023, the Company filed a\nprospectus supplement to amend, supplement and supersede certain information contained in the earlier prospectus and prospectus supplement(collectively, the \u201cMay 2022\nProspectus\u201d), which reduced the amount of shares of common stock the Company may offer and sell under the ATM Agreement to an aggregate offering price of up to\n$9,000,000 from time to time. Under the May 2022 Prospectus, the Company initially registered up to $100,000,000 of common stock for offer and sale. On March 23, 2023,\nthe date the Company filed its Annual Report on Form 10-K for the year ended December 31, 2022, the offering limits set forth in General Instruction I.B.6 of Form S-3, which\nis referred to as the \u201cbaby shelf\u201d rules, began to apply and therefor the amount to be offered under the ATM Agreement was reduced, in part to provide room under the baby\nshelf rules for a registered direct offering of securities for approximately $5,000,000, which closed on May 8, 2023.\n\nFor so long as the Company\u2019s public float is less than $75,000,000, it may not sell more than the equivalent of one-third of its public float during any twelve consecutive\nmonths pursuant to the baby shelf rules. As of May 8, 2023, the Company had the capacity to issue up to approximately$3.4 million worth of shares under the baby shelf rules.\nIf the Company\u2019s public float decreases, the amount of securities the Company may sell under its Shelf Registration Statement will also decline.\n\nAlthough alternative public and private transaction structures are expected to be available, these may require additional time and cost, may impose operational restrictions on\nthe Company, and may not be available on attractive terms. To the extent the Company raises additional capital or debt, this could cause additional dilution to the Company\u2019s\ncurrent stockholders. The terms of any future capital raise or debt issuance and the costs of any financing are uncertain. There are no assurances that the Company would be\nable to raise additional financing when needed or that it would be able to do so on favorable terms. As part of the recent registered direct offering which closed on May 8, 2023,\nthe Company agreed not to issue shares for 90 days, or issue shares under its ATM for 180 days.\n\nBased on internally prepared forecast cash flows which take into consideration what management considers to be reasonable scenarios given the inherent risks and\nuncertainties, combined with existing cash balances, management believes that the Company will be able to meet its obligations as they become due for at least one year from\nthe date of the issuance of these condensed consolidated financial statements.\n\nAccordingly, management of the Company believes that it is appropriate to prepare the Group\u2019s consolidated financial statements on a going concern basis. However, should\nthe Company be unable to source sufficient funding through the factors noted above, the Company may not be able to realize assets at their recognized values and extinguish its\nliabilities in the normal course of business at the amounts stated in these consolidated financial statements.\n\nThese condensed consolidated financial statements do not include any adjustments relating to the recoverability and carrying amounts of assets and the amounts of liabilities\nshould the Company be unable to continue as a going concern and meet its obligations and debts as and when they fall due.\n\n\n 8\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 12 of 220\n\nNOTE 2 \u2013 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\n\nPrinciples of Consolidation and Basis of Preparation\n\nThe accompanying consolidated financial statements of the Company include the accounts of the Company and its wholly or majority owned and controlled subsidiaries.\nIntercompany investments, balances and transactions have been eliminated in consolidation. Non\u2013controlling interests represents the minority equity investment in the\nCompany\u2019s subsidiaries, plus the minority investors\u2019 share of the net operating results and other components of equity relating to the non\u2013controlling interest.\n\nPursuant to a Certificate of Amendment to the Certificate of Incorporation of the Company dated February 6, 2023, Mawson executed at a ratio of 1-6 reverse stock split of its\noutstanding common stock and reduced its authorized common stock to 90,000,000 shares, as set forth in the Company\u2019s Current Report on Form 8-K filed February 9, 2023.\nUnless otherwise indicated, all share and per share amounts included in this Annual Report reflect the effects of the Reverse Stock Split.\n\nAny changes in the Company\u2019s ownership interest in a consolidated subsidiary, through additional equity issuances by the consolidated subsidiary or from the Company\nacquiring the shares from existing stockholders, in which the Company maintains control is recognized as an equity transaction, with appropriate adjustments to both the\nCompany\u2019s additional paid-in capital and the corresponding non-controlling interest.\n\nUse of Estimates and Assumptions\n\nThe preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported\nin the financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions. The Company\u2019s management believes that the estimates,\njudgments and assumptions used are reasonable based upon information available at the time they are made.\n\nThese 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\nconsolidated financial statements, and the reported amounts of income and expenses during the reporting periods. Actual results could differ from those estimates. The\nCompany has considered the following to be significant estimates made by management, including but not limited to, going concern assumptions, estimating the useful lives of\nfixed assets, realization of long-lived assets, unrealized tax positions and the realization of digital currencies, valuing the derivative asset classified under Level 3 fair value\nhierarchy, business combinations and the contingent obligation with respect to future revenues.\n\nReclassifications\n\nCertain reclassifications of prior period amounts have been made to conform to current period presentation.\n\n\n 9\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 13 of 220\n\nSignificant Accounting Policies\n\nRevenue Recognition \u2013 Digital currency mining revenue\n\nThe Company recognizes revenue under Accounting Standards Codification (\u201cASC\u201d) 606, Revenue from Contracts with Customers. The core principle of ASC 606 is that a\ncompany should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects\nto be entitled in exchange for those goods or services. Five steps are required to be followed in evaluating revenue recognition: (i) identify the contract with the customer; (ii)\nidentity the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity\nsatisfies a performance obligation.\n\nIn order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised\ngood or service that is distinct. A performance obligation meets ASC 606\u2019s definition of a \u201cdistinct\u201d good or service (or bundle of goods or services) if both of the following\ncriteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or\nservice is capable of being distinct), and the entity\u2019s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e.,\nthe promise to transfer the good or service is distinct within the context of the contract).\n\nThere is currently no specific definitive guidance in U.S. GAAP or alternative accounting frameworks for the accounting of digital currencies and management has exercised\njudgement in determining appropriate accounting treatment for the recognition of revenue for such operations.\n\nThe Company has entered into a contract with mining pools and has undertaken the performance obligation of providing computing power in exchange for non-cash\nconsideration in the form of digital currency. The provision of computing power is the only performance obligation in the Company\u2019s contract with its pool operators. Where\nthe consideration received is variable (for example, due to payment only being made upon successful mining), it is recognized when it is highly probable that the variability is\nresolved, which is generally when the digital currency is received.\n\nThe Company measures the non-cash consideration received at the fair market value of the digital currency received. Management estimates fair value on a daily basis, as the\nquantity of digital currency received multiplied by the price quoted on the crypto exchange that the Company uses to dispose of digital currency.\n\nProperty and equipment\n\nProperty and equipment are stated at cost, net of accumulated depreciation. All other repair and maintenance costs are charged to operating expenses as incurred. The present\nvalue of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.\nProperty and equipment transferred from customers is initially measured at the fair value at the date on which control is obtained.\n\nProperty and equipment are depreciated on a straight-line or declining balance basis based on the asset classification, over their useful lives to the economic entity commencing\nfrom the time the assets arrive at their destination where they are ready for use. Low-cost assets are capitalized and immediately depreciated. Depreciation is calculated over the\nfollowing estimated useful lives:\n\n Depreciation\nAsset class Useful life method\nFixtures 5 years Straight-Line\nPlant and equipment 10 years Straight-Line\nModular data center 5 years Declining\nMotor vehicles 5 years Straight-Line\nComputer equipment 3 years Straight-Line\nProcessing machinery (Miners) 2 years Straight-Line\nTransformers 15 years Straight-Line\nLeasehold improvements Shorter of useful Straight-Line\n life or lease term\n\n\n 10\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 14 of 220\n\nProperty and equipment are derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of\nthe asset included in the income statement when the asset is derecognized.\n\nThe residual values, useful lives and methods of depreciation of property and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.\n\nThe Company\u2019s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be\nrecoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be\ngenerated by the assets. If such an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset\nexceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.\n\nFair value of and recognition of revenue from financial instruments:\n\nThe Company accounts for financial instruments under ASC 820, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value\nin generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements,\nASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:\n\n Level 1 \u2014 quoted prices (unadjusted) in active markets for identical assets or liabilities;\n\n Level 2 \u2014 observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in\n markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and\n\n Level 3 \u2014 assets and liabilities whose significant value drivers are unobservable. Observable inputs are based on market data obtained from independent sources, while\n unobservable inputs are based on the Company\u2019s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the\n inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified\n using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.\n\n Fair value measured at March 31, 2023\n Significant\n Total fair Quoted prices other Significant\n value as at in active observable unobservable\n March 31, markets inputs inputs\n 2023 (Level 1) (Level 2) (Level 3)\nDerivative asset $ 10,618,746 - - 10,618,746\n\n Fair value measured at December 31, 2022\n Significant\n Total fair Quoted prices other Significant\n value as at in active observable unobservable\n December 31, markets inputs inputs\n 2022 (Level 1) (Level 2) (Level 3)\nDerivative asset $ 11,299,971 - - 11,299,971\nMarketable securities $ 3,243,957 $ 3,243,957 $ - $ -\n\nLevel 1 Assets:\n\nThe Company held 1.59 million shares of common stock in CleanSpark Inc (\u201cCleanSpark\u201d), a Nasdaq listed company as at December 31, 2022. This was recorded at fair value\nwith changes in fair value recognized in the accompanying unaudited condensed consolidated statements of operations. The fair value of the CleanSpark investment is classified\nin Level 1 of the fair value hierarchy as it is quoted on an active market, that being Nasdaq. During the three month period ended March 31, 2023, the Company sold all of its\nshares in CleanSpark.\n\n\n 11\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 15 of 220\n\nLevel 3 Assets:\n\nPower Supply Agreement\n\nIn June 2022, the Company entered into a Power Supply Agreement with Energy Harbor LLC, the energy supplier to the Company\u2019s Pennsylvania facility, to provide the\ndelivery of a fixed portion of the total amount of electricity for a fixed price through to December 2026. If the Pennsylvania facility uses more electricity than contracted, the\ncost of the excess is incurred at a new price quoted by Energy Harbor LLC.\n\nWhile the Company manages operating costs at the Pennsylvania facility in part by periodically selling unused or uneconomical power back to the market, the Company does\nnot consider such actions as trading activities. That is, the Company does not engage in speculation in the power market as part of its ordinary activities. Because the sale of any\nelectricity under a curtailment program allows for net settlement, the Company has determined the Power Supply Agreement meets the definition of a derivative under ASC\n815, Derivatives and Hedging. However, because the Company has the ability to sell the power back to the grid rather than take physical delivery, physical delivery is not\nprobable through the entirety of the contract and therefore, the Company does not believe the normal purchases and normal sales scope exception applies to the Power Supply\nAgreement. Accordingly, the Power Supply Agreement (the non-hedging derivative contract) is recorded at estimated fair value each reporting period with the change in the fair\nvalue recorded in change in fair value of derivative asset in the consolidated statements of operations.\n\nThe Power Supply Agreement was classified as a derivative asset beginning in the quarter ended June 30, 2022 and measured at fair value on the date of Power Supply\nAgreement, with changes in fair value recognized in the accompanying unaudited condensed consolidated statements of operations. The estimated fair value of the Company\u2019s\nderivate asset is classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs utilized in the valuation. Specifically, the Company\u2019s discounted cash\nflow estimation models contain quoted commodity exchange spot and forward prices and are adjusted for basis spreads for load zone-to-hub differentials through the term of\nthe Power Supply Agreement, which ends in December 2026. In addition, the Company adopted a discount rate of approximately 20% above the terminal value of the\nobservable market inputs, but also includes unobservable inputs based on qualitative judgment related to company-specific risk factors. The terms of the Power Supply\nAgreement require pre-payment of collateral, calculated as forward cost based on the market cost rate of electricity versus the fixed price stated in the contract.\n\nShare based payments\n\nThe Company follows ASC 718-10 Compensation-Stock Compensation. The Company expenses stock-based compensation to employees and non-employees over the requisite\nservice period based on the estimated grant-date fair value of the awards. The Company determines the grant date fair value of the restricted stock units (\u201cRSUs\u201d) and options\nusing the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of stock-based awards represent management\u2019s best estimates and involve\ninherent uncertainties and the application of management\u2019s judgment. These assumptions are the expected stock volatility, the risk\u2013free interest rate, the expected life of the\noption, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility computes stock price volatility over expected terms based on its historical\ncommon stock trading prices. Risk\u2013free interest rates are calculated based on the implied yield available on U. S. 10-year Treasury bond.\n\nDigital currencies\n\nDigital currencies are included in current assets in the consolidated condensed balance sheets. Digital currencies are classified as indefinite-lived intangible assets in accordance\nwith ASC 350, Intangibles \u2013 Goodwill and Other, and are accounted for in connection with the Company\u2019s revenue recognition policy detailed above.\n\n\n 12\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 16 of 220\n\nThe following table presents the Company\u2019s digital currency (Bitcoin) activities for the quarter ended March 31, 2023, and 2022:\n\n Three months to\n March 31,\n 2023 2022\n\nOpening number of Bitcoin held as at December 31, 2022 and 2021 0.00 0.92\nNumber of Bitcoin received 121.11 458.68\nNumber of Bitcoin sold (120.09) (459.60)\nClosing number of Bitcoin held as at March 31, 2023 and 2022 1.02 0.00\n\nDigital currencies are not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely\nthan 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\nfirst 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 likely that an impairment exists, a\nquantitative 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\nrecognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.\n\nThe Company\u2019s policy is to dispose of Bitcoin received from mining operations at the earliest opportunity, therefore the holding period is minimal, usually no more than a few\ndays. Due to the short period which Bitcoin are held prior to sale and the consequent small numbers held, the risk of impairment is not material. No impairment charges have\nbeen recorded during the quarters ended March 31, 2023 and 2022.\n\nRecent Accounting Pronouncements\n\nFrom time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (\u201cFASB\u201d) or other standard setting bodies and adopted by the\nCompany as of the specified effective date. For information with respect to recent accounting pronouncements, see Note 2 to the consolidated financial statements for the\nCompany as of December 31, 2022, included in the Company\u2019s Annual Report on Form 10-K filed with SEC on March 23, 2022. Recent accounting pronouncements since that\ndate include:\n\nIn March 2023, the FASB issued ASU update 2023-01\u2014Leases (Topic 842): Common Control Arrangements. The Company early adopted ASU 2023-01, as allowed under the\nASU. Adoption of this ASU did not have a material impact on the Company\u2019s consolidated financial statements or disclosures.\n\nIn March 2023, the FASB issued ASU update 2023-02\u2014Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using\nthe Proportional Amortization Method (a consensus of the Emerging Issues Task Force). The Company does not expect ASU 2023-02 to have a material impact on the\nCompany\u2019s consolidated financial statements or disclosures.\n\n\n 13\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 17 of 220\n\nNOTE 3 \u2013 BASIC AND DILUTED NET LOSS PER SHARE\n\nNet loss per common share is calculated in accordance with ASC 260, Earnings Per Share. Basic loss per share is computed by dividing net loss by the weighted average\nnumber 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\nweighted average shares outstanding, as they would be anti-dilutive.\n\nSecurities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share as at March 31, 2023 and 2022 are as\nfollows:\n\n As at March 31,\n 2023 2022\nWarrants to purchase common stock 2,825,278 1,165,698\nOptions to purchase common stock 417 125,577\nRestricted Stock-Units (\u201cRSUs\u201d) issued under a management equity plan 303,450 303,215\n 3,129,145 1,594,490\n\nThe following table sets forth the computation of basic and diluted loss per share:\n\n For the three months ended\n March 31,\n 2023 2022\nNet Loss attributable to Mawson Infrastructure Group, Inc. common stockholders $ (11,102,025) $ (11,335,655)\n\nDenominator:\nWeighted average common shares - basic and diluted 13,953,308 11,854,946\n\nLoss per common share - basic and diluted $ (0.80) $ (0.96)\n\nNOTE 4 \u2013 LEASES\n\nThe Company leases corporate office space at Level 5, 97 Pacific Highway, North Sydney NSW 2060 Australia, being 1,076 square feet under a license agreement.\n\nThe Company leases 6-acres of land in Pennsylvania which began in October 2021 for thirty-six months with the option to exercise four additional three-year extensions. An\namendment was signed during March 2023 to lease an additional 3.12 acres of land.\n\nOn March 16, 2022, Luna Squares Property LLC entered into a lease with respect to a property in the City of Sharon, Mercer County, Pennsylvania with Vertua Property, Inc., a\nrelated party (see Note 12). The term of the lease is for 5 years, with 2 options to extend for 5 years each.\n\nDuring May 2022, Luna Square Texas LLC entered into four lease agreements to lease 11 acres of land in Texas for a period of five years. This is reflected as an asset held for\nsale as of March 31, 2023 and was sold on April 18, 2023 (see Note 6).\n\nOther than the foregoing leases, the Company does not lease any material assets during the quarter ended March 31, 2023. The Company believes that these offices and\nfacilities are suitable and adequate for its operations as currently conducted and as currently foreseen. In the event additional or substitute offices and facilities are required, the\nCompany believes that it could obtain such offices and facilities at commercially reasonable rate.\n\n\n 14\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 18 of 220\n\nThe Company\u2019s lease costs recognized in the Consolidated Condensed Statements of Operations consist of the following:\n\n For the three months ended\n March 31,\n 2023 2022\n\nOperating lease charges (1) $ 407,212 $ 367,135\nFinance lease charges:\nAmortization of right-of-use assets 8,143 4,302\nInterest on lease obligations 2,080 1,478\n $ 10,223 $ 5,780\n\n(1) Included in selling, general and administrative expenses.\n\nThe following is a schedule of the Company\u2019s lease liabilities by contractual maturity as of March 31, 2023:\n\n Operating Finance\n leases leases\n\n2023 $ 1,171,950 $ 28,632\n2024 1,261,338 38,176\n2025 267,372 38,176\n2026 278,064 15,016\n2027 70,190 -\nTotal undiscounted lease obligations 3,048,914 120,000\nLess imputed interest (280,234) (13,538)\nTotal present value of lease liabilities 2,768,680 106,462\nLess current portion of lease liabilities 1,397,729 31,275\nNon-current lease liabilities $ 1,370,951 $ 75,187\n\nOther lease information as of and for the period ended March 31, 2023:\n\n Operating Finance\n leases leases\n\nOperating cash out flows from leases $ 100,000 $ 9,543\nWeighted-average remaining lease term (years) 2.29 3.14\nWeighted-average discount rate (%) 8.0% 7.5%\n\n\n 15\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 19 of 220\n\nNOTE 5 \u2013 PROPERTY AND EQUIPMENT\n\nProperty and equipment, net, consisted of the following:\n\n March 31, December 31,\n 2023 2022\n\nPlant and equipment 4,118,491 4,263,662\nComputer equipment 162,457 163,060\nFurniture and fixtures 29,016 29,492\nProcessing machines (Miners) 102,381,318 103,337,719\nModular data center 21,323,426 19,713,534\nMotor vehicles 326,704 326,704\nTransformers 4,737,512 4,596,892\nLow-cost assets 1,059,319 995,292\nAssets under construction 11,737,313 11,592,582\nLeasehold improvements 487,530 487,527\nTotal 146,363,086 145,506,464\nLess: Accumulated depreciation (61,798,906) (54,489,966)\nProperty and equipment, net 84,564,180 91,016,498\n\nThe Company incurred depreciation and amortization expense in the amounts of $7.96 million and $13.80 million for the quarters ended March 31, 2023 and March 31, 2022,\nrespectively. There were no impairment charges recognized for property and equipment for either the quarter ended March 31, 2023, or March 31, 2022.\n\nThe reclassification of property and equipment to assets held for sale is in relation to the sale of Luna Squares Texas LLC to M Turing VCC Oracle Phase 1 Fund (see Note 6).\n\nNOTE 6 \u2013 ASSETS HELD FOR SALE\n\nOn April 18, 2023, the Company sold 100% of its membership interest in Luna Squares Texas LLC, a Delaware limited liability company, which held rights to 4 greenfield\nleases in Midland, TX, as well as related contracts. The sale price was $3.0m in cash and $5.5m in stablecoins. In addition, the Company sold 59 transformers which were\nearmarked for these Texas sites.\n\nFrom November 9, 2022 these assets were classified as held for sale, from this date depreciation and amortization on the property and equipment and the leases ceased. As at\nMarch 31, 2023 the assets included in the sale are stated at carrying value and comprised of the following assets.\n March 31,\n 2023\nProperty and equipment $ 4,289,684\nSecurity deposit 1,010,716\nOperating lease right-of-use asset 145,659\nAssets held for sale $ 5,446,059\n\nNOTE 7 \u2013 EQUITY METHOD INVESTMENTS\n\nMawson AU Limited is a 34.9% shareholder of Tasmania Data Infrastructure Pty Ltd (\u201cTDI\u201d) from November 23, 2022 and therefore was accounted for as an equity method\ninvestment from this date under ASC 323 Investments \u2013 Equity Method and Joint Ventures . Our share of income and losses from our equity method investments is included in\nshare of net loss of equity method investment in our consolidated statements of operations.\n\n\n 16\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 20 of 220\n\nNOTE 8 \u2013 INCOME TAXES\n\nThe Company\u2019s effective tax rate is calculated by dividing total income tax expense by the sum of income before income tax expense and the net income attributable to\nnoncontrolling interests. The Company has maintained a full valuation allowance for federal and the majority of its state jurisdictions.\n\n For the three months ended\n March 31,\n 2023 2022\n\nEffective income tax rate 0.00% 0.00%\n\nThe Company\u2019s effective tax rate is calculated by dividing total income tax expense by the sum of income before income tax expense and the net income attributable to\nnoncontrolling interests. The Company has maintained a full valuation allowance for federal and the majority of its state jurisdictions. Income tax expense of $548,083 during\nthe three months ended March, 31 2023 relates to the recognition of previously unrecognized tax liability due for the December, 31, 2022 year. The company determined the\nimpact of recording this adjustment during 2023 was not material to the financial statements or the opening balance of the accumulated deficit.\n\nNOTE 9 \u2013 BORROWINGS\n\nMarshall loan\n\nIn December 2021 MIG No. 1 Pty Ltd entered into a Secured Loan Facility Agreement with Marshall Investments MIG Pty Ltd. The loan matures in February 2024 and bears\ninterest at a rate of 12.00% per annum, payable monthly with interest payments commencing in December 2021. This loan facility is secured by direct assets of MIG No.1 Pty\nLtd and a general security agreement given by the Company. Principal repayments began during November 2022.\n\nThe outstanding balance is $9.08 million as at March 31, 2023 all of which is classified as a current liability.\n\nCelsius loan\n\nOn February 23, 2022, Luna Squares LLC entered into a Co-Location Agreement with Celsius Mining LLC. In connection with this agreement, Celsius Mining LLC loaned\nLuna Squares LLC a principal amount of $20,000,000, for the purpose of funding the infrastructure required to meet the obligations of the Co-Location Agreement, for which\nLuna Squares LLC issued a Secured Promissory Note for repayment of such amount. The Secured Promissory Note accrues interest daily at a rate of 12% per annum. Luna\nSquares LLC is required to amortize the loan at a rate of 15% per quarter, principal repayments began at the end of September 2022. The Secured Promissory Note has a\nmaturity date of August 23, 2023, the outstanding balance is $11.0 million as at March 31, 2023, all of which is classified as a current liability. Celsius Mining LLC filed for\nChapter 11 bankruptcy protection on July 13, 2022. Celsius Mining LLC has proposed certain changes to the Secured Promissory Note and the related security agreement,\nhowever the parties have been unable to agree mutually satisfactory agree terms.\n\nW Capital loan\n\nOn September 2, 2022, Mawson Infrastructure Group Pty Ltd entered into a Secured Loan Facility Agreement with W Capital Advisors Pty Ltd with a total loan facility of\nAUD$3 million (USD$1.9 million). This was amended on September 29, 2022 and the loan facility was increased to AUD$8 million (USD$5.2 million). As at March 31, 2023,\nAUD$3.53 million (USD$2.36 million) has been drawn down from this facility, all of which is classified as a current liability. The Secured Loan Facility accrues interest daily\nat a rate of 12% per annum and is paid monthly. Principal repayments began in March 2023.\n\nConvertible notes\n\nOn July 8, 2022, the Company issued secured convertible promissory notes to investors in the aggregate principal amount of $3,600,000 (the \u201cSecured Convertible Promissory\nNotes\u201d) in exchange for an aggregate of $3,600,000 in cash. The Secured Convertible Promissory Notes are convertible at the option of the holder at a price of $5.10 per share\nof our common stock. The Secured Convertible Promissory Notes bear interest of twenty percent per annum. One-half of the interest that accrues each month on the Secured\nConvertible Promissory Notes must be paid monthly. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable under the Secured\nConvertible Promissory Notes, is due and payable if not converted pursuant to the terms and conditions of the Secured Convertible Promissory Note on the earlier of (i) one\nyear after its issuance, or (ii) following an event of default. On September 29, 2022, the Company entered into a letter variation relating to some of the Secured Convertible\nPromissory Notes, with an aggregate principal amount of $3.1 million, which gave those holders the option to elect for pre-payment (including accrued interest to maturity)\nsubject to certain conditions. Payments of the interest could be made partially in common stock of the Company, at the Company\u2019s election. All of the investors included in this\nletter variation elected for the pre-payment option and therefore there were $3.1 million principal repayments made during November 2022. The final convertible noteholder\nwho was not a party to this variation opted to enter into an arrangement whereby it received pre-payment of interest but agreed that repayment of the principal was not required\nuntil the originally agreed Repayment Date (June 2023) and therefore the remaining $0.50 million has been classified as a current liability.\n\n\n 17\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 21 of 220\n\nNOTE 10 \u2013 STOCKHOLDERS\u2019 EQUITY\n\nStock-Based Compensation:\n\nEquity plans\n\nUnder the 2018 Equity Plan, which was approved by stockholders on February 22, 2018, the aggregate number of Shares reserved under this Plan was originally 10,441,251.\nOn August 15, 2018, the stockholders approved the First Amendment to the 2018 Equity Plan, which changed the total number of shares of the Company\u2019s common stock to\n2,500,000 shares. In addition, the number of shares issuable under the Plan on the first day of each fiscal year beginning with the 2019 fiscal year, would increase by an amount\nequal to the lower of (i) 100,000 shares (after a later 10 for 1 stock split) or (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year. As of\nJanuary 1, 2023, that meant there were a maximum of 574, 153 shares available. After the 6 for 1 reverse stock split in February 2023, there were 95,693 shares available under\nthe 2018 Plan. After an issue of 93,334 restricted stock units to a consultant (W Capital Advisors Pty Ltd) under the 2018 Plan, and taking into account all options that were\nissued under the 2018 Plan (after adjusting reverse stock splits), the 2018 Plan is essentially exhausted until it automatically replenishes on January 1, 2024.\n\nUnder the 2021 Equity Plan, which was adopted by the Company on August 3, 2021, originally for an aggregate of up to 70,000,000 Shares. Following a 10 for 1 reverse stock\nsplit on August 12, 2021, that number was reduced to 7,000,000. Following a 6 for 1 reverse stock split which took effect on February 9, 2023, the aggregate number of Shares\nunder the 2021 Equity Plan was further reduced to 1,166,667. Stockholder consent is being sought at the May 17, 2023 annual meeting to increase this number to 10,000,000.\nAs of March 31, 2023, the number of Shares reserved under this Plan was 383,315.\n\nThe Company\u2019s stock-based compensation expenses recognized during the three months ended March 31, 2023 and 2022 were included in share based payments expenses in\nthe accompanying unaudited condensed consolidated statements of operations.\n\nThe Company recognized stock-based compensation expense during the three months ended March 31, 2023 and 2022 as follows:\n\n For the three months ended\n March 31,\n 2023 2022\nPerformance-based restricted stock awards $ 166,779 $ 166,276\nService-based restricted stock awards 307,069 -\nTotal stock-based compensation $ 473,848 $ 166,276\n\n Weighted\n Average\n Weighted Remaining\n Average Contractual Aggregate\n Number of Exercise Life (in Intrinsic\n shares Price years) Value\nOutstanding as of December 31, 2022 416,791 0.22 9.09\n Issued 93,334 -\n Exercised (206,438) - 609,806\n Expired - -\nOutstanding as of March 31, 2023 303,867 0 9.26\nExercisable as of March 31, 2023 191,702 0.30 5.50\n\n\n 18\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 22 of 220\n\nRestricted Common Stock\n\nThe Company recognized an expense in relation to the restricted stock units during the three months ended March 31, 2023 and 2022 as follows:\n\n For the three months ended\n March 31,\n 2023 2022\nRestricted stock unit expense $ 29,995 $ -\nTotal restricted stock unit expense $ 29,995 $ -\n\nFuture expense related to share-based payments is expected to total approximately $0.15 million which will be expensed over the next 1.29 years.\n\nCommon Stock\n\nOn September 29, 2022, the Company entered into a letter variation relating to three out of four of the Secured Convertible Promissory Notes, where it gave those holders the\noption to elect for pre-payment (including accrued interest to maturity). Payments of the interest may be made partially in common stock of the Company, at the Company\u2019s\nelection. All of the investors included in this letter variation elected for the pre-payment option and therefore there were 104,178 shares of common stock of the Company\nissued as part of this letter variation. The final convertible noteholder who was not a party to this variation opted to enter into an arrangement on January 16, 2023 whereby it\nreceived pre-payment of interest which was also partially paid in shares. In total 18,807 shares of common stock of the Company were issued as part of this arrangement. The\nCompany recognized an $0.06 million expense in relation to 18,807 shares issued in the three months ended March 31, 2023 within in the share based payment expense.\n\nPursuant to that certain Certificate of Amendment to the Certificate of Incorporation of the Company dated February 6, 2023 Mawson executed at a ratio of 1-6 reverse stock\nsplit of its outstanding common stock and reduced its authorized common stock to 90,000,000 shares, as set forth in the Company\u2019s Current Report on Form 8-K filed February\n9, 2023. This reverse stock split meant there were an additional 141 shares issued due to rounding, which are included in the issuance of common stock, share based\ncompensation within the consolidated condensed statements of stockholders\u2019 equity.\n\nUnder the terms of the Cosmos Transaction Bid Implementation Agreement the Company made share-based awards under an Incentive Compensation Program during\nSeptember 2021 (refer to reverse acquisition accounting policy). During the three-month period ended March 31, 2023, certain participants partially converted certain of these\nawards into 100,000 shares of common stock of the Company.\n\nThe Company made share-based payments under an Incentive Compensation Program during December 2022. During the quarter ended March 31, 2023, certain participants\npartially exercised certain of these awards into 13,104 shares of common stock of the Company.\n\nW Capital Advisors Pty Ltd was issued 93,334 shares of common stock during February 2023 for consultancy and advisory services provided to the Company, the fair value of\nthese shares was $0.25 million.\n\n\n 19\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 23 of 220\n\nOn May 27, 2022, the Company entered into an ATM Agreement with Wainwright, to sell shares of our common stock, par value $0.001 per share, having an aggregate sales\nprice of up to $100 million, from time to time, through an \u201cat the market offering\u201d program under which Wainwright acts as the sales agent. During the quarter ended March 31,\n2023, 175,664 shares were issued as part of the ATM Agreement for net cash proceeds of $471,379.\n\nRestricted Stock\n\nAs of March 31, 2023, the Company had no restricted stock outstanding.\n\nCommon Stock Warrants\n\nA summary of the status of the Company\u2019s outstanding stock warrants and changes during the three months ended March 31, 2023, is as follows:\n\n Weighted\n Average\n Weighted Remaining\n Average Contractual\n Number of Exercise Life\n Warrants Price (in years)\nOutstanding as of December 31, 2022 2,825,278 4.17 3.30\n Issued - - -\n Exercised - - -\n Expired - - -\nOutstanding as of March 31, 2023 2,825,278 $ 4.17 3.30\nWarrants exercisable as of March 31, 2023 2,825,278 $ 4.17 3.30\n\nThe Company recognized an expense in relation to warrants issued in 2022 during the three months ended March 31, 2023 within in the share based payment expense of $0.50\nmillion.\n\nNOTE 11 \u2013 COMMITMENTS AND CONTINGENCIES\n\nThe Company is currently in the process of applying for sales tax registrations and exemptions in different states in the U.S. At this stage, the Company is unable to determine\nthe financial impact of sales tax.\n\nNOTE 12 \u2013 RELATED PARTY TRANSACTIONS\n\nOn March 16, 2022, Luna Squares LLC entered into a lease with respect to a property in the City of Sharon, Mercer County, Pennsylvania with Vertua Property, Inc, a\nsubsidiary entity in which Vertua Ltd has a 100% ownership interest. James Manning, CEO, a director and a significant shareholder of the Company, is also a director of Vertua\nLtd and has a material interest in the Sharon lease as a large shareholder of Vertua Ltd. The lease is for a term of 5 years, and Luna Squares LLC has 2 options to extend for 5\nyears each. Rent is subject to annual increases equal to the amount of the Consumer Price Index for the Northeast Region, or 4%, whichever is higher. The base rental amount in\nthe first year is $0.24 million. Depending on power energization and usage, variable additional rent may be payable, with charges ranging from $500 to $10,000 per month,\ndepending on power energized and whether it is available.\n\nDuring the quarter ended March 31, 2023 and the quarter ended March 31, 2022 Mawson Infrastructure Group Pty Ltd paid Vertua Limited $154,559 and $43,873 respectively,\nfor reimbursement for office costs. James Manning, CEO, a director and a significant shareholder of the Company, is also a director of Vertua Ltd.\n\n\n 20\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 24 of 220\n\nNOTE 13 \u2013 SUBSEQUENT EVENTS\n\nOn April 18, 2023, the Company sold 100% of its membership interest in Luna Squares Texas LLC, which held rights to 4 greenfield leases in Midland, TX, as well as related\nrevenue sharing contracts with the landlords. The sale price was $8.5m in cash and stablecoins. In addition, Mawson sold 59 transformers which were earmarked for these\nTexas sites.\n\nEffective May 1, 2023 Mawson Ohio LLC took an assignment of a lease for a site in Corning, Ohio. The term of the lease is for 4 years, with 1 option to extend for 5 years. The\nsite area has a capacity of up to 24MW, with a potential for a further 26MW (subject to the construction of a new substation). The site has not been accurately measured and is\npart of a much larger site of 118 acres, however the lease area is that are which Mawson Ohio LLC requires for the operation its data center facility comprising of 12 MDCs. 12\nMDCs could house up to approximately 7,056 miners.\n\nOn May 3, 2023, the Company has entered into a definitive agreement with institutional investors for the issuance and sale of 2,083,336 shares of its common stock (or pre-\nfunded warrants in lieu thereof) at a purchase price of $2.40 per share of common stock in a registered direct offering. In addition, in a concurrent private placement, the\nCompany will issue to the institutional investors unregistered warrants to purchase up to 2,604,170 shares of its common stock with an exercise price of $3.23 per share and are\nexercisable six months following issuance for a period of five and one-half years following issuance. The shares of common stock and pre-funded warrants described above are\nbeing offered and sold by the Company pursuant to a \u201cshelf\u201d registration statement on Form S-3 (File No. 333-264062). The warrants to purchase common stock described\nabove were offered and sold by the Company pursuant to Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder. This offering closed on May 8, 2022.\nThe net amount raised was approximately $5.0 million.\n\nAs a condition to the sale of 2,083,336 shares of common stock described above, the Company amended the warrants previously issued to one of the investors in that offering to\npurchase an aggregate of 1,666,667 shares of common stock for an exercise price of $6.06 per share, which were issued in July of 2022 (the \u201cExisting Warrants\u201d), effective\nupon the closing of the offering, such that the amended Existing Warrants have a reduced exercise price of $3.23 per share, are exercisable six months following the closing of\nthe offering, and will expire five and one-half years following the closing of this offering.\n\nEffective May 4, 2023, the Company filed a prospectus supplement to amend, supplement and supersede certain information contained in the prospectus supplement dated May\n27, 2022, and its accompanying prospectus dated April 11, 2022 (collectively, the \u201cMay 2022 Prospectus\u201d), relating to the offer and sale of common stock through H.C.\nWainwright & Co., LLC (\u201cWainwright\u201d), as sales agent, in \u201cat the market offerings\u201d as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, pursuant\nto the At the Market Offering Agreement with Wainwright dated as of May 27, 2022 (the \u201cATM Agreement\u201d). The prospectus supplement reduced the amount of shares of\nCommon Stock The Company may offer and sell under the ATM Agreement to an aggregate offering price of up to $9,000,000 from time to time through Wainwright.\n\nUnder the May 2022 Prospectus, the Company initially registered up to $100,000,000 of our common stock for offer and sale pursuant to the ATM Agreement. However, on\nMarch 23, 2023, the date the Company filed its Annual Report on Form 10-K for the year ended December 31, 2022, the registration registering the shares being sold pursuant\nto the ATM Agreement became subject to the offering limits set forth in General Instruction I.B.6 of Form S-3. As of May 3, 2023, the aggregate market value of our\noutstanding common stock held by non-affiliates was approximately $45,720,757.33, which we calculated based on 14,371,373 shares of outstanding common stock as of May\n3, 2023, of which 12,735,587 shares were held by non-affiliates, and a price per share of $3.59 which was the closing price of our common stock on March 23, 2023.\n\n\n 21\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 25 of 220\n\nItem 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations\n\n Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of our balance sheets, statements of operations\nand cash flows. The following discussion and analysis of our financial condition and results of operations should be read together with the interim condensed consolidated\nfinancial 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\ndisclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. All amounts are in U.S. dollars.\n\n Throughout this report, unless otherwise designated, the terms \u201cwe,\u201d \u201cus,\u201d \u201cour,\u201d the \u201cCompany,\u201d \u201cMawson,\u201d \u201cour company\u201d and the \u201ccombined company\u201d refer\nto Mawson Infrastructure Group Inc., a Delaware corporation, and its direct and indirect subsidiaries, including Mawson Infrastructure Group Pty Ltd, an Australian company\n(\u201cMawson AU\u201d), Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, Cosmos MIG No.1 Pty Ltd, MIG No.1 LLC, Mawson AU Limited, Luna Squares\nLLC, Luna Squares Texas, Luna Squares Repairs LLC, Luna Squares Property LLC, Mawson Midland LLC, Mawson Ohio LLC, Mawson Hosting LLC and Mawson Mining\nLLC .\n\n Pursuant to that certain Certificate of Amendment to the Certificate of Incorporation of the Company dated February 6, 2023 Mawson executed at a ratio of 1-6\nreverse stock split of its outstanding common stock and reduced its authorized common stock to 90,000,000 shares, as set forth in the Company\u2019s Current Report on Form 8-K\nfiled February 9, 2023.\n\nForward-Looking Statement Notice\n\n This Quarterly Report on Form 10-Q contains forward-looking statements about our expectations, beliefs or intentions regarding, among other things, our product\ndevelopment efforts, business, financial condition, results of operations, strategies or prospects. In addition, from time to time, our representatives have made or may make\nforward-looking statements, orally or in writing. Forward-looking statements can be identified by the use of forward-looking words such as \u201cbelieve,\u201d \u201cexpect,\u201d \u201cintend,\u201d\n\u201cplan,\u201d \u201cmay,\u201d \u201cshould\u201d or \u201canticipate\u201d or their negatives or other variations of these words or other comparable words or by the fact that these statements do not relate strictly\nto historical or current matters. These forward-looking statements may be included in, but are not limited to, various filings made by us with the SEC, press releases or oral\nstatements 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\nresults 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\nuncertainties 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\nour actual activities or results to differ materially from the activities and results anticipated in forward-looking statements, including, but not limited to, the risk factors set forth\nin our Annual Report on Form 10-K for the year ended December 31, 2022, and in Part II \u2013 Item 1A of this report.\n\n This report identifies important factors which could cause our actual results to differ materially from those indicated by the forward-looking statements, particularly\nthose set forth under Item 1A. \u201cRisk Factors\u201d as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.\n\n Such risk factors 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\nstatements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.\n\n\n 22\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 26 of 220\n\n 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:\n\n - our need to, and difficulty in, raising additional capital;\n\n - downturns in the digital currency industry;\n\n - inflation;\n\n - increased interest rates;\n\n - the inability to procure needed hardware;\n\n - the failure or breakdown of mining equipment, or internet connection failure;\n\n - access to reliable and reasonably priced electricity sources;\n\n - Cyber-security threats;\n\n - our ability to obtain proper insurance;\n\n - construction risks;\n\n - banks and other financial institutions ceasing to provide services to our industry.\n\n - changes to the Bitcoin network\u2019s protocols and software;\n\n - the decrease in the incentive to mine Bitcoin;\n\n - the increase of transaction fees related to digital assets:\n\n - the fraud or security failures of large digital asset exchanges;\n\n - future digital asset, technological and digital currency development; and\n\n - the regulation and taxation of digital assets like Bitcoin;\n\n - our ability to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002;\n\n - material litigation, investigations or enforcement actions by regulators and governmental authorities.\n\n 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\nthe cautionary statements included in this report. Except as required by applicable law, we undertake no obligations to update or revise forward-looking statements to reflect\nevents 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\nrisks and uncertainties.\n\nOverview\n\n Mawson is a \u2018Digital Asset Infrastructure\u2019 business, which owns and operates (through its subsidiaries) modular data centers (\u201cMDCs\u201d) in the United States. We are\nalso developing technology to enable us to own and better operate MDCs.\n\n Our primary business is the ownership and operation of the digital infrastructure associated with the operation of blockchain applications. Application-Specific\nIntegrated Circuit (\u201cASIC\u201d) computers known as Miners enable the \u2018mining\u2019 of digital assets such as Bitcoin. We currently operate in one site located in Pennsylvania USA.\nThe Miners we operate are predominately focused on the process of digital mining, specifically for Bitcoin.\n\n In exchange for powering down our systems and curtailing the power we get from the grid in response to instances of high electricity demand, we receive net energy\nbenefits. We also have a contract with our energy provider where we can trade our energy to achieve net energy benefits. We have recognized a derivative asset on our balance\nsheet for the contract we have with our energy provider, which has been measured at fair value with any changes in fair value recognized in our statement of operations.\n\n We offer \u2018hosting\u2019 or \u2018co-location\u2019 facilities to other businesses in the digital asset infrastructure industry to have their Miners located within our MDCs. These\nbusinesses pay us a fee for the use of our facilities and related services (often based on power consumption).\n\n\n 23\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 27 of 220\n\n We also sell new and used digital currency mining, and MDC equipment on a periodic basis, subject to prevailing market conditions and our surplus production\ncapacity.\n\nAs of March 31, 2023\n\n Existing Order and Cumulative\n Operations Purchase Fleet Fully\n Online Agreements Deployed\nTotal miners online 6,104 - 6,104\nTotal miners in transit - - -\nTotal miners on order - - -\nTotal miners in storage 17,228 - 17,228\nTotal miners 23,332 - 23,332\n\n We continue to conduct research and development in relation to our MDCs which we are actively testing in several configurations and locations to determine the best\nconfiguration for both ASIC and alternate computing uses.\n\nRecent Developments.\n\n\n On April 18, 2023, the Company sold 100% of its membership interest in Luna Squares Texas LLC, which held rights to 4 greenfield leases in Midland, TX, as well as\nrelated contracts. The sale price was $8.5 million in cash and stablecoins. In addition, the Company sold 59 transformers which were earmarked for these Texas sites. The buyer\nwas a fund managed by Mainnet Capital, a Singapore-based fund manager, called M Turing VCC Oracle Phase 1 Fund.\n\n Our legacy business was as a clinical-stage biopharmaceutical company focused on the treatment of ophthalmic disorders, including dry eye syndrome (the \u201cLO2A\u201d\nbusiness). All of the economic benefits of any successful monetization of our LO2A business, if any, would benefit only the holders of contingent value rights (\u201cCVR\u201d) and any\ncontingent right holders. Accordingly we assessed that the fair value of this asset at the acquisition date was $nil. The asset was therefore assessed as impaired and the prior\ncarrying amount of $23.96 million has been fully expensed in the consolidated statements of operations for the year ended December 31, 2021.On March 8, 2021, the Company\nentered into the Contingent Value Rights Agreement (\u201cCVR Agreement\u201d), pursuant to which certain holders of the CVRs had certain rights to any value created in respect of\nthe LO2A business previously carried on by the Company. Despite the holders\u2019 representative\u2019s good faith endeavors, the holders\u2019 representative was unable to procure a\nsuitable transaction. On March 9, 2023, the CVR Agreement was terminated, and the rights of the CVR holders under that agreement expired at the same time. On February 7,\n2023, the Company entered into a share purchase agreement with N.Danenberg Holding (2000) Ltd to sell the Company\u2019s shares or interests in Wize NC Inc, Occuwize Ltd and\nWize Pharma Ltd (\u201cWize Entities\u201d) effective December 31, 2022 in consideration for $10,000. This transaction closed on March 9, 2023. As a result of the sale transaction the\nWize Entities were deconsolidated from the group effective December 31, 2022.\n\n On April 18, 2023, the Company sold 100% of its membership interest in Luna Squares Texas LLC, which held rights to 4 greenfield leases in Midland, TX, as well as\nrelated revenue sharing contracts with the landlords. The sale price was $8.5m in cash and stablecoins. In addition, Mawson sold 59 transformers which were earmarked for\nthese Texas sites.\n\n Effective May 1, 2023 Mawson Ohio LLC took an assignment of a lease for a site in Corning, Ohio. The term of the lease is for 4 years, with 1 option to extend for 5\nyears. The site area has a capacity of up to 24MW, with a potential for a further 26MW (subject to the construction of a new substation). The site has not been accurately\nmeasured and is part of a much larger site of 118 acres, however the lease area is that are which Mawson Ohio LLC requires for the operation its data center facility comprising\nof 12 MDCs. 12 MDCs could house up to approximately 7,056 miners.\n\n On May 3, 2023, the Company has entered into a definitive agreement with institutional investors for the issuance and sale of 2,083,336 shares of its common stock (or\npre-funded warrants in lieu thereof) at a purchase price of $2.40 per share of common stock in a registered direct offering. In addition, in a concurrent private placement, the\nCompany will issue to the institutional investors unregistered warrants to purchase up to 2,604,170 shares of its common stock with an exercise price of $3.23 per share and are\nexercisable six months following issuance for a period of five and one-half years following issuance. The shares of common stock and pre-funded warrants described above are\nbeing offered and sold by the Company pursuant to a \u201cshelf\u201d registration statement on Form S-3 (File No. 333-264062). The warrants to purchase common stock described\nabove were offered and sold by the Company pursuant to Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder. This offering closed on May 8, 2022.\nThe net amount raised was approximately $5.0 million.\n\n As a condition to the sale of 2,083,336 shares of common stock described above, the Company amended the warrants previously issued to one of the investors in that\noffering to purchase an aggregate of 1,666,667 shares of common stock for an exercise price of $6.06 per share, which were issued in July of 2022 (the \u201cExisting Warrants\u201d),\neffective upon the closing of the offering, such that the amended Existing Warrants have a reduced exercise price of $3.23 per share, are exercisable six months following the\nclosing of the offering, and will expire five and one-half years following the closing of this offering.\n\n Effective May 4, 2023, the Company filed a prospectus supplement to amend, supplement and supersede certain information contained in the prospectus supplement\ndated May 27, 2022, and its accompanying prospectus dated April 11, 2022 (collectively, the \u201cMay 2022 Prospectus\u201d), relating to the offer and sale of common stock through\nH.C. Wainwright & Co., LLC (\u201cWainwright\u201d), as sales agent, in \u201cat the market offerings\u201d as defined in Rule 415 promulgated under the Securities Act of 1933, as amended,\npursuant to the At the Market Offering Agreement with Wainwright dated as of May 27, 2022 (the \u201cATM Agreement\u201d). The prospectus supplement reduced the amount of\nshares of Common Stock The Company may offer and sell under the ATM Agreement to an aggregate offering price of up to $9,000,000 from time to time through Wainwright.\n\n Under the May 2022 Prospectus, the Company initially registered up to $100,000,000 of our common stock for offer and sale pursuant to the ATM Agreement.\nHowever, on March 23, 2023, the date the Company filed its Annual Report on Form 10-K for the year ended December 31, 2022, the registration registering the shares being\nsold pursuant to the ATM Agreement became subject to the offering limits set forth in General Instruction I.B.6 of Form S-3. As of May 3, 2023, the aggregate market value of\nour outstanding common stock held by non-affiliates was approximately $45,720,757.33, which we calculated based on 14,371,373 shares of outstanding common stock as of\nMay 3, 2023, of which 12,735,587 shares were held by non-affiliates, and a price per share of $3.59 which was the closing price of our common stock on March 23, 2023.\n\n\n 24\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 28 of 220\n\nEnvironment, Sustainability, Governance\n\n The Company has a strategy to source renewable or sustainable sources of energy, including carbon-neutral or low carbon emissions sources for the majority of its\noperations. This is a key criteria when analyzing a new site for acquisition, or selling an existing site. The Company believes it can make a positive contribution towards\nlowering carbon emissions by supporting low-emissions power sources.\n\n The Company can provide, and has provided, electricity grid stability by curtailing its power usage during times of high power prices through its Energy Markets\nProgram, for example through its membership in the PJM Market, and various demand response programs where they are available.\n\n The Company recognizes the challenges posed by climate change, including regulatory, increased costs, and adverse weather events, and seeks to mitigate these risks\nby for example ensuring that it is informed of regulatory changes, keeping involved with industry groups and thought leaders, and ensuring that physical mitigation steps are\nundertaken, such as during the process if selecting sites in lower risk climates and regions (i.e. cooler climates, less prone to flooding, cyclones or wildfires), and then ensuring\nthat the construction of the sites takes into account potential climate or weather-related events.\n\nResults of Operations \u2013 Three months Ended March 31, 2023 compared to the three months ended March 31, 2022\n\n For the three months ended\n March 31,\n 2023 2022\nRevenues:\n Digital currency mining revenue 2,756,000 18,783,842\n Hosting co-location revenue 4,322,553 548,948\n Net energy benefits 441,055 -\n Sale of equipment 150,997 91,545\nTotal revenues 7,670,605 19,424,335\n Less: Cost of revenues (excluding depreciation) 4,678,002 8,412,360\nGross profit 2,992,603 11,011,975\n Selling, general and administrative 4,977,417 6,476,945\n Share based payments 1,068,288 390,609\n Depreciation and amortization 7,962,523 13,803,032\n Change in fair value of derivative asset 681,225 -\n Total operating expenses 14,689,453 20,670,586\nLoss from operations (11,696,850) (9,658,611)\n Non-operating income/(expense):\n Losses on foreign currency transactions (418,216) (699,237)\n Interest expense (835,107) (1,236,673)\n Loss on write off property and equipment (118,933) -\n Profit on sale of site 790,847 -\n Gain on sale of marketable securities 1,437,230 -\n Other income 44,510 24,447\n Share of net loss of equity method investments (36,356) -\n Total non-operating expense 863,975 (1,911,463)\nLoss before income taxes (10,832,875) (11,570,074)\n Income tax expenses (548,083) -\nNet Loss (11,380,958) (11,570,074)\nLess: Net loss attributable to non-controlling interests (278,933) (234,419)\n\nNet Loss attributed to Mawson Infrastructure Group, Inc. stockholders $ (11,102,025) $ (11,335,655)\n\nNet Loss per share, basic & diluted $ (0.80) $ (0.96)\nWeighted average number of shares outstanding 13,953,308 11,854,946\n\n\n 25\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 29 of 220\n\nRevenues\n\n Digital currency mining revenues from production for the three months ended March 31, 2023 and 2022 were $2.76 million and $18.78 million respectively. This\nrepresented a decrease of $16.02 million or 85%. The decrease in mining revenue for the period was primarily attributable to a decrease in the total Bitcoin produced. Bitcoin\nproduced totaled 121.11 in 2023 compared with 458.68 in the 2022 period, a decrease of 74% of Bitcoin produced over the respective period. The reason for this decrease is due\nto less miners being deployed during the current period due to the sale of the Georgia site which occurred during October 2022, in addition to this the difficulty to mine Bitcoin\nwas also higher during the current quarter. Another reason for the decrease in digital currency mining revenue is due to the average price of Bitcoin. During the quarter ended\nMarch 31, 2023, the average price of Bitcoin was $22,721 whereas the average price of Bitcoin during the quarter ended March 31, 2022 was $41,256, a 45% decrease in the\naverage price.\n\n Hosting co-location revenue for the three months ended March 31, 2023 and 2022 were $4.32 million and $0.55 million respectively. This increase is due to an\nincrease in the number of miners we hosted during the period ended in March 2023.\n\n Net energy benefits for the three months ended March 31, 2023 and 2022, were $0.44 million and $0 respectively. This increase is due to us not offering this service at\nin the three months ended March 31, 2022.\n\n Sales of digital mining equipment for the three months ended March 31, 2023 and 2022, were $0.15 million and $0.09 million, respectively.\n\nOperating Cost and Expenses\n\n Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; share based payments; and depreciation and amortization.\n\nCost of revenues.\n\n Our cost of revenue consists primarily of direct power costs related to digital currency mining, and cost of mining equipment sold.\n\n Cost of revenues for the three months ended March 31, 2023 and 2022 were $4.68 million and $8.41 million, respectively. The decrease in cost of revenue was\nprimarily attributable to a decrease in power costs related to energy to operate the mining equipment within our owned and hosting facilities. This decrease is attributable to less\nminers being used in operations during the current quarter due to the sale of the Georgia site.\n\nSelling, general and administrative.\n\n Our selling, general and administrative expenses consist primarily of professional and management fees relating to: accounting, payroll, audit, and legal; equipment\nrepairs; marketing; freight; insurance; consultant fees; lease amortization and general office expenses.\n\n Selling, general and administrative expenses for the three months ended March 31, 2023 and 2022 were $4.98 million and $6.48 million respectively. Total selling,\ngeneral and administrative expenses reduced by $1.51 million in the period. The main reasons for the decrease the expenses were due to equipment repair costs decreasing by\n$0.83 million; information technology expenses decreased by $0.37 million; freight costs decreased by $0.22 million and marketing costs decreased by $0.22 million. This is\noffset by an increase in property tax of $0.32 million in relation to the Georgia site which was sold during 2022 and an increase in business and property insurance by $0.14\nmillion.\n\n\n 26\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 30 of 220\n\nShare based payments.\n\n Share based payments expenses for the three months ended March 31, 2023 and 2022 were $1.07 million and $0.39 million respectively. In the three months ended\nMarch 31, 2023, share based payments were largely attributable to costs recognized for warrants issued to Celsius Mining LLC amounting to $0.50 million, shares issued to W\nCapital Advisors Pty Ltd amounting to $0.31 million and $0.20 million in relation to long-term incentives for the Company\u2019s leadership team.\n\nDepreciation and amortization.\n\n Depreciation consists primarily of depreciation of digital currency mining hardware and MDC equipment.\n\n Depreciation and amortization for the three months ended March 31, 2023 and 2022 were $7.96 million and $13.80 million, respectively. The decrease is primarily\nattributable to the Company owning less miners in the quarter ended March 31, 2023, as at March 31 2023 there were 23,332 miners whereas as at March 31 2022 there were\n39,225 miners. There was also a revised estimate of the useful life of miners with effect from December 1, 2022 to better reflect the pattern of consumption the change being\neffected by changing the method of depreciation from reducing balance to the straight line method from that date.\n\nChange in fair value of derivative asset\n\n During the three months ended March 31, 2023, there was an adverse change in the fair value of the derivative asset by $0.68 million in relation to our power supply\narrangements.\n\nNon-operating expense\n\n Non-operating expenses consist primarily of interest expense, losses on foreign currency transactions, loss on write off property, plant and equipment, and share of net\nloss of associates accounted for using the equity method.\n\n Interest expense for the three months ended March 31, 2023 and 2022 were $0.84 million and $1.24 million, respectively. This was a decrease of $0.39 million which\nwas attributable to the paydown of debt during 2022 and the current quarter resulting in a lower interest charge.\n\n During the three months ended March 31, 2023, the realized and unrealized loss on foreign currency transactions was $0.42 million, and for the three months ended\nMarch 31, 2022 there was a loss of $0.70 million due to the movement in foreign exchange rates.\n\nNon-operating income\n\n Non-operating income consists primarily of a gain on the sale of investments, profit on sale of site assets and other income.\n\n The gain on sales of marketable securities for the three months ended March 31, 2023 and 2022 were $1.44 million and $0, respectively. The gain during the quarter\nwas in relation to the sale of CleanSpark shares.\n\n The profit on sale of site assets for the three months ended March 31, 2023 and 2022 were $0.79 million and $0, respectively. This gain on sale relates to an accounting\nadjustment relating to the sale of the Georgia site to CleanSpark. The company determined the impact of recording this adjustment during 2023 was not material to the financial\nstatements or the opening balance of the accumulated deficit.\n\nNet loss attributable to Mawson Infrastructure Group, Inc. stockholders\n\n As a result of the foregoing, the Company recognized a net loss of $11.10 million for the three months ended March 31, 2023, compared to a net loss of $11.34 million\nfor the three months ended March 31, 2022.\n\n\n 27\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 31 of 220\n\nLiquidity and Capital Resources\n\nGeneral\n\n 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.\nSignificant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures. For the three\nmonth period ended March 31, 2023, we financed our operations primarily through:\n\n 1. Net cash provided by operating activities of $1.22 million;\n\n 2. On December 9, 2021, MIG No.1 Pty Ltd entered into a Secured Loan Facility Agreement with Marshall Investments MIG Pty Ltd (\u201cMarshall\u201d) with a total loan\n facility of AUD$20 million (USD$12.98 million). Principal repayments began in November 2022, the outstanding balance as at March 31, 2023 is $9.08 million.\n\n 3. On February 23, 2022, Luna Squares LLC entered into the Co-Location Agreement with Celsius Mining LLC, in connection with this agreement, Celsius Mining\n loaned Luna Squares LLC a principal amount of US$20,000,000, for the purpose of funding the infrastructure required to meet part of the obligations of the Co-\n Location Agreement. The outstanding balance as at March 31, 2023 is $11 million.\n\n 4. On July 8, 2022, the Company issued secured convertible promissory notes to investors in the aggregate principal amount of $3,600,000 in exchange for an\n aggregate of $3,600,000. The outstanding loan balance as at March 31, 2023 is $0.5 million.\n\n 5. On July 17, 2022, the Company entered into a Securities Purchase Agreement with an institutional investor providing for the issuance and sale by the Company of\n 1.33 million shares of the Company\u2019s common stock, at a price of $4.80 per share, accompanied by warrants to purchase 1.67 million shares of the Company\u2019s\n common stock in a registered direct offering pursuant to a \u201cshelf\u201d registration statement on Form S-3 (File No. 333-264062). The warrants issued in this offering\n have an exercise price of $6.06 per share of our common stock, are exercisable 6 months after issuance and will expire five and one-half years following issuance.\n This offering closed on July 20, 2022. The net amount raised was $5.62 million.\n\n 6. On September 2, 2022, Mawson Infrastructure Group Pty Ltd entered into a Secured Loan Facility Agreement with W Capital Advisors Pty Ltd with a total loan\n facility of AUD$8 million (USD$5.2 million. The outstanding balance as at March 31, 2023 is $2.36 million.\n\n During the three months ending March 31, 2023 we repaid $5.40 million of principal payments against the historical facilities provided by Celsius and W Capital\nAdvisors Pty Ltd.\n\n We believe our working capital requirements will continue to be funded through a combination of the cash we expect to generate from future operations, our existing\nfunds, external debt facilities available to us and further issuances of shares. These are expected to be adequate to fund our operations over the next twelve months. In addition,\nthe Company has access to equity financing through the ATM offering facility entered in May 2022, however, the Company\u2019s access to its ATM facility is currently limited by\nthe Instruction I.B.6 to Form S-3, known as the \u201cbaby shelf\u201d rules because of the Company\u2019s public float being less than $75 million. Because of the \u201cbaby shelf\u201d rules\nlimitation and the Company\u2019s recent offer and sale of approximately $5 million of shares of common stock and pre-funded warrants (along with a concurrent private offering of\nwarrants to purchase common stock), the Company reduced the amount available to be sold through it ATM facility to $9 million. For our business to grow it is expected we\nwill continue investing in mining equipment, and will require additional working capital in the short-term. We have an aggregate of $22.94 million of debt and 15.33 million of\ncustomer deposits that is required to be repaid within eleven months unless we refinance or renegotiate the terms.\n\n\n 28\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 32 of 220\n\n Please see our Risk Factor entitled \u201cWe may need to raise additional capital to continue our operations and execute our business strategy\u201d in our Annual Report on\nForm 10-K for the year ended December 31, 2022.\n\nWorking Capital and Cash Flows\n\n As of March 31, 2023, and December 31, 2022, we had cash and cash equivalents balance of $1.39 million and $0.95 million, respectively.\n\n As of March 31, 2023, and December 31, 2022, our trade receivables balance was $7.95 million and $10.46 million, respectively.\n\n As of March 31, 2023, we had $22.94 million of outstanding short-term borrowings, and as of December 31, 2022, we had $23.61 million of short-term borrowings.\nThe short-term borrowings as of March 31, 2023, relate to the to the secured loan facilities with Celsius Mining LLC, W Capital Advisors Pty Ltd, the secured convertible\npromissory notes issued to investors and Marshall Investments MIG Pty Ltd. As of March 31, 2023, and as of December 31, 2022, we had $0 and $4.51 million, respectively, of\noutstanding long-term borrowings.\n\n As of March 31, 2023, we had negative working capital of $31.81 million and as at December 31, 2022, we had negative working capital of $15.17 million.\n\n The following table presents the major components of net cash flows (used in) provided by operating, investing and financing activities for the three months ending\nMarch 31, 2023 and 2022:\n\n Three Months Ended\n March 31,\n 2023 2022\n\nNet cash provided by operating activities $ 1,316,592 $ 5,865,759\nNet cash provided by/(used in) investing activities $ 4,069,294 $ (29,661,210)\nNet cash (used in)/provided by financing activities $ (4,935,714) $ 23,484,932\n\n For the three months ended March 31, 2023, net cash provided by operating activities was $1,316,592 and for the three months ended March 31, 2022, net cash\nprovided by operating activities was $5,865,759. The decrease in net cash provided by operating activities was primarily attributable to timing differences in trade and other\nreceivables and trade and other payables.\n\n For the three months ended March 31, 2023, net cash provided by investing activities was $4,069,294 and for the three months ended March 31, 2022 net cash used in\ninvesting activities was $29,661,210. The net cash provided by investing activities during March 31, 2023 was primarily attributable the proceeds from sale of investment\nshares in CleanSpark.\n\n For the three months ended March 31, 2023, net cash used in financing activities was $4,935,714 and for the three months ended March 31, 2022 net provided by\nfinancing activities was $23,484,932. The cash used in financing activities during March 31, 2023 was primarily attributable to the repayment of borrowings.\n\nFinancial condition\n\n As at March 31, 2023 and December 31, 2022, we had net current liabilities of $31.81 million and $15.17 million respectively. As at March 31, 2023 and December\n31, 2022, we had net assets of $66.73 million and $76.17 million respectively. As at March 31, 2023 we had an accumulated deficit of $133.36 million compared to $122.26\nmillion as at December 31, 2022. Our cash position at March 31, 2023, was $1.39 million in comparison to $0.95 million at December 31, 2022. For the three month period\nending March 31 2023 and March 31, 2022 the Company incurred a loss after tax of $11.38 million and a loss after tax of $11.57 million respectively.\n\n\n 29\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 33 of 220\n\n Our primary requirements for liquidity and capital are working capital, capital expenditures, public company costs and general corporate needs. We expect these needs\nto 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\nfacilities available to us and further issuances of shares.\n\n In the event that we require additional capital to respond to competitive pressure, market dynamics, new technologies, customer demands, business opportunities,\nchallenges, acquisitions or unforeseen circumstances in either the short-term or long-term, we may determine to engage in equity or debt financings or enter into credit facilities\nfor other reasons. If we are unable to obtain adequate financing on terms satisfactory to us when we require it, our ability to continue to grow or support our business model and\nto respond to business challenges could be significantly limited. In particular, rising inflation and interest rates, and the conflict between Russia and Ukraine have resulted in,\nand may continue to result in, significant disruption and volatility in the global financial markets, reducing our ability to access capital. If we are unable to raise additional funds\nwhen or on the terms desired, our business, financial condition and results of operations could be adversely affected.\n\nOn May 4, 2023, the Company has entered into a definitive agreement with institutional investors for the issuance and sale of 2,083,336 shares of its common stock at a\npurchase price of $2.40 per share of common stock in a registered direct offering. In addition, in a concurrent private placement, the Company will issue to the institutional\ninvestors unregistered warrants to purchase up to 2,604,170 shares of its common stock with an exercise price of $3.23 per share and are exercisable six months following\nissuance for a period of five and one-half years following issuance. The closing of the registered direct offering and the concurrent private placement is expected to occur on or\nabout May 8, 2023, subject to the satisfaction of customary closing conditions.\n\nNon-GAAP Financial Measures\n\n The Company utilizes a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing its overall business performance, for making\noperating decisions and for forecasting and planning future periods. The Company considers the use of non-GAAP financial measures helpful in assessing its current financial\nperformance, 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\nof 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.\nConsistent with this approach, the Company believes that disclosing non-GAAP financial measures to the readers of its financial information provides such readers with useful\nsupplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. Investors\nare cautioned that there are inherent limitations associated with the use non-GAAP financial measures as an analytical tool. In particular, non-GAAP financial measures are not\nbased 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\nwill be reflected in the company\u2019s financial results for the foreseeable future. In addition, other companies, including other companies in the Company\u2019s industry, may calculate\nnon-GAAP financial measures differently than the Company does, limiting their usefulness as a comparative tool.\n\n The Company is providing supplemental financial measures for (i) non-GAAP adjusted earnings before interest, taxes, depreciation and amortization, or (\u201cadjusted\nEBITDA\u201d) that excludes the impact of interest, taxes, depreciation, amortization, share-based compensation expense, LO2A write-back, unrealized gains/losses on share of\nassociates, and certain non-recurring expenses. We believe that adjusted EBITDA is useful to investors in comparing our performance across reporting periods on a consistent\nbasis.\n\n For the three months Ended\n March 31,\n 2023 2022\nReconciliation of non-GAAP adjusted EBITDA:\nNet loss: $ (11,380,958) $ (11,570,074)\n Share of net loss of equity method investments 36,356 -\n Depreciation and amortization 7,962,523 13,803,032\n Share based payments 1,068,288 390,609\n Unrealized and realized losses/(gain) 418,216 699,237\n Other non-operating income (44,510) (24,447)\n Other non-operating expenses 954,040 1,236,673\n Income tax 548,083 -\nAdjusted EBITDA (non-GAAP) $ (437,962) $ 4,535,030\n\n\n 30\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 34 of 220\n\nCritical accounting estimates\n\n The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts\nreported in the financial statements and accompanying notes. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and\ndisclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of income and expenses during the reporting\nperiods. 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,\nManagement'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, 2022.\n\nItem 3. Quantitative and Qualitative Disclosures about Market Risks\n\n As a smaller reporting company, the Company has elected not to provide the disclosure required by this item.\n\nItem 4. Controls and Procedures\n\nEvaluation of disclosure controls and procedures\n\n Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), has\nevaluated 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\n(the \u201cExchange Act\u201d), as of the end of the period covered by this Quarterly Report. Our management recognizes that any controls and procedures, no matter how well designed\nand operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of\npossible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures\nwere not effective at the reasonable assurance level as of March 31, 2023, due to the material weaknesses in our internal control over financial reporting described below.\nManagement\u2019s assessment of the effectiveness of our disclosure controls and procedures is expressed at a level of reasonable assurance because management recognizes that\nany controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives.\n\n Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of\neffectiveness 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\nor procedures may deteriorate.\n\n 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\nmaterial misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.\n\n Significant Reliance on Key Individuals. There is inadequate segregation of duties in place related to our financial reporting and other management review and\noversight procedures due to the lack of sufficient accounting personnel. This is not inconsistent with similar small fast-growing organizations. This gives rise to the risk of lack\nof ability to react in a timely manner to operations issues and meet increased US GAAP/SOX/SEC registrant requirements. In addition, this poses the risk that compliance and\nother reporting obligations are not dealt with in an adequate manner.\n\n Controls over the financial statement close and reporting process. Controls were not adequately designed or implemented in the financial statement close and\nreporting process. This includes controls related to complex and judgmental accounting transactions including business acquisitions and divestures, derivatives, manual journal\nentries, account reconciliations and financial statement policies and disclosures.\n\n\n 31\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 35 of 220\n\n Information and Technology Controls. There are control deficiencies related to information technology (\u201cIT\u201d) general controls that aggregate into a material\nweakness. Deficiencies identified include lack of controls over access to programs and data, program changes, program development, program changes and general IT controls.\n\n Data from third parties. The Company did not properly execute its designed controls to ensure that data received from third parties is complete and accurate. Such\ndata is relied on by the Company in determining amounts pertaining to mining and hosting revenue, net energy benefits, and digital currency assets.\n\n Fixed asset verification. The Company did not properly execute its designed controls around physical asset verification at US mining sites. Together with system\nlimitations, restricting tracking of fixed asset movements, there is a risk around the existence of fixed assets. The root cause is the lack of sufficient capable personnel to\nperform physical asset inspections, combined with system limitations.\n\n Notwithstanding the identified material weaknesses and management\u2019s assessment that our internal control over financial reporting was not effective as of March\n31,2023, management believes that the consolidated condensed financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our\nfinancial 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\nassistance of outside advisors with expertise in these matters in preparing the financial statements.\n\nRemediation\n\n Our Board of Directors and management take internal control over financial reporting and the integrity of our financial statements seriously. With the oversight of\nsenior management and our audit committee, we continue to remediate the underlying causes of the identified material weaknesses, such that the controls are designed,\nimplemented and operating effectively.\n\n Our remediation efforts commenced in the prior financial year, where we performed a risk assessment, designed controls, and gradually implemented controls for all\nbusiness processes. In the current financial year, management updated the initial risk assessment, refined control designs, continued the implementation of controls and\nperformed ongoing remediation efforts to uplift the quality and effectiveness of existing controls. Remediation efforts further included the implementation of new IT systems\nand applications with robust controls, segregating duties through implementing system workflows and the hiring of qualified personnel in financial reporting and IT. A number\nof controls remain to be implemented in the upcoming quarters.\n\n The material weaknesses in our internal control over financial reporting will not be considered remediated until controls operated for a sufficient period of time and\nhave been tested for and concluded on for effectiveness. Formal management testing of the effectiveness of controls is planned for the third and fourth quarters of this financial\nyear.\n\n Remediation efforts for upcoming quarters will be focused on implementing the remainder of controls, refining existing controls and validating the effectiveness of\nimplemented controls using criteria set forth by Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control. We cannot provide any\nassurance that our remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts. In addition, we continue\nto evaluate and work to improve our internal control over financial reporting related to the identified material weaknesses, management may determine to take additional\nmeasures to address control deficiencies or determine to modify the remediation plan described above.\n\nChanges in internal control over financial reporting\n\n 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\n15d-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\nCompany\u2019s internal control over financial reporting.\n\nLimitations on Effectiveness of Controls and Procedures and Internal Control over Financial Reporting\n\n In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and\nprocedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure\ncontrols and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment\nin evaluating the benefits of possible controls and procedures relative to their costs.\n\n\n 32\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 36 of 220\n\n PART II. OTHER INFORMATION\n\nItem 1. Legal Proceedings\n\n We are currently not, and have not been in the recent past, a party to any legal proceedings which may have or have had in the recent past significant effects on our\nfinancial position or profitability. However, we have been in the past, and may be from time to time in the future, named as a defendant in certain routine litigation incidental to\nour business.\n\nItem 1A. Risk Factors\n\n The Company\u2019s risk factors were disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 which was filed on March 23,\n2023. The Company does not have any additional risk factors to disclose.\n\nItem 2. Unregistered Sales of Equity Securities and Use of Proceeds\n\n On January 16, 2023, the Company entered into an arrangement with the holder of a convertible promissory note whereby the holder received pre-payment of interest\nto become due under the convertible promissory note by means of the Company issuing 18,807 shares of common stock to the holder. The shares issued were valued at $0.06\nmillion on the date of issuance and represented a partial payment of the interest on the debt.\n\n On February 10, 2023, the Company issued to W Capital Advisors Pty Ltd 93,334 shares of the Company\u2019s common stock valued at $0.31 million on the date of\nissuance for consultancy and advisory services provided to the Company.\n\n We believe that the foregoing sales qualified for exemption under Section 4(a)(2) of the Securities Act and/or Regulation D, as promulgated under the Securities Act,\nsince the issuance of the securities by us did not involve a public offering. The offerings were not \u201cpublic offerings\u201d as defined in Section 4(a)(2) due to the type of investors,\nthe insubstantial number of investors involved in the offering, the size of the offering, the manner of the offering and number of securities offered. In addition, these security\nholders represented as to the necessary investment intent as required by Section 4(a)(2) and/or Regulation D. We did not employ an underwriter in connection with the issuance\nof the securities described above.\n\nItem 3. Defaults Upon Senior Securities\n\n None\n\nItem 4. Mine Safety Disclosures\n\n Not applicable.\n\nItem 5. Other Information\n\n None\n\n\n 33\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 37 of 220\n\nItem 6. Exhibits\n\n2.1\u2020 Bid Implementation Agreement between Wize Pharma, Inc. and Cosmos Capital Limited, dated December 30, 2020 (Incorporated by reference to the Company\u2019s\n Current Report on Form 8-K filed with the SEC on January 5, 2021)\n2.2\u2020 Deed of Amendment, dated January 18, 2021, of the Bid Implementation Agreement between Wize Pharma, Inc. and Cosmos Capital Limited, dated December\n 30, 2020 (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with the SEC on January 19, 2021)\n3.1 Certificate of Incorporation (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with the SEC on April 5, 2012)\n3.2 Certificate of Amendment to Certificate of Incorporation (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with the SEC on July 18,\n 2013)\n3.3 Certificate of Amendment to Certificate of Incorporation dated November 15, 2017 (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed\n with the SEC on November 21, 2017)\n3.4 Certificate of Amendment to Certificate of Incorporation dated March 1, 2018 (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with\n the SEC on March 5, 2018)\n3.5 Certificate of Amendment to Certificate of Incorporation dated March 17, 2021 (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with\n the SEC on March 23, 2021)\n3.6 Certificate of Amendment to Certificate of Incorporation dated June 9, 2021 (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with the\n SEC on June 14, 2021)\n3.7 Certificate of Amendment to Certificate of Incorporation dated August 11, 2021 (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with\n the SEC on August 16, 2021)\n3.8* Certificate of Amendment to Certificate of Incorporation dated February 6, 2022\n3.9 Certificate of Registration of a Company of Cosmos Capital Limited ACN 636 458 912 (Incorporated by reference to the Company\u2019s Registration Statement on\n Form S-1 (File No. 333-256947) filed with the SEC on June 9, 2021)\n3.10 Constitution of Cosmos Capital Limited (Incorporated by reference to the Company\u2019s Registration Statement on Form S-1 (File No. 333-256947) filed with the\n SEC on June 9, 2021)\n3.11 Bylaws (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with the SEC on May 10, 2013)\n10.1 Director Appointment Letter between the Company and Rahul Mewawalla dated January 31, 2023 (Incorporated by reference to the Company\u2019s Current Report\n on Form 8-K filed with the SEC on January 31, 2023)\n31.1* Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.\n31.2* Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.\n32** Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.\n99.1* Press Release\n99.2* Investor Presentation\n101 The following materials from the Company\u2019s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline XBRL (eXtensible\n Business Reporting Language): (i) Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, (ii) Consolidated Statements of Operations for the\n three months ended March 31, 2023 and 2022, (iii) Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022, and (iv) Notes\n to Consolidated Financial Statements\n104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)\n\n* Filed herewith.\n\n** Furnished herewith.\n\n\u2020 Exhibits and schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. We will furnish the omitted exhibits and schedules to the Securities\n and Exchange Commission upon request by the Securities and Exchange Commission.\n\n\n 34\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 38 of 220\n\n SIGNATURES\n\n Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the\nundersigned, thereunto duly authorized.\n\n Mawson Infrastructure Group Inc.\n\nDate: May 15, 2023 By: /s/ James Manning\n James Manning, Chief Executive Officer\n (Principal Executive Officer)\n\nDate: May 15, 2023 By: /s/ Ariel Sivikofsky\n Principal Financial Officer\n (Principal Financial and Accounting Officer)\n\n\n 35\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 39 of 220\n\n\n\n\n EXHIBIT B\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 40 of 220\n UNITED STATES\n SECURITIES AND EXCHANGE COMMISSION\n Washington, D.C. 20549\n\n FORM 10-Q\n\n (Mark One)\n \u2612 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n For the quarterly period ended June 30, 2023\n\n or\n\n \u2610 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n For the transition period from ________________ to ________________\n\n Commission File Number: 001-40849\n\n Mawson Infrastructure Group Inc.\n (Exact name of registrant as specified in its charter)\n\n Delaware XX-XXXXXXX\n (State or other jurisdiction of (I.R.S. Employer\n incorporation or organization) Identification No.)\n\n 201 Clark Street, Sharon, Pennsylvania 16146\n (Address of principal executive offices) (Zip Code)\n\n +1-412 -515-0896\n (Registrant\u2019s telephone number, including area code)\n\n\n (Former name, former address and former fiscal year, if changed since last report)\n\nSecurities registered pursuant to Section 12(b) of the Act:\n\n Title of each class Trading symbol(s) Name of each exchange on which registered\n Common Stock, par value $0.001 per share MIGI The Nasdaq Stock Market LLC\n\nIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934\nduring the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing\nrequirements for the past 90 days. Yes \u2612 No \u2610\n\nIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of\nRegulation S-T (\u00a7232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).\nYes \u2612 No \u2610\n\nIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an\nemerging growth company. See the definitions of \u201clarge accelerated filer,\u201d \u201caccelerated filer,\u201d \u201csmaller reporting company,\u201d and \u201cemerging growth\ncompany\u201d in Rule 12b-2 of the Exchange Act.\n\nLarge accelerated filer \u2610 Accelerated filer \u2610\nNon-accelerated filer \u2612 Smaller reporting company \u2612\n Emerging growth company \u2610\n\nIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new\nor revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. \u2610\n\nIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes \u2610 No \u2612\n\nAs of August 18, 2023, the issuer had a total of 16,518,043 shares of common stock, par value $0.001 per share, outstanding.\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 41 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC.\n FORM 10-Q\n FOR THE QUARTER ENDED JUNE 30, 2023\n\n TABLE OF CONTENTS\n\n Page\nItem Number\n Part I \u2013 Financial Information\n\nItem 1. Financial Statements 1\nItem 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations 26\nItem 3. Quantitative and Qualitative Disclosures about Market Risks 39\nItem 4. Controls and Procedures 39\n\n Part II \u2013 Other Information\n\nItem 1. Legal Proceedings 41\nItem 1A. Risk Factors 41\nItem 2. Unregistered Sales of Equity Securities and Use of Proceeds 43\nItem 3. Defaults Upon Senior Securities 43\nItem 4. Mine Safety Disclosure 43\nItem 5. Other Information 43\nItem 6. Exhibits 44\n Signatures 45\n\n\n i\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 42 of 220\n\n PART I. FINANCIAL INFORMATION\n\nItem 1. Financial Statements\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED BALANCE SHEETS\n\n June 30, December 31,\n 2023 2022\nASSETS (unaudited)\nCurrent assets:\n Cash and cash equivalents $ 5,607,254 $ 946,265\n Prepaid expenses 3,584,578 3,488,868\n Trade and other receivables 6,403,552 10,458,076\n Assets held for sale - 5,446,059\nTotal current assets 15,595,384 20,339,268\nProperty and equipment, net 78,529,474 91,016,498\nDerivative asset 5,174,446 11,299,971\nInvestments, equity method 1,993,837 2,085,373\nMarketable securities - 3,243,957\nSecurity deposits 424,064 2,524,065\nOperating lease right-of-use asset 3,052,978 2,819,933\n\nTotal assets $ 104,770,183 $ 133,329,065\n\nLIABILITIES AND STOCKHOLDERS\u2019 EQUITY\nCurrent liabilities:\n Trade and other payables $ 25,337,339 $ 10,572,061\n Current portion of operating lease liability 1,649,529 1,300,062\n Current portion of finance lease liability 31,859 30,702\n Current portion of long-term borrowings 20,873,805 23,610,583\nTotal current liabilities 47,892,532 35,513,408\nCustomer deposits - 15,328,445\nOperating lease liability, net of current portion 1,478,707 1,727,975\nFinance lease liability, net of current portion 67,000 83,223\nLong-term borrowings, net of current portion - 4,509,894\nTotal liabilities 49,438,239 57,162,945\nCommitments and Contingencies (Note 9)\n\nStockholders\u2019 equity:\nSeries A preferred stock; 1,000,000 shares authorized, no shares issued and outstanding as of June 30, 2023 and\n December 31, 2022 - -\nCommon stock, $0.001 par value per share; 90,000,000 shares authorized, 16,454,709 and 13,625,882 shares issued\n and outstanding as of June 30, 2023, and December 31, 2022, respectively 16,455 13,626\n Additional paid-in capital 202,136,148 194,294,559\n Accumulated other comprehensive income 5,321,282 5,021,467\n Accumulated deficit (150,703,559) (122,257,628)\nTotal Mawson Infrastructure Group, Inc. stockholders\u2019 equity 56,770,326 77,072,024\nNon-controlling interest (1,438,382) (905,904)\nTotal stockholder\u2019s equity 55,331,944 76,166,120\nTotal liabilities and stockholder\u2019s equity $ 104,770,183 $ 133,329,065\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 1\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 43 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS\n (Unaudited)\n\n For the three months For the six months\n ended ended\n June 30, June 30,\n 2023 2022 2023 2022\nRevenues:\n Digital currency mining revenue $ 4,896,521 $ 16,212,525 $ 7,652,521 $ 34,996,368\n Hosting co-location revenue 4,594,752 3,567,912 8,917,306 4,116,860\n Net energy benefits 1,017,678 - 1,458,734 -\n Sale of equipment 42,584 - 193,581 91,545\n Total revenues 10,551,535 19,780,437 18,222,142 39,204,773\n Less: Cost of revenues (excluding depreciation) 7,028,458 14,359,072 11,706,460 22,771,433\nGross profit 3,523,077 5,421,365 6,515,682 16,433,340\n Selling, general and administrative 6,265,256 9,431,088 11,242,674 15,908,034\n Stock based compensation 687,276 936,235 1,691,619 1,326,844\n Depreciation and amortization 8,789,755 16,023,817 16,752,279 29,826,849\n Change in fair value of derivative asset 5,444,300 (17,714,357) 6,125,525 (17,714,357)\n Total operating expenses 21,186,587 8,676,783 35,812,097 29,347,370\nLoss from operations (17,663,510) (3,255,418) (29,296,415) (12,914,030)\nNon-operating income (expense):\n Losses on foreign currency transactions (397,165) 1,657,055 (815,382) 957,818\n Interest expense (647,062) (1,565,040) (1,546,114) (2,801,713)\n Impairment of financial assets - (1,107,197) - (1,107,197)\n Profit on sale of site 2,562,283 - 3,353,130 -\n Gain on sale of marketable securities - - 1,437,230 -\n Other income 252,363 1,864,968 177,941 1,889,415\n Share of net loss of equity method investments - - (36,356) -\n Total non-operating income (expense), net 1,770,419 849,786 2,570,449 (1,061,677)\nLoss before income taxes (15,893,091) (2,405,632) (26,725,966) (13,975,707)\n Income tax expense (1,756,371) - (2,304,454) -\nNet Loss (17,649,462) (2,405,632) (29,030,420) (13,975,707)\nLess: Net loss attributable to non-controlling interests (305,556) (288,229) (584,489) (522,648)\nNet Loss attributed to Mawson Infrastructure Group stockholders $ (17,343,906) $ (2,117,403) $ (28,445,931) (13,453,059)\n\nNet Loss per share, basic and diluted $ (1.12) $ (0.18) $ (1.93) $ (1.12)\nWeighted average number of shares outstanding 15,527,824 11,933,092 14,744,915 11,965,129\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 2\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 44 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS\n (Unaudited)\n\n For the three months For the six months\n ended ended\n June 30, June 30,\n 2023 2022 2023 2022\nNet Loss $ (17,649,462) $ (2,405,632) $ (29,030,420) $ (13,975,707)\nOther comprehensive (income) loss\nForeign currency translation adjustment 220,093 (2,579,238) 351,826 (1,995,930)\nComprehensive loss (17,429,369) (4,984,870) (28,678,594) (15,971,637)\nLess: Comprehensive loss attributable to non-controlling interests (305,556) (288,229) (584,489) (522,648)\nComprehensive loss attributable to common stockholders $ (17,123,813) $ (4,696,641) $ (28,094,105) $ (15,448,989)\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 3\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 45 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS\u2019 EQUITY\n (Unaudited)\n\n For the Three Months Ended June 30, 2023\n\n Accumulated Total\n Common Common Additional Other Mawson Non-\n Stock Stock Paid-in- Comprehensive Accumulated Stockholders\u2019 controlling Total\n (#) ($) Capital Income/(Loss) Deficit Equity interest Equity\nBalance as of March 31, 2023 14,131,110 $ 14,131 $ 196,110,680 $ 5,112,159 $(133,359,653) $ 67,877,317 $(1,143,796) $ 66,733,521\nIssuance of warrants - - 500,500 - - 500,500 - 500,500\nExercising of RSU\u2019s and stock\n options 656 1 - - - 1 - 1\nIssuance of RSU\u2019s and stock\n options - - 186,775 - - 186,775 - 186,775\nIssuance of common stock, net\n of issuance costs 2,322,943 2,323 5,338,193 - - 5,340,516 - 5,340,516\nNet loss - - - - (17,343,906) (17,343,906) (305,556) (17,649,462)\nOther comprehensive income - - - 209,123 - 209,123 10,970 220,093\nBalance as of June 30, 2023 16,454,709 $ 16,455 $202,136,148 $ 5,321,282 $(150,703,559) $ 56,770,326 $(1,438,382) $ 55,331,944\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 4\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 46 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS\u2019 EQUITY\n (Unaudited)\n\n For the Three Months Ended June 30, 2022\n\n Accumulated Total\n Common Common Additional Other Mawson Non-\n Stock Stock Paid-in- Comprehensive Accumulated Stockholders\u2019 controlling Total\n (#) ($) Capital Income/(Loss) Deficit Equity interest Equity\nBalance as of March 31, 2022 11,930,883 $ 11,931 $186,712,936 $ 62,214 $ (82,458,914) $ 104,328,167 $ (399,045) $103,929,122\nIssuance of common stock, stock\n based compensation 833 1 435,733 - - 435,734 - 435,734\nIssuance of warrants - - 500,500 - - 500,500 - 500,500\nIssuance of RSU\u2019s and stock\n options 150,167 150 746 - - 896 - 896\nNet loss - - - - (2,117,403) (2,117,403) (288,229) (2,405,632)\nOther comprehensive income - - - (2,592,266) - (2,592,266) 13,028 (2,579,238)\nNon-controlling interest - - (917,684) - 1,623,457 705,773 534,019 1,239,792\nBalance as of June 30, 2022 12,081,883 $ 12,082 $186,732,231 $ (2,530,052) $ (82,952,860) $ 101,261,401 $ (140,227) $101,121,174\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 5\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 47 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS\u2019 EQUITY\n (Unaudited)\n\n For the Six Months Ended June 30, 2023\n\n Accumulated Total\n Common Common Additional Other Mawson Non-\n Stock Stock Paid-in- Comprehensive Accumulated Stockholders\u2019 controlling Total\n (#) ($) Capital Income/(Loss) Deficit Equity interest Equity\nBalance as of December 31,\n 2022 13,625,882 $ 13,626 $194,294,559 $ 5,021,467 $(122,257,628) $ 77,072,024 $ (905,904) $ 76,166,120\nConversion of notes payable into\n common stock 104,319 104 276,855 - - 276,959 - 276,959\nIssuance of common stock in\n lieu of interest on borrowings 18,807 19 63,926 - - 63,945 - 63,945\nIssuance of common stock for\n services 93,334 93 306,976 - - 307,069 - 307,069\nIssuance of warrants - - 1,001,000 - - 1,001,000 - 1,001,000\nExercising of RSU\u2019s and stock\n options 113,760 114 (114) - - - - -\nStock based compensation for\n RSUs - - 383,550 - - 383,550 - 383,550\nIssuance of common stock, net\n of issuance costs 2,498,607 2,499 5,809,396 - - 5,811,895 - 5,811,895\nNet loss - - - - (28,445,931) (28,445,931) (584,489) (29,030,420)\nOther comprehensive income - - - 299,815 - 299,815 52,011 351,826\nBalance as of June 30, 2023 16,454,709 $ 16,455 $202,136,148 $ ) )\n 5,321,282 $(150,703,559 $ 56,770,326 $(1,438,382 $ 55,331,944\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 6\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 48 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS\u2019 EQUITY\n (Unaudited)\n\n For the Six Months Ended June 30, 2022\n\n Accumulated Total\n Common Common Additional Other Mawson Non-\n Stock Stock Paid-in- Comprehensive Accumulated Stockholders\u2019 controlling Total\n (#) ($) Capital Income/(Loss) Deficit Equity interest Equity\nBalance as of December 31, 2021 11,791,085 11,791 186,377,777 (521,094) (71,123,259) 114,745,215 (164,626) 114,580,589\nIssuance of common stock, stock\n based compensation 3,131 3 543,460 - - 543,463 - 543,463\nIssuance of warrants - - 667,333 - - 667,333 - 667,333\nIssuance of RSU\u2019s and stock\n options 287,667 288 61,345 - - 61,633 - 61,633\nNet loss - - - - (13,453,059) (13,453,059) (522,648) (13,975,707)\nOther comprehensive income - - - (2,008,958) - (2,008,958) 13,028 (1,995,930)\nNon-controlling interest - - (917,684) - 1,623,458 705,774 534,019 1,239,793\nBalance as of June 30, 2022 12,081,883 $ 12,082 $186,732,231 (2,530,052) (82,952,860) 101,261,401 (140,227) 101,121,174\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 7\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 49 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS\n (Unaudited)\n\n For the six months ended\n June 30,\n 2023 2022\nCASH FLOWS FROM OPERATING ACTIVITIES\n Net loss $ (29,030,420) $ (13,975,707)\nAdjustments to reconcile net loss to net cash provided by (used in) operating activities:\n Depreciation and amortization 16,752,279 29,826,849\n Amortization of operating lease right-of-use asset 678,310 809,130\n Foreign exchange gain 751,833 137,758\n Sale of intellectual property - (1,465,829)\n Stock based compensation 1,691,619 1,326,844\n Non-cash interest expense 866,691 138,293\n Unrealized (gain) loss on derivative asset 6,125,525 (17,714,357)\n Non-controlling interest - 1,239,793\n Gain on sale of marketable securities (1,437,230) -\n Share of loss from equity method investments 36,122 -\n Loss on sale of property and equipment 158,023 -\n Loss on write off of property and equipment 73,243 -\n Profit on sale of site (3,353,130) -\nChanges in assets and liabilities: -\n Trade and other receivables 1,808,709 1,394,878\n Operating lease liabilities (807,136) -\n Other current assets 2,004,290 (7,869,996)\n Trade and other payables (511,208) 39,299,304\nNet cash (used in) provided by operating activities (4,192,480) 33,146,960\nCASH FLOWS FROM INVESTING ACTIVITIES\n Payment for the purchase of property and equipment (4,851,771) (21,100,867)\n Proceeds from sale of site 8,107,508 -\n Proceeds from sales of property and equipment 584,301 -\n Proceeds from sale of marketable securities 6,927,003 -\n Payment of property and equipment deposits - (32,054,326)\nNet cash provided by (used in) investing activities 10,767,041 (53,155,193)\nCASH FLOWS FROM FINANCING ACTIVITIES\n Proceeds from common share issuances 6,192,845 51,524\n Payments of stock issuance costs (380,950) -\n Proceeds from borrowings 1,986,870 26,581,467\n Repayment of finance lease liabilities (19,088) (937,008)\n Repayment of borrowings (9,672,854) (6,182,245)\nNet cash (used in) provided by financing activities (1,893,177) 19,513,738\nEffect of exchange rate changes on cash and cash equivalents (20,395) (2,478,952)\nNet increase in cash and cash equivalents 4,660,989 (2,973,447)\nCash and cash equivalents at beginning of period 946,265 5,467,273\nCash and cash equivalents at end of period $ 5,607,254 $ 2,493,826\nSupplemental disclosure of cash flow information\nNon-cash transactions\nRecognition of right of use operating asset and lease liability $ 911,356 $ -\nAccrued interest on convertible notes settled in common stock $ 276,959 $ -\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 8\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 50 of 220\n\n MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES\n NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS\n (Unaudited)\n\nNOTE 1 \u2013 GENERAL\n\nGeneral\n\nMawson Infrastructure Group, Inc. (the \u201cCompany\u201d or \u201cMawson\u201d or \u201cwe\u201d), was incorporated in the State of Delaware on February 10, 2012.\n\nMawson, through its subsidiaries, is a \u2018Digital Asset Infrastructure\u2019 business, which owns and operates data centers in the United States. As at June 30,\n2023, Mawson owned 23,458 Application-Specific Integrated Circuit (\u201cASIC\u201d) computers known as \u201cMiners,\u201d specifically focused on the SHA-256\nalgorithm.\n\nThe accompanying consolidated financial statements, including the results of the Company\u2019s subsidiaries: Mawson Infrastructure Group Pty Ltd (\u201cMawson\nAU\u201d), Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, MIG No.1 Pty Ltd, MIG No.1 LLC, Mawson AU Pty Ltd, Luna\nSquares LLC, Mawson Bellefonte LLC (formed May 5, 2023), Luna Squares Repairs LLC, Luna Squares Property LLC, Mawson Midland LLC, Mawson\nHosting LLC, Mawson Ohio LLC and Mawson Mining LLC (collectively referred to as the \u201cGroup\u201d), have been prepared by the Company, pursuant to the\nrules and regulations of the U.S. Securities and Exchange Commission (\u201cSEC\u201d) and in accordance with generally accepted accounting principles in the\nUnited States (\u201cU.S. GAAP\u201d).\n\nThese consolidated, condensed unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements of\nthe Group as of December 31, 2022, and the notes thereto, included in the Company\u2019s Annual Report on Form 10-K filed with SEC on March 23, 2023.\nAccordingly, they do not include all the information and footnotes required by U.S GAAP for complete financial statements. The results of the interim\nperiod are not necessarily indicative of the results to be expected for the full year ending December 31, 2023. These consolidated, condensed interim\nfinancial statements reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position, the results of\noperations and cash flows of the Company for the periods presented.\n\nGoing Concern\n\nThe accompanying unaudited consolidated condensed financial statements have been prepared assuming the Company will continue as a going concern\nbasis and in accordance with generally accepted accounting principles in the United States of America. The going concern basis of presentation assumes\nthat 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\nits liabilities and commitments in the normal course of business.\n\nPursuant to the requirements of the Financial Accounting Standards Board\u2019s Accounting Standards Codification (\u201cASC\u201d) Topic 205-40, Disclosure of\nUncertainties about an Entity\u2019s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in\nthe aggregate, that raise substantial doubt about the Company\u2019s ability to continue as a going concern for one year from the date these financial statements\nare issued. This evaluation does not take into consideration the potential mitigating effect of management\u2019s plans that have not been fully implemented or\nare not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology,\nmanagement evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company\u2019s ability to continue as a going\nconcern. The mitigating effect of management\u2019s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented\nwithin 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\nconditions or events that raise substantial doubt about the entity\u2019s ability to continue as a going concern within one year after the date that the financial\nstatements are issued.\n\n\n 9\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 51 of 220\n\nFor the six month period ended June 30, 2023, the Company incurred a loss after tax of $29.03 million, and as at June 30, 2023, had net current liabilities\nof $32.30 million, had total net assets of $55.33 million and had an accumulated deficit of $150.70 million. The Company\u2019s cash position as at June 30,\n2023, was $5.61 million.\n\nBitcoin prices have recovered from their lows of approximately $16,000 in late 2022 to approximately $30,000 recently, however this price is still\nsubstantially less than the previous highs of approximately $67,000 in late 2021. In addition, the difficulty of earning Bitcoin is approximately 70% higher\nthan the same time last year, and trending higher, which means the Company typically earns less Bitcoin for the same effort. In addition, the rewards that\nBitcoin miners earn are expected to halve (not including transaction fees) in or about April or May 2024. The Company\u2019s miners and other mining\nequipment will require replacement over time to ensure that the Company can continue to competitively and efficiently produce Bitcoin. These trend\nfactors are outside the Company\u2019s direct control, and the Company may not be able to practically mitigate their impact. The Company cannot predict with\nany certainty whether these trends will reverse or persist.\n\nOn July 20, 2023 we received a notice from Celsius Mining LLC that Celsius Mining LLC does not intend to renew its Customer Equipment Co-Location\nAgreement (\u201cCo-Location Agreement\u201d), under which it receives hosting services from Luna Squares LLC (a subsidiary of the Company), and that it will\nexpire in accordance with its terms. Celsius Mining LLC is currently the Company\u2019s only hosting customer. The Company hosts approximately 20,000\nminers for Celsius Mining LLC. In addition, Celsius Mining LLC has made certain allegations against Luna Squares LLC in respect of its performance\nunder the Co-Location Agreement. Luna Squares LLC has made certain allegations against Celsius Mining LLC in respect of its performance under the\nCo-Location Agreement. There is a risk of a dispute or litigation arising out of these cross allegations, which also relate to the advanced deposit paid by\nCelsius Mining LLC to Luna Squares LLC valued at $15.33 million (the \u201cCelsius Deposit\u201d) and Luna Squares LLC\u2019s and Celsius Mining LLC\u2019s\nperformance under the Co-Location Agreement. Luna Squares LLC claims, amongst other things, that the deposit, in full or in part, has been forfeited due\nto Celsius Mining LLC\u2019s breaches and its other actions or inactions under the Co-Location Agreement. If Celsius Mining LLC prevails on the dispute,\nLuna Squares LLC could be required to return the deposit to Celsius Mining LLC. While this amount is included as a current liability within trade and\nother payables in the consolidated condensed Balance Sheet, the outcome of the dispute is uncertain. In addition, Celsius Mining LLC has failed to pay\napproximately $3.40 million worth of pre-petition and post-petition hosting invoices. Celsius Mining LLC and Luna Squares LLC have indicated a\nwillingness to continue discussions for hosting services including related to the Co-Location Agreement, and the timing and outcome of such discussions\nare uncertain.\n\nHosting revenue accounts for a substantial part of the Company\u2019s revenue. The Company is in active discussions with potential new customers for hosting\nservices to replace Celsius, however there is no certainty that the Company will be able to enter into hosting agreements with new customers in a timely\nmanner, or at all, or that the agreements with the new customers will replace all the revenue that Celsius Mining LLC generates for the Company. The\nCompany may decide to use the hosting infrastructure\u2019s capacity to self-mine or for other purposes, however it will need to raise a potentially significant\namount of capital to finance and acquire further hardware (specifically miners) for self-mining and the potential timing and outcome of these other potential\noptions are uncertain.\n\nIn addition to the Celsius Deposit, in connection with the Co-Location Agreement, Celsius Mining LLC loaned $20 million to Luna Squares LLC, through\na Secured Promissory Note (the \u201cCelsius Promissory Note\u201d), which has a maturity date of August 23, 2023, and an outstanding balance as at June 30, 2023,\nof $11.33 million. On July 18, 2023 Luna Squares LLC paid to Celsius Mining LLC $3.33 million as principal and interest.\n\nCelsius Mining LLC is currently in default on payments on the Co-Location Agreement to Luna Squares LLC, and the Company and Luna Squares LLC\nhave reserved all rights.\n\nCelsius Mining LLC filed for Chapter 11 bankruptcy protection on July 13, 2022. On July 25, 2023, Celsius Mining LLC filed a Debtors\u2019 Ex Parte Motion\nfor an Order Under Federal Rules of Bankruptcy for Subpoenas for Examination of, and Production of Documents from Mawson Infrastructure Group Inc.,\nLuna Squares LLC, and Cosmos Infrastructure LLC, and the Bankruptcy Court entered an Order on July 26, 2023. Celsius Mining LLC has indicated it\nintends to use the process of discovery to evaluate the status of the liens securing the Celsius Promissory Note and other potential claims Celsius Mining\nLLC may have against Mawson and its related entities, including with respect to the Co-Location Agreement. The discovery process is ongoing.\n\nThe Company has a Secured Loan Facility Agreement with Marshall Investments GCP Pty Ltd ATF for the Marshall Investments MIG Trust (\u201cMarshall\u201d).\nThe loan matures in February 2024 and the outstanding balance is $8.07 million as at June 30, 2023. On June 30, 2023, MIG No. 1 Pty Ltd did not make a\nprincipal and interest payment of $0.50 million. MIG No. 1 Pty Ltd and Marshall are in ongoing discussions with respect to the payment, and the loan\nterms generally. Marshall and MIG No. 1 Pty Ltd have each reserved their rights.\n\n\n 10\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 52 of 220\n\nA subsidiary of the Company, Mawson Infrastructure Group Pty Ltd (\u201cMIG PL\u201d) has a Secured Loan Facility Agreement for working capital with W\nCapital Advisors Pty Ltd with a total loan facility of AUD$8 million (USD$5.2 million) (\u201cWorking Capital Loan\u201d). As at June 30, 2023, AUD$1.46 million\n(USD$0.97 million) has been drawn down from this facility. The Secured Loan Facility expired in March 2023 and the Company and W Capital Advisors\nPty Ltd are in ongoing discussions regarding the terms and extension of the loan. W Capital Advisors Pty Ltd and MIG PL have each reserved their rights.\n\nThe Company has a Secured Convertible Promissory Note with W Capital Advisors Pty Ltd with an outstanding balance of $0.50 million as at June 30,\n2023. The Convertible Note matured in July 2023 and the Company is in ongoing discussions with the noteholder. W Capital Advisors Pty Ltd and the\nCompany have each reserved their rights.\n\nThe Company has not fulfilled specific payment obligations related to the Marshall loan, the Working Capital Loan and Secured Convertible Promissory\nNote mentioned above. Consequently, the creditors associated with these debt facilities may initiate actions as allowed by relevant grace periods. This\nincludes the possibility of opting to expedite the repayment of the principal debt, pursuing legal action against the Company for payment default, raising\ninterest rates to the default rate, or taking appropriate measures concerning collateral, if applicable.\n\nThe Company has evaluated the above conditions and concluded that these conditions raise substantial doubt regarding our ability to continue as a going\nconcern for a period of at least one year from the date of issuance of these unaudited condensed consolidated financial statements.\n\nTo alleviate these conditions, the Company has explored various avenues to enhance liquidity, fund the Company\u2019s expenditures, and meet debt servicing\nrequirements. These strategies include, among others:\n\n \u25cf Engage in discussions with new and existing lenders, including related to refinancing debt, raising additional debt, or modifying terms of existing\n debt.\n\n \u25cf Considering equity issuances such as capital raises\n\n \u25cf Assessing and evaluating corporate and strategic transactions including engaging an investment bank.\n\n \u25cf Assessing and evaluating monetizing specific assets, including potential sales of mining infrastructure equipment, miners, operational sites, or\n expansion locations under consideration.\n\n \u25cf Conducting assessments to identify and implement operational efficiencies, cost-cutting measures, and other actions aimed at enhancing revenue\n and optimizing expenses.\n\nAlthough the Company may have access to debt, equity and other sources of funding, these may require additional time and cost, may impose operational\nrestrictions 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\ncapital or debt, this could cause additional dilution to the Company\u2019s current stockholders. The terms of any future capital raise or debt issuance and the\ncosts of any financing are uncertain and may be unfavorable to the Company. In addition, pursuant to terms and provisions of previous fundraising, the\nCompany is subject to certain restrictive covenants that put restrictions on the Company. Should the Company be unable to source sufficient funding, the\nCompany 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\nconsolidated financial statements.\n\nThe Company has engaged Needham and Company, an investment bank, and is obtaining advice from outside legal counsel. It is important to note that\nstrategic and other initiatives may not lead to any transaction or other outcome.\n\nThese condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and\nsatisfaction of liabilities and other commitments in the normal course of business. They do not include any adjustments relating to the recoverability and\ncarrying 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\nas and when they fall due.\n\n\n 11\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 53 of 220\n\nNOTE 2 \u2013 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\n\nPrinciples of Consolidation and Basis of Preparation\n\nThe accompanying consolidated financial statements of the Company include the accounts of the Company and its wholly or majority owned and\ncontrolled subsidiaries. Intercompany investments, balances and transactions have been eliminated in consolidation. Non\u2013controlling interests represent the\nminority equity investment in the Company\u2019s subsidiaries, plus the minority investors\u2019 share of the net operating results and other components of equity\nrelating to the non\u2013controlling interest.\n\nPursuant to a Certificate of Amendment to the Certificate of Incorporation of the Company dated February 6, 2023, Mawson executed a reverse stock split\nof its outstanding common stock at a ratio of 1:6 and reduced its authorized common stock to 90,000,000 shares, as set forth in the Company\u2019s Current\nReport on Form 8-K filed February 9, 2023. Unless otherwise indicated, all share and per share amounts included in this Annual Report reflect the effects\nof the reverse stock split.\n\nAny change in the Company\u2019s ownership interest in a consolidated subsidiary, through additional equity issuances by the consolidated subsidiary or from\nthe Company acquiring the shares from existing stockholders, in which the Company maintains control is recognized as an equity transaction, with\nappropriate adjustments to both the Company\u2019s additional paid-in capital and the corresponding non-controlling interest.\n\nUse of Estimates and Assumptions\n\nThe preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect\nthe amounts reported in the financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions. The Company\u2019s\nmanagement believes that the estimates, judgments, and assumptions used are reasonable based upon information available at the time they are made.\n\nThese estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the\ndates of the consolidated financial statements, and the reported amounts of income and expenses during the reporting periods. Actual results could differ\nfrom those estimates. The Company has considered the following to be significant estimates made by management, including but not limited to, going\nconcern assumptions, estimating the useful lives of fixed assets, realization of long-lived assets, unrealized tax positions and the realization of digital\ncurrencies, valuing the derivative asset classified under Level 3 fair value hierarchy, business combinations and the contingent obligation with respect to\nfuture revenues.\n\nReclassifications\n\nCertain reclassifications of prior period amounts have been made to conform to current period presentation.\n\n\n 12\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 54 of 220\n\nSignificant Accounting Policies\n\nRevenue Recognition \u2013 Digital currency mining revenue\n\nThe Company recognizes revenue under Accounting Standards Codification (\u201cASC\u201d) 606, Revenue from Contracts with Customers. The core principle of\nASC 606 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the\nconsideration to which the company expects to be entitled in exchange for those goods or services. Five steps are required to be followed in evaluating\nrevenue recognition: (i) identify the contract with the customer; (ii) identity the performance obligations in the contract; (iii) determine the transaction\nprice; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfies a performance obligation.\n\nIn order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and\nidentify each promised good or service that is distinct. A performance obligation meets ASC 606\u2019s definition of a \u201cdistinct\u201d good or service (or bundle of\ngoods or services) if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other\nresources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity\u2019s promise to transfer the good or\nservice to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the\ncontext of the contract).\n\nThere is currently no specific definitive guidance in U.S. GAAP or alternative accounting frameworks for the accounting of digital currencies and\nmanagement has exercised judgment in determining appropriate accounting treatment for the recognition of revenue for such operations.\n\nThe Company has entered into a contract with mining pools and has undertaken the performance obligation of providing computing power in exchange for\nnon-cash consideration in the form of digital currency. The provision of computing power is the only performance obligation in the Company\u2019s contract\nwith its pool operators. Where the consideration received is variable (for example, due to payment only being made upon successful mining), it is\nrecognized when it is highly probable that the variability is resolved, which is generally when the digital currency is received.\n\nThe Company measures the non-cash consideration received at the fair market value of the digital currency received. Management estimates fair value on a\ndaily basis, as the quantity of digital currency received multiplied by the price quoted on the crypto exchange that the Company uses to dispose of digital\ncurrency.\n\nHosting Co-location revenue\n\nThe Company provides power for our co-location hosting customers on a variable basis. Revenue is currently received monthly from the customer based on\nthe power usage at the rate outlined in each customer contract.\n\nThe Company recognizes variable power revenue each month as the uncertainty related to the consideration is resolved, power is provided to customers,\nand customers utilize the power (the customer simultaneously receives and consumes the benefits of the Company\u2019s performance).\n\nThe customer contracts contain variable consideration to be allocated to and recognized in the period to which the consideration relates. Usually this is\nwhen it is invoiced, rather than obtaining an estimation of variable consideration at the beginning of the customer contracts.\n\nCustomers also are invoiced a fixed monthly fee for maintenance services which include cleaning, cabling and other services to maintain the customers\u2019\nequipment.\n\n\n 13\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 55 of 220\n\nRevenue recognition \u2013 equipment sales\n\nThe Company earned revenues from the sale of earlier generation digital currency mining units and modular data centers that have been assembled or\nrefurbished for resale (collectively \u201cHardware\u201d). Revenue from the sale of Hardware is recognized upon transfer of control of the Hardware to the\ncustomer. At the date of sale, the net book value is expensed in cost of revenues.\n\nRevenue recognition \u2013 net energy benefits\n\nIn exchange for powering down the Company\u2019s systems and curtailing power, in response to instances of high electricity demand, the Company receives\nnet energy benefits from the grid. The Company also has a power pricing arrangement pursuant to which it can trade energy to achieve net energy benefits.\n\nRevenue for curtailing power is recognized over the period of time that the services are being provided. The Company estimates the amount of curtailable\npower and the expected payment for that power and recognizes revenue based on the proportion of the service that has been provided. In this arrangement\nthe Company is considered the principal and revenue is recognized on a gross basis.\n\nRevenue through the Company\u2019s power pricing arrangement is recognized over the period of time that the services are being provided. The Company\nestimates the amount of energy available for sale and the expected payment for that energy, and recognizes revenue based on the proportion of the service\nthat has been provided. In this arrangement the Company is considered the principal and revenue is recognized on a gross basis.\n\nProperty and equipment\n\nProperty and equipment are stated at cost, net of accumulated depreciation. All other repair and maintenance costs are charged to operating expenses as\nincurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the\nrecognition criteria for a provision are met. Property and equipment transferred from customers is initially measured at the fair value at the date on which\ncontrol is obtained.\n\nProperty and equipment are depreciated on a straight-line or declining balance basis based on the asset classification, over their useful lives to the economic\nentity commencing from the time the assets arrive at their destination where they are ready for use. Low-cost assets are capitalized and immediately\ndepreciated. Depreciation is calculated over the following estimated useful lives:\n\n Depreciation\nAsset class Useful life method\nFixtures 5 years Straight-Line\nPlant and equipment 10 years Straight-Line\nModular data center 5 years Declining\nMotor vehicles 5 years Straight-Line\nComputer equipment 3 years Straight-Line\nProcessing machinery (Miners) 2 years Straight-Line\nTransformers 15 years Straight-Line\nLeasehold improvements Shorter of useful life Straight-Line\n or lease term\n\nProperty and equipment are derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising\non derecognition of the asset is included in the income statement.\n\n\n 14\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 56 of 220\n\nThe residual values, useful lives and methods of depreciation of property and equipment are reviewed at each financial year end and adjusted prospectively,\nif appropriate.\n\nThe Company\u2019s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset\nmay not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future\nundiscounted cash flows expected to be generated by the assets. If such an asset is considered to be impaired, the impairment to be recognized is measured\nby the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or\nfair value less costs to sell.\n\nFair value of financial instruments:\n\nThe Company accounts for financial instruments under ASC 820, Fair Value Measurements. This statement defines fair value, establishes a framework for\nmeasuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and\ncomparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair\nvalue into three levels as follows:\n\n Level 1 \u2014 quoted prices (unadjusted) in active markets for identical assets or liabilities;\n\n Level 2 \u2014 observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar\n assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are\n observable; and\n\n Level 3 \u2014 assets and liabilities whose significant value drivers are unobservable. Observable inputs are based on market data obtained from\n independent sources, while unobservable inputs are based on the Company\u2019s market assumptions. Unobservable inputs require significant management\n judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those\n instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such\n determination requires significant management judgment.\n\n Fair value measured at June 30, 2023\n Significant\n Total fair Quoted prices other Significant\n value as at in active observable unobservable\n June 30, markets inputs inputs\n 2023 (Level 1) (Level 2) (Level 3)\nDerivative asset $ 5,174,446 - - $ 5,174,446\n\n Fair value measured at December 31, 2022\n Significant\n Total fair Quoted prices other Significant\n value as at in active observable unobservable\n December 31, markets inputs inputs\n 2022 (Level 1) (Level 2) (Level 3)\nDerivative asset $ 11,299,971 - - $ 11,299,971\nMarketable securities $ 3,243,957 $ 3,243,957 $ - $ -\n\n\n 15\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 57 of 220\n\nLevel 3 Assets:\n\nPower Supply Agreement\n\nIn June 2022, the Company entered into a Power Supply Agreement with Energy Harbor LLC, the energy supplier to the Company\u2019s Pennsylvania facility,\nto provide the delivery of a fixed portion of the total amount of electricity for a fixed price through to December 2026. If the Pennsylvania facility uses\nmore electricity than contracted, the cost of the excess is incurred at a new price quoted by Energy Harbor LLC.\n\nWhile the Company manages operating costs at the Pennsylvania facility in part by periodically selling unused or uneconomical power back to the market,\nthe Company does not consider such actions as trading activities. That is, the Company does not engage in speculation in the power market as part of its\nordinary activities. Because the sale of any electricity under a curtailment program allows for net settlement, the Company has determined the Power\nSupply Agreement meets the definition of a derivative under ASC 815, Derivatives and Hedging. However, because the Company has the ability to sell the\npower back to the grid rather than take physical delivery, physical delivery is not probable through the entirety of the contract and therefore, the Company\ndoes not believe the normal purchases and normal sales scope exception applies to the Power Supply Agreement. Accordingly, the Power Supply\nAgreement (the non-hedging derivative contract) is recorded at estimated fair value each reporting period with the change in the fair value recorded in\n\u201cchange in fair value of derivative asset\u201d in the consolidated statements of operations.\n\nThe Power Supply Agreement was classified as a derivative asset beginning in the quarter ended June 30, 2022 and measured at fair value on the date of\nPower Supply Agreement, with changes in fair value recognized in the accompanying unaudited condensed consolidated statements of operations. The\nestimated fair value of the Company\u2019s derivate asset is classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs utilized in\nthe valuation. Specifically, the Company\u2019s discounted cash flow estimation models contain quoted commodity exchange spot and forward prices and are\nadjusted for basis spreads for load zone-to-hub differentials through the term of the Power Supply Agreement, which expires in December 2026. In\naddition, the Company adopted a discount rate of approximately 20% above the terminal value of the observable market inputs, but also includes\nunobservable inputs based on qualitative judgment related to company-specific risk factors. The terms of the Power Supply Agreement require pre-payment\nof collateral, calculated as forward cost based on the market cost rate of electricity versus the fixed price stated in the contract.\n\nStock based compensation\n\nThe Company follows ASC 718-10 Compensation-Stock Compensation. The Company expenses stock-based compensation to employees and non-\nemployees over the requisite service period based on the estimated grant-date fair value of the awards. The Company determines the grant date fair value of\nthe restricted stock units (\u201cRSUs\u201d) and options using the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of stock-\nbased awards represent management\u2019s best estimates and involve inherent uncertainties and the application of management\u2019s judgment. These assumptions\nare the expected stock volatility, the risk\u2013free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected\nforfeiture rate. Expected volatility computes stock price volatility over expected terms based on its historical common stock trading prices. Risk\u2013free\ninterest rates are calculated based on the implied yield available on a U. S. 10-year Treasury bond.\n\nDigital currencies\n\nDigital currencies are included in current assets in the consolidated condensed balance sheets. Digital currencies are classified as indefinite-lived intangible\nassets in accordance with ASC 350 Intangibles \u2013 Goodwill and Other, and are accounted for in connection with the Company\u2019s revenue recognition policy\ndetailed above.\n\n\n 16\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 58 of 220\n\nThe following table presents the Company\u2019s digital currency (Bitcoin) activities for the three months and six months ended June 30, 2023:\n\n Three Six\n months to months to\n June 30, June 30,\n 2023 2023\n\nOpening number of Bitcoin held as at March 31, 2023 and December 31, 2022 1.02 0\nNumber of Bitcoin received 181.62 302.73\nNumber of Bitcoin sold (182.64) (302.73)\nClosing number of Bitcoin held as at June 30, 2023 0 0\n\nDigital currencies are not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating\nthat 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\nimpairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists.\nIf it is determined that it is not likely that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is\nrequired to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset.\nSubsequent reversal of impairment losses is not permitted.\n\nThe Company\u2019s policy is to dispose of Bitcoin received from mining operations at the earliest opportunity, therefore the holding period is minimal, usually\nno more than a few days. Due to the short period for which Bitcoin are held prior to sale and the consequent small numbers held, the risk of impairment is\nnot material. No impairment charges have been recorded during the six month periods ended June 30, 2023 and 2022.\n\nEquity method investments\n\nEquity investments are accounted for under the equity method if we are able to exercise significant influence, but not control, over an investee. Our share of\nthe earnings or losses as reported by the investees is classified as income from equity investees on our consolidated condensed statements of operations.\nThe investments are evaluated for impairment annually and when facts and circumstances indicate that the carrying value may not be recoverable. If a\ndecline in fair value is determined to be other-than-temporary, an impairment charge is recorded in our consolidated condensed statements of operations.\n\nRecent Accounting Pronouncements\n\nFrom time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (\u201cFASB\u201d) or other standard setting bodies and\nadopted by the Company as of the specified effective date. For information with respect to recent accounting pronouncements, see Note 2 to the\nconsolidated financial statements for the Company as of December 31, 2022, included in the Company\u2019s Annual Report on Form 10-K filed with SEC on\nMarch 23, 2023. Recent accounting pronouncements since that date include:\n\nIn March 2023, the FASB issued ASU update 2023-01\u2014Leases (Topic 842): Common Control Arrangements. The Company early adopted ASU 2023-01,\nas allowed under the ASU. Adoption of this ASU did not have a material impact on the Company\u2019s consolidated financial statements or disclosures.\n\nIn March 2023, the FASB issued ASU update 2023-02\u2014Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax\nCredit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force). The Company does not expect ASU 2023-\n02 to have a material impact on the Company\u2019s consolidated financial statements or disclosures.\n\n\n 17\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 59 of 220\n\nNOTE 3 \u2013 BASIC AND DILUTED NET LOSS PER SHARE\n\nNet loss per common share is calculated in accordance with ASC 260, Earnings Per Share. Basic loss per share is computed by dividing net loss by the\nweighted average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive\ncommon stock equivalents in the weighted average shares outstanding, as they would be anti-dilutive.\n\nSecurities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share as at June 30, 2023 and\n2022 are as follows:\n\n As at June 30,\n 2023 2022\nWarrants to purchase common stock 5,546,122 1,065,278\nOptions to purchase common stock 1,750,417 4,910\nRestricted Stock-Units (\u201cRSUs\u201d) issued under a management equity plan 4,443,516 408,288\n 11,740,055 1,478,476\n\nNOTE 4 \u2013 LEASES\n\nDuring the quarter ended June 30, 2023, the Company entered into two new lease agreements, outlined below.\n\nEffective May 1, 2023 Mawson Ohio LLC took an assignment of a lease agreement for approximately 64,600 square foot for a undeveloped site in\nCorning, Ohio. The term of the lease is for four years, with an option to extend for five years.\n\nEffective May 24, 2023 Mawson Bellefonte LLC entered into a lease agreement for a 9,918 square foot developed mining facility in Bellefonte, PA. The\nterm of the lease is for two years and seven months, with an option to extend for five years.\n\nThe Company\u2019s lease costs recognized in the Consolidated Condensed Statements of Operations consist of the following:\n\n For the three months ended For the six months ended\n June 30, June 30,\n 2023 2022 2023 2022\nOperating lease charges (1) $ 404,778 $ 434,977 $ 811,991 $ 802,112\nFinance lease charges:\nAmortization of right-of-use assets $ 8,143 $ 8,094 $ 16,287 $ 12,396\nInterest on lease obligations $ 1,310 $ 2,468 $ 4,021 $ 3,946\n\n(1) Included in selling, general and administrative expenses.\n\n\n 18\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 60 of 220\n\nThe following is a schedule of the Company\u2019s lease liabilities by contractual maturity as of June 30, 2023:\n\n Operating Finance\n leases leases\n\n2023 $ 858,374 $ 19,088\n2024 1,548,388 38,176\n2025 592,926 38,176\n2026 434,033 15,016\n2027 70,191 -\nTotal undiscounted lease obligations 3,503,912 110,456\nLess imputed interest (375,676) (11,597\nTotal present value of lease liabilities 3,128,236 98,859\nLess current portion of lease liabilities 1,649,529 31,859\nNon-current lease liabilities $ 1,478,707 $ 67,000\n\nOther lease information as of June 30, 2023:\n\n Operating Finance\n leases leases\n\nOperating cash out flows from leases $ 728,837 $ 19,088\nWeighted-average remaining lease term (years) 2.33 2.89\nWeighted-average discount rate (%) 8.9% 7.5%\n\nNOTE 5 \u2013 PROPERTY AND EQUIPMENT\n\nProperty and equipment, net, consisted of the following:\n\n June 30, December 31,\n 2023 2022\n\nPlant and equipment $ 4,672,674 $ 4,263,662\nComputer equipment 162,060 163,060\nFurniture and fixtures 28,703 29,492\nProcessing machines (Miners) 102,164,610 103,337,719\nModular data center 24,935,634 19,713,534\nMotor vehicles 357,704 326,704\nTransformers 9,893,024 4,596,892\nLow-cost assets 1,134,858 995,292\nAssets under construction 5,183,049 11,592,582\nLeasehold improvements 487,527 487,527\nTotal 149,019,843 145,506,464\nLess: Accumulated depreciation (70,490,369) (54,489,966)\nProperty and equipment, net $ 78,529,474 $ 91,016,498\n\nThe Company incurred depreciation and amortization expenses in the amounts of $8.79 million and $16.02 million for the three month period ended June\n30, 2023 and 2022, respectively. The Company incurred depreciation and amortization expenses in the amounts of $16.75 million and $29.83 million for\nthe six month periods ended June 30, 2023 and 2022, respectively. There were no impairment charges recognized for property and equipment for either the\nsix month periods ended June 30, 2023 and 2022.\n\nOn April 18, 2023, the Company sold 100% of its membership interest in Luna Squares Texas LLC along with 59 transformers. The total sales price was\n$8.5 million in cash and stablecoins, the profit on sale of this site has been included in the consolidated condensed statement of operations.\n\n\n 19\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 61 of 220\n\nNOTE 6 \u2013 INCOME TAXES\n\nThe Company\u2019s effective tax rate is calculated by dividing the total income tax expense by the sum of income before the income tax expense and the net\nincome attributable to noncontrolling interests. The Company has maintained a full valuation allowance for federal and the majority of its state\njurisdictions.\n\n For the three months ended\n June 30,\n 2023 2022\n\nEffective income tax rate 0.00% 0.00%\n\n For the six months ended\n June 30,\n 2023 2022\n\nEffective income tax rate 0.00% 0.00%\n\nThe Company\u2019s effective tax rate is calculated by dividing the total income tax expense by the sum of income before the income tax expense and the net\nincome attributable to noncontrolling interests. The Company has maintained a full valuation allowance for federal and the majority of its state\njurisdictions.\n\nNOTE 7 \u2013 BORROWINGS\n\nMarshall loan\n\nIn December 2021 MIG No. 1 Pty Ltd entered into a Secured Loan Facility Agreement with Marshall Investments MIG Pty Ltd. The loan matures in\nFebruary 2024 and bears interest at a rate of 12% per annum, payable monthly with interest payments that commenced in December 2021. This loan\nfacility is secured by direct assets of MIG No.1 Pty Ltd and a general security agreement given by the Company. Principal repayments began during\nNovember 2022. The outstanding balance is $8.07 million as at June 30, 2023 all of which is classified as a current liability.\n\nThe loan matures in February 2024 and the outstanding balance is $8.07 million as at June 30, 2023. On June 30, 2023 MIG No. 1 Pty Ltd did not make a\nprincipal and interest payment of $0.50 million. MIG No. 1 Pty Ltd and Marshall are in ongoing discussions with respect to the payment, and the loan\nterms generally. Marshall has reserved its rights.\n\n\n 20\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 62 of 220\n\nCelsius loan\n\nOn February 23, 2022, Luna Squares LLC entered into the Co-location Agreement with Celsius Mining LLC. In connection with this agreement, Celsius\nMining LLC loaned Luna Squares LLC a principal amount of $20 million, for the purpose of funding the infrastructure required to meet the obligations of\nthe Co-Location Agreement, for which Luna Squares LLC issued a Secured Promissory Note for repayment of such amount. The Secured Promissory Note\naccrues interest daily at a rate of 12% per annum, and Luna Squares LLC is required to amortize the loan at a rate of 15% per quarter. Repayments to the\nprincipal amount began at the end of September 2022. The Secured Promissory Note has a maturity date of August 23, 2023 and the outstanding balance as\nat June 30, 2023 is $11.33 million, which is classified as a current liability. On July 18, 2023 Luna Squares LLC paid to Celsius Mining LLC $3.33 million\nas principal and interest. Celsius Mining LLC filed for Chapter 11 bankruptcy protection on July 13, 2022.\n\nW Capital loan\n\nOn September 2, 2022, MIG PL entered into a Secured Loan Facility Agreement with W Capital Advisors Pty Ltd with a total loan facility of AUD$3.00\nmillion (USD$1.9 million). This was amended on September 29, 2022 and the loan facility was increased to AUD$8.00 million (USD$5.2 million). During\nthe six month period ending June 30, 2023, the Company received AUD$3.00 million (USD$1.99 million) from this loan facility. As at June 30, 2023,\nAUD$1.46 million (USD$0.97 million) has been drawn down from this facility, all of which is classified as a current liability. The Secured Loan Facility\naccrues interest daily at a rate of 12% per annum and is paid monthly. Principal repayments are paid ad hoc in line with the loan facility agreement. The\nSecured Loan Facility expired in March 2023 and MIG PL and W Capital Advisors Pty Ltd are in ongoing discussions regarding the extension of the loan.\nW Capital Advisors Pty Ltd and MIG Pty Ltd have each reserved their rights.\n\nConvertible notes\n\nOn July 8, 2022, the Company issued secured convertible promissory notes to investors in the aggregate principal amount of $3.60 million (the \u201cSecured\nConvertible Promissory Notes\u201d) in exchange for an aggregate of $3.6 million in cash. On September 29, 2022, the Company entered into a letter variation\nrelating to some of the Secured Convertible Promissory Notes, with an aggregate principal amount of $3.1 million, which gave those holders the option to\nelect for pre-payment (including accrued interest to maturity) subject to certain conditions. All of the investors included in this letter variation elected for\nthe pre-payment option and therefore there were $3.1 million principal repayments made during November 2022. The final convertible noteholder (W\nCapital Advisors Pty Ltd) who was not a party to this variation opted to enter into an arrangement whereby it received pre-payment of interest but agreed\nthat the principal amount of $0.50 million was not immediately required to be repaid. That principal amount has been classified as a current liability. The\nconvertible note matured in July 2023 and the Company is in ongoing discussions with the noteholder regarding a resolution. W Capital Advisors Pty Ltd\nand MIG PL have each reserved their rights.\n\n\n 21\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 63 of 220\n\nNOTE 8 \u2013 STOCKHOLDERS\u2019 EQUITY\n\nStock-Based Compensation:\n\nEquity plans\n\nUnder the 2018 Equity Plan, the number of shares issuable under the Plan on the first day of each fiscal year increase by an amount equal to the lower of (i)\n100,000 shares (after a later 10 for 1 stock split) or (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year. As of June 30,\n2023, there were no shares issuable under the 2018 Equity Plan until it automatically replenishes on January 1, 2024.\n\nAt the Company\u2019s annual meeting on May 17, 2023, the stockholders approved an amendment to the 2021 Equity Plan that, amongst other things,\nincreased the number of the shares available under the 2021 Equity Plan to 10,000,000 shares. As of June 30, 2023, the number of shares reserved under\nthe 2021 Equity Plan was 4,133,322.\n\nThe Company recognized stock-based compensation expense during the three and six months ended June 30, 2023 and 2022 as follows:\n\n For the three months ended For the six months ended\n June 30, June 30,\n 2023 2022 2023 2022\nPerformance-based restricted stock awards $ 166,779 $ 187,648 $ 333,558 $ 353,924\nService-based restricted stock awards 19,997 248,086 49,992 305,586\nStock issued to consultants - - 307,069 -\nCommon stock warrant expense 500,500 500,500 1,001,000 667,333\nTotal stock-based compensation $ 687,276 $ 936,234 $ 1,691,619 $ 1,326,843\n\nPerformance-based awards\n\nPerformance-based awards generally vest over a three-year performance period upon the successful completion of specified market and performance\nconditions.\n\nThe following table presents a summary of the Company\u2019s performance-based awards restricted stock awards activity:\n\n Weighted\n Average\n Weighted Remaining\n Average Contractual Aggregate\n Number of Exercise Life (in Intrinsic\n shares Price years) Value\nOutstanding as of December 31, 2022 342,310 - 8.33 $ 472,388\n Issued - -\n Exercised (100,000) - 318,000\n Expired - -\nOutstanding as of June 30, 2023 242,310 - 9.04 $ 457,966\nExercisable as of June 30, 2023 144,327 - 4.97 $ 272,778\n\n\n 22\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 64 of 220\n\nAs of June 30, 2023, there was approximately $0.70 million of unrecognized compensation cost related to the performance-based awards, which is\nexpected to be recognized over a remaining weighted-average vesting period of approximately one year.\n\nService-based restricted stock awards\n\nService-based awards generally vest over a one year service period.\n\nThe following table presents a summary of the Company\u2019s service-based awards activity:\n\n Weighted\n Average\n Weighted Remaining\n Average Contractual Aggregate\n Number of Exercise Life Intrinsic\n shares Price (in years) Value\nOutstanding as of December 31, 2022 74,246 - 8.42 102,459\n Issued 4,140,720 -\n Exercised (13,760) - 43,744\n Expired - -\nOutstanding as of June 30, 2023 4,201,206 - 2.84 7,940,279\nExercisable as of June 30, 2023 60,486 - 0.13 114,319\n\nAs of June 30, 2023, there was approximately $7.83 million of unrecognized compensation cost related to the service-based restricted stock awards, which\nis expected to be recognized over a remaining weighted-average vesting period of approximately one year. James Manning who stepped down as Chief\nExecutive Officer of the Company, effective May 22, 2023, had agreed with the Company that he would be issued 1.35 million RSUs and his other RSU\nagreements would be cancelled, as set forth in the Company\u2019s Current Report on Form 8-K filed May 22, 2023. However, these RSUs have not been issued\nand have not been included in the above table. Similarly, the existing RSUs have not been cancelled and therefore are included in the above table.\n\nStock options awards\n\nStock options awards vest upon the successful completion of specified market conditions.\n\nThe following table presents a summary of the Company\u2019s Stock options awards activity:\n\n Weighted\n Average\n Weighted Remaining\n Average Contractual\n Number of Exercise Life\n shares Price (in years)\nOutstanding as of December 31, 2022 417 $ 35.90 1.26\n Issued 1,750,000 1.89\n Exercised - -\n Expired - -\nOutstanding as of June 30, 2023 1,750,417 $ 1.90 10.0\nExercisable as of June 30, 2023 417 $ 35.90 1.26\n\n\n 23\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 65 of 220\n\nCommon Stock Warrants\n\nA summary of the status of the Company\u2019s outstanding stock warrants and changes during the six months ended June 30, 2023, is as follows:\n\n Weighted\n Average\n Weighted Remaining\n Average Contractual\n Number of Exercise Life\n Warrants Price (in years)\nOutstanding as of December 31, 2022 2,825,278\n Issued 2,967,512 14.31 3.69\n Exercised (246,668) - -\n Expired - - -\nOutstanding as of June 30, 2023 5,546,122 $ 14.31 3.39\nWarrants exercisable as of June 30, 2023 5,546,122 $ 14.31 3.69\n\nAs of June 30, 2023, there was approximately $0.80 million of unrecognized compensation cost related to the warrants issued is expected to be recognized\nover a remaining weighted-average vesting period of approximately six months.\n\nOn May 3, 2023, the Company has entered into a definitive agreement with institutional investors for the issuance and sale of 2,083,336 shares of its\ncommon stock at a purchase price of $2.40 per share of common stock and 246,668 pre-funded warrants at an offering price of $2.399 and an exercise price\nof $0.001 per share in a registered direct offering. In relation to this agreement, the Company issued the institutional investors unregistered warrants to\npurchase up to 2,604,170 shares of its common stock with an exercise price of $3.23 per share. The underwriter was also issued warrants to purchase up to\nan aggregate of 116,667 shares of common stock at an exercise price of $3.00 per share. The Company determined that the warrants did not meet the\ncriteria for a derivative and therefore, these warrants were recorded in stockholders\u2019 equity as a stock issuance cost with no net effect on stockholders\u2019\nequity.\n\nAs a condition to the sale of 2,083,336 shares of common stock described above, the Company amended the warrants previously issued to one of the\ninvestors in that offering to purchase an aggregate of 1,666,667 shares of common stock for an exercise price of $6.06 per share, which were issued in July\nof 2022 (the \u201cExisting Warrants\u201d), effective upon the closing of the offering, such that the amended Existing Warrants have a reduced exercise price of\n$3.23 per share, are exercisable six months following the closing of the offering, and will expire five and one-half years following the closing of this\noffering. This modification has been accounted for in accordance with ASC 815 Derivatives and Hedging. The Company determined that the incremental\nfair value of the warrants subsequent to the warrant modification were not material and therefore, the Company did not record additional equity issuance\ncosts and additional-paid-in capital as a result of the modification.\n\nCommon Stock\n\nOn May 3, 2023, the Company has entered into a definitive agreement with institutional investors for the issuance and sale of 2,083,336 shares of its\ncommon stock (or prefunded warrants in lieu thereof) at a purchase price of $2.40 per share of common stock in a registered direct offering for proceeds of\n$4.6 million, net of issuance costs.\n\nThe Company has the ability through its ATM Agreement to sell shares of its common stock. Effective May 4, 2023, the Company filed a prospectus\nsupplement to amend, supplement and supersede certain information contained in the earlier prospectus and prospectus supplement, which reduced the\nnumber of shares of common stock the Company may offer and sell under the ATM Agreement to an aggregate offering price of up to $9,000,000 from\ntime to time. During the quarter ended June 30, 2023, 239,607 shares were issued as part of the ATM Agreement for cash proceeds of $721,460, net of\nissuance costs. The Company is contractually restricted from issuing any stock under its ATM Agreement until on or about November 7, 2023.\n\nDuring the quarter ended June 30, 2023, there were exercises of restricted stock units and common stock options into 656 shares of common stock of the\nCompany for proceeds totaling $186,776.\n\n\n 24\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 66 of 220\n\nNOTE 9 \u2013 COMMITMENTS AND CONTINGENCIES\n\nThe Company is currently in the process of applying for sales tax registrations and exemptions in different states in the U.S. At this stage, the Company is\nunable to determine the financial impact of sales tax.\n\nThe determination of tax liabilities involves significant judgement as well as the application of complex tax laws and regulations. As of the reporting date,\ncertain income tax matters are uncertain and cannot be reliable estimated primarily for the subsidiaries under the U.S. tax jurisdictions for the current and\nprior periods. The Company has not recorded any tax liabilities or benefits pertaining to these subsidiaries for the period.\n\nNOTE 10 \u2013 RELATED PARTY TRANSACTIONS\n\nOn March 16, 2022, Luna Squares LLC entered into a lease with respect to a property in the City of Sharon, Mercer County, Pennsylvania with Vertua\nProperty, Inc, a subsidiary entity in which Vertua Ltd has a 100% ownership interest. James Manning, a director and a significant stockholder of the\nCompany, is also a director of Vertua Ltd and has a material interest in the Sharon lease as a large stockholder of Vertua Ltd. The lease is for a term of five\nyears, and Luna Squares LLC has two options to extend for five years each. Rent is subject to annual increases equal to the amount of the Consumer Price\nIndex for the Northeast Region, or 4%, whichever is higher. The base rental amount in the first year is $0.24 million. Depending on power energization and\nusage, variable additional rent may be payable, with charges ranging from $500 to $10,000 per month, depending on power energized and whether it is\navailable.\n\nDuring the six month periods ended June, 2023 and 2022, Mawson Infrastructure Group Pty Ltd paid Vertua Limited $154,224 and $102,750 respectively,\nfor reimbursement for office costs charged with a mark-up. James Manning, a director and a significant stockholder of the Company, is also a director of\nVertua Ltd. Manning family members also own interests in Vertua Ltd.\n\nDuring the six month periods ended June, 2023 and 2022, Mawson Infrastructure Group Pty Ltd paid First Equity Tax Pty Ltd $42,741 and $10,124\nrespectively, for tax advisory services. James Manning, a director and a significant stockholder of the Company, has interests in and is also a partner of\nFirst Equity Tax Pty Ltd.\n\nDuring the six month periods ended June, 2023 and 2022, Mawson Infrastructure Group Pty Ltd paid First Equity Advisory Pty Ltd $48,223 and $25,167\nrespectively, for accounting labor services. James Manning, a director and a significant stockholder of the Company, has interests in First Equity Advisory\nPty Ltd.\n\nDuring the six month periods ended June, 2023 and 2022, Mawson Infrastructure Group Pty Ltd paid Defender Investment Management Pty Ltd $363,611\nand $262,802 respectively, in lieu of paying Mr. Manning directly for his employment. These payments were disclosed in the Executive Summary\nCompensation table in the Company\u2019s 2022 and 2023 Proxy Statements. Mr. James Manning, is a director and a significant stockholder of the Company,\nand is a director of Defender Investment Management Pty Ltd. Manning family members have equity interests in and control Defender Investment\nManagement Pty Ltd.\n\nDuring the six month periods ended June, 2023 and 2022, Mawson Infrastructure Group Pty Ltd paid Manning Motorsports Pty Ltd $35,495 and $41,525\nrespectively, for vehicle services. James Manning, a director and a significant stockholder of the Company, has direct interests in and is a director of\nManning Motorsports Pty Ltd.\n\nDuring the six month periods ended June, 2023 and 2022, Mawson Infrastructure Group Pty Ltd paid International Cargo Solutions, a division of Flynt ICS\nPty Ltd, $841,042 and $4,464,097 respectively, for freight services. Manning Capital Holdings Pty Ltd, a company associated with Mr. Manning may have\nhad debt interests in Flynt ICS Pty Ltd. Vertua Ltd entered into an agreement to acquire International Cargo Solutions, a division of Flynt ICS Pty Ltd in\nOctober 2022. The transaction closed on June 30, 2023. James Manning, a director and a significant stockholder of the Company, is also a director of\nVertua Ltd. Manning family members own interests in Vertua Ltd.\n\nThere may be additional related party transactions. Mr. James Manning has not signed a declaration of related party transactions to the Company\u2019s\nsatisfaction at the time of this filing.\n\nNOTE 11 \u2013 SUBSEQUENT EVENTS\n\nOn July 18, 2023 Luna Squares LLC paid to Celsius Mining LLC $3.33 million as principal and interest related to the Celsius Promissory Note.\n\nOn July 20, 2023 we received a notice from Celsius Mining LLC that Celsius Mining LLC does not intend to renew its Co-Location Agreement, under\nwhich it receives hosting services from Luna Squares LLC (a subsidiary of the Company), and that it will expire in accordance with its terms. Celsius\nMining LLC is the Company\u2019s only hosting customer. The Company hosts approximately 20,000 miners for Celsius Mining LLC. Celsius Mining LLC has\nmade certain allegations against Luna Squares LLC in respect of its performance under the Co-Location Agreement. Luna Squares LLC has made certain\nallegations again Celsius Mining LLC in respect of its performance under the Co-Location Agreement. There is a risk of dispute or litigation arising out of\nthese allegations.\n\nOn July 25, 2023, a Debtors\u2019 Ex Parte Motion for an Order Under Federal Rules of Bankruptcy Procedure 2004 and 9016 for Subpoenas for Examination\nof, and Production of Documents From, Mawson Infrastructure Group Inc., Luna Squares, and Cosmos Infrastructure LLC was filed, and the Bankruptcy\nCourt entered an order on July 26, 2023, authorizing the Debtors to take discovery of the Mawson Entities . The Debtors intend to take discovery of the\nMawson Entities to evaluate the status of the liens securing the Celsius Promissory Note and other potential claims the Debtors may have against the\nMawson Entities, including with respect to the Co-Location Agreement. The discovery process is ongoing.\n\n\n 25\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 67 of 220\n\nItem 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations\n\n Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of our balance sheets,\nstatements of operations and cash flows. The following discussion and analysis of our financial condition and results of operations should be read together\nwith the interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our\naudited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.\nAll amounts are in U.S. dollars.\n\n Throughout this report, unless otherwise designated, the terms \u201cwe,\u201d \u201cus,\u201d \u201cour,\u201d the \u201cCompany,\u201d \u201cMawson,\u201d \u201cour company\u201d and the\n\u201ccombined company\u201d refer to Mawson Infrastructure Group Inc., a Delaware corporation, and its direct and indirect subsidiaries, including Mawson\nInfrastructure Group Pty Ltd, an Australian company (\u201cMawson AU\u201d), Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC,\nCosmos MIG No.1 Pty Ltd, MIG No.1 LLC, Mawson AU Limited, Mawson Bellefonte LLC, Luna Squares Texas, Luna Squares Repairs LLC, Luna Squares\nProperty LLC, Mawson Midland LLC, Mawson Ohio LLC, Mawson Hosting LLC and Mawson Mining LLC.\n\nForward-Looking Statement Notice\n\n This Quarterly Report on Form 10-Q contains forward-looking statements about our expectations, beliefs or intentions regarding, among other\nthings, our product development efforts, business, financial condition, results of operations, strategies or prospects. In addition, from time to time, our\nrepresentatives have made or may make forward-looking statements, orally or in writing. Forward-looking statements can be identified by the use of\nforward-looking words such as \u201cbelieve,\u201d \u201cexpect,\u201d \u201cintend,\u201d \u201cplan,\u201d \u201cmay,\u201d \u201cshould\u201d or \u201canticipate\u201d or their negatives or other variations of these words\nor other comparable words or by the fact that these statements do not relate strictly to historical or current matters. These forward-looking statements may\nbe included in, but are not limited to, various filings made by us with the SEC, press releases or oral statements made by or with the approval of one of our\nauthorized executive officers. Forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made.\nBecause forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could\ncause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our\nactual activities or results to differ materially from the activities and results anticipated in forward-looking statements, including, but not limited to, the risk\nfactors summarized below.\n\n This report identifies important factors which could cause our actual results to differ materially from those indicated by the forward-looking\nstatements, particularly those set forth under Item 1A. \u201cRisk Factors\u201d below .\n\n Such risk factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of\nour forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.\n\n\n 26\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 68 of 220\n\n The following important factors, among others, could affect future results and events, causing those results and events to differ materially from\nthose expressed or implied in our forward-looking statements:\n\n - our need to, and difficulty in, raising additional capital;\n\n - downturns in the Cryptocurrency industry;\n\n - inflation;\n\n - increased interest rates;\n\n - the inability to procure needed hardware;\n\n - the failure or breakdown of mining equipment, or internet connection failure;\n\n - access to reliable and reasonably priced electricity sources;\n\n - Cyber-security threats;\n\n - our ability to obtain proper insurance;\n\n - construction risks;\n\n - banks and other financial institutions ceasing to provide services to our industry.\n\n - changes to the Bitcoin network\u2019s protocols and software;\n\n - the decrease in the incentive to mine Bitcoin;\n\n - the increase of transaction fees related to digital assets:\n\n - the fraud or security failures of large digital asset exchanges;\n\n - future digital asset, technological and digital currency development; and\n\n - the regulation and taxation of digital assets like Bitcoin;\n\n - our ability to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002;\n\n material litigation, investigations or enforcement actions by regulators and governmental authorities, as disclosed in the legal proceedings\n -\n section and elsewhere.\n\n\n 27\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 69 of 220\n\n Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are\nnot limited to, the risk factors set out in Item 1A. Risk Factors.\n\n 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\nin their entirety by the cautionary statements included in this report. Except as required by applicable law, we undertake no obligations to update or revise\nforward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. In\nevaluating forward-looking statements, you should consider these risks and uncertainties.\n\nOverview\n\n Mawson is a \u2018Digital Asset Infrastructure\u2019 business, which owns and operates (through its subsidiaries) data centers in the United States.\n\n Our business includes the ownership and operation of the digital infrastructure associated with the operation of blockchain applications.\nApplication-Specific Integrated Circuit (\u201cASIC\u201d) computers known as Miners enable the \u2018mining\u2019 of digital assets such as Bitcoin. We currently operate on\ntwo sites located in Pennsylvania. The Miners we operate are predominately focused on the process of digital mining, specifically Bitcoin.\n\n We offer hosting or co-location facilities to other businesses in the digital asset infrastructure industry to have their Miners located within our data\ncenters. These businesses pay us for the use of our infrastructure and related services.\n\n In exchange for curtailing the power we utilize from the grid in response to instances of high electricity demand, we receive net energy benefits.\nWe also have a contract with our energy provider where we can trade our energy to achieve net energy benefits. We have recognized a derivative asset on\nour balance sheet for the contract we have with our energy provider, which has been measured at fair value with any changes in fair value recognized in our\nstatement of operations.\n\n We also sell new and used digital currency mining, data center infrastructure and equipment on a periodic basis, subject to prevailing market\nconditions.\n\n We continue to conduct research and development in relation to our data centers, design, operations and technology.\n\nRecent Developments\n\n Effective July 14, 2023, the Company appointed Mr. William \u201cSandy\u201d Harrison as its new Chief Financial Officer pursuant to the terms of an offer\nletter which is filed as Exhibit 10.4 hereto. Mr. Harrison has more than 27 years of experience as a senior finance executive primarily in semiconductor and\ncommunications-related technology companies. His roles have included senior research analyst, director of research, and a partner at two investment\nbanking firms where he served as a principal and participated in several operating committee roles. He has also served as vice-president of investor\nrelations as well as headed the financial planning and analysis and marketing communications teams at a multi-billion-dollar market-cap technology\ncompany. Mr. Harrison earned a B.A. degree from Washington and Lee University and a MBA in Finance from Loyola University Maryland. He is a\nprevious holder of the Series 7, 24, 63, 86 and 87 licenses. There are no reportable family relationships or related person transactions involving the\nCompany and Mr. Harrison. Mr. Harrison is not a party to any transaction that would require disclosure under Item 404(a) of Regulation S-K promulgated\nunder the Securities Act of 1933, as amended.\n\n From August 9, 2022, Mr. Ariel Sivikofsky provided Chief Financial Officer services to the Company. Pursuant to the appointment of Mr.\nHarrison as Chief Financial Officer, Mr. Sivikofsky ceased providing those services. Mr. Sivikofsky has made certain claims for compensation against the\nCompany which the Company disputes. In addition, the Company announced the departure of Mr. Liam Wilson as the Company\u2019s Chief Operating Officer\neffective July 14, 2023. The Company does not at this time expect to seek a replacement for the Chief Operating Officer position as such responsibilities\nwill be absorbed by the Chief Executive Officer and President and other members of the leadership team.\n\n On July 19, 2023, the Company entered into an Addendum to the Employment Agreement between the Company and Rahul Mewawalla, dated\nMay 22, 2023 (the \u201cAddendum\u201d). The Addendum is intended to provide management continuity related to a potential or actual change-in-control event of\nthe Company and to align with shareholder interests in support of corporate transactions. The Addendum provides for double (200%) severance related\npayments and benefits if Mr. Mewawalla\u2019s employment is terminated (actually or constructively, or by Mr. Mewawalla for Good Reason) upon or after a\nchange-in-control of the Company. The increase in payments and benefits provided to Mr. Mewawalla following a qualifying termination is the same for all\nchange-in-control events. The description set forth above is qualified in its entirety by reference to the full text of the Addendum, which is filed as Exhibit\n10.5 hereto.\n\n\n 28\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 70 of 220\n\n On July 20, 2023 we received a notice from Celsius Mining LLC that Celsius Mining LLC does not intend to renew its Co-Location Agreement,\nunder which it receives hosting services from Luna Squares LLC (a subsidiary of the Company), and that it will expire in accordance with its terms. Celsius\nMining LLC is the Company\u2019s only hosting customer. The Company hosts approximately 20,000 miners for Celsius Mining LLC. Celsius Mining LLC has\nmade certain allegations against Luna Squares LLC in respect of its performance under the Co-Location Agreement. Luna Squares LLC has made certain\nallegations against Celsius Mining LLC in respect of its performance under the Co-Location Agreement. There is a risk of dispute or litigation arising out\nof these allegations.\n\n The Company is in active discussions with potential new customers for hosting services to replace Celsius, however there is no guarantee that the\nCompany will be able to enter into hosting agreements with new customers in a timely manner, or at all, or that the agreements with the new customers will\nreplace the revenue that Celsius Mining LLC generates for the Company. Celsius Mining LLC and Luna Squares LLC tare in discussions related to Co-\nLocation Agreement, however the outcome of these discussions is uncertain. The Company may decide to use the hosting infrastructure\u2019s capacity to self-\nmine or for other purposes, however it will need to raise a potentially significant amount of capital to finance and acquire further hardware (specifically\nminers) for self-mining and the potential timing and outcome of these other potential options are uncertain.\n\n On July 25, 2023, a Debtors\u2019 Ex Parte Motion for an Order Under Federal Rules of Bankruptcy Procedure 2004 and 9016 for Subpoenas for\nExamination of, and Production of Documents From, Mawson Infrastructure Group Inc., Luna Squares, and Cosmos Infrastructure LLC was filed, and the\nBankruptcy Court entered an order on July 26, 2023 . Celsius has indicated it intends to use the process of discovery to evaluate the status of the liens\nsecuring the Celsius Promissory Note and other potential claims Celsius may have against Mawson and its related entities, including with respect to the Co-\nLocation Agreement. The discovery process is ongoing.\n\nEnvironment, Sustainability, Governance\n\n The Company has a strategy to source renewable or sustainable sources of energy, including carbon-neutral or low carbon emissions sources for\nthe majority of its operations. These are key criteria when analyzing a new site for acquisition, lease or selling an existing site. The Company believes it\ncan make a positive contribution towards lowering carbon emissions by supporting carbon neutral or low-emissions power sources.\n\n The Company can provide, and has provided, electricity grid stability by curtailing its power usage during times of high-power demand through its\nEnergy Markets Program, for example through its membership in the PJM Market, and various demand response programs as and where they are available.\n\n\n\n 29\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 71 of 220\n\nResults of Operations \u2013 Three months Ended June 30, 2023 compared to the three months ended June 30, 2022\n\n For the three months\n ended\n June 30,\n 2023 2022\nRevenues:\n Digital currency mining revenue $ 4,896,521 $ 16,212,525\n Hosting co-location revenue 4,594,752 3,567,912\n Net energy benefits 1,017,678 -\n Sale of equipment 42,584 -\n Total revenues 10,551,535 19,780,437\n Less: Cost of revenues (excluding depreciation) 7,028,458 14,359,072\nGross profit 3,523,077 5,421,365\n Selling, general and administrative 6,265,256 9,431,088\n Stock based compensation 687,276 936,235\n Depreciation and amortization 8,789,755 16,023,817\n Change in fair value of derivative asset 5,444,300 (17,714,357)\n Total operating expenses 21,186,587 8,676,783\nLoss from operations (17,663,510) (3,255,418)\nNon-operating income (expense):\n Losses on foreign currency transactions (397,165) 1,657,055\n Interest expense (647,062) (1,565,040)\n Impairment of financial assets - (1,107,197)\n Profit on sale of site 2,562,283 -\n Gain on sale of marketable securities - -\n Other income 252,363 1,864,968\n Share of net loss of equity method investments - -\n Total non-operating income (expense), net 1,770,419 849,786\nLoss before income taxes (15,893,091) (2,405,632)\n Income tax expense (1,756,371) -\nNet Loss (17,649,462) (2,405,632)\nLess: Net loss attributable to non-controlling interests (305,556) (288,229)\nNet Loss attributed to Mawson Infrastructure Group stockholders $ (17,343,906) $ (2,117,403)\n\nNet Loss per share, basic and diluted $ (1.12) $ (0.18)\nWeighted average number of shares outstanding 15,527,824 11,933,092\n\n\n 30\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 72 of 220\n\nRevenues\n\n Digital currency mining revenues from production of Bitcoin for the three months ended June 30, 2023 and 2022 were $4.90 million and $16.21\nmillion respectively. This represented a decrease of $11.31 million or 70%. The decrease in mining revenue for the period was primarily attributable to a\ndecrease in the total Bitcoin produced. Bitcoin produced totaled 181.62 in 2023 compared with 489.60 in the 2022 period, a decrease of 63% of Bitcoin\nproduced over the respective period. The decrease is due to less miners being deployed during the current period as a result of the transition of mining to\nthe Pennsylvania sites following the sale of the Georgia site, which occurred during October 2022. Additionally, the difficulty to mine Bitcoin during the\ncurrent quarter increased significantly over the prior period, and there was a decrease in the average price of Bitcoin. During the quarter ended June 30,\n2022, the average price of Bitcoin was $32,790, whereas the average price of Bitcoin during the quarter ended June 30, 2023 was $27,986, a 15% decrease\nin the average price.\n\n Hosting co-location revenue for the three months ended June 30, 2023 and 2022 were $4.59 million and $3.57 million respectively. This increase\nis due to an increase in the number of miners we hosted during the period ended in June 2023.\n\n Net energy benefits for the three months ended June 30, 2023 and 2022, were $1.02 million and $0 respectively. This increase is due to the fact we\ndid not participate in this program during the three months ended June 30, 2022.\n\n Sales of digital mining equipment for the three months ended June 30, 2023 and 2022, were $0.04 million and $0 respectively.\n\nOperating Cost and Expenses\n\n Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; stock-based compensation; and\ndepreciation and amortization.\n\nCost of revenue\n\n Our cost of revenue consists primarily of direct power costs related to digital currency mining, cost of energy sold and cost of mining equipment\nsold.\n\n Cost of revenue for the three months ended June 30, 2023 and 2022 were $7.03 million and $14.36 million, respectively. The decrease in cost of\nrevenue was primarily attributable to a decrease in power costs related to energy to operate the mining equipment within our owned and hosting facilities.\nThis decrease is attributable to less miners being used in operations during the current quarter due to the sale of the Georgia site.\n\nSelling, general and administrative\n\n Our selling, general and administrative expenses consist primarily of professional and management fees relating to: accounting, employee\ncompensation payroll, audit, and legal; equipment repairs; marketing; freight; insurance; consultant fees; lease amortization and general office expenses.\n\n Selling, general and administrative expenses for the three months ended June 30, 2023 and 2022 were $6.27 million and $9.43 million\nrespectively, which is a reduction of $3.16 million in the period. The decrease in these expenses is primarily attributable to personal property tax decreasing\nby $1.29 million in relation to the Georgia site (which was sold during 2022); marketing costs decreasing by $0.38 million; contact labor costs decreasing\nby $0.47 million; legal costs decreasing by $0.43 million and equipment repairs decreasing by $0.59 million. This is offset by an increase in freight of\n$0.75 million.\n\n\n 31\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 73 of 220\n\nStock based compensation\n\n Stock based compensation expenses for the three months ended June 30, 2023 and 2022 were $0.69 million and $0.94 million respectively. In the\nthree months ended June 30, 2023, stock based compensation was largely attributable to costs recognized for warrants issued to Celsius Mining LLC\namounting to $0.50 million, and $0.19 million in relation to long-term incentives for the Company\u2019s management.\n\nDepreciation and amortization\n\n Depreciation consists primarily of depreciation of digital currency mining hardware and MDC equipment.\n\n Depreciation and amortization for the three months ended June 30, 2023 and 2022 were $8.79 million and $16.02 million, respectively. The\ndecrease is primarily attributable to the Company owning less miners in the quarter ended June 30, 2023. At June 30 2023 we owned 23,458 miners\nwhereas as at June 30, 2022 we owned 35,329 miners. We also revised our estimate of the useful life of miners with effect from December 1, 2022 to better\nreflect the pattern of consumption. The change was effected by updating the method of depreciation from reducing balance to the straight-line method from\nthat date.\n\nChange in fair value of derivative asset\n\n During the three months ended June 30, 2023 and 2022, there was an adverse change in the fair value of the derivative asset by $5.44 million and\na gain of $17.71 million, respectively in relation to our power supply arrangements. The reason for the adverse change in the derivative asset is due to the\nfall in the price of energy costs combined with less time left on the power supply agreement.\n\nNon-operating expenses\n\n Non-operating expenses consist primarily of interest expenses and losses on foreign currency transactions.\n\n Interest expenses for the three months ended June 30, 2023 and 2022 were $0.65 million and $1.57 million, respectively. This decrease of $0.92\nmillion was attributable to the paydown of debt during 2022 and the current quarter, resulting in lower interest charges.\n\n During the three months ended June 30, 2023, the realized and unrealized loss on foreign currency transactions was $0.40 million, in contrast to\nthe three months ended June 30, 2022, where there was a gain of $1.66 million due to the movement in foreign exchange rates.\n\nNon-operating income\n\n Non-operating income consists primarily of sale of site assets and other income.\n\n The profit on sale of site assets for the three months ended June 30, 2023 and 2022 were $2.56 million and $0, respectively. This profit is in\nrelation to the sale of the Luna Squares Texas LLC, including 59 transformers.\n\nNet loss attributable to Mawson Infrastructure Group, Inc. stockholders\n\n As a result of the foregoing, the Company recognized a net loss of $17.65 million for the three months ended June 30, 2023, compared to a net\nloss of $2.41 million for the three months ended June 30, 2022.\n\n\n 32\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 74 of 220\n\nResults of Operations \u2013 Six months Ended June 30, 2023 compared to the six months ended June 30, 2022\n\n For the six months\n ended\n June 30,\n 2023 2022\nRevenues:\n Digital currency mining revenue $ 7,652,521 $ 34,996,368\n Hosting co-location revenue 8,917,306 4,116,860\n Net energy benefits 1,458,734 -\n Sale of equipment 193,581 91,545\n Total revenues 18,222,142 39,204,773\n Less: Cost of revenues (excluding depreciation) 11,706,460 22,771,433\nGross profit 6,515,682 16,433,340\n Selling, general and administrative 11,242,674 15,908,034\n Stock based compensation 1,691,619 1,326,844\n Depreciation and amortization 16,752,279 29,826,849\n Change in fair value of derivative asset 6,125,525 (17,714,357)\n Total operating expenses 35,812,097 29,347,370\nLoss from operations (29,296,415) (12,914,030)\nNon-operating income (expense):\n Losses on foreign currency transactions (815,382) 957,818\n Interest expense (1,546,114) (2,801,713)\n Impairment of financial assets - (1,107,197)\n Profit on sale of site 3,353,130 -\n Gain on sale of marketable securities 1,437,230 -\n Other income 177,941 1,889,415\n Share of net loss of equity method investments (36,356) -\n Total non-operating income (expense), net 2,570,449 (1,061,677)\nLoss before income taxes (26,725,966) (13,975,707)\n Income tax expense (2,304,454) -\nNet Loss (29,030,420) (13,975,707)\nLess: Net loss attributable to non-controlling interests (584,489) (522,648)\nNet Loss attributed to Mawson Infrastructure Group stockholders $ (28,445,931) (13,453,059)\n\nNet Loss per share, basic and diluted $ (1.93) $ (1.12)\nWeighted average number of shares outstanding 14,744,915 11,965,129\n\n\n 33\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 75 of 220\n\nRevenues\n\n Digital currency mining revenues from production for the six months ended June 30, 2023 and 2022 were $7.65 million and $35.0 million\nrespectively. This represented a decrease of $27.35 million or 78%. The decrease in mining revenue for the period was primarily attributable to a decrease\nin the total Bitcoin produced. Bitcoin produced totaled 302.73 in 2023 compared with 948.27 in the 2022 period, a decrease of 68% of Bitcoin produced\nover the respective period. The reason for this decrease is due to less miners being deployed during the current period due to the sale of the Georgia site\nwhich occurred during October 2022, in addition to this the difficulty to mine Bitcoin was also higher during the current six month period. Another reason\nfor the decrease in digital currency mining revenue is due to the average price of Bitcoin. During the six month period ended June 30, 2023, the average\nprice of Bitcoin was $25,368 whereas the average price of Bitcoin during the six month period ended June 30, 2022 was $37,011, a 31% decrease in the\naverage price.\n\n Hosting co-location revenue for the six months ended June 30, 2023 and 2022 were $8.92 million and $4.12 million respectively. This increase is\ndue to an increase in the number of miners we hosted during the period ended in March 2023.\n\n Net energy benefits for the six months ended June 30, 2023 and 2022, were $1.46 million and $0 respectively. This increase is due to the fact we\ndid not participate in this program during the six months ended June 30, 2022.\n\n Sales of digital mining equipment for the six months ended June 30, 2023 and 2022, were $0.19 million and $0.09 million, respectively.\n\nOperating Cost and Expenses\n\n Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; stock based compensation; and\ndepreciation and amortization.\n\nCost of revenues.\n\n Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; stock based compensation; and\ndepreciation and amortization.\n\n Cost of revenues for the six months ended June 30, 2023 and 2022 were $11.71 million and $22.77 million, respectively. The decrease in cost of\nrevenue was primarily attributable to a decrease in power costs related to energy to operate our mining equipment and hosting facilities. This decrease is\nattributable to less miners being used in operations during the current six month period due to the sale of the Georgia site.\n\nSelling, general and administrative.\n\n Our selling, general and administrative expenses consist primarily of professional and management fees relating to: accounting, employee\ncompensation , audit, and legal; equipment repairs; marketing; freight; insurance; consultant fees; lease amortization and general office expenses.\n\n Selling, general and administrative expenses for the six months ended June 30, 2023 and 2022 were $11.24 million and $15.91 million\nrespectively. Total selling, general and administrative expenses reduced by $4.67 million in the period. Some of the main factors impacting the decrease the\nexpenses were due to personal property tax decreasing by $1.34 million in relation to the Georgia site which was sold during 2022; marketing costs\ndecreased by $0.60 million; contact labor costs decreased by $0.88 million; legal costs decreased by $0.57 million; recruitment costs decreased by $0.35\nmillion and equipment repairs decreased by $1.0 million. This is offset by an increase in freight of $0.53 million and an increase in payroll costs of $0.44\nmillion.\n\n\n 34\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 76 of 220\n\nStock based compensation\n\n Stock based compensation expenses for the six months ended June 30, 2023 and 2022 were $1.69 million and $1.33 million respectively. In the six\nmonths ended June 30, 2023, stock based compensation was largely attributable to costs recognized for warrants issued to Celsius Mining LLC amounting\nto $1.0 million, shares issued to W Capital Advisors Pty Ltd amounting to $0.31 million for consultancy and advisory work and $0.38 million in relation to\nlong-term incentives for the Company\u2019s leadership team.\n\nDepreciation and amortization\n\n Depreciation consists primarily of depreciation of digital currency mining hardware and MDC equipment.\n\n Depreciation and amortization for the six months ended June 30, 2023 and 2022 were $16.75 million and $29.83 million, respectively. The\ndecrease is primarily attributable to the Company owning less miners in the six month period ended June 30, 2023, as at June 30 2023 there were 23,458\nminers whereas as at June 30, 2022 there were 35,329 miners. There was also a revised estimate of the useful life of miners with effect from December 1,\n2022 to better reflect the pattern of consumption the change being effected by changing the method of depreciation from reducing balance to the straight\nline method from that date.\n\nChange in fair value of derivative asset\n\n During the six months ended June 30, 2023, there was an adverse change in the fair value of the derivative asset by $6.13million and a gain of\n$17.71 million, respectively in relation to our power supply arrangements. The reason for the adverse change in the derivative asset is due to the fall in the\nprice of energy costs combined with less time left on the power supply agreement.\n\nNon-operating expense\n\n Non-operating expenses consist primarily of interest expense, losses on foreign currency transactions, loss on write off property, plant and\nequipment, and share of net loss of associates accounted for using the equity method.\n\n Interest expense for the six months ended June 30, 2023 and 2022 were $1.55 million and $2.80 million, respectively. This was a decrease of\n$1.32 million which was attributable to the paydown of debt during 2022 and the current six month period resulting in a lower interest charge.\n\n During the six months ended June 30, 2023, the realized and unrealized loss on foreign currency transactions was $0.82 million, and for the six\nmonths ended June 30, 2022 there was a gain of $0.96 million due to the movement in foreign exchange rates.\n\nNon-operating income\n\n Non-operating income consists primarily of, profit on sale of site assets, gain on sales of marketable securities and other income.\n\n The gain on sales of marketable securities for the six months ended June 30, 2023 and 2022 were $1.44 million and $0, respectively. The gain\nduring the six month period was in relation to the sale of CleanSpark, Inc shares.\n\n The profit on sale of site assets for the six months ended June 30, 2023 and 2022 were $3.35 million and $0, respectively. This is mainly in\nrelation to the sale of the Luna Squares Texas LLC and the 59 transformers. However, $0.79 million of this gain on sale relates to an accounting adjustment\nrelating to the sale of the Georgia site to CleanSpark, Inc during 2022. The Company determined the impact of recording this adjustment during 2023 was\nnot material to the financial statements or the opening balance of the accumulated deficit.\n\nNet loss attributable to Mawson Infrastructure Group, Inc. stockholders\n\n As a result of the foregoing, the Company recognized a net loss of $29.03 million for the six months ended June 30, 2023, compared to a net loss\nof $13.98 million for the six months ended June 30, 2022.\n\n\n 35\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 77 of 220\n\nLiquidity and Capital Resources\n\nGeneral\n\n Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on\nan ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable\nand capital expenditures. For the six month period ended June 30, 2023, we financed our operations primarily through:\n\n 1. Net cash used by operating activities of $4.19 million;\n\n 2. On September 2, 2022, Mawson Infrastructure Group Pty Ltd entered into a Secured Loan Facility Agreement with W Capital Advisors Pty\n Ltd with a total loan facility of AUD$8 million (USD$5.2 million). During the six month period ending June 30, 2023, the Company received\n AUD$3 million (USD$1.99 million) from this loan facility. As at June 30, 2023, AUD$1.46 million (USD$0.97 million) has been drawn\n down from this facility. The Secured Loan Facility expired in March 2023 and the Company and W Capital Advisors Pty Ltd are in ongoing\n discussions regarding the terms and extension of the loan. W Capital Advisors Pty Ltd and MIG PL have each reserved their rights.\n\n 3. The Company has the ability through its ATM Agreement to sell shares of its common stock. Effective May 4, 2023, the Company filed a\n prospectus supplement to amend, supplement and supersede certain information contained in the earlier prospectus and prospectus\n supplement, which reduced the amount of shares of common stock the Company may offer and sell under the ATM Agreement to an\n aggregate offering price of up to $9,000,000 from time to time. During the six months ended June 30, 2023, 415,271 shares were issued as\n part of the ATM Agreement for cash proceeds of $1.19 million, net of issuance costs. However, the Company is currently contractually\n restricted from issuing any stock under its ATM Agreement until on or about November 7, 2023.\n\n 4. On May 3, 2023, the Company has entered into a definitive agreement with institutional investors for the issuance and sale of 2,083,336\n shares of its common stock (or pre-funded warrants in lieu thereof) at a purchase price of $2.40 per share of common stock in a registered\n direct offering. In addition, in a concurrent private placement, the Company will issue to the institutional investors unregistered warrants to\n purchase up to 2,604,170 shares of its common stock with an exercise price of $3.23 per share and are exercisable six months following\n issuance for a period of five and one-half years following issuance. The shares of common stock and pre-funded warrants described above are\n being offered and sold by the Company pursuant to a \u201cshelf\u201d registration statement on Form S-3 (File No. 333-264062). The warrants to\n purchase common stock described above were offered and sold by the Company pursuant to Section 4(a)(2) of the Securities Act and\n Regulation D promulgated thereunder. This offering closed on May 8, 2022. The net amount raised was $4.60 million. As a condition of the\n offering the Company was precluded from issuing new shares until the date that is 60 days from the date the offering closed, or new shares\n under the ATM until the date that is 180 days from the date the offering closed.\n\n During the six months ending June 30, 2023 we repaid $9.67 million of principal payments against the historical facilities provided by Celsius,\nMarshall and W Capital Advisors Pty Ltd.\n\n We believe our working capital requirements will continue to be funded through a combination of the cash we expect to generate from future\noperations, our existing funds, external debt facilities that may be available to us, further issuances of shares, and other potential sources of capital,\nmonetization or funds. These are expected to be adequate to fund our operations over the next twelve months. In addition, the Company shall have access\nto equity financing through the ATM offering facility post the contractually restricted period. For our business to grow it is expected, we may continue\ninvesting in mining equipment and infrastructure and will require additional working capital in the short-term and long-term. As at June 30, 2023 we had\nan aggregate of $20.87 million of debt that is required to be repaid within eight months unless we refinance or renegotiate the terms, $3.33 million of this\ndebt was paid during July 2023, a further $11.06 million is required to be repaid on or before August 31, 2023, unless we refinance or renegotiate the terms.\nIn addition, the Celsius deposit of $15.33 million is the subject of a dispute.\n\n Please see our Risk Factor entitled \u201cWe may need to raise additional capital to continue our operations and execute our business strategy\u201d in our\nAnnual Report on Form 10-K for the year ended December 31, 2022.\n\nWorking Capital and Cash Flows\n\n As of June 30, 2023, and December 31, 2022, we had cash and cash equivalents balance of $5.61 million and $0.95 million, respectively.\n\n As of June 30, 2023, and December 31, 2022, our trade receivables balance was $6.40 million and $10.46 million, respectively.\n\n\n 36\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 78 of 220\n\n As of June 30, 2023, we had $20.87 million of outstanding short-term borrowings, and as of December 31, 2022, we had $23.61 million of short-\nterm borrowings. The short-term borrowings as of June 30, 2023, relate to the to the secured loan facilities with Celsius Mining LLC, W Capital Advisors\nPty Ltd, the secured convertible promissory notes issued to investors and Marshall Investments MIG Pty Ltd. As of June 30, 2023, and as of December 31,\n2022, we had $0 and $4.51 million, respectively, of outstanding long-term borrowings.\n\n As of June 30, 2023, we had negative working capital of $32.30 million and as at December 31, 2022, we had negative working capital of $15.17\nmillion.\n\n The following table presents the major components of net cash flows (used in) provided by operating, investing and financing activities for the\nthree months ending June 30, 2023 and 2022:\n\n Six Months Ended\n June 30,\n 2023 2022\n\nNet cash (used in)/provided by operating activities $ (4,192,480) $ 33,146,960\nNet cash provided by/(used in) investing activities $ 10,767,041 $ (53,155,193)\nNet cash (used in)/provided by financing activities $ (1,893,177) $ 19,513,738\n\n For the six months ended June 30, 2023, net cash used by operating activities was $4,192,480 and for the six months ended June 30, 2022, net\ncash provided by operating activities was $33,146,960. The decrease in net cash provided by operating activities was primarily attributable to timing\ndifferences in trade and other receivables and trade and other payables.\n\n For the six months ended June 30, 2023, net cash provided by investing activities was $10,767,041 and for the six months ended June 30, 2022,\nnet cash used in investing activities was $53,155,193. The net cash provided by investing activities during June 30, 2023 was primarily attributable the\nproceeds from sale of investment shares in CleanSpark, Inc.\n\n For the six months ended June 30, 2023, net cash used in financing activities was 1,893,177 and for the six months ended June 30, 2022, net\nprovided by financing activities was $19,513,738. The cash used in financing activities during June 30, 2023 was primarily attributable to the repayment of\nborrowings.\n\nMaterial Cash Requirements\n\n The following discussion summarizes our material cash requirements from contractual and other obligations.\n\n In December 2021 MIG No. 1 Pty Ltd entered into a Secured Loan Facility Agreement with Marshall. The loan matures in February 2024 and\nbears interest at a rate of 12% per annum, payable monthly with interest payments commencing that commenced in December 2021. This loan facility is\nsecured by direct assets of MIG No.1 Pty Ltd and a general security agreement given by the Company. Principal repayments began during November 2022.\nThe outstanding balance is $8.07 million as at June 30, 2023, all of which is classified as a current liability. On June 30, 2023 MIG No. 1 Pty Ltd did not\nmake a principal and interest payment of $0.50 million. MIG No. 1 Pty Ltd and Marshall are in ongoing discussions with respect to the payment, and the\nloan terms generally. Marshall and MIG No. 1 Pty Ltd have each reserved their rights.\n\n On February 23, 2022, Luna Squares LLC entered into a Co-Location Agreement with Celsius Mining LLC. In connection with this agreement,\nCelsius Mining LLC loaned Luna Squares LLC a principal amount of $20 million, for the purpose of funding the infrastructure required to meet the\nobligations of the Co-Location Agreement, for which Luna Squares LLC issued a Secured Promissory Note for repayment of such amount. The Secured\nPromissory Note accrues interest daily at a rate of 12% per annum. Luna Squares LLC is required to amortize the loan at a rate of 15% per quarter,\nprincipal repayments began at the end of September 2022. The Secured Promissory Note has a maturity date of August 23, 2023, the outstanding balance is\n$11.33 million as of June 30, 2023, all of which is classified as a current liability. Celsius Mining LLC filed for Chapter 11 bankruptcy protection on July\n13, 2022. Under the Co-location Agreement, Celsius Mining LLC advanced deposits of $15.33 million to Luna Squares LLC. The deposits are the subject\nof a commercial dispute between the parties.\n\n On September 2, 2022, Mawson Infrastructure Group Pty Ltd entered into a Secured Loan Facility Agreement with W Capital Advisors Pty Ltd\nwith a total loan facility of AUD$3.00 million (USD$1.9 million). This was amended on September 29, 2022 and the loan facility was increased to\nAUD$8.00 million (USD$5.2 million). As at June 30, 2023, AUD$1.46 million (USD$0.97 million) has been drawn down from this facility, all of which is\nclassified as a current liability. The Secured Loan Facility accrues interest daily at a rate of 12% per annum and is paid monthly. Principal repayments are\npaid ad hoc in line with the loan facility agreement. The Secured Loan Facility expired in March 2023 and Mawson Infrastructure Group Pty Ltd and W\nCapital Advisors Pty Ltd are in ongoing discussions. W Capital Advisors Pty Ltd and MIG PL have each reserved their rights.\n\n\n 37\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 79 of 220\n\n On July 8, 2022, the Company issued secured convertible promissory notes to investors in the aggregate principal amount of $3.60 million (the\n\u201cSecured Convertible Promissory Notes\u201d) in exchange for an aggregate of $3.60 million in cash. On September 29, 2022, the Company entered into a letter\nvariation relating to some of the Secured Convertible Promissory Notes, with an aggregate principal amount of $3.1 million, which gave those holders the\noption to elect for pre-payment (including accrued interest to maturity) subject to certain conditions. All of the investors included in this letter variation\nelected for the pre-payment option and therefore there were $3.1 million principal repayments made during November 2022. The final convertible\nnoteholder who was not a party to this variation opted to enter into an arrangement whereby it received pre-payment of interest but agreed that repayment\nof the principal was not required therefore the remaining $0.50 million has been classified as a current liability. The final convertible note matured in July\n2023 and the Company is in ongoing discussions with the noteholder.\nFinancial condition\n As at June 30, 2023 and December 31, 2022, we had net current liabilities of $32.30 million and $15.17 million respectively. As at June 30, 2023\nand December 31, 2022, we had net assets of $55.33 million and $76.17 million respectively. As at June 30, 2023 we had an accumulated deficit of\n$150.70 million compared to $122.26 million as at December 31, 2022. Our cash position at June 30, 2023, was $5.61 million in comparison to $0.95\nmillion at December 31, 2022. For the six month period ending June 30, 2023 and June 30, 2022 the Company incurred a loss after tax of $29.03 million\nand a loss after tax of $13.98 million respectively. Included in trade and other receivables is a $2 million payment being the final payment due from\nCleanSpark, Inc for the sale of the Georgia facility. CleanSpark, Inc has disputed this payment and there is uncertainty as to whether the Company can\nrecover this amount in part or full.\n Our primary requirements for liquidity and capital are working capital, capital expenditures, public company costs and general corporate needs. In\nparticular, we have large power usage costs, and other significant costs include our lease, operational and employee costs. We expect these capital and\nliquidity 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\ncash equivalents, external debt facilities available to us and further issuances of shares.\n We require additional capital to respond to near-term debt repayment obligations, competitive pressure, market dynamics, new technologies,\ncustomer demands, business opportunities, challenges, potential acquisitions or unforeseen circumstances, and we will likely need to determine to engage\nin 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\ncontinue to fund, grow or support our business model and to respond to business challenges could be significantly limited, our business, financial condition\nand results of operations could be adversely affected, and this may result in bankruptcy or our ceasing operations.\n The Company is taking steps to preserve cash by optimizing costs and negotiating with suppliers to improve their terms of trade. The Company\nhas been improving its revenue generation by improving the efficiency of its operations. The Company will continue to seek to optimize its cashflows.\nNon-GAAP Financial Measures\n The Company utilizes a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing its overall business\nperformance, for making operating decisions and for forecasting and planning future periods. The Company considers the use of non-GAAP financial\nmeasures helpful in assessing its current financial performance, ongoing operations and prospects for the future. While the Company uses non-GAAP\nfinancial measures as a tool to enhance its understanding of certain aspects of its financial performance, the Company does not consider these measures to\nbe a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, the Company believes that\ndisclosing non-GAAP financial measures to the readers of its financial information provides such readers with useful supplemental data that, while not a\nsubstitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. Investors are cautioned\nthat there are inherent limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, non-GAAP financial\nmeasures are not based on a comprehensive set of accounting rules or principles and many of the adjustments to the GAAP financial measures reflect the\nexclusion of items that are recurring and will be reflected in the company\u2019s financial results for the foreseeable future. In addition, other companies,\nincluding other companies in the Company\u2019s industry, may calculate non-GAAP financial measures differently than the Company does, limiting their\nusefulness as a comparative tool.\n The Company is providing supplemental financial measures for (i) non-GAAP adjusted earnings before interest, taxes, depreciation and\namortization, or (\u201cadjusted EBITDA\u201d) that excludes the impact of interest, taxes, depreciation, amortization, share-based compensation expense, unrealized\ngains/losses on share of associates, and certain non-recurring expenses. We believe that adjusted EBITDA is useful to investors in comparing our\nperformance across reporting periods on a consistent basis.\n For the three months For the six months\n ended ended\n June 30, June 30,\n 2023 2022 2023 2022\nReconciliation of non-GAAP adjusted EBITDA:\nNet loss: $ (17,649,462) $ (2,405,632) $ (29,030,420) $ (13,975,707)\nImpairment of financial assets - 1,107,197 - 1,107,197\nShare of net loss of equity method investments - - 36,356 -\nDepreciation and amortization 8,789,755 16,023,817 16,752,279 29,826,849\nStock based compensation 687,276 936,235 1,691,619 1,326,844\nUnrealized and realized losses/(gain) 397,165 (1,657,055) 815,382 (957,818)\nOther non-operating income (252,363) (1,864,968) (177,941) (1,889,415)\nOther non-operating expenses 647,062 1,565,040 1,546,114 2,801,713\nIncome tax 1,756,371 - 2,304,454 -\nEBITDA (non-GAAP) $ (5,624,196) $ 13,704,634 $ (6,062,157) $ 18,239,663\n\n\n 38\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 80 of 220\n\nCritical accounting estimates\n\n The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions\nthat affect the amounts reported in the financial statements and accompanying notes. These estimates, judgments and assumptions can affect the reported\namounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported\namounts of income and expenses during the reporting periods. Actual results could differ from those estimates. There have been no material changes to our\ncritical accounting policies and estimates as set forth in Item 7, Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations,\nincluded in our Annual Report on Form 10-K for the year ended December 31, 2022.\n\nItem 3. Quantitative and Qualitative Disclosures about Market Risks\n\n As a smaller reporting company, the Company has elected not to provide the disclosure required by this item.\n\nItem 4. Controls and Procedures\n\nEvaluation of disclosure controls and procedures\n\n Our Board of Directors and management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial\nOfficer (principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e)) and 15d-\n15(e) under the Securities Exchange Act of 1934, as amended (the \u201cExchange Act\u201d), as of the end of the period covered by this Quarterly Report. Our\nBoard of Directors and management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable\nassurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and\nprocedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures\nwere not effective at the reasonable assurance level as of June 30, 2023, including the material weaknesses in our internal control over financial reporting\ndescribed below. Management\u2019s assessment of the effectiveness of our disclosure controls and procedures is expressed at a level of reasonable assurance\nbecause management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of\nachieving their objectives.\n\n Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any\nevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree\nof compliance with the policies or procedures may deteriorate.\n\n A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable\npossibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.\n\n Significant Reliance on Certain Individuals. There is inadequate segregation of duties in place related to our financial reporting and other review\nand oversight procedures due to the lack of sufficient accounting personnel. This is not inconsistent with similar small organizations. This gives rise to the\nrisk of lack of ability to react in a timely manner to operations issues and to meet the requirements of the SEC, U.S. GAAP and the Sarbanes-Oxley Act of\n2002. In addition, this poses the risk that compliance and other reporting obligations are not dealt with in an adequate manner.\n\n Controls over the financial statement close and reporting process. Controls were not adequately designed or implemented in the financial\nstatement close and reporting process. This includes controls related to complex and judgmental accounting transactions including business acquisitions\nand divestures, derivatives, manual journal entries, account reconciliations and financial statement policies and disclosures.\n\n Information and Technology Controls. There are control deficiencies related to information technology (\u201cIT\u201d) general controls that in the\naggregate constitute a material weakness. Deficiencies identified include lack of controls over access to programs and data, program changes, program\ndevelopment and general IT controls.\n\n\n 39\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 81 of 220\n\n Data from third parties. The Company did not properly execute its designed controls to ensure that data received from third parties was complete\nand accurate. Such data is relied on by the Company in determining amounts pertaining to mining and hosting revenue, net energy benefits, and digital\ncurrency assets.\n\n Fixed asset verification. The Company did not properly execute its designed controls around physical asset verification. Together with system\nlimitations, restricting tracking of fixed asset movements, there is a risk around the existence of fixed assets.\n\n Notwithstanding the identified material weaknesses and management\u2019s assessment that our disclosure controls and procedures were not effective\nas of June 30, 2023, management believes that the consolidated condensed financial statements included in this Quarterly Report on Form 10-Q fairly\npresent, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with\ngenerally accepted accounting principles. We rely on the assistance of outside advisors with expertise in these matters in preparing the financial\nstatements.\n\nRemediation\n\n Our Board of Directors and management take internal control over financial reporting and the integrity of our financial statements seriously. With\nthe oversight of senior management and our audit committee, we continue to remediate the underlying causes of the identified material weaknesses, such\nthat the controls are designed, implemented and operate better.\n\n Our remediation efforts commenced in fiscal year 2022, when we performed a risk assessment, designed controls, and gradually implemented\ncontrols for all business processes. In the current financial year, management updated the initial risk assessment, refined control designs, continued the\nimplementation of controls and performed ongoing remediation efforts to uplift the quality and effectiveness of existing controls. Remediation efforts\nfurther included the implementation of new IT systems and applications with robust controls, segregating duties through implementing system workflows\nand the hiring of qualified personnel in financial reporting and IT. A number of controls remain to be implemented in the upcoming quarters.\n\n Whilst controls have been implemented across all business processes, the material weaknesses in our internal control over financial reporting and\ninformation technology will not be considered remediated until controls are operated for a sufficient period of time and have been tested for and concluded\non for effectiveness. Further testing of the effectiveness of controls is planned in subsequent quarters.\n\n Remediation efforts for upcoming quarters will be focused on implementing the remainder of controls, refining existing controls and validating the\neffectiveness of implemented controls using criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in\nInternal Control. We cannot provide any assurance that our remediation efforts will be successful or that our internal control over financial reporting and\nother 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\nfinancial reporting related to the identified material weaknesses, management may determine to take additional measures to address control deficiencies or\ndetermine to modify the remediation plan described above.\n\nChanges in internal control over financial reporting\n\n Except for the remedial measures described above, there have been no other changes in our internal control over financial reporting (as defined in\nRules 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\nreasonably likely to materially affect, the Company\u2019s internal control over financial reporting.\n\nLimitations on Effectiveness of Controls and Procedures and Internal Control over Financial Reporting\n\n In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any\ncontrols and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In\naddition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource\nconstraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.\n\n\n 40\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 82 of 220\n\n PART II. OTHER INFORMATION\n\nItem 1. Legal Proceedings\n\n We are currently not, and have not been in the recent past, a party to any litigation which may have or have had in the recent past significant\neffects on our financial position or profitability. However, we have been in the past, and may be from time to time in the future, be involved in certain\nlitigation related to our businesses. The Company and some of its subsidiaries are currently in commercial disputes, including with Celsius Mining LLC,\nwhereby Celsius Mining LLC, the Company and/or its subsidiaries and affiliates have made certain allegations and claims against each other. The\nCompany is also in a commercial dispute with CleanSpark, Inc. related to payments due by CleanSpark, Inc. to the Company. If the Company and those\nsubsidiaries are unable to resolve these issues with Celsius Mining LLC and/or CleanSpark, Inc, these disputes may lead to litigation. Mr. Sivikofsky, who\npreviously provided CFO services to the Company, has made certain compensation related claims against the Company which the Company disputes.\n\nItem 1A. Risk Factors\n\n The Company\u2019s risk factors were disclosed in (i) Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 which\nwas filed on March 23, 2023 and (ii) Part II, Item 1A of our Quarterly Report on form 10-Q for the quarter ended March 31, 2023. In addition, the\nCompany includes the additional risk factors and updates to existing risk factors below:\n\nListing on The Nasdaq Capital Market (\u201cNasdaq\u201d)\n\n On May 24, 2023 the Company notified Nasdaq that we had fallen out of compliance with Nasdaq\u2019s Listing Rules regarding Majority Independent\nBoard and Audit Committee Composition due to an independent director becoming an executive of the company. The Nasdaq Listing Rules provide a cure\nperiod to regain compliance, which is until our next annual stockholders\u2019 meeting. The Company plans to add a new independent Board director and to the\nAudit Committee and looks forward to subsequently regaining compliance with the Nasdaq Listing Rules within the cure period allowed by the Nasdaq.\n\n There is a risk that the Company may be de-listed if it fails to maintain compliance with any of the other Nasdaq Listing Rules.\n\nWe will need to raise substantial additional capital to continue our operations and execute our business strategy, and we may not be able to raise adequate\ncapital on a timely basis, on favorable terms, or at all.\n\n We have a history of losses from operations, we expect negative cash flows from our operations to continue for the foreseeable future, and we\nexpect that our net losses will continue for the foreseeable future as we seek to increase the efficiency of our operations, find new hosting customers, and\ngrow the size of our self-mining operations. These circumstances raise substantial doubt about our ability to continue as a going concern. Our financial\nstatements as of June 30, 2023, have been prepared on the basis that we will be able to continue as a going concern and do not include any adjustments that\nmight result from the outcome of this uncertainty. At June 30, 2023, our accumulated deficit was $150.70 million, our cash and cash equivalents were $5.61\nmillion, and we had negative working capital of $32.30 million. Advancing our future plans will require substantial additional investment. Based on our\ncurrent operating plan estimates, we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over the next 12\nmonths from the date of this report. We will need to raise substantial additional capital in the near term to continue to fund our operations and execute our\ncurrent business strategy. The amount and timing of our capital needs have and will continue to depend on many factors, as discussed further below as well\nas under \u201cItem 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations \u2014Liquidity and Capital Resources.\u201d\n\n\n 41\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 83 of 220\n\n Our capital needs have depended on, and will continue to depend on, many factors that are highly variable and difficult to predict, including:\n\n \u25cf working capital,\n\n \u25cf capital expenditures,\n\n \u25cf public company costs and\n\n \u25cf general corporate needs.\n\n We are seeking to raise additional capital through a variety of means, including equity, equity-linked or debt securities offerings, or other types of\narrangements or sources of capital, monetization or funds. Our past success in raising capital through equity offerings should not be viewed as an indication\nwe will be successful in raising capital through those or any other means in the future. We expect that our ability to raise additional capital and the amount\nof capital available to us will depend not only on our operations, assets and progress effecting our business plan, but also on several factors outside of our\ncontrol, such as macroeconomic and financial market conditions.\n\n Unstable and unfavorable market and economic conditions may harm our ability to raise additional capital. An economic downturn, recession or\nrecessionary concerns, delay or failure of the U.S. government to raise the federal debt ceiling, increased inflation, rising interest rates, adverse\ndevelopments affecting financial institutions or the financial services industry, or the occurrence or continued occurrence of events similar to those in recent\nyears, such as a fall in the price of Bitcoin, the COVID-19 pandemic or other public health emergencies, geopolitical conflict (such as the war in Ukraine),\nnatural/environmental disasters, supply-chain disruptions, terrorist attacks, strained relations between the U.S. and a number of other countries, social and\npolitical discord and unrest in the U.S. and other countries, and government shutdowns, among others, increase market volatility and have long-term\nadverse effects on the U.S. and global economies and financial markets. Volatility and deterioration in the financial markets and liquidity constraints or\nother adverse developments affecting financial institutions may make equity or debt financings more difficult, more costly or more dilutive and may\nincrease competition for, or limit the availability of, funding from other third-party sources, such as from strategic collaborations and government and other\ngrants.\n\n Our management may devote significant time and we may incur substantial costs in pursuing, evaluating and negotiating potential strategic\noptions or capital-raising transactions and those efforts may not prove successful on a timely basis, or at all. If we cannot raise adequate additional capital\nwhen needed, we may be forced to reorganize or merge with another entity, sell or monetize assets, file for bankruptcy, or cease operations. If we become\nunable to continue as a going concern, we may have to liquidate our assets, and might realize significantly less than the values at which they are carried on\nour financial statements, and our stockholders may lose all or part of their investment in our common stock.\n\nWe will need to raise capital to meet our debt service obligations on or before August 23, 2023, and to fund our working capital needs. Our inability to\nraise sufficient capital would have a material adverse effect on our financial condition and business.\n\n As of June 30, 2023, we had cash and cash equivalents of approximately $5.61 million. As of June 30, 2023, approximately $20.87 million of\nloans and other borrowings and payables is due of which $3.33 million of this debt was paid during July 2023. We need to raise capital to meet our debt\nservice obligations and fund our working capital needs. We currently have no arrangements for such capital and no assurances can be given that we will be\nable to raise such capital when needed, on acceptable terms, or at all. If we are unable to raise or source sufficient capital, we will need to implement\nadditional measures to reduce operating expenses and to preserve capital, any of which may further adversely affect our operations. If we fail to comply\nwith our debt service obligations, our lenders could declare a default, which could lead to all or a number of payment obligations becoming immediately\ndue and payable and have a material adverse effect on our financial condition and business.\n\n On July 20, 2023 we received a notice from Celsius Mining LLC that Celsius Mining LLC does not intend to renew its Co-Location Agreement,\nunder which it receives hosting services from Luna Squares LLC (a subsidiary of the Company), and that it will expire in accordance with its terms. Celsius\nMining LLC is the Company\u2019s only hosting customer. The Company hosts approximately 20,000 miners for Celsius Mining LLC. In addition, Celsius\nMining LLC has made certain allegations against Luna Squares LLC in respect of its performance under the Co-Location Agreement. Luna Squares LLC\nhas made certain allegations against Celsius Mining LLC in respect of its performance under the Co-Location Agreement. There is a risk of litigation\narising out of these allegations.\n\n\n 42\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 84 of 220\n\n The Company is in discussions with potential new customers for hosting services to replace Celsius, however there is no guarantee that the\nCompany will be able to enter into hosting agreements with new customers in a timely manner, or at all, or that the agreements with the new customers will\nreplace the revenue that Celsius Mining LLC generated for the Company. Celsius Mining LLC has indicated a desire to continue working with Luna\nSquares LLC to discuss a new Co-Location Agreement, however the outcome of this discussion is uncertain. The Company may decide to use the hosting\ninfrastructure\u2019s capacity to self-mine or for other purposes, however it will need to raise a potentially significant amount of capital to finance and acquire\nfurther hardware (specifically miners) for self-mining and the potential timing and outcome of these and other potential options are uncertain.\n\n On July 25, 2023, a Debtors\u2019 Ex Parte Motion for an Order Under Federal Rules of Bankruptcy Procedure 2004 and 9016 for Subpoenas for\nExamination of, and Production of Documents From, Mawson Infrastructure Group Inc., Luna Squares, and Cosmos Infrastructure LLC [Docket No. 3088]\nwas filed, and the Bankruptcy Court entered an order on July 26, 2023, authorizing the Debtors to take discovery of the Mawson Entities [Docket No.\n3091]. The Debtors intend to take discovery of the Mawson Entities to evaluate the status of the liens securing the Promissory Note and other potential\nclaims the Debtors may have against the Mawson Entities, including with respect to the Co-Location Agreement. The discovery process is ongoing.\n\n The Company requires capital to invest in new hardware. Bitcoin mining hardware becomes obsolete over time, and the difficulty to mine for\nBitcoin increases as the total hashrate of the Bitcoin network increases. This means that if competitors continue to increase their hashing power relative to\nthe Company, the Company will tend to earn less Bitcoin if its hashing power does not increase in a similar manner.\n\nItem 2. Unregistered Sales of Equity Securities and Use of Proceeds\n\n None\n\nItem 3. Defaults Upon Senior Securities\n\n None\n\nItem 4. Mine Safety Disclosures\n\n Not applicable.\n\nItem 5. Other Information\n\n None.\n\n\n 43\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 85 of 220\n\nItem 6. Exhibits\n\n2.1\u2020 Bid Implementation Agreement between Wize Pharma, Inc. and Cosmos Capital Limited, dated December 30, 2020 (Incorporated by reference\n to the Company\u2019s Current Report on Form 8-K filed with the SEC on January 5, 2021)\n2.2\u2020 Deed of Amendment, dated January 18, 2021, of the Bid Implementation Agreement between Wize Pharma, Inc. and Cosmos Capital Limited,\n dated December 30, 2020 (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with the SEC on January 19, 2021)\n3.1 Certificate of Incorporation (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with the SEC on April 5, 2012)\n3.2 Certificate of Amendment to Certificate of Incorporation (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with the\n SEC on July 18, 2013)\n3.3 Certificate of Amendment to Certificate of Incorporation dated November 15, 2017 (Incorporated by reference to Company\u2019s Current Report\n on Form 8-K filed with the SEC on November 21, 2017)\n3.4 Certificate of Amendment to Certificate of Incorporation dated March 1, 2018 (Incorporated by reference to Company\u2019s Current Report on\n Form 8-K filed with the SEC on March 5, 2018)\n3.5 Certificate of Amendment to Certificate of Incorporation dated March 17, 2021 (Incorporated by reference to Company\u2019s Current Report on\n Form 8-K filed with the SEC on March 23, 2021)\n3.6 Certificate of Amendment to Certificate of Incorporation dated June 9, 2021 (Incorporated by reference to Company\u2019s Current Report on Form\n 8-K filed with the SEC on June 14, 2021)\n3.7 Certificate of Amendment to Certificate of Incorporation dated August 11, 2021 (Incorporated by reference to Company\u2019s Current Report on\n Form 8-K filed with the SEC on August 16, 2021)\n3.8* Certificate of Amendment to Certificate of Incorporation dated February 6, 2023\n3.9 Certificate of Registration of a Company of Cosmos Capital Limited ACN 636 458 912 (Incorporated by reference to the Company\u2019s\n Registration Statement on Form S-1 (File No. 333-256947) filed with the SEC on June 9, 2021)\n3.10 Constitution of Cosmos Capital Limited (Incorporated by reference to the Company\u2019s Registration Statement on Form S-1 (File No. 333-\n 256947) filed with the SEC on June 9, 2021)\n3.11 Bylaws (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with the SEC on May 10, 2013)\n4.1 Form of Common Warrant (Incorporated by reference to the Company\u2019s Current Report on Form 8-K filed with the SEC on May 8, 2023)\n4.2 Form of Pre-Funded Warrant (Incorporated by reference to the Company\u2019s Current Report on Form 8-K filed with the SEC on May 8, 2023)\n4.3 Form of Placement Agent Warrant (Incorporated by reference to the Company\u2019s Current Report on Form 8-K filed with the SEC on May 8,\n 2023)\n4.4 Form of Warrant Amendment Agreement dated May 3, 2023 (Incorporated by reference to the Company\u2019s Current Report on Form 8-K filed\n with the SEC on May 8, 2023)\n10.1 Form of Securities Purchase Agreement (Incorporated by reference to the Company\u2019s Current Report on Form 8-K filed with the SEC on May\n 8, 2023)\n10.2 Employment Agreement by and between Mawson Infrastructure Group Inc. and Rahul Mewawalla, dated May 22, 2023 (Incorporated by\n reference to the Company\u2019s Current Report on Form 8-K filed with the SEC on May 25, 2023)\n10.3 Letter Deed of Departure by and between Mawson Infrastructure Group Pty Ltd and James Manning, dated May 22, 2023 (Incorporated by\n reference to the Company\u2019s Current Report on Form 8-K filed with the SEC on May 25, 2023)\n10.4 Chief Financial Officer Offer Letter and Exhibit A (Incorporated by reference to the Company\u2019s Current Report on Form 8-K filed with the\n SEC on July 14, 2023)\n10.5 Addendum dated July 19, 2023 to Employment Agreement between Mawson Infrastructure Group, Inc. and Rahul Mewawalla (Incorporated\n by reference to the Company\u2019s Current Report on Form 8-K filed with the SEC on July 21, 2023)\n31.1* Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.\n31.2* Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.\n32** Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.\n101 The following materials from the Company\u2019s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline XBRL\n (eXtensible Business Reporting Language) includes: (i) Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, (ii)\n Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022, (iii) Consolidated Statements of\n Comprehensive Loss for the three and six months ended June 30, 2023, and 2022, (iv) Consolidated Statements of Cash Flows for the six\n months ended June 30, 2023 and 2022, (v) Consolidated Statements of Stockholders\u2019 Equity for the three and six months ended June 30, 2023\n and 2022, and (vi) Notes to Consolidated Financial Statements\n104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)\n\n* Filed herewith.\n\n** Furnished herewith.\n\n\u2020 Exhibits and schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. We will furnish the omitted exhibits and\n schedules to the Securities and Exchange Commission upon request by the Securities and Exchange Commission.\n\n\n 44\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 86 of 220\n\n SIGNATURES\n\n Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its\nbehalf by the undersigned, thereunto duly authorized.\n\n Mawson Infrastructure Group Inc.\n\nDate: August 21, 2023 By: /s/ Rahul Mewawalla\n Rahul Mewawalla\n Chief Executive Officer and President\n (Principal Executive Officer)\n\n\nDate: August 21, 2023 By: /s/ William Harrison\n William Harrison\n Chief Financial Officer\n (Principal Financial and Accounting Officer)\n\n\n 45\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 87 of 220\n\n\n\n\n EXHIBIT C\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 88 of 220\n UNITED STATES\n SECURITIES AND EXCHANGE COMMISSION\n Washington, D.C. 20549\n\n FORM 10-Q\n\n (Mark One)\n \u2612 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n For the quarterly period ended September 30, 2024\n\n or\n\n \u2610 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934\n\n For the transition period from ________________ to ________________\n\n Commission File Number 001-40849\n\n Mawson Infrastructure Group Inc.\n (Exact name of registrant as specified in its charter)\n\n Delaware XX-XXXXXXX\n (State or other jurisdiction of (I.R.S. Employer\n incorporation or organization) Identification No.)\n\n 950 Railroad Avenue, Midland, Pennsylvania 15059\n (Address of principal executive offices) (Zip code)\n\n Registrant\u2019s telephone number, including area code: 1-412-515-0896\n\n Securities registered pursuant to Section 12(b) of the Act:\n\n Title of each class Trading symbol(s) Name of each exchange on which registered\n Common Stock, par value $0.001 per share MIGI The Nasdaq Stock Market LLC\n\nIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934\nduring the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing\nrequirements for the past 90 days. Yes \u2612 No \u2610\n\nIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of\nRegulation S-T (\u00a7232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).\nYes \u2612 No \u2610\n\nIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an\nemerging growth company. See the definitions of \u201clarge accelerated filer,\u201d \u201caccelerated filer,\u201d \u201csmaller reporting company,\u201d and \u201cemerging growth\ncompany\u201d in Rule 12b-2 of the Exchange Act.\n\nLarge accelerated filer \u2610 Accelerated filer \u2610\nNon-accelerated filer \u2612 Smaller reporting company \u2612\n Emerging growth company \u2610\n\nIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new\nor revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. \u2610\n\nIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes \u2610 No \u2612\n\nAs of November 8, 2024, the issuer had a total of 18,707,614 shares of common stock, par value $0.001 per share, outstanding.\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 89 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC.\n FORM 10-Q\n FOR THE QUARTER ENDED SEPTEMBER 30, 2024\n\n TABLE OF CONTENTS\n\n Page\nItem Number\n Part I \u2013 Financial Information\n\nItem 1. Financial Statements 1\nItem 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations 26\nItem 3. Quantitative and Qualitative Disclosures About Market Risks 39\nItem 4. Controls and Procedures 39\n\n Part II \u2013 Other Information\n\nItem 1. Legal Proceedings 41\nItem 1A. Risk Factors 42\nItem 2. Unregistered Sales of Equity Securities and Use of Proceeds 42\nItem 3. Defaults Upon Senior Securities 42\nItem 4. Mine Safety Disclosures 43\nItem 5. Other Information 43\nItem 6. Exhibits 44\n Signatures 45\n\n\n i\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 90 of 220\n\n PART I. FINANCIAL INFORMATION\n\nItem 1. Financial Statements\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED BALANCE SHEETS\n\n September 30,\n 2024 December 31,\n (unaudited) 2023\nASSETS\nCurrent assets:\n Cash and cash equivalents $ 5,758,346 $ 4,476,339\n Prepaid expenses 4,504,739 3,556,933\n Trade and other receivables 12,836,742 12,105,387\nTotal current assets 23,099,827 20,138,659\nProperty, plant and equipment, net 29,716,284 57,740,291\nDerivative asset 3,179,992 4,058,088\nInvestments, equity method - 106,807\nSecurity deposits 481,903 415,000\nOperating lease right-of-use asset 4,288,876 2,307,399\nTOTAL ASSETS $ 60,766,882 $ 84,766,244\n\nLIABILITIES AND STOCKHOLDERS\u2019 EQUITY (DEFICIT)\nCurrent liabilities:\n Trade and other payables $ 36,271,942 $ 32,513,113\n Current portion of operating lease liability 1,208,262 1,416,310\n Current portion of finance lease liability 346,819 33,059\n Current portion of long-term borrowings 21,365,242 19,352,752\nTotal current liabilities 59,192,265 53,315,234\nOperating lease liability, net of current portion 2,828,862 1,016,216\nFinance lease liability, net of current portion 302,095 50,164\nTOTAL LIABILITIES 62,323,222 54,381,614\nStockholders\u2019 equity (deficit):\n Series A preferred stock; 1,000,000 shares authorized, no shares issued and outstanding as of September 30, 2024\n and December 31, 2023 - -\n Common stock, $0.001 par value per share; 90,000,000 shares authorized, 18,707,614 and 16,644,711 shares issued\n and outstanding as of September 30, 2024 and December 31, 2023 18,707 16,645\n Additional paid-in capital 222,552,668 211,279,176\n Accumulated other comprehensive income 149,380 608,688\n Accumulated deficit (224,277,095) (182,666,465)\nTotal Mawson Infrastructure Group, Inc. stockholders\u2019 equity (deficit) (1,556,340) 29,238,044\nNon-controlling interest - 1,146,586\nTOTAL STOCKHOLDERS\u2019 EQUITY (DEFICIT) (1,556,340) 30,384,630\nTOTAL LIABILITIES AND STOCKHOLDERS\u2019 EQUITY (DEFICIT) $ 60,766,882 $ 84,766,244\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 1\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 91 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS\n (Unaudited)\n\n For the Three-Months ended For the Nine-Months ended\n September 30, September 30,\n 2024 2023 2024 2023\nRevenues:\n Digital colocation revenue $ 9,518,696 $ 2,959,074 $ 25,884,176 $ 11,876,379\n Energy management revenue 1,963,805 1,475,333 6,168,906 2,934,066\n Digital assets mining revenue 833,516 6,898,223 11,596,363 14,550,744\n Equipment sales - - 550,000 193,581\n Total revenues 12,316,017 11,332,630 44,199,445 29,554,770\n Less: Cost of revenues (excluding depreciation) 7,996,440 7,715,920 28,577,249 19,422,380\nGross profit 4,319,577 3,616,710 15,622,196 10,132,390\n Selling, general and administrative 6,000,344 3,655,444 13,100,223 14,898,118\n Stock based compensation 5,320,823 3,784,316 11,275,554 5,475,935\n Depreciation and amortization 3,607,848 11,875,618 16,211,516 28,627,896\n Change in fair value of derivative asset 789,146 520,838 878,096 6,646,363\n Total operating expenses 15,718,161 19,836,216 41,465,389 55,648,312\nLoss from operations (11,398,584) (16,219,506) (25,843,193) (45,515,922)\nNon-operating income (expense):\n Losses on foreign currency transactions (352,375) (600,619) (474,210) (1,416,000)\n Interest expense (801,625) (514,953) (2,289,150) (2,061,067)\n Impairment of financial assets - (1,837,063) -- (1,837,063)\n Profit on sale of site - - - 3,353,130\n Gain on sale of marketable securities - - - 1,437,230\n Other expenses (443,537) (158,577) (29,800) (226,330)\n Loss on deconsolidation - - (12,444,097) -\n Other income 119,526 - 309,209 245,694\n Share of net loss of equity method investments - - - (36,356)\n Total non-operating income (expense), net (1,478,011) (3,111,212) (14,928,048) (540,762)\nLoss before income taxes (12,876,595) (19,330,718) (40,771,241) (46,056,684)\n Income tax benefit (expense) 648,857 - (1,044,475) (2,304,454)\nNet Loss (12,227,738) (19,330,718) (41,815,716) (48,361,138)\nLess: Net loss attributable to non-controlling interests - (283,101) (205,086) (867,590)\nNet Loss attributed to Mawson Infrastructure Group stockholders $ (12,227,738) $ (19,047,617) $ (41,610,630) $ (47,493,548)\nNet Loss per share, basic and diluted $ (0.66) $ (1.15) $ (2.37) $ (3.10)\nWeighted average number of shares outstanding 18,519,572 16,500,833 17,529,342 15,336,653\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 2\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 92 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS\n (Unaudited)\n\n For the Three-Months ended For the Nine-Months ended\n September 30, September 30,\n 2024 2023 2024 2023\nNet Loss $ (12,227,738) $ (19,330,718) $ (41,815,716) $ (48,361,138)\nOther comprehensive (income) loss\nForeign currency translation adjustment 15,437 267,458 (511,149) 619,284\nComprehensive loss (12,212,301) (19,063,260) (42,326,865) (47,741,854)\nLess: Comprehensive loss attributable to non-controlling interests - (283,101) (205,086) (867,590)\nComprehensive loss attributable to common stockholders $ (12,212,301) $ (18,780,159) $ (42,121,779) $ (46,874,264)\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 3\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 93 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS\u2019 EQUITY (DEFICIT)\n (Unaudited)\n\n For the Three-Months Ended September 30, 2024\n Accumulated Total\n Common Common Additional Other Mawson Non- Total\n Stock Stock Paid-in- Comprehensive Accumulated Stockholders\u2019 controlling Equity\n (#) ($) Capital Income/(Loss) Deficit Equity interest (Deficit)\nBalance as of June 30,\n 2024 17,518,483 $ 17,518 $ 216,302,100 $ 133,943 $ (212,049,357) $ 4,404,204 $ - $ 4,404,204\nExercising of RSU\u2019s\n and stock options 1,189,131 1,189 929,745 - - 929,745 - 929,745\nStock based\n compensation\n expense for RSU\u2019s\n and stock options - - 5,320,823 - - 5,320,823 - 5,320,823\nNet loss - - - - (12,227,738) (12,227,738) - (12,227,738)\nOther comprehensive\n income - - - 15,437 - 15,437 - 15,437\nBalance as of\n September 30, 2024 18,707,614 $ 18,707 $ 222,552,668 $ 149,380 $ (224,277,095) $ (1,556,340) $ - $ (1,556,340)\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 4\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 94 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS\u2019 EQUITY (DEFICIT)\n (Unaudited)\n\n For the Three-Months Ended September 30, 2023\n Accumulated Total\n Common Common Additional Other Mawson Non-\n Stock Stock Paid-in- Comprehensive Accumulated Stockholders\u2019 controlling Total\n (#) ($) Capital Income/(Loss) Deficit Equity interest Equity\nBalance as of June 30,\n 2023 16,454,709 $ 16,455 $ 202,136,148 $ 5,321,282 $ (150,703,559) $ 56,770,326 $ (1,438,382) $ 55,331,944\nIssuance of warrants - - 500,500 - - 500,500 - 500,500\nExercising of RSU\u2019s\n and stock options 63,334 63 163,339 - - 163,402 - 163,402\nStock based\n compensation\n expense for RSU\u2019s\n and stock options - - 3,120,413 - - 3,120,413 - 3,120,413\nNet loss - - - - (19,047,617) (19,047,617) (283,101) (19,330,718)\nOther comprehensive\n income - - - 221,839 221,839 45,619 267,458\nBalance as of\n September 30, 2023 16,518,043 $ 16,518 $ 205,920,400 $ 5,543,121 $ (169,751,176) $ 41,728,863 $ (1,675,864) $ 40,052,999\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 5\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 95 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS\u2019 EQUITY (DEFICIT)\n (Unaudited)\n\n For the Nine-Months Ended September 30, 2024\n Accumulated Total\n Common Common Additional Other Mawson Non- Total\n Stock Stock Paid-in- Comprehensive Accumulated Stockholders\u2019 controlling Equity\n (#) ($) Capital Income/(Loss) Deficit Equity interest (Deficit)\nBalance as of\n December 31, 2023 16,644,711 $ 16,645 $ 211,279,176 $ 608,688 $ (182,666,465) $ 29,238,044 $ 1,146,586 $ 30,384,630\nExercising of RSU\u2019s and\n stock options 2,062,903 2,062 (2,062) - - - - -\nStock based\n compensation expense\n for RSU\u2019s and stock\n options - - 11,275,554 - - 11,275,554 - 11,275,554\nDeconsolidation of MIG\n No.1 Pty Ltd - - - - - - (889,659) (889,659)\nNet loss - - - - (41,610,630) (41,610,630) (205,086) (41,815,716)\nOther comprehensive\n loss - - - (459,308) - (459,308) (51,841) (511,149)\nBalance as of\n September 30, 2024 18,707,614 $ 18,707 $ 222,552,668 $ 149,380 $ (224,277,095) $ (1,556,340) $ - $ (1,556,340)\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 6\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 96 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS\u2019 EQUITY (DEFICIT)\n (Unaudited)\n\n For the Nine-Months Ended September 30, 2023\n Accumulated Total\n Common Common Additional Other Mawson Non-\n Stock Stock Paid-in- Comprehensive Accumulated Stockholders\u2019 controlling Total\n (#) ($) Capital Income/(Loss) Deficit Equity interest Equity\nBalance as of\n December 31, 2022 13,625,882 $ 13,626 $ 194,294,559 $ 5,021,467 $ (122,257,628) $ 77,072,024 $ (905,904) $ 76,166,120\nConversion of notes\n payable into common\n stock 104,319 104 276,855 - - 276,959 - 276,959\nIssuance of common\n stock in lieu of\n interest on borrowings 18,807 19 63,926 - - 63,945 - 63,945\nIssuance of common\n stock for services 93,334 93 306,976 - - 307,069 - 307,069\nIssuance of warrants - - 1,501,500 - - 1,501,500 - 1,501,500\nExercising of RSU\u2019s\n and stock options 177,094 177 163,339 - - 163,516 - 163,516\nStock based\n compensation for\n RSU\u2019s - - 3,503,849 - - 3,503,849 - 3,503,849\nIssuance of common\n stock, net of issuance\n costs 2,498,607 2,499 5,809,396 - - 5,811,895 - 5,811,895\nNet loss - - - - (47,493,548) (47,493,548) (867,590) (48,361,138)\nOther comprehensive\n income - - - 521,654 - 521,654 97,630 619,284\nBalance as of\n September 30, 2023 16,518,043 $ 16,518 $ 205,920,400 $ 5,543,121 $ (169,751,176) $ 41,728,863 $ (1,675,864) $ 40,052,999\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 7\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 97 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS\n (Unaudited)\n\n For the Nine-Months ended\n September 30,\n 2024 2023\nCASH FLOWS FROM OPERATING ACTIVITIES\n Net loss $ (41,815,716) $ (48,361,138)\n Adjustments to reconcile net loss to net cash provided by (used in) operating activities:\n Depreciation and amortization 16,211,516 28,627,896\n Amortization of operating lease right-of-use asset 2,165,370 1,057,500\n Foreign exchange loss (gain) (487,908) 1,303,569\n Stock based compensation 11,275,554 5,475,935\n Non-cash interest expense 2,259,247 1,365,291\n Unrealized (gain) loss on derivative asset 878,096 6,646,363\n Loss on deconsolidation 12,959,923 -\n Gain on sale of marketable securities - (1,437,230)\n Share of loss from equity method investments - 36,356\n Loss on sale of property and equipment 18,262 231,266\n Gain on lease termination (72,159) -\n Profit on sale of site - (3,353,130)\n Impairment of equity method investment - 1,837,063\n Changes in assets and liabilities:\n Trade and other receivables (731,355) (2,398,826)\n Operating lease liabilities (1,600,314) (1,096,790)\n Other current assets (1,014,710) 4,041,803\n Trade and other payables 3,060,628 1,205,999\nNet cash (used in) provided by operating activities 3,106,434 (4,818,073)\nCASH FLOWS FROM INVESTING ACTIVITIES\n Payment for the purchase of property and equipment (1,934,610) (5,254,665)\n Proceeds from sale of site - 8,107,508\n Proceeds from sales of property and equipment 836,956 730,697\n Proceeds from sale of marketable securities - 6,927,003\nNet cash provided by (used in) investing activities (1,097,654) 10,510,543\nCASH FLOWS FROM FINANCING ACTIVITIES\n Proceeds from common share issuances - 6,192,845\n Payments of stock issuance costs - (380,950)\n Proceeds from borrowings - 1,930,425\n Repayment of finance lease liabilities (226,773) (28,632)\n Repayment of borrowings (500,000) (12,829,158)\nNet cash (used in) provided by financing activities (726,773) (5,115,470)\nEffect of exchange rate changes on cash and cash equivalents - (26,427)\nNet increase/(decrease) in cash and cash equivalents 1,282,007 550,573\nCash and cash equivalents at beginning of period 4,476,339 946,265\nCash and cash equivalents at end of period $ 5,758,346 $ 1,496,838\nSupplemental disclosure of cash flow information\nCash paid for interest $ 29,903 $ -\nCash paid for income taxes $ 777,500 $ -\nNon-cash transactions\nRecognition of right of use operating asset and lease liability $ - $ 929,138\nAccrued interest on convertible notes settled in common stock $ - $ 276,959\n\n See accompanying notes to unaudited consolidated condensed financial statements.\n\n\n 8\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 98 of 220\n\n MAWSON INFRASTRUCTURE GROUP INC. AND SUBSIDIARIES\n NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS\n (Unaudited)\nNOTE 1 \u2013 GENERAL\n\nNature of Operations\n\nMawson Infrastructure Group Inc. (\u201cMawson,\u201d the \u201cCompany,\u201d \u201cwe,\u201d \u201cus,\u201d and \u201cour\u201d) is a technology company focused on digital infrastructure\nplatforms, headquartered in the United States of America.\n\nThe Company is a corporation incorporated in Delaware in 2012. On March 9, 2021, the Company acquired the shares of Cosmos Capital Limited in a\nstock for stock exchange. This transaction has been accounted for as a reverse asset acquisition. The Company was previously known as Wize Pharma Inc\nand changed its name on March 17, 2021. Shares of the Company\u2019s common stock, par value $0.001 per share (\u201cCommon Stock\u201d) have been listed on The\nNasdaq Capital Market since September 29, 2021.\n\nThe Company develops and operates digital infrastructure platforms for enterprise customers and for its own purposes. The Company\u2019s digital\ninfrastructure platforms can be used to operate computing resources for a number of applications, and are offered across digital assets, artificial intelligence\n(AI), high-performance computing (HPC) and other computing applications. The Company also has an energy management business, which utilizes\nsoftware and analysis, to generate revenue when the Company adapts its power usage to the real-time needs of the grid. The Company may also transact in\ndigital computational machines, data center infrastructure, and related equipment periodically, subject to business and commercial opportunities.\n\nThe Company has a strategy to prioritize the usage of carbon-free energy sources, including nuclear energy, to power its digital infrastructure platforms and\ncomputational machines.\n\nThe Company manages and operates digital infrastructure platforms delivering a total current capacity of approximately 129 megawatts (MW) with its\ncurrent operational sites with an additional 24 MW of future capacity that is under development, all strategically located in locations served by the PJM\nEnergy Market in the United States. The PJM Energy Market is the largest wholesale power market in North America.\n\nPreviously, the Company also had interests in the Australian market, however for strategic and commercial reasons, the Company is currently focused on\nadvancing its interests in North America. The Company currently operates facilities in the United States of America and does not have operating sites in\nAustralia. 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\nand holdings in Australia. The accompanying consolidated condensed unaudited interim financial statements, including the results of a number of the\nCompany\u2019s Australian subsidiaries: Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, MIG No.1 Pty Ltd (on March 19, 2024,\nMIG No.1 Pty Ltd was placed into a Australian court appointed liquidation and wind-up process), MIG No.1 LLC, Mawson AU Pty Ltd (on April 23,\n2024, Mawson AU Pty Ltd was placed into a Australian court appointed liquidation and wind-up process, as disclosed in note 3), an Australian entity\nMawson Services Pty Ltd (on April 29, 2024, Mawson Services Pty Ltd was placed into a Australian court appointed liquidation and wind-up process, as\ndisclosed in note 3), Luna Squares LLC, Mawson Bellefonte LLC, Luna Squares Repairs LLC, Luna Squares Property LLC, Mawson Midland LLC,\nMawson Hosting LLC, Mawson Ohio LLC and Mawson Mining LLC (collectively referred to as the \u201cGroup\u201d), have been prepared by the Company,\npursuant to the rules and regulations of the U.S. Securities and Exchange Commission (\u201cSEC\u201d) and in accordance with generally accepted accounting\nprinciples in the United States of America (\u201cGAAP\u201d).\n\nThese consolidated, condensed unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements of\nthe Group as of December 31, 2023, and the notes thereto, included in the Company\u2019s Annual Report on Form 10-K filed with the SEC on April 1, 2024.\nAccordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. The results of the interim period\nare not necessarily indicative of the results to be expected for the full year ending December 31, 2024. These consolidated, condensed unaudited interim\nfinancial statements reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position, the results of\noperations and cash flows of the Company for the periods presented.\n\n\n 9\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 99 of 220\n\nGoing Concern\n\nThe accompanying consolidated, condensed unaudited interim financial statements have been prepared assuming the Company will continue on a going\nconcern basis and in accordance with GAAP. The going concern basis of presentation assumes that the Company will continue in operation one year after\nthe 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\nbusiness.\n\nPursuant to the requirements of the Financial Accounting Standards Board\u2019s Accounting Standards Codification (\u201cASC\u201d) Topic 205-40, Disclosure of\nUncertainties about an Entity\u2019s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in\nthe aggregate, that raise substantial doubt about the Company\u2019s ability to continue as a going concern for one year from the date these financial statements\nare issued. This evaluation does not take into consideration the potential mitigating effect of management\u2019s plans that have not been fully implemented or\nare not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology,\nmanagement evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company\u2019s ability to continue as a going\nconcern. The mitigating effect of management\u2019s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented\nwithin 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\nconditions or events that raise substantial doubt about the entity\u2019s ability to continue as a going concern within one year after the date that the financial\nstatements are issued.\n\nFor the nine-months ended September 30, 2024, the Company incurred a loss after tax of $41.61 million, and as of September 30, 2024, had negative\nworking capital of $36.09 million, had stockholders\u2019 deficit of $1.56 million and had an accumulated deficit of $224.28 million. The Company\u2019s cash\nposition as of September 30, 2024, was $5.76 million.\n\nThe Company\u2019s revenue is dependent on a number of external factors, including commercial terms, payments from customers, payments from partners,\ncounterparty risks, and market conditions, including those related to digital assets, artificial intelligence, high-performance computing and other markets.\nThese factors are outside the Company\u2019s direct control, and the Company may not be able to practically mitigate their impact. The Company cannot predict\nwith any certainty whether these trends will reverse or persist. In addition, the Company\u2019s equipment and infrastructure will require replacement over time\nas they come to the end of their useful lives to ensure that the Company can continue to operate competitively and efficiently\n\nCelsius Colocation Agreement Dispute\n\nOn July 18, 2024, Celsius Network, LLC filed for arbitration of its claims against the Company with the American Arbitration Association in the matter\nentitled, \u201cCelsius Network Ltd., Celsius Mining LLC and Ionic Digital Mining LLC v. Mawson Infrastructure Group, Luna Squares LLC and Cosmos\nInfrastructure LLC - Case 01-24-0006-4462\u201d (the \u201cCelsius Collocation Agreement Dispute\u201d). The Company opposes the claim in arbitration and on August\n12, 2024, filed responsive pleadings denying the claims and asserting affirmative defenses, including set off against the claims, and the Company asserted\ncross-claims against Celsius for sums due to the Company in excess of $115.00 million. This includes counter claims asserted by the Company against\nCelsius Network Ltd., Celsius Mining LLC and Ionic Digital Mining LLC in excess of $115.00 million for damages due to the Company, including but not\nlimited to, for breach of the Digital Colocation Agreement by Celsius. The matter is proceeding through the arbitration process. An arbitrator was\nappointed on September 30, 2024 and the parties submitted their respective positions on October 25, 2024 regarding the scheduling of the arbitration. A\npreliminary hearing was held on October 30, 2024 before the arbitrator to establish an arbitration schedule. Company plans to pursue its claims again\nCelsius and to defend against claims alleged by Celsius.\n\nLoan Disputes with Australian Entities (W Capital and Marshall)\n\nThe Company is the guarantor of a Secured Loan Facility Agreement by MIG No. 1 Pty Ltd (\u201cMIG No.1\u201d) with Marshall Investments GCP Pty Ltd ATF\nfor the Marshall Investments MIG Trust (\u201cMarshall\u201d). The loan matured in February 2024 and the total outstanding balance is $10.53 million as of\nSeptember 30, 2024. There have been no principal and interest payments made since May 2023. This Secured Loan Facility Agreement was entered into\nwith an Australian entity MIG No.1, which was placed into a court-appointed liquidation and wind-up process and was deconsolidated from the group on\nMarch 18, 2024. On May 28, 2024, Marshall submitted a statutory demand for payment under Australian law. On June 17, 2024, the Company responded,\nobjecting to the demand under Australian law. Subsequently, on October 3, 2024, a proceeding before the Federal Court of Australia, New South Wales\nentitled \u201cIn The Matter Of Mawson Infrastructure Group Inc. (ARBN 649 261 861)\u201d, File No. NSD1395/2024\u201d was filed by W Capital against the\nCompany, seeking a hearing on November 29, 2024 to determine the Company\u2019s solvency under Australian law. Marshall Investments GCP Pty Ltd gave\nformal notice that it intends to appear before the court (the \u201cMarshall and W Capital Australian Loan Disputes\u201d). The current proceeding is in Australian\ncourts and there are no associated proceedings in the United States. The Company believes that W Capital and Marshall are using this proceeding in\nAustralia as a bad faith attempt to gain leverage in ongoing legal disputes between the parties.\n\n\n 10\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 100 of 220\n\nThe Company is the guarantor on of a Secured Loan Facility Agreement for working capital by Mawson Infrastructure Group Pty Ltd with W Capital\nAdvisors Pty Ltd. As of September 30, 2024, AUD $1.95 million (USD $1.35 million) has been drawn down from this facility. The Secured Loan Facility\nexpired in March 2023. This Secured Loan Facility Agreement was entered into with an Australian entity Mawson Infrastructure Group Pty Ltd, this\ncompany was placed into Australian voluntary administration on October 30, 2023, and on November 3, 2023, W Capital Advisors appointed receivers and\nmanagers in Australia under the terms of their security relating to their working capital facility.\n\nThe Company, or its subsidiaries, have not fulfilled specific payment obligations related to the Celsius Promissory Note, the Marshall loan and the W\nCapital Working Capital Loan mentioned above. Consequently, the creditors associated with these debt facilities may initiate actions as allowed by relevant\ngrace periods. This includes the possibility of opting to expedite the repayment of the principal debt, pursuing legal action against the Company or its\nsubsidiaries for payment default, raising interest rates to the default or overdue rate, or taking appropriate measures concerning collateral (including\nappointing a receiver), if applicable.\n\nThe Company has evaluated the above conditions and concluded that these conditions raise substantial doubt regarding our ability to continue as a going\nconcern for a period of at least one year from the date of issuance of these consolidated financial statements.\n\nTo mitigate these conditions, the Company has explored various avenues to enhance liquidity, fund the Company\u2019s expenditures, and meet debt servicing\nrequirements. These strategies include, among others:\n\n \u25cf Expanding its digital infrastructure platform and increasing capacities for either digital colocation services and/or AI and HPC markets;\n\n \u25cf Executing new customer digital colocation service agreements in either AI, HPC, and/or digital assets mining to diversify its exposure across\n customers and/or markets;\n\n \u25cf Engaging in discussions with capital providers, including related to equity and/or debt;\n\n \u25cf Considering equity issuances such as capital raises and at-the-market (ATM) transactions;\n\n \u25cf Assessing and evaluating corporate and strategic transactions;\n\n \u25cf Assessing and evaluating commercial opportunities or other business opportunities under consideration;\n\n \u25cf Conducting assessments to identify and implement operational improvements and/or efficiencies and other actions aimed at enhancing revenue\n and/or optimizing expenses; and\n\n \u25cf Evaluating, assessing and pursuing business revenue and margin expansion opportunities.\n\nMawson successfully expanded its Midland Facility by 20 MW in June 2024, increasing its total operating capacity to about 129 MW from about 109 MW.\nIn August 2024, Mawson expanded into Perry County, Ohio securing an initial 24 MW of capacity that could expand Mawson\u2019s operating capacity to 153\nMW once completed.\n\n\n 11\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 101 of 220\n\nThe Company also announced in June 2024 that it had executed a new digital colocation agreement for about 20 MW, or about 5,880 mining units at its\nMidland facilities. This agreement helped further diversify our customer base and expand our digital colocation services.\n\nAlthough the Company may have access to capital, equity, debt, and/or other sources of funding, these may require additional time and cost, may impose\noperational restrictions and other covenants on the Company, may not be available on attractive terms, and may not be available at all. If the Company\nraises additional capital or debt, this could cause additional dilution to the Company\u2019s current stockholders. The terms of any future capital raise or debt\nissuance and the costs of any financing are uncertain and may be unfavorable to the Company and the Company\u2019s current stockholders. Should the\nCompany 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\nnormal course of business at the amounts stated in these consolidated financial statements.\n\nAs previously reported, the Company obtains advice from outside resources, however, it is important to note that strategic and other initiatives may not lead\nto any transaction or other outcome.\n\nThese consolidated, condensed unaudited interim financial statements have been prepared on a going concern basis, which contemplates the realization of\nassets and satisfaction of liabilities and other commitments in the normal course of business. They do not include any adjustments relating to the\nrecoverability and carrying amounts of assets and the amounts of liabilities should the Company be unable to continue as a going concern and meet its\nobligations and debts as and when they fall due.\n\nNOTE 2 \u2013 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\n\nPrinciples of Consolidation and Basis of Preparation\n\nThe accompanying unaudited consolidated condensed financial statements of the Company include the accounts of the Company and its wholly or majority\nowned and controlled subsidiaries. Intercompany investments, balances and transactions have been eliminated in consolidation. Non\u2013controlling interests\nrepresent the minority equity investment in the Company\u2019s subsidiaries, plus the minority investors\u2019 share of the net operating results and other components\nof equity relating to the non\u2013controlling interest.\n\nAny change in the Company\u2019s ownership interest in a consolidated subsidiary, through additional equity issuances by the consolidated subsidiary or from\nthe Company acquiring the shares from existing stockholders, in which the Company maintains control is recognized as an equity transaction, with\nappropriate adjustments to both the Company\u2019s additional paid-in capital and the corresponding non-controlling interest.\n\nUse of Estimates and Assumptions\n\nThe preparation of the financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the\namounts reported in the financial statements and accompanying notes. These estimates, judgments and assumptions can affect the reported amounts of\nassets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of\nincome and expenses during the reporting periods. Actual results could differ from those estimates. The Company has considered the following to be\nsignificant estimates made by management, including but not limited to, going concern assumptions, estimating the useful lives of fixed assets, realization\nof long-lived assets, unrealized tax positions, valuing the derivative asset classified under Level 3 fair value hierarchy, and the contingent obligation with\nrespect to future revenues.\n\nRevenue recognition\n\nDigital colocation revenue\n\nThe Company additionally charges colocation fees for the use of the facilities, and other related fees. Digital colocation customers typically pay for energy\nused in connection with the customer colocation services agreement on a pass-through basis, which may be on a fixed or variable basis calculated on the\nportion of energy used by the customer on the site. Revenue is typically received monthly from the customer based on the power usage at the rates outlined\nin each customer contract.\n\nThe customer contracts contain variable consideration to be allocated to and recognized in the period to which the consideration relates. Usually this is\nwhen it is invoiced, rather than obtaining an estimation of variable consideration at the beginning of the customer contracts.\n\n\n 12\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 102 of 220\n\nEnergy management revenue\n\nThe Company also has an energy management business to generate revenue when the Company adapts its power usage to the real-time needs of the grid.\n\nRevenue for curtailing power is recognized over the period that the services are being provided. The Company estimates the amount of curtailable power\nand the expected payment for that curtailment and recognizes revenue based on the proportion of the service that has been provided. In this arrangement,\nthe Company is considered the principal and revenue is recognized on a gross basis.\n\nRevenue through the Company\u2019s power pricing arrangement is recognized over the period that the services are being provided. The Company estimates the\namount of energy available for sale and the expected payment for that energy, and recognizes revenue based on the proportion of the service that has been\nprovided. In this arrangement, the Company is considered the principal and revenue is recognized on a gross basis.\n\nDigital mining revenue\n\nThe Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of ASC 606 is that a company should\nrecognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company\nexpects to be entitled in exchange for those goods or services. Five steps are required to be followed in evaluating revenue recognition: (i) identify the\ncontract with the customer; (ii) identity the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price;\nand (v) recognize revenue when or as the entity satisfies a performance obligation.\n\nIn order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and\nidentify each promised good or service that is distinct. A performance obligation meets ASC 606\u2019s definition of a \u201cdistinct\u201d good or service (or bundle of\ngoods or services) if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other\nresources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity\u2019s promise to transfer the good or\nservice to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the\ncontext of the contract).\n\nThe Company has a contract with mining pools and has undertaken the performance obligation of providing computing power in exchange for non-cash\nconsideration in the form of digital assets. The provision of computing power is the only performance obligation in the Company\u2019s contract with its pool\noperators. Where the consideration received is variable (for example, due to payment only being made upon successful mining), it is recognized when it is\nhighly probable that the variability is resolved, which is generally when the digital asset is received.\n\nThe Company measures the non-cash consideration received at the fair market value of the digital asset received. Management estimates fair value on a\ndaily basis, as the quantity of digital assets received multiplied by the price quoted on the exchange that the Company uses to dispose of digital assets.\n\nEquipment sales\n\nThe Company had previously earned revenues from the sale of equipment and/or infrastructure (collectively, \u201cHardware\u201d). Revenue from the sale of\nHardware is recognized upon transfer of control of the Hardware to the customer. At the date of sale, the net book value is expensed in cost of revenues.\n\n\n 13\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 103 of 220\n\nProperty, Plant, and Equipment\n\nProperty, plant and equipment (PP&E) are stated at cost, net of accumulated depreciation. All other repair and maintenance costs are charged to operating\nexpenses as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset\nif the recognition criteria for a provision are met. Property, plant and equipment transferred from customers is initially measured at the fair value at the date\non which control is obtained.\n\nPP&E are depreciated on a straight-line or declining balance basis based on the asset classification, over their useful lives to the economic entity\ncommencing from the time the assets arrive at their destination where they are ready for use. Low-cost assets are capitalized and immediately depreciated.\nDepreciation is calculated over the following estimated useful lives:\n\nAsset class Useful life Depreciation Method\nFixtures 5 years Straight-Line\nPlant and equipment 10 years Straight-Line\nModular data center 5 years Declining\nMotor vehicles 5 years Straight-Line\nComputer equipment 3 years Straight-Line\nComputational and Processing machinery (Miners) 2 years Straight-Line\nTransformers 15 years Straight-Line\nLeasehold improvements Shorter of useful life or lease term Straight-Line\n\nPP&E are derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition\nof the asset is included in the consolidated statement of operations.\n\nThe residual values, useful lives and methods of depreciation of PP&E are reviewed at each financial year end and adjusted prospectively, if appropriate.\n\nThe Company\u2019s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset\nmay not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future\nundiscounted cash flows expected to be generated by the assets. If such an asset is considered to be impaired, the impairment to be recognized is measured\nby the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or\nfair value less costs to sell.\n\nFair value of financial instruments:\n\nThe Company accounts for financial instruments under ASC 820, Fair Value Measurements. This statement defines fair value, establishes a framework for\nmeasuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and\ncomparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair\nvalue into three levels as follows:\n\nLevel 1 \u2014 quoted prices (unadjusted) in active markets for identical assets or liabilities;\n\nLevel 2 \u2014 observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets\nand liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and\n\nLevel 3 \u2014 assets and liabilities whose significant value drivers are unobservable. Observable inputs are based on market data obtained from independent\nsources, while unobservable inputs are based on the Company\u2019s market assumptions. Unobservable inputs require significant management judgment or\nestimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair\nvalue measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires\nsignificant management judgment.\n\n\n 14\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 104 of 220\n\n Fair value measured as of September 30, 2024\n Total Total Total\n Total Level 1 Level 2 Level 3\nDerivative asset $ 3,179,992 - - $ 3,179,992\n\n Fair value measured as of December 31, 2023\n Total Total Total\n Total Level 1 Level 2 Level 3\nDerivative asset $ 4,058,088 - - $ 4,058,088\n\nLevel 3 Assets:\n\nIn June 2022, the Company entered into a Power Supply Agreement with Energy Harbor LLC, the energy supplier to the Company\u2019s Midland,\nPennsylvania facility, to provide the delivery of a fixed portion of the total amount of electricity for a fixed price through to December 2026. There were\nfive amendments to the contract with Energy Harbor LLC entered into in November 2023, December 2023, January 2024, April 2024 and May 2024 all the\ncontracts were to purchase additional electricity at a fixed price for the months of December 2023, January 2024, February 2024, April 2024, May 2024\nand June 2024. If the Midland, Pennsylvania facility uses more electricity than contracted, the cost of the excess is incurred at a new price quoted by\nEnergy Harbor LLC.\n\nWhile the Company participates in energy management programs at its Midland, Pennsylvania facility, the Company does not consider such actions as\ntrading activities. That is, the Company does not engage in speculation in the power market as part of its ordinary activities. Because the sale of any\nelectricity under a curtailment program allows for net settlement, the Company has determined the Power Supply Agreement meets the definition of a\nderivative under ASC 815, Derivatives and Hedging. However, because the Company has the ability to sell the power back to the grid rather than take\nphysical delivery, physical delivery is not probable through the entirety of the contract and therefore, the Company does not believe the normal purchases\nand normal sales scope exception applies to the Power Supply Agreement. Accordingly, the Power Supply Agreement (the non-hedging derivative\ncontract) is recorded at estimated fair value each reporting period with the change in the fair value recorded in \u201cchange in fair value of derivative asset\u201d in\nthe consolidated statements of operations.\n\nThe Power Supply Agreement was classified as a derivative asset beginning in the quarter ended September 30, 2022, and measured at fair value on the\ndate of Power Supply Agreement, with changes in fair value recognized in the accompanying consolidated statements of operations. The estimated fair\nvalue of the Company\u2019s derivative asset is classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs utilized in the\nvaluation. Specifically, the Company\u2019s discounted cash flow estimation models contain quoted commodity exchange spot and forward prices and are\nadjusted for basis spreads for load zone-to-hub differentials through the term of the Power Supply Agreement, which expires in December 2026. In\naddition, the Company adopted a discount rate of approximately 20% above the terminal value of the observable market inputs, but also includes\nunobservable inputs based on qualitative judgment related to company-specific risk factors. The terms of the Power Supply Agreement require pre-payment\nof collateral, calculated as forward cost based on the market cost rate of electricity versus the fixed price stated in the contract.\n\nStock based compensation\n\nThe Company follows ASC 718-10, Compensation-Stock Compensation. The Company expenses stock-based compensation to directors, employees, and\nnon-employees over any requisite service period based on the grant-date fair value of the awards. The Company determines the grant-date fair value of\noptions using the Trinomial Lattice Method. The assumptions used in calculating the fair value of stock-based awards represent management\u2019s best\nestimates and involve inherent uncertainties and the application of management\u2019s judgment. These assumptions are the expected stock volatility, the risk\u2013\nfree interest rate, the expected life of the option, and the expected forfeiture rate. Expected volatility computes stock price volatility over expected terms\nbased on its historical common stock trading prices. Risk\u2013free interest rates are calculated based on the yield of a 3-year or 5-year United States Treasury\nconstant maturity bond, depending on the agreement.\n\n\n 15\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 105 of 220\n\nDigital assets\n\nDigital assets are included in current assets in the consolidated balance sheets. Digital assets are classified as indefinite-lived intangible assets in\naccordance with ASC 350, Intangibles \u2013 Goodwill and Other, and are accounted for in connection with the Company\u2019s revenue recognition policy detailed\nabove.\n\nThe following table presents the Company\u2019s digital assets (such as bitcoin) activities for the three-months and nine-months ended September 30, 2024:\n\n Three- Nine-\n months to months to\n September 30, September 30,\n 2024 2024\n\nOpening number of bitcoin held\nNumber of bitcoin received 13.47 203.05\nNumber of bitcoin sold (13.47) (203.05)\nClosing number of bitcoin held 0.00 0.00\n\nDigital assets are not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it\nis more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for\nimpairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists.\nIf it is determined that it is not likely that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is\nrequired to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset.\nSubsequent reversal of impairment losses is not permitted.\n\nThe Company\u2019s policy is to typically dispose of bitcoin received from mining operations at the earliest opportunity, therefore the holding period is\ngenerally minimal, usually no more than a few days. Due to the short period for which bitcoin is held prior to sale and the consequent small numbers held,\nthe risk of impairment is not material. No impairment charges have been recorded during the nine-month periods ended September 30, 2024 and 2023.\n\nRecent Accounting Pronouncements\n\nFrom time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies and\nadopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will\nnot have a material impact on the Company\u2019s financial position or results of operations upon adoption.\n\nIn December 2023, the FASB issued ASU 2023-08, Intangibles\u2014Goodwill and Other\u2014Crypto Assets (Topic 3580-60): Accounting for and Disclosure of\nCrypto Assets. Under the new guidance, an entity would be required to subsequently measure certain crypto assets at fair value, with changes in fair value\nincluded in net income in each reporting period. The proposed set of rules would also require presentation of crypto assets and related fair value changes\nseparately in the balance sheet and income statement and require various disclosures in interim and annual periods. The Company does not expect the\nadoption of ASU 2023-08 to have a material impact on its consolidated financial statements since the Company\u2019s policy is to dispose of bitcoin received\nfrom mining operations at the earliest opportunity, therefore the holding period is minimal, usually no more than a few days. ASU 2023-08 is effective for\nfiscal years beginning after December 15, 2024 and interim periods within those fiscal years. The Company will adopt ASU 2023-08 on January 1, 2025.\n\n\n 16\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 106 of 220\n\nNOTE 3 \u2013 AUSTRALIAN SUBSIDIARIES DECONSOLIDATION\n\nPreviously, the Company also had interests in the Australian market, however for strategic and commercial reasons, the Company is currently focused on\nadvancing its interests in North America. The Company has previously reported through an 8-K filing on March 29, 2024 that the Company may seek to\nexit certain or all of its entities and holdings in Australia. The Company currently operates facilities in the United States of America and does not have\noperating sites in Australia.\n\nMIG No.1 (Australian Entity)\n\nLiquidation and Deconsolidation of an Australian entity MIG No.1\n\nOn March 19, 2024, the Company\u2019s subsidiary and an Australian entity, MIG No.1 was placed into an Australian court appointed liquidation due to it being\ndeemed insolvent in Australia. The liquidation of an insolvent company in Australia allows an independent registered Australian liquidator (the liquidator)\nto take control of the Australian entity so its affairs can be wound up in an orderly and fair way and to benefit creditors. In the instance of MIG No.1, it is\nan Australian court liquidation, where a liquidator is appointed by the Australian court to wind up a company following an application (by a creditor of\nMIG No.1). As a result of this, the Company ceded authority for managing this Australian entity to the Australian liquidator, and the Company does not\ncarry on MIG No.1\u2019s activities in the ordinary course of business. For these reasons, it was concluded that the Company had ceded control of MIG No.1,\nand no longer had significant influence over this Australian entity since the liquidator was in control of this Australian entity. Therefore, MIG No.1 loss of\ncontrol was effective when it was placed into Australian court appointed liquidation on March 19, 2024, and was deconsolidated at this date, in accordance\nwith ASC 810-10-15. In order to deconsolidate this Australian entity, MIG No.1, the carrying values of the assets, liabilities and equity components\npreviously recognized in accumulated other comprehensive income of MIG No.1 were removed from the Company\u2019s consolidated balance sheet as of\nMarch 19, 2024, in accordance with ASC 810, Consolidation. The net impact of removing the assets and liabilities resulted in a loss on deconsolidation of\n$12.36 million being recorded in the condensed, consolidated statement of operations.\n\nInvestment in the Australian entity MIG No.1\n\nThe investment in this Australian entity, MIG No.1, held by the Company was accounted for under ASC 321, Investments \u2014 Equity Securities as it was\nconcluded the Company did not have significant influence over MIG No.1 from March 19, 2024. The fair value of MIG No.1 was estimated to be $0, as at\nthe time of the deconsolidation.\n\nTreatment of intercompany balances\n\nThe Company had total payables owed to MIG No.1 of $1.24 million. These payables have been treated as external payables from the date of liquidation,\nMarch 19, 2024.\n\nAustralian entity MIG No.1 Secured Loan Facility Agreement\n\nMIG No. 1 has a Secured Loan Facility Agreement with Marshall. The loan matured in February 2024 and the total outstanding balance is $10.53 million\nas of September 30, 2024. The Company is a guarantor of this loan.\n\nMawson AU Pty Ltd (Australian Entity)\n\nLiquidation and Deconsolidation of an Australian entity Mawson AU Pty Ltd\n\nOn April 23, 2024, the Company\u2019s Australian entity and a subsidiary, Mawson AU Pty Ltd was placed into an Australian court appointed liquidation. The\nliquidation of an insolvent Australian company in Australia allows an independent registered Australian liquidator (the liquidator) to take control of the\nAustralian entity so its affairs can be wound up in an orderly approach. In the instance of Mawson AU Pty Ltd, it is an Australian court liquidation, where a\nliquidator is appointed by the Australian court to wind up a company. As a result of this the Company ceded authority for this Australian entity to the\nAustralian liquidator, and the Company does not carry on Mawson AU Pty Ltd\u2019s activities in the ordinary course of business. For these reasons, it was\nconcluded that the Company had ceded control of Mawson AU Pty Ltd, and no longer had significant influence over this Australian entity since the\nliquidator was in control of this Australian entity. Therefore, Mawson AU Pty Ltd loss of control was effective when it was placed into Australian court\nappointed liquidation on April 23, 2024, and was deconsolidated at this date, in accordance with ASC 810-10-15. In order to deconsolidate this Australian\nentity, Mawson AU Pty Ltd, the carrying values of the assets, liabilities and equity components previously recognized in accumulated other comprehensive\nincome of Mawson AU Pty Ltd were removed from the Company\u2019s consolidated balance sheet as of April 23, 2024, in accordance with ASC 810,\nConsolidation. The net impact of removing the assets and liabilities resulted in a gain on deconsolidation of $3.49 million being recorded in the condensed,\nconsolidated statement of operations.\n\n\n 17\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 107 of 220\n\nInvestment in the Australian entity Mawson AU Pty Ltd\n\nThe investment in this Australian entity, Mawson AU Pty Ltd, held by the Company was accounted for under ASC 321, Investments \u2014 Equity Securities as\nit was concluded the Company did not have significant influence over Mawson AU Pty Ltd from April 23, 2024. The fair value of Mawson AU was\nestimated to be $0, as at the time of the deconsolidation.\n\nTreatment of intercompany balances\n\nThe Company had total receivables owed from Mawson AU Pty Ltd of $3.77 million. In accordance with ASC 310, these receivables have been treated as\nexternal receivables from the date of liquidation, April 23, 2024, and written off in the condensed, consolidated financial statements.\n\nMawson Services Pty Ltd (Australian Entity)\n\nLiquidation and Deconsolidation of an Australian entity Mawson Services Pty Ltd\n\nOn April 29, 2024, the Company\u2019s Australian entity and a subsidiary, Mawson Services Pty Ltd was placed into an Australian court appointed liquidation.\nThe liquidation of an insolvent company in Australia allows an independent registered Australian liquidator (the liquidator) to take control of the Australian\nentity so its affairs can be wound up in an orderly approach As a result of this the Company ceded authority for this Australian entity to the Australian\nliquidator, and the Company does not carry on Mawson Services Pty Ltd\u2019s activities in the ordinary course of business. For these reasons, it was concluded\nthat the Company had ceded control of Mawson Services Pty Ltd, and no longer had significant influence over this Australian entity since the liquidator\nwas in control of this Australian entity. Therefore, Mawson Services Pty Ltd loss of control was effective when it was placed into Australian court\nappointed liquidation on April 29, 2024, and was deconsolidated at this date, in accordance with ASC 810-10-15. In order to deconsolidate this Australian\nentity, Mawson Services Pty Ltd, the carrying values of the assets, liabilities and equity components previously recognized in accumulated other\ncomprehensive income of Mawson Services Pty Ltd were removed from the Company\u2019s consolidated balance sheet as of April 29, 2024, in accordance\nwith ASC 810, Consolidation. The net impact of removing the assets and liabilities resulted in a gain on deconsolidation of $0.19 million being recorded in\nthe condensed, consolidated statement of operations\n\nInvestment in the Australian entity Mawson Services Pty Ltd\n\nThe investment in this Australian entity, Mawson Services Pty Ltd, held by the Company was accounted for under ASC 321, Investments \u2014 Equity\nSecurities as it was concluded the Company did not have significant influence over Mawson Services Pty Ltd from April 29, 2024. The fair value of\nMawson Services Pty Ltd was estimated to be $0, as at the time of the deconsolidation.\n\nTreatment of intercompany balances\n\nThe Company had no payables or receivables owed to Mawson Services Pty Ltd at the date of liquidation, April 29, 2024.\n\n\n 18\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 108 of 220\n\nNOTE 4 \u2013 BASIC AND DILUTED NET LOSS PER SHARE\n\nNet loss per common share is calculated in accordance with ASC 260, Earnings Per Share. Basic loss per share is computed by dividing net loss by the\nweighted average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive\ncommon stock equivalents in the weighted average shares outstanding, as they would be anti-dilutive.\n\nSecurities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share as of September 30,\n2024 and 2023, are as follows:\n\n As of September 30,\n 2024 2023\n\nWarrants to purchase common stock 4,904,016 5,546,122\nOptions to purchase common stock 3,500,417 1,750,417\nRestricted Stock-Units (\u201cRSU\u2019s\u201d) issued under equity incentive plan(s) 14,335,305 5,660,426\n 22,739,738 12,956,965\n\nNOTE 5 \u2013 LEASES\n\nThe Company\u2019s operating leases are for digital mining and colocation sites and its finance leases are primarily for related plant and equipment.\n\nThe Company\u2019s lease costs recognized in the consolidated condensed statements of operations consist of the following:\n\n For the three-Months ended For the nine-Months ended\n September 30, September 30,\n 2024 2023 2024 2023\nOperating lease charges (1) $ 533,963 $ 448,449 $ 1,325,171 $ 1,260,440\nFinance lease charges:\nAmortization of right-of-use assets $ 102,797 $ 8,143 $ 150,635 $ 24,430\nInterest on lease obligations $ 23,536 $ 1,799 $ 35,234 $ 5,820\n\n(1) Included in selling, general and administrative expenses.\n\nThe following is a schedule of the Company\u2019s lease liabilities by contractual maturity as of September 30, 2024:\n\n Operating Finance\n leases leases\n\nRemainder of 2024 $ 380,839 $ 103,294\n2025 1,710,898 413,176\n2026 1,584,205 216,266\n2027 1,270,570 -\n Total undiscounted lease obligations 4,946,512 732,736\nLess imputed interest (909,388) (83,821)\n Total present value of lease liabilities 4,037,124 648,915\n Less current portion of lease liabilities 1,208,262 346,819\nNon-current lease liabilities $ 2,828,862 $ 302,095\n\n\n 19\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 109 of 220\n\nOther lease information as of September 30, 2024:\n\n Operating Finance\n leases leases\n\nOperating cash out flows from leases $ 1,516,767 $ 226,773\nWeighted-average remaining lease term (years) 2.89 1.59\nWeighted-average discount rate (%) 8.6% 13.4%\n\nNOTE 6 \u2013 PROPERTY, PLANT AND EQUIPMENT\n\nProperty, plant and equipment, net, consisted of the following:\n\n September 30, December 31,\n 2024 2023\n\nPlant and equipment $ 10,404,241 $ 4,973,191\nComputer equipment 176,151 125,695\nProcessing machines (Miners) 77,447,520 102,984,186\nModular data center 22,103,986 25,449,717\nMotor Vehicles 199,246 199,246\nTransformers 9,344,544 9,843,359\nLow-cost assets 1,047,876 998,815\nAssets under construction - 4,764,051\nLeasehold improvements 487,527 487,527\nTotal 121,211,091 149,825,787\nLess: Accumulated depreciation (91,494,807) (92,085,496)\nProperty, plant and equipment, net $ 29,716,284 $ 57,740,291\n\nThe Company incurred depreciation and amortization expenses in the amounts of $3.61 million and $11.88 million for the three-month period ended\nSeptember 30, 2024 and 2023, respectively. The Company incurred depreciation and amortization expenses in the amounts of $16.21 million and $28.63\nmillion for the nine-month periods ended September 30, 2024 and 2023, respectively. There were no impairment charges recognized for property, plant and\nequipment for either the nine-month periods ended September 30, 2024 and 2023.\n\nNOTE 7 \u2013 INCOME TAXES\n\nThe Company records income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax effects\nattributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax\nbases, and operating loss and tax credit carryforwards. The Company establishes a valuation allowance if management believes it is more likely than not\nthat the deferred tax assets will not be recovered based on an evaluation of objective verifiable evidence. Management has considered the Company\u2019s\nhistory of book and tax income and losses incurred since inception, and the other positive and negative evidence, and has concluded as of this time that it is\nmore likely than not that the Company will not realize the benefits of the net deferred tax assets as of September 30, 2024.\n\nThe Company recorded income tax benefit (expense) of approximately 5.10% and 0.0% of loss before income tax expense for the three-month periods\nended September 30, 2024 and 2023, respectively.\n\n For the Three-Months ended\n September 30, 2024\n 2024 2023\n\nEffective income tax rate 5.10% 0.00%\n\n\n 20\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 110 of 220\n\n For the Nine-Months ended\n September 30, 2024\n 2024 2023\n\nEffective income tax rate (2.60)% 0.00%\n\nAs of September 30, 2024, the Company had no unrecognized tax benefits and does not anticipate any significant change to the unrecognized tax benefit\nbalance.\n\nNOTE 8 \u2013 BORROWINGS\n\nW Capital loan\n\nThe Company is the guarantor of a Secured Loan Facility Agreement for working capital by Mawson Infrastructure Group Pty Ltd with W Capital\nAdvisors Pty Ltd. As of September 30, 2024, AUD $1.95 million (USD $1.35 million) has been drawn down from this facility, all of which is classified as\na 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\nis paid monthly. Principal repayments are paid ad hoc in line with the loan facility agreement. The Secured Loan Facility expired in March 2023. This\nSecured Loan Facility Agreement was originally with Mawson Infrastructure Group Pty Ltd and this Australian entity was placed into Australian voluntary\nadministration on October 30, 2023 and on November 3, 2023, W Capital Advisors appointed receivers and managers in Australia under the terms of their\nsecurity relating to their working capital facility. The Company has corresponded with W Capital Advisory Pty Ltd and/or its representatives, the\nCompany\u2019s ongoing significant concerns about W Capital Advisory Ptv Ltd and James Manning, a former board director and executive of the Company,\nbeing related parties. W Capital Advisory Pty has not responded to the Company\u2019s concerns in a manner satisfactory to the Company.\n\nMarshall loan\n\nThe Company is the guarantor of a Secured Loan Facility Agreement by MIG No. 1 with Marshall. The loan matured in February 2024 and bears interest at\na rate of 12% per annum (with an overdue rate provision of an additional 500bps), payable monthly with interest payments that commenced in December\n2021. 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\nbegan during November 2022. The outstanding balance including interest is $10.53 million as of September 30, 2024, all of which is classified as a current\nliability. There has been no principal and interest payments made since May 2023. This Secured Loan Facility Agreement was entered into with an\nAustralian entity MIG No.1, this company was placed into a court appointed liquidation and wind-up process and was deconsolidated from the group on\nMarch 19, 2024. On March 19, 2024, Marshall appointed receivers and managers in Australia under the terms of their security relating to their secured loan\nfacility. The direct assets that secure this loan include 5,372 miners and 8 modular data centers (\u201cMDCs\u201d), these assets are held by the MIG No.1 and\ntherefore were included in the deconsolidation. The receiver\u2019s statutory duty includes the obligation to sell the secured assets at market value or, if market\nvalue is not known, at the best price reasonably obtainable to maximize the prospects of there being sufficient proceeds available to satisfy the balance of\nthe 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\nand MDCs. On June 25, 2024, Marshall inspected and inventoried the miners and MDCs located at the Company\u2019s Midland facilities. The Company is\ncurrently not utilizing these miners or MDCs for its operations and has asked Marshall to take these assets out of the Company\u2019s storage. Marshall has not\nresponded to the Company\u2019s ask for these miners and MDCs to be removed from the Company\u2019s storage. The Company is reserving all its rights and\nremedies against Marshall.\n\n\n 21\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 111 of 220\n\nCelsius loan\n\nOn February 23, 2022, Luna entered into a Digital Colocation Agreement with Celsius Mining LLC. In connection with this agreement, Celsius Mining\nLLC loaned Luna a principal amount of $20.00 million, for the purpose of funding the infrastructure required to meet the obligations of the Digital\nColocation Agreement, for which Luna issued a Secured Promissory Note for repayment of such amount. The Secured Promissory Note accrues interest\ndaily 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\nquarter, principal repayments began at the end of September 2022. The Secured Promissory Note had a maturity date of August 23, 2023, the outstanding\nbalance including interest is $9.38 million as of September 30, 2024, all of which is classified as a current liability. Celsius Mining LLC transferred the\nbenefit of the promissory note to Celsius Network Ltd. Celsius Mining LLC and Celsius Network Ltd filed for Chapter 11 bankruptcy protection on July\n13, 2022. Under the Digital Colocation Agreement, Celsius Mining LLC advanced $15.33 million to Luna that were held as a deposit. Whether that amount\nhas been forfeited or must be returned to Celsius Mining LLC is the subject of a dispute between the parties. Pursuant to a court order dated April 22, 2024,\nthe Celsius civil lawsuit against Luna and Mawson has been dismissed pursuant to the Company\u2019s successful motion to compel arbitration.\n\nOn July 18, 2024, Celsius Network, LLC filed for arbitration of its claims against the Company with the American Arbitration Association in the matter\nentitled, \u201cCelsius Network Ltd., Celsius Mining LLC and Ionic Digital Mining LLC v. Mawson Infrastructure Group, Luna Squares LLC and Cosmos\nInfrastructure LLC - Case 01-24-0006-4462\u201d. For more details on this dispute, please see the Celsius Collocation Agreement Dispute found in Part\nI. Financial Information, Item 1. Financial Statements, contained in this Form 10-Q and made part here of and incorporated herein by reference.\n\nConvertible notes\n\nOn July 8, 2022, the Company issued secured convertible promissory notes to investors in exchange for cash. The outstanding balance relates to the interest\non the convertible note which has been accrued from July 2022 onwards and therefore the outstanding balance is $0.11 million as of September 30, 2024,\nall 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\nSydney Australia, in the matter entitled \u201cW Capital Advisors Pty Ltd in its capacity as trustee for the W Capital Advisors Fund v. Mawson Infrastructure\nGroup, Inc.\u201d, Docket No. 2024/00117331, alleging a claim to seek USD $0.17 million as unpaid interest under a convertible note after the Company paid in\nfull the principal of $0.50 million, and AUD $0.30 million under a loan deed, plus interest and costs for sums due claiming corporate guarantee by the\nCompany for a \u201cVariation Deed to Loan Deed\u201d dated September 29, 2022, executed by its Australian entity, Mawson Infrastructure Group Pty Ltd. The\nCompany sought dismissal of the Australian proceedings arguing jurisdiction of any claims against the Company should be in the United States as set forth\nin the agreements between the parties. Despite its objections, the Australian court ruled in favor of the Australian claimant and rendered a judgment against\nthe 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\nmillion, and AUD $0.30 million under a loan deed, plus interest and costs for sums due.\n\nOn June 12, 2024, W Capital issued a statutory demand under Australian Law to the Company seeking USD $0.17 million as unpaid interest under a\nconvertible note after the Company paid in full the principal of $0.50 million, and AUD $0.30 million under a loan deed. The Company rejected this\ndemand. Subsequently, on October 3, 2024, a proceeding before the Federal Court of Australia, New South Wales was filed by W Capital against the\nCompany, seeking a hearing in Australia on November 29, 2024 regarding its claims related to Company\u2019s solvency under Australian law. The current\nproceeding is in Australian courts and there are no associated proceedings in the United States. The Company believes that W Capital and Marshall are\nusing this proceeding in Australia as a bad faith attempt to gain leverage in ongoing legal disputes between the parties. For further information, please\nreference the Marshall and W Capital Australian Loan Disputes found in Part I. Financial Information, Item 1. Financial Statements, made part here of and\nincorporated herein by reference.\n\nNOTE 9 \u2013 STOCKHOLDERS\u2019 EQUITY\n\nCommon Stock\n\nDuring the nine-month period ended September 30, 2024, vested and outstanding restricted stock units were exercised for 2,062,903 shares of common\nstock of the Company.\n\nCommon Stock Warrants\n\nThe Company\u2019s outstanding stock warrants have not changed during the nine-months ended September 30, 2024. The outstanding stock warrants as of\nSeptember 30, 2024 are 4,904,016 with a weighted average remaining contractual life (in years) of 2.90 and a weighted average exercise price of $11.07,\nall of which are exercisable.\n\n\n 22\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 112 of 220\n\nStock-Based Compensation:\n\nEquity plans\n\nUnder the 2018 Equity Plan, the number of shares issuable under the Plan on the first day of each fiscal year increase by an amount equal to the lower of (i)\n100,000 shares (after a later 10 for 1 stock split) or (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year. At the\nCompany\u2019s annual meeting on May 17, 2023, the stockholders approved an amendment to the 2021 Equity Plan that, amongst other things, increased the\nnumber of the shares available under the 2021 Equity Plan to 10,000,000 shares, and the shares available under the 2021 Equity Plan increased by\n1,000,000 shares on January 1, 2024 to 11,000,000. Upon review of the previously granted shares in previous years and the availability of shares, on April\n9, 2024, the Board of Directors approved the 2024 Omnibus Equity Plan (the \u201c2024 Plan\u201d) which will provide an initial 10,000,000 shares of common\nstock available for grant per the terms of the 2024 Plan and provides alignment with long-term stockholder value creation. The 2024 Omnibus Equity Plan\nwas approved by the stockholders at the Company\u2019s annual general meeting held on June 12, 2024. The 2024 Plan replaced and succeeded the Company\u2019s\n2018 Equity Incentive Plan and 2021 Equity Incentive Plan. The 2024 Plan provides that awards issued under the 2024 Plan, the 2018 Plan or the 2021\nPlan that expire, lapse or are terminated, surrendered or canceled without having been fully exercised or are forfeited in whole or in part, in any case in a\nmanner that results in any share of Common Stock covered by such award being reacquired by the Company or otherwise not being issued, such share of\nCommon Stock shall again be available for the grant of awards under the 2024 Plan. Further, shares of Common Stock delivered (either by actual delivery\nor attestation) to the Company by a participant to (1) satisfy the applicable exercise or purchase price of an award, and/or (2) satisfy any applicable tax\nwithholding obligation, in each case, shall be added to the number of shares of Common Stock available for the grant of awards under the 2024 Plan.\nTherefore, an additional 5,000,000 shares of Common Stock are being registered hereunder for those purposes, for an aggregate of 15,000,000 shares of\nCommon Stock being registered hereunder.\n\nThe Company recognized stock-based compensation expense during the three and nine months ended September 30, 2024 and 2023, as follows:\n\n For the Three-Months ended For the Nine-Months ended\n September 30, September 30,\n 2024 2023 2024 2023\nPerformance-based restricted stock awards $ 2,913 $ (812,901) $ 79,070 $ (479,343)\nService-based restricted stock awards 4,125,992 4,096,717 11,161,386 4,146,709\nStock issued to consultants - - - 307,069\nWarrant expense - 500,500 - 1,501,500\nOption expense* 1,191,918 - 35,098 -\nTotal stock-based compensation** $ 5,320,823 $ 3,784,316 $ 11,275,554 $ 5,475,935\n\n* The option expense for the nine-month period to September 30, 2024 contains a reversal of stock-based compensation expenses from 2023 for\n cancelled option awards, offset by option expense incurred during the period.\n\n** Stock-based compensation expense in the consolidated, condensed unaudited statement of operations includes $11.28 million of stock-based\n compensation.\n\nPerformance-based awards\n\nPerformance-based awards generally vest over a three-year performance period upon the successful completion of specified market and performance\nconditions.\n\n\n 23\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 113 of 220\n\nThe following table presents a summary of the Company\u2019s performance-based awards restricted stock awards activity:\n\n Weighted\n Average\n Remaining\n Contractual\n Number of Life\n shares (in years)\nOutstanding as of December 31, 2023 75,545 8.58\n Expired/forfeited (3,444) -\nOutstanding as of September 30, 2024 72,101 7.81\nExercisable as of September 30, 2024 61,617 6.70\n\nService-based restricted stock awards\n\nService-based awards generally vest over a specified time period pursuant to the grant by the Compensation Committee of the Board of Directors and as\nspecified in the award agreements or employment agreements.\n\nThe following table presents a summary of the Company\u2019s service-based awards activity:\n\n Weighted\n Average\n Remaining\n Contractual\n Number of Life\n shares (in years)\nOutstanding as of December 31, 2023 5,242,393 2.28\n Issued 12,480,531 -\n Exercised (3,459,720) -\nOutstanding as of September 30, 2024 14,263,204 1.54\nExercisable as of September 30, 2024 16,804 0.01\n\nAs of September 30, 2024, there was approximately $20.54 million of unrecognized compensation cost related to the service-based restricted stock awards,\nwhich is expected to be recognized over a remaining weighted-average vesting period of approximately four years.\n\nStock options awards\n\nStock options awards vest upon the successful completion of specified stock price threshold conditions.\n\nThe following table presents a summary of the Company\u2019s Stock options awards activity:\n\n Weighted\n Average\n Weighted Remaining\n Average Contractual Aggregate\n Number of Exercise Life Intrinsic\n shares Price (in years) Value\nOutstanding as of December 31, 2023 3,500,417 $ 1.23 9.70 $ 6,923,000\n Cancelled (1,750,000) 0.94 - -\n Issued 1,750,000 0.94 - -\nOutstanding as of September 30, 2024 3,500,417 $ 1.07 9.45 $ 605,500\nExercisable as of September 30, 2024 417 $ 0.00 - $ -\n\n\n 24\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 114 of 220\n\nAs of September 30, 2024, there was approximately $0.61 million of unrecognized compensation cost related to the stock options awards, which is\nexpected to be recognized over a remaining weighted-average vesting period of approximately eight months.\n\nNOTE 10 \u2013 SUBSEQUENT EVENTS\n\nEffective September 6, 2024, the Company terminated the At the Market Offering Agreement with H.C. Wainwright & Co., LLC dated May 27, 2022. The\nCompany filed an 8K on October 25, 2024 announcing this termination. This filing is incorporated herein by reference.\n\nOn October 3, 2024, a proceeding before the Federal Court of Australia, New South Wales was filed by W Capital against the Company, seeking a hearing\non November 29, 2024 regarding its claims related to Company\u2019s solvency under Australian law. The current proceeding is in Australian courts and there\nare no associated proceedings in the United States. The Company believes that W Capital and Marshall are using this proceeding in Australia as a bad faith\nattempt to gain leverage in ongoing legal disputes between the parties. For further information, please reference the Marshall and W Capital Australian\nLoan Disputes found in Part I. Financial Information, Item 1. Financial Statements, made part here of and incorporated herein by reference.\n\nOn October 17, 2024, the Company filed a complaint in The Court of Common Pleas of Mercer County, Pennsylvania (file number 2024-2332), against\nVertua Property, Inc. as landlord for the Company\u2019s Sharon, PA property for breach of the lease agreement and wrongful termination of the lease, as well as\nfor tortious interference with a business relationship, seeking reinstatement of the lease, compensatory damages, disgorgement of revenue, and exemplary\nand punitive damages, as well as reimbursement for Plaintiffs\u2019 costs and expenses including attorneys\u2019 fees and costs of suit. Vertua Property, Inc. is a\ncompany affiliated to Darron Wolter of W Capital and to James Manning, a former board director and executive of the Company.\n\n\n 25\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 115 of 220\n\nItem 2. Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations\n\n Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of our balance sheets,\nstatements of operations and cash flows. The following discussion and analysis of our financial condition and results of operations should be read together\nwith the interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our\naudited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.\nAll amounts are in U.S. dollars.\n\n Throughout this report, unless otherwise designated, the terms \u201cwe,\u201d \u201cus,\u201d \u201cour,\u201d the \u201cCompany,\u201d \u201cMawson,\u201d \u201cour company\u201d and the \u201ccombined\ncompany\u201d refer to Mawson Infrastructure Group Inc., a Delaware corporation, Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager\nLLC, 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,\nMawson AU Pty Limited (on April 23, 2024, Mawson AU Pty Ltd was placed into a court appointed liquidation and wind-up process), Mawson Services\nPty Ltd (on April 29, 2024, Mawson Services Pty Ltd was placed into a court appointed liquidation and wind-up process), Mawson Bellefonte LLC, Luna\nSquares LLC, Luna Squares Repairs LLC, Luna Squares Property LLC, Mawson Midland LLC, Mawson Ohio LLC, Mawson Hosting LLC and Mawson\nMining LLC.\n\nCautionary Note Regarding Forward-Looking Statements\n\n This Quarterly Report on Form 10-Q contains forward-looking statements, about our expectations, beliefs or intentions regarding, among other\nthings, our product development efforts, business, financial condition, results of operations, strategies or prospects. Forward-looking statements can be\nidentified by the use of forward-looking words such as \u201cbelieve\u201d, \u201cexpect\u201d, \u201cintend\u201d, \u201cplan\u201d, \u201cmay\u201d, \u201cshould\u201d, \u201ccould\u201d or \u201canticipate\u201d or their negatives or\nother 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\nforward-looking statements may be included in, but are not limited to, various filings made by us with the United States Securities and Exchange\nCommission (the \u201cSEC\u201d), press releases or oral statements made by or with the approval of one of our authorized executive officers. Forward-looking\nstatements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to\nmatters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially\nfrom any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially\nfrom the activities and results anticipated in forward-looking statements, including, but not limited to, the factors summarized below.\n\n 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\nactual results to differ materially from those indicated by the forward-looking statements, particularly those set forth herein under Item 1A. \u201cRisk Factors\u201d\nbelow, and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.\n\n 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,\n2023, 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\nstatements. Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The following important factors,\namong others, could affect future results and events, causing those results and events to differ materially from those expressed or implied in our forward-\nlooking statements:\n\n - continued evolution and uncertainty related to growth in blockchain and bitcoin and other digital assets\u2019 usage;\n\n - access to reliable and reasonably priced electricity sources;\n\n - operational, maintenance, repair, safety, and construction risks;\n\n - the failure or breakdown of mining equipment, or internet connection failure;\n\n\n 26\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 116 of 220\n\n - our reliance on key management personnel and employees;\n\n - our ability to attract or retain the talent needed to sustain or grow the business;\n\n - our ability to develop and execute on our business strategy and plans;\n\n - counterparty risks related to our customers, agreements and/or contracts;\n\n - adverse actions by creditors, debt providers, or other parties;\n\n - high volatility in bitcoin and other digital assets\u2019 prices and in value attributable to our business;\n\n - our need to, and difficulty in, raising additional debt or equity capital and the availability of financing opportunities;\n\n - failure to maintain required compliance to remain eligible for the most cost-effective forms of raising additional equity capital;\n\n - the evolution of AI and HPC market and changing technologies;\n\n - the slower than expected growth in demand for AI, HPC and other accelerated computing technologies than expected;\n\n - the ability to timely implement and execute on AI and HPC digital infrastructure contracts or deployment;\n\n - the ability to timely complete the digital infrastructure build-out in order to achieve its revenue expectations for the periods mentioned;\n\n - downturns in the digital assets industry;\n\n - inflation, economic or political environment;\n\n - cyber-security threats;\n\n - our ability to obtain proper insurance;\n\n - banks and other financial institutions ceasing to provide services to our industry;\n\n - changes to the Bitcoin and/or other networks\u2019 protocols and software;\n\n - the decrease in the incentive or increased network difficulty to mine Bitcoin;\n\n - the increase of transaction fees related to digital assets:\n\n - the fraud or security failures of large digital asset exchanges;\n\n - the regulation and taxation of digital assets like Bitcoin;\n\n - our ability to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002; and\n\n - material litigation, investigations, or enforcement actions, including by regulators and governmental authorities.\n\n Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are\nnot 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.\n\n 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\nin their entirety by the cautionary statements included in this report. We undertake no obligation to update or revise forward-looking statements to reflect\nevents or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. In evaluating forward-looking statements, you\nshould consider these risks and uncertainties.\n\n\n 27\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 117 of 220\n\nCompany Overview\n\n Mawson Infrastructure Group Inc. (\u201cMawson,\u201d the \u201cCompany,\u201d \u201cwe,\u201d \u201cus,\u201d and \u201cour\u201d) is a technology company focused on digital infrastructure\nplatforms, headquartered in the United States of America.\n\n The Company is a corporation incorporated in Delaware in 2012. On March 9, 2021, the Company acquired the shares of Cosmos Capital Limited\nin a stock for stock exchange. This transaction has been accounted for as a reverse asset acquisition. The Company was previously known as Wize Pharma\nInc and changed its name on March 17, 2021. Shares of the Company\u2019s common stock, par value $0.001 per share (\u201cCommon Stock\u201d) have been listed on\nThe Nasdaq Capital Market since September 29, 2021.\n\n The Company develops and operates digital infrastructure platforms for enterprise customers and for its own purposes. The Company\u2019s digital\ninfrastructure platforms can be used to operate computing resources for a number of applications, and are offered across digital assets, artificial intelligence\n(AI), high-performance computing (HPC) and other computing applications. The Company also has an energy management business, which utilizes\nsoftware and analysis, to generate revenue when the Company adapts its power usage to the real-time needs of the grid. The Company may also transact in\ndigital computational machines, data center infrastructure, and related equipment periodically, subject to business and commercial opportunities.\n\n The Company has a strategy to prioritize the usage of carbon-free energy sources, including nuclear energy, to power its digital infrastructure\nplatforms and computational machines.\n\n The Company manages and operates digital infrastructure platforms delivering a total current capacity of approximately 129 megawatts (MW)\nwith its current operational sites with an additional 24 MW of future capacity that is under development, all strategically located in locations served by the\nPJM Energy Market in the United States. The PJM Energy Market is the largest wholesale power market in North America.\n\n Previously, the Company also had an interest in the Australian energy market, however for strategic and commercial reasons, the Company is\ncurrently focused on advancing its interests in North America. The Company currently operates facilities in the United States of America and does not have\noperating sites in Australia. The Company has previously reported through an 8-K filing on March 29, 2024 that the Company may seek to exit certain or\nall of its entities and holdings in Australia. The accompanying consolidated condensed unaudited interim financial statements, including the results of a\nnumber of the Company\u2019s Australian subsidiaries: Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, MIG No.1 Pty Ltd (on\nMarch 19, 2024, MIG No.1 Pty Ltd was placed into a Australian court appointed liquidation and wind-up process), MIG No.1 LLC, Mawson AU Pty Ltd\n(on April 23, 2024, Mawson AU Pty Ltd was placed into a Australian court appointed liquidation and wind-up process, as disclosed in note 3), an\nAustralian entity Mawson Services Pty Ltd (on April 29, 2024, Mawson Services Pty Ltd was placed into a Australian court appointed liquidation and\nwind-up process, as disclosed in note 3), Luna Squares LLC, Mawson Bellefonte LLC, Luna Squares Repairs LLC, Luna Squares Property LLC, Mawson\nMidland LLC, Mawson Hosting LLC, Mawson Ohio LLC and Mawson Mining LLC (collectively referred to as the \u201cGroup\u201d), have been prepared by the\nCompany, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (\u201cSEC\u201d) and in accordance with generally accepted\naccounting principles in the United States of America (\u201cGAAP\u201d).\n\nRecent Developments\n\n On August 6, 2024, the Company announced the future departure of Mr. Craig Hibbard as the Company\u2019s Chief Development Officer given\npersonal reasons. Mr. Hibbard will remain with the Company in a full-time capacity until February 6, 2025 to ensure a structured transition. The Company\ndoes not plan to continue with a Chief Development Officer position henceforth and the responsibilities will be divided amongst other management team\nmembers.\n\n On August 9, 2024, a wholly owned subsidiary of the Company, Mawson Hosting, LLC, and BE Global Development Limited, executed a Service\nProvider Agreement for the provision of AI/HPC digital colocation services for 20MW of power for AI/HPC digital colocation services at the Company\u2019s\nfacilities at pre-determined pricing for the first two years of the agreement, with the pricing subject to updates every two years, and with an initial six-year\ncontract term. The contract is expected to generate $92 million in the first 2 years, with cumulative revenue potential of $285 million through the 6-year\ninitial contract term. In addition, the Company and the Customer also entered into an additional non-binding Letter of Intent (the \u201cLOI\u201d) to supplement the\nbinding 20 MW agreement, to plan for further expansion of their business relationship to a total of 144 MW over time. The Company filed an 8K on\nAugust 12, 2024 attaching the agreement as Exhibit 99.1. This filing is incorporated herein by reference.\n\n\n 28\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 118 of 220\n\n On August 21, 2024, the Company secured a lease amendment to expand its Ohio facility and extending the lease term for 9 years, through April\n2033. Securing an initial 24 MW of capacity through agreements. The Company filed an 8K on August 27, 2024 announcing the event pursuant to a press\nrelease which was attached here to the 8-K as Exhibit 99.1 and is incorporated herein by reference.\n\n On September 6, 2024, Luna Squares Property, LLC, a wholly-owned subsidiary of the Company, filed a praecipe of lis pendens for the property\nleased in Sharon, Pennsylvania. It did so to also provide third parties such as Bitfarms Ltd. notice that the property is encumbered by a lease between Luna\nSquares Property LLC and Vertua Property, Inc. This property is the subject of a current civil lawsuit between the Company and Luna Squares against\nVertua. On October 17, 2024, the Company filed several claims against Vertua Property, Inc including claims for breach of the lease agreement and\nwrongful termination of the lease, as well as for tortious interference with a business relationship, seeking reinstatement of the lease, compensatory\ndamages, disgorgement of revenue, and exemplary and punitive damages, as well as reimbursement for Plaintiffs\u2019 costs and expenses including attorneys\u2019\nfees and costs of suit.\n\n On September 9, 2024, the Company entered into the Third Amendment to Lease Agreement (the \u201cAmendment\u201d) which amended the existing\nLease Agreement, dated as of September 20, 2021, by and between the Company and Jewel Acquisition, LLC, pursuant to which the Company leases\napproximately 8 acres of land and improvements located at 950 10th Street (950 Railroad Avenue), Midland (Beaver County), Pennsylvania (the \u201cLease\u201d).\nThe Amendment extends the Lease from September 14, 2024 to September 14, 2027 and sets new rental rates that are effective as of September 15, 2024.\nFuture minimum lease payments for the Lease, as amended, are approximately $1,380,509, with annual increases of 3.1%. All other terms of the Lease\nremain in full force and effect. The Company filed an 8K on September 11, 2024 attaching the amendment as Exhibit 99.1. This filing is incorporated\nherein by reference.\n\n On September 11, 2024, the Company entered into a Marketing Services Agreement with Outside The Box Capital Inc. (\u201cOTB\u201d) pursuant to\nwhich OTB will provide certain marketing and distribution services to the Company for a six month term in consideration for the payment of a fee of\n$100,000 worth of restricted shares of the Company\u2019s common stock, as approved by the Company\u2019s board. The Company filed an 8K on September 11,\n2024 attaching the agreement as Exhibit 99.1. This filing is incorporated herein by reference.\n\n\n 29\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 119 of 220\n\nResults of Operations \u2013 Three-months Ended September 30, 2024 compared to the three-months ended September 30, 2023\n\n For the Three-Months ended\n September 30,\n 2024 2023\nRevenues:\n Digital colocation revenue $ 9,518,696 $ 2,959,074\n Energy management revenue 1,963,805 1,475,333\n Digital assets mining revenue 833,516 6,898,223\n Equipment sales - -\n Total revenues 12,316,017 11,332,630\n Less: Cost of revenues (excluding depreciation) 7,996,440 7,715,920\nGross profit 4,319,577 3,616,710\n Selling, general and administrative 6,000,344 3,655,444\n Stock based compensation 5,320,823 3,784,316\n Depreciation and amortization 3,607,848 11,875,618\n Change in fair value of derivative asset 789,146 520,838\n Total operating expenses 15,718,161 19,836,216\nLoss from operations (11,398,584) (16,219,506)\nNon-operating income (expense):\n Losses on foreign currency transactions (352,375) (600,619)\n Interest expense (801,625) (514,953)\n Impairment of financial assets - (1,837,063)\n Profit on sale of site - -\n Gain on sale of marketable securities - -\n Other expenses (443,537) (158,577)\n Loss on deconsolidation - -\n Other income 119,526 -\n Share of net loss of equity method investments - -\n Total non-operating income (expense), net (1,478,011) (3,111,212)\nLoss before income taxes (12,876,595) (19,330,718)\n Income tax benefit (expense) 648,857 -\nNet Loss (12,227,738) (19,330,718)\nLess: Net loss attributable to non-controlling interests - (283,101)\nNet Loss attributed to Mawson Infrastructure Group stockholders $ (12,227,738) $ (19,047,617)\nNet Loss per share, basic and diluted $ (0.66) $ (1.15)\nWeighted average number of shares outstanding 18,519,572 16,500,833\n\nRevenues\n\n Digital colocation business revenues for the three-months ended September 30, 2024 and 2023, were $9.52 million and $3.00 million,\nrespectively. This represented an increase of $6.56 million or 222% increase.\n\n The increase in revenue was due to the Company providing digital colocation services to multiple digital colocation customers. For the same\nperiod of 2023, the Company only provided digital colocation services to a single customer whereas the Company now provides digital colocation services\nto multiple customers. The Company expects to continue to diversify its digital colocation services customer across customers and to expand its business.\n\n Energy management business revenues for the three-months ended September 30, 2024 and 2023, were $1.96 million and $1.48 million,\nrespectively. This represented an increase of $0.49 million or 33% increase.\n\n This increase is due to the Company enhanced energy management program participation in the three-months ended September 30, 2024 than in\nthe 2023 period. The revenue opportunity from energy management is expected to be impacted by seasonal patterns and other weather-related events as\nwell as the dynamic nature of global power prices.\n\n\n 30\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 120 of 220\n\n Digital assets mining revenues from the production of bitcoin for the three-months ended September 30, 2024, and 2023, were $0.83 million and\n$6.90 million, respectively. The decrease for the three-months ended September 30, 2024, was due to a number of factors, including the impact of the April\n2024 halving event, and a higher global network difficulty rate in the three-months ended September 30, 2024 compared to the same period in 2023, which\nled to lower bitcoin production from self-mining. In the three-months ended September 30, 24 period, the Company also significantly expanded and grew\nits digital colocation services business across multiple customers reallocating some of its digital asset mining capacities. The Company believes its digital\nmining revenue may continue to fluctuate with bitcoin pricing and market conditions as the bitcoin industry works through the expected volatility\ninherently associated with bitcoin including the impact post the April 2024 halving event.\n\nOperating Cost and Expenses\n\n Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; stock-based compensation; change in fair\nvalue of derivative asset; and depreciation and amortization.\n\nCost of revenue\n\n Our cost of revenue consists primarily of direct power costs related to digital asset mining and digital colocation services and cost of equipment\nand infrastructure sold.\n\n Cost of revenue for the three-months ended September 30, 2024 and 2023, were $8.00 million and $7.72 million, respectively. The increase in cost\nof revenue was primarily attributable to an increase in power costs related to the increase in energy used to operate the colocated equipment for our\nenterprise digital colocation customers within our facilities.\n\nSelling, general and administrative\n\n Our selling, general and administrative expenses consist primarily of professional and management fees relating to: audit; legal; professional\nservices, director and employee compensation, equipment repairs; marketing; freight; insurance; consultant fees; lease amortization, general and other\nexpenses.\n\n Selling, general and administrative expenses for the three-months ended September 30, 2024 and 2023 were $6.00 million and $3.66 million,\nrespectively.\n\nStock based compensation\n\n Stock based compensation expenses for the three-months ended September 30, 2024 and 2023 were $5.32 million and $3.78 million, respectively.\nIn the three-months ended September 30, 2024, stock-based compensation expense was attributable to the costs recognized in relation to long-term\nincentives for the Company\u2019s directors, management, and employees and to continue to align incentives with long-term stockholder value creation.\n\nDepreciation and amortization\n\n Depreciation consists primarily of depreciation of digital asset mining hardware, MDC equipment and other data center infrastructure.\n\n Depreciation and amortization for the three-months ended September 30, 2024 and 2023, were $3.61 million and $11.88 million, respectively. The\nlower depreciation and amortization expense is the result of an increased number of the Company\u2019s digital asset mining hardware being fully depreciated\nand lower number of digital asset miners for the three-months ended September 30, 2024 following the deconsolidation of MIG No. 1 Pty Ltd.\n\nChange in fair value of derivative asset\n\n During the three-months ended September 30, 2024 and 2023, there was a loss on the fair value of the derivative asset by $0.79 million and a loss\nof $0.52 million, respectively, in relation to our power supply arrangements. The loss on the derivative asset was due to an expected decrease in the price of\nenergy costs in 2024 and decrease in the amount of time remaining for the derivative asset.\n\n\n 31\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 121 of 220\n\nNon-operating expenses\n\n Non-operating expenses consist primarily of interest expenses and other expenses.\n\n Interest expenses for the three-months ended September 30, 2024 and 2023, were $0.80 million and $0.51 million, respectively driven by default\ninterest on loans outstanding.\n\nNon-operating income\n\n Non-operating income consists primarily of gain on foreign currency transactions and other income.\n\n During the three-months ended September 30, 2024 and 2023, the realized and unrealized gain on foreign currency transactions was a loss of\n$0.35 million and a loss of $0.60 million, respectively. This difference was due mostly to the movement in foreign exchange rates.\n\nNet loss attributable to Mawson Infrastructure Group, Inc. stockholders\n\n As a result of the foregoing, the Company recognized a net loss of $12.23 million for the three-months ended September 30, 2024, compared to a\nnet loss of $19.05 million for the three-months ended September 30, 2023.\n\nResults of Operations \u2013 Nine-months Ended September 30, 2024 compared to the nine-months ended September 30, 2023\n\n For the Nine-Months ended\n September 30,\n 2024 2023\nRevenues:\n Digital colocation revenue $ 25,884,176 $ 11,876,379\n Energy management revenue 6,168,906 2,934,066\n Digital assets mining revenue 11,596,363 14,550,744\n Equipment sales 550,000 193,581\n Total revenues 44,199,445 29,554,770\n Less: Cost of revenues (excluding depreciation) 28,577,249 19,422,380\nGross profit 15,622,196 10,132,390\n Selling, general and administrative 13,100,223 14,898,118\n Stock based compensation 11,275,554 5,475,935\n Depreciation and amortization 16,211,516 28,627,896\n Change in fair value of derivative asset 878,096 6,646,363\n Total operating expenses 41,465,389 55,648,312\nLoss from operations (25,843,193) (45,515,922)\nNon-operating income (expense):\n Losses on foreign currency transactions (474,210) (1,416,000)\n Interest expense (2,289,150) (2,061,067)\n Impairment of financial assets - (1,837,063)\n Profit on sale of site - 3,353,130\n Gain on sale of marketable securities - 1,437,230\n Other expenses (29,800) (226,330)\n Loss on deconsolidation (12,444,097) -\n Other income 309,209 245,694\n Share of net loss of equity method investments - (36,356)\n Total non-operating income (expense), net (14,928,048) (540,762)\nLoss before income taxes (40,771,241) (46,056,684)\n Income tax expense (1,044,475) (2,304,454)\nNet Loss (41,815,716) (48,361,138)\nLess: Net loss attributable to non-controlling interests (205,086) (867,590)\nNet Loss attributed to Mawson Infrastructure Group stockholders $ (41,610,630) $ (47,493,548)\nNet Loss per share, basic and diluted $ (2.37) $ (3.10)\nWeighted average number of shares outstanding 17,529,342 15,336,653\n\n\n 32\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 122 of 220\n\nRevenues\n\n Digital colocation services revenues for nine-months ended September 30, 2024 and 2023, were $25.88 million and $11.88 million, respectively,\nrepresenting an increase of $14.01 million or 118% increase.\n\n The increase in revenue was due to growth of the digital colocation business during the nine-months ended September 30, 2024, where the\nCompany provided digital colocation services to multiple digital colocation customers, whereas for the nine-months ended September 30, 2023 the\nCompany provided digital colocation services to a single customer.\n\n Energy management revenues for the nine-months ended September 30, 2024 and 2023, were $6.17 million and $2.93 million, respectively,\nrepresenting an increase of $3.23 million or 110% increase.\n\n This increase is due to the Company\u2019s enhanced participation in energy management programs.\n\n Digital assets revenues from production of bitcoin for the nine-months ended September 30, 2024, and 2023, were $11.60 million and $14.55\nmillion, respectively. In the nine-months ended September 30, 24 period, the Company also significantly expanded its digital colocation services business\nreallocating some of its digital asset mining capacities. The Company believes its digital mining revenue may continue to fluctuate with bitcoin pricing and\nmarket conditions as the bitcoin industry works through the expected volatility inherently associated with bitcoin including the impact post the April 2024\nhalving event.\n\n Sales of digital mining and other equipment for the nine-months ended September 30, 2024 and 2023, were $0.55 million and $0.19 million,\nrespectively.\n\nOperating Cost and Expenses\n\n Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; stock-based compensation; change in fair\nvalue of derivative asset; and depreciation and amortization.\n\nCost of revenue\n\n Our cost of revenue consists primarily of direct power costs related to digital assets mining and digital colocation services and cost of mining\nequipment sold.\n\n Cost of revenue for the nine-months ended September 30, 2024 and 2023, were $28.58 million and $19.42 million, respectively. The increase in\ncost of revenue was primarily attributable to an increase in power costs related to the energy used to operate the Company\u2019s mining equipment and\ncustomer colocated mining equipment within our facilities.\n\n\n 33\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 123 of 220\n\nSelling, general and administrative\n\n Our selling, general and administrative expenses consist primarily of professional and management fees relating to: audit; legal; equipment\nrepairs; marketing; freight; insurance; consultant fees; lease amortization, director and employee compensation, general and other expenses.\n\n Selling, general and administrative expenses for the nine-months ended September 30, 2024 and 2023 were $13.10 million and $14.90 million,\nrespectively, which is a reduction of $1.80 million or 12% from period to period. The decrease is primarily attributable to lower employee compensation\nexpenses including payroll costs, lower doubtful debt expense, reduced freight costs, lower marketing and travel expenses also driven by the cost reduction,\nefficiency, and optimization actions that the Company had previously undertaken.\n\nStock-based compensation\n\n Stock-based compensation expenses for the nine-months ended September 30, 2024 and 2023 were $11.28 million and $5.48 million, respectively.\nIn the nine-months ended September 30, 2024, stock-based compensation was attributable to costs recognized in relation to long-term incentives for the\nCompany\u2019s directors and employees and to continue to align incentives with long-term stockholder value creation.\n\nDepreciation and amortization\n\n Depreciation consists primarily of depreciation of digital asset mining hardware and MDC equipment.\n\n Depreciation and amortization for the nine-months ended September 30, 2024 and 2023, were $16.21 million and $28.63 million, respectively.\n\nChange in fair value of derivative asset\n\n During the nine-months ended September 30, 2024 and 2023, there was a loss on the fair value of the derivative asset by $0.88 million and a loss\nof $6.65 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\nincrease in the price of energy costs in 2024.\n\nNon-operating expenses\n\n Non-operating expenses consist primarily of interest expenses, loss on deconsolidation and other expenses.\n\n Interest expenses for the nine-months ended September 30, 2024 and 2023, were $2.29 million and $2.06 million, respectively.\n\n During the nine-months ended September 30, 2024, the Company recognized a deconsolidation loss of $12.44 million. This loss was as a result of\nthree Australian entities and subsidiaries, MIG No.1 Pty Ltd, Mawson AU Pty Ltd and Mawson Services Pty Ltd going into Australian court appointed\nliquidation and accordingly these subsidiaries were deconsolidated. The deconsolidation loss recorded was due to the removal of the net assets and certain\nliabilities of this subsidiary from the condensed consolidated financial statements. See Note 3 - Subsidiary Deconsolidation to the Consolidated Condensed\nFinancial Statements (Unaudited) in Item 1. Financial Statements, for further discussion.\n\nNon-operating income\n\n Non-operating income consists primarily of gain on foreign currency transactions and other income.\n\n During the nine-months ended September 30, 2024 and 2023, the realized and unrealized loss on foreign currency transactions was a loss of $0.47\nmillion and a loss of $1.42 million, respectively. This difference was due mostly to the movement in foreign exchange rates.\n\n\n 34\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 124 of 220\n\nNet loss attributable to Mawson Infrastructure Group, Inc. stockholders\n\n As a result of the foregoing, the Company recognized a net loss of $41.61 million for the nine-months ended September 30, 2024, compared to a\nnet loss of $47.49 million for the nine-months ended September 30, 2023.\n\nLiquidity and Capital Resources\n\nGeneral\n\n Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on\nan ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable\nand capital expenditure. For the nine-month period ended September 30, 2024, we financed our operations primarily through net positive cash flow\nprovided by operating activities and other cash reserves. During the nine-months ending September 30, 2024, the Company repaid $0.50 million of\nprincipal payments against previous facilities provided by W Capital Advisors Pty Ltd.\n\n On May 27, 2022, the Company entered an At the Market Offering Agreement (the \u201cATM Agreement\u201d) with H.C. Wainwright & Co., LLC\n(\u201cWainwright\u201d), and filed a prospectus supplement, to sell shares of its Common Stock through an \u201cat the market offering\u201d program as defined in Rule 415\npromulgated under the Securities Act of 1933, as amended. Effective May 4, 2023, the Company filed a prospectus supplement to amend, supplement and\nsupersede certain information contained in the earlier prospectus and prospectus supplement, which reduced the number of shares of Common Stock the\nCompany may offer and sell under the ATM Agreement to an aggregate offering price of up to $9.00 million from time to time. The Company terminated\nthe ATM Agreement effective September 6, 2024. The Company may choose to enter into other \u201cat the market offering\u201d programs with other parties in the\nfuture.\n\n We believe our near-term working capital requirements will continue to be funded through a combination of the cash we expect to generate from\nfuture operations, our existing funds, external debt facilities that may be available to us, future issuances of shares, and other potential sources of capital,\nmonetization, or funds. We believe a combination of these opportunities are expected to be adequate to fund our longer-term operations needed over the\nnext twelve-months. For our business growth, it is expected we may continue investing in expanding our infrastructure, expanding and/or upgrading our\ninfrastructure and/or other equipment and will require additional working capital in the short-term and long-term. As of September 30, 2024, we had an\naggregate of $21.37 million of debt all of which is overdue for repayment unless we refinance, renegotiate the terms or prevail in our disputes and/or\nrelated claims. In addition, the Celsius deposit of $15.33 million is the subject of an ongoing legal dispute in arbitration. For more details on this dispute,\nplease see the Celsius Collocation Agreement Dispute found in Part I. Financial Information, Item 1. Financial Statements, contained in this Form 10-Q and\nmade part here of and incorporated herein by reference.\n\n Please see our Risk Factor entitled \u201cWe will need to raise substantial additional capital to continue our operations and execute our business\nstrategy, 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\nfavorable terms, or at all. Our inability to raise sufficient capital would have a material adverse effect on our financial condition and business.\u201d in our\nAnnual Report on Form 10-K for the year ended December 31, 2023.\n\nWorking Capital and Cash Flows\n\n As of September 30, 2024 and December 31, 2023, we had a cash and cash equivalent balance of $5.76 million and $4.48 million, respectively,\nrepresenting a positive increase of 29% in our cash and cash equivalent balance. As of September 30, 2024 and December 31, 2023, the trade receivables\nbalance was $12.84 million and $12.11 million, respectively. As of September 30, 2024, we had $21.37 million of outstanding short-term borrowings, and\nas of December 31, 2023, we had $19.35 million of short-term borrowings. The short-term borrowings as of September 30, 2024, relate to Celsius Mining\nLLC, W Capital Advisors Pty Ltd, the secured convertible promissory notes issued to investors and Marshall Investments MIG Pty Ltd (these loans are\ncurrently in default, refer to Material Cash Requirements section below for more information). As of September 30, 2024 and December 31, 2023, we had\nnegative working capital of $36.09 million and $33.18 million, respectively.\n\n\n 35\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 125 of 220\n\n The following table presents the major components of net cash flows (used in) provided by operating, investing and financing activities for the\nyears ending September 30, 2024 and 2023:\n\n Nine-Months Ended\n September 30,\n 2024 2023\n\nNet cash provided by (used in) operating activities $ 3,106,434 $ (4,818,073)\nNet cash provided by (used in) investing activities $ (1,097,654) $ 10,510,543\nNet cash used in financing activities $ (726,773) $ (5,115,470)\n\n For the nine-month period ended September 30, 2024, net cash provided by operating activities was $3.11 million and for the nine-months period\nended September 30, 2023, net cash used operating activities was $4.82 million. The increase in net cash provided by operating activities was attributable\nto operations and timing differences in trade and other receivables and trade and other payables amongst other factors.\n\n For the nine-month period ended September 30, 2024, net cash used in investing activities was $1.10 million and for the nine-month period ended\nSeptember 30, 2023, net cash provided by investing activities was $10.51 million. The net cash used in investing activities during the nine-months ended\nSeptember 30, 2024, was primarily attributable to the proceeds from sale of certain non-utilized equipment. The net cash provided by investing activities\nduring the nine-month period to September 30, 2023 was primarily attributable to the proceeds from sale of investment shares in CleanSpark, Inc.\n\n For the nine-month period ended September 30, 2024, net cash used in financing activities was $0.73 million and for the nine-month period ended\nSeptember 30, 2023, net cash used in financing activities was $5.12 million. The cash used in financing activities during the nine-month period ended\nSeptember 30, 2024, was primarily attributable to the repayment of borrowings.\n\nMaterial Cash Requirements\n\n The following discussion summarizes our material cash requirements from contractual and other obligations.\n\n The Company is the guarantor of a Secured Loan Facility Agreement by MIG No. 1 with Marshall. The loan matured in February 2024 and bears\ninterest at a rate of 12% per annum (with an overdue rate provision of an additional 500bps), payable monthly with interest payments commencing that\ncommenced 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.\nPrincipal repayments began during November 2022. The outstanding balance including interest is $10.53 million as of September 30, 2024, all of which is\nclassified as a current liability. There has been no principal and interest payments made since May 2023. This Secured Loan Facility Agreement was\nentered into with an Australian entity MIG No.1, this company was placed into a court appointed liquidation and wind-up process and was deconsolidated\nfrom 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\ntheir secured loan facility. The direct assets that secure this loan include 5,372 miners and 8 modular data centers (\u201cMDCs\u201d), these assets are held by the\nMIG No.1 and therefore were included in the deconsolidation. The receiver\u2019s statutory duty includes the obligation to sell the secured assets at market\nvalue or, if market value is not known, at the best price reasonably obtainable to maximize the prospects of there being sufficient proceeds available to\nsatisfy 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\nthe sale of these miners and MDCs. The Company also reserves and retains all rights against Marshall.\n\n On February 23, 2022, Luna entered into a Digital Colocation Agreement with Celsius Mining LLC. In connection with this agreement, Celsius\nMining LLC loaned Luna a principal amount of $20.00 million, for the purpose of funding the infrastructure required to meet the obligations of the Digital\nColocation Agreement, for which Luna issued a Secured Promissory Note for repayment of such amount. The Secured Promissory Note accrues interest\ndaily 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\nquarter, principal repayments began at the end of September 2022. The Secured Promissory Note had a maturity date of August 23, 2023, the outstanding\nbalance including interest is $9.38 million as of September 30, 2024, all of which is classified as a current liability. Celsius Mining LLC transferred the\nbenefit of the promissory note to Celsius Network Ltd. Celsius Mining LLC and Celsius Network Ltd filed for Chapter 11 bankruptcy protection on July\n13, 2022. Under the Digital Colocation Agreement, Celsius Mining LLC advanced $15.33 million to Luna that were held as a deposit. Whether that amount\nhas 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\nfor arbitration of its claims against the Company. The Company has filed cross-claims against Celsius. For more details on this dispute, please see the\nCelsius Collocation Agreement Dispute found in Part I. Financial Information, Item 1. Financial Statements, contained in this Form 10-Q and made part\nhere of and incorporated herein by reference.\n\n\n 36\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 126 of 220\n\n The Company is the guarantor of a Secured Loan Facility Agreement for working capital by an Australian entity Mawson Infrastructure Group Pty\nLtd with W Capital Advisors Pty Ltd. As of September 30, 2024, AUD $1.95 million (USD $1.35 million) has been drawn down from this facility, all of\nwhich 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\nadditional 800bps) and is paid monthly. Principal repayments are paid ad hoc in line with the loan facility agreement. The Secured Loan Facility expired in\nMarch 2023. This Secured Loan Facility Agreement was originally with Mawson Infrastructure Group Pty Ltd and this Australian entity was placed into\nAustralian voluntary administration on October 30, 2023 and on November 3, 2023, W Capital Advisors appointed receivers and managers in Australia\nunder the terms of their security relating to their working capital facility. The receiverships of these two Australian companies are proceeding, and the\nCompany is dependent on the appointed receivers and managers to send information on their respective status.\n\n On May 31, 2024, W Capital obtained a judgment from the Australian court awarding it a money judgment for USD $0.17 million as unpaid\ninterest under the convertible note after the Company paid in full the principal of $0.50 million, and AUD $0.30 million under a loan deed. On June 12,\n2024, W Capital issued a statutory demand under Australian Law to the Company seeking USD $0.17 million as unpaid interest under a convertible note\nafter the Company paid in full the principal of $0.50 million, and AUD $0.30 million under a loan deed. The Company rejected this demand. Subsequently,\non October 3, 2024, a proceeding before the Federal Court of Australia, New South Wales was filed by W Capital against the Company, seeking a hearing\non November 29, 2024 regarding its claims related to Company\u2019s solvency under Australian law. The current proceeding is in Australian courts and there\nare no associated proceedings in the United States. The Company believes that W Capital and Marshall are using this proceeding in Australia as a bad faith\nattempt to gain leverage in ongoing legal disputes between the parties. For further information, please reference the Marshall and W Capital Australian\nLoan Disputes found in Part I. Financial Information, Item 1. Financial Statements, made part here of and incorporated herein by reference.\n\nFinancial condition\n\n As of September 30, 2024, and December 31, 2023, we had negative working capital of $36.09 million and $33.18 million, respectively. As of\nSeptember 30, 2024, and December 31, 2023, we had negative net assets of $1.56 million and $30.38 million, respectively. As of September 30, 2024, we\nhad an accumulated deficit of $224.28 million compared to $182.67 million as of December 31, 2023. Our cash position of September 30, 2024, was $5.76\nmillion in comparison to $4.48 million as of December 31, 2023. For the nine-month period ended September 30, 2024 and 2023 the Company incurred a\nloss after tax of $41.61 million and $48.36 million, respectively. Included in trade and other receivables is a $2.00 million payment due and pending from\nCleanSpark, Inc. for the sale of the Georgia facility. CleanSpark, Inc has disputed the obligation to make this payment. On July 16, 2024, the Company\nfiled 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\nmatter entitled, \u201cMawson Infrastructure Group, Inc. and Luna Squares, LLC v. CleanSpark, Inc. and CSRE Properties Sandersville, LLC\u201d under Civil\nAction 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.\nFor more details, please see the CleanSpark Litigation found in Item 1. Legal Proceedings, Part II Other Information contained in this Form 10-Q.\n\n Our primary requirements for liquidity and capital are working capital, capital expenditures, public company costs and general corporate needs. In\nparticular, we have large power usage costs, and other significant costs include our lease, operational, general costs and employee costs. We expect these\ncapital 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\ncash and cash equivalents, external debt facilities available to us and further issuances of shares.\n\n\n 37\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 127 of 220\n\n We require additional capital to respond to near-term debt repayment obligations, competitive pressure, market dynamics, new technologies,\ncustomer demands, business opportunities, challenges, potential acquisitions or unforeseen circumstances, and we will likely need to determine to engage\nin equity, debt or other financings in the short term. If we are unable to obtain adequate financing on terms satisfactory to us when we require it, our ability\nto continue to fund, grow or support our business model and to respond to business challenges could be significantly limited, our business, financial\ncondition and results of operations could be adversely affected, and this may result in bankruptcy or our ceasing operations.\n\n The Company continues to take steps to preserve cash by optimizing operations, costs and pursuing efficiencies. The Company has been\nimproving its revenue generation by enhancing its operations, driving growth in business lines, and adding multiple, enterprise digital colocation services\ncustomers and diversifying its businesses. The Company will continue to seek to optimize its cashflows through these and other initiatives.\n\nNon-GAAP Financial Measures\n\n The Company utilizes a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing its overall business\nperformance, for making operating decisions and for forecasting and planning future periods. The Company considers the use of non-GAAP financial\nmeasures helpful in assessing its current financial performance, ongoing operations, and prospects for the future. While the Company uses non-GAAP\nfinancial measures as a tool to enhance its understanding of certain aspects of its financial performance, the Company does not consider these measures to\nbe a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, the Company believes that\ndisclosing non-GAAP financial measures to the readers of its financial information provides such readers with useful supplemental data that, while not a\nsubstitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. Investors are cautioned\nthat there are inherent limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, non-GAAP financial\nmeasures are not based on a comprehensive set of accounting rules or principles and many of the adjustments to the GAAP financial measures reflect the\nexclusion of items that are recurring and will be reflected in the company\u2019s financial results for the foreseeable future. In addition, other companies,\nincluding other companies in the Company\u2019s industry, may calculate non-GAAP financial measures differently than the Company does, limiting their\nusefulness as a comparative tool.\n\n The Company is providing supplemental financial measures for (i) non-GAAP adjusted earnings before interest, taxes, depreciation and\namortization, or (\u201cadjusted EBITDA\u201d) that excludes the impact of interest, income tax, depreciation, amortization, stock-based compensation expense,\nchange in fair value of derivative asset, impairment of financial assets, unrealized gains/losses, share of net loss of equity method investments, loss on\ndeconsolidation and certain non-recurring expenses. We believe that adjusted EBITDA is useful to investors in comparing our performance across reporting\nperiods on a consistent basis where one-time, or non-recurring gains or losses or expenses unrelated to operating activities would otherwise mask the\nCompany\u2019s operating performance.\n\n For the Three-Months ended For the Nine-Months ended\n September 30, September 30,\n 2024 2023 2024 2023\nReconciliation of non-GAAP adjusted EBITDA:\nNet loss: $ (12,227,738) $ (19,330,718) $ (41,815,716) $ (48,361,138)\nImpairment of financial assets - 1,837,063 - 1,837,063\nShare of net loss of equity method investments - - - 36,356\nDepreciation and amortization 3,607,848 11,875,618 16,211,516 28,627,896\nStock based compensation 5,320,823 3,784,316 11,275,554 5,475,935\nUnrealized and realized losses/(gain) 352,375 600,619 474,210 1,416,000\nOther non-operating income (119,526) - (309,209) (245,694)\nOther non-operating expenses 1,245,162 673,530 2,318,950 2,287,397\nLoss on deconsolidation - - 12,444,097 -\nChange in fair value of derivative asset 789,146 520,838 878,096 6,646,363\nIncome tax (648,857) - 1,044,475 2,304,454\nEBITDA (non-GAAP) $ (1,680,767) $ (38,734) $ 2,521,973 $ (24,632)\n\n\n 38\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 128 of 220\n\nCritical accounting estimates\n\n The preparation of the financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that\naffect the amounts reported in the financial statements and accompanying notes. These estimates, judgments and assumptions can affect the reported\namounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported\namounts of income and expenses during the reporting periods. Actual results could differ from those estimates. There have been no material changes to our\ncritical accounting policies and estimates as set forth in Item 7, Management\u2019s Discussion and Analysis of Financial Condition and Results of Operations,\nincluded in our Annual Report on Form 10-K for the year ended December 31, 2023.\n\nItem 3. Quantitative and Qualitative Disclosures About Market Risk\n\n As a smaller reporting company, the Company has elected not to provide the disclosure required by this item.\n\nItem 4. Controls and Procedures\n\nEvaluation of disclosure controls and procedures\n\n Our Board of Directors, the Board Committee(s), and management team, including our Chief Executive Officer and President (principal executive\nofficer) and Chief Financial Officer (principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in\nRules 13a- 15(e)) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (the \u201cExchange Act\u201d), as of the end of the period covered by this\nQuarterly Report. Our Board of Directors and management recognizes that any controls and procedures, no matter how well designed and operated, can\nprovide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship\nof possible controls and procedures. Based on this evaluation, our Chief Executive Officer and President and Chief Financial Officer have concluded that\nour disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2024, including the material weaknesses in\nour internal control over financial reporting described below. Management\u2019s assessment of the effectiveness of our disclosure controls and procedures is\nexpressed at a level of reasonable assurance because management recognizes that any controls and procedures, no matter how well designed and operated,\ncan provide only reasonable assurance of achieving their objectives.\n\n Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any\nevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree\nof compliance with the policies or procedures may deteriorate.\n\n A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable\npossibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.\n\n Whilst remediation actions are ongoing and controls have been implemented across multiple business processes, the material weaknesses in our\ninternal control over financial reporting and information technology will not be considered remediated, until controls have operated for a sufficient period\nof 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\nreport, we continue to disclose the following material weaknesses.\n\n Significant Reliance on Certain Individuals. There is inadequate segregation of duties in place related to our financial reporting and other review\nand oversight procedures due to the lack of sufficient accounting and other personnel. This is not inconsistent with similar sized organizations. This gives\nrise 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-\nOxley Act of 2002. In addition, this poses the risk that compliance and other reporting obligations are not dealt with in an adequate manner.\n\n\n 39\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 129 of 220\n\n Controls over the financial statement close and reporting process. Controls were not adequately designed or implemented in the financial\nstatement close and reporting process. This includes controls related to complex and judgmental accounting transactions including business acquisitions\nand divestures, derivatives, manual journal entries, account reconciliations and financial statement policies and disclosures.\n\n Information and Technology Controls. There are control deficiencies related to information technology (\u201cIT\u201d) general controls that in the\naggregate constitute a material weakness. Deficiencies identified include lack of controls over access to programs and data, program changes, program\ndevelopment and general IT controls.\n\n Data from third parties. The Company does not have the resources and personnel to fully execute its designed controls to ensure that data\nreceived from third parties was validated, complete and accurate. Such data is relied on by the Company in determining amounts pertaining to mining and\ndigital colocation revenue, net energy benefits, and digital asset assets.\n\n Fixed asset verification. The Company does not have the resources and personnel to fully execute its designed controls around physical asset\nverification. Together with system limitations, restricting tracking of fixed asset movements, there is a risk around the existence of fixed assets.\n\n Notwithstanding the identified material weaknesses and management\u2019s assessment that our disclosure controls and procedures were not effective\nas of September 30, 2024, management believes that the consolidated condensed financial statements included in this Quarterly Report on Form 10-Q fairly\npresent, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with\ngenerally accepted accounting principles. We rely on the assistance of outside advisors with expertise in these matters in preparing the financial statements.\n\nRemediation\n\n Our Board of Directors and management take internal control over financial reporting and the integrity of our financial statements seriously. Our\nmanagement continues to work to find ways to improve its controls related to our material weaknesses. With the oversight of the Board of Directors, the\nBoard Committee(s), and management, the Company plans to continue to progress the remediation of the underlying causes of the identified material\nweaknesses, primarily through the performance of a risk assessment process; the development and implementation of formal, documented policies and\nprocedures, improved processes and control activities (including an assessment of the segregation of duties); as well as the hiring of additional finance and\nother personnel for specific roles including financial reporting.\n\n Whilst controls have been implemented across all business processes and are operating, the material weaknesses in our internal control over\nfinancial reporting and information technology will not be considered remediated until controls have operated for a sufficient period of time and have been\ntested 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\nthe material weaknesses.\n\n Remediation efforts for upcoming quarters will be focused on progressing the implementation of the remainder of controls, refining existing\ncontrols and validating the effectiveness of implemented controls using criteria set forth by the Committee of Sponsoring Organizations of the Treadway\nCommission (COSO) in Internal Control. We cannot provide any assurance that our remediation efforts will be successful or that our internal control over\nfinancial 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\nour internal control over financial reporting related to the identified material weaknesses, management may determine to take additional measures to\naddress control deficiencies or determine to modify or update the remediation plan described above.\n\nChanges in internal control over financial reporting\n\n Except for the remedial measures described above, there have been no other changes in our internal control over financial reporting (as defined in\nRules 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\nreasonably likely to materially affect, the Company\u2019s internal control over financial reporting.\n\nLimitations on Effectiveness of Controls and Procedures and Internal Control over Financial Reporting\n\n In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, the Board of Directors, Board\nCommittee(s), and management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable\nassurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial\nreporting must reflect the fact that there are resource constraints, and that the Board of Directors, Board Committee(s), and management is required to\napply judgment in evaluating the benefits of possible controls and procedures relative to their costs.\n\n\n 40\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 130 of 220\n\n PART II. OTHER INFORMATION\n\nItem 1. Legal Proceedings\n\n The Company, and some of its subsidiaries or entities including Australian entities, are currently in disputes, as outlined below. These disputes\nmay be in or may lead to litigation.\n\n On January 8, 2024, a commercial demand was made by an Australian entity Flynt ICS Pty Ltd to the Company\u2019s subsidiary and an Australian\nentity, MIG No. 1 Pty Ltd, for $0.13 million, for alleged claimed sums due under a service agreement. As determined by the Audit Committee\u2019s\ninvestigation into Mr. James Manning, Flynt ICS Pty Ltd is a party related to Mr. James Manning, a former board director and executive of the Company.\nThe Audit Committee\u2019s investigation concluded that Mr. Manning had not disclosed such related party transactions to the Company, and Mr. Manning has\nnot cooperated with the Company on its investigation. On March 19, 2024, MIG No.1 Pty Ltd was placed into an Australian court appointed liquidation\nand wind-up process. The Company has ongoing concerns about Flynt ICS Pty Ltd and James Manning being related parties and lack of disclosure by\nFlynt ICS Pty Ltd and James Manning amongst other concerns. Flynt ICS Pty Ltd and Mr. Manning have not responded to the Company\u2019s concerns in a\nmanner satisfactory to the Company.\n\n On April 19, 2024, a civil suit entitled \u201cBlockware Solutions, LLC v. Mawson Bellefonte LLC and Mawson Infrastructure Group, Inc.\u201d was filed\nin the US District Court, Southern District of New York under Civil Action No. 1:24-cv-02976. The parties have elected to enter the court\u2019s Mediation\nProgram. The matter is ongoing and the mediation hearing date is currently pending finalization.\n\n 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\nSouthern District of New York in the matter entitled, \u201cMawson Infrastructure Group, Inc. and Luna Squares, LLC v. CleanSpark, Inc. and CSRE Properties\nSandersville, LLC\u201d under Civil Action Number 1:24-cv-5379 for claims and payments due to the Company in excess of $2.00 million (the \u201cCleanSpark\nLitigation\u201d). The matter is proceeding through the court system. On September 13, 2024, CleanSpark filed a motion to dismiss. On October 18, 2024, the\nCompany filed a brief in opposition. CleanSpark is due to file a reply motion by November 8, 2024.\n\n On July 18, 2024, Celsius Network, LLC filed for arbitration of its claims against the Company with the American Arbitration Association in the\nmatter entitled, \u201cCelsius Network Ltd., Celsius Mining LLC and Ionic Digital Mining LLC v. Mawson Infrastructure Group, Luna Squares LLC and\nCosmos Infrastructure LLC - Case 01-24-0006-4462\u201d. For more details on this dispute, please see the Celsius Collocation Agreement Dispute found in Part\nI. Financial Information, Item 1. Financial Statements, contained in this Form 10-Q and made part here of and incorporated herein by reference.\n\n On October 3, 2024, a proceeding before the Federal Court of Australia, New South Wales entitled \u201cIn The Matter Of Mawson Infrastructure\nGroup Inc. (ARBN 649 261 861)\u201d, File No. NSD1395/2024\u201d was filed by W Capital against the Company, seeking a hearing on November 29, 2024\nregarding its claims related to the Company\u2019s solvency under Australian law. Marshall Investments GCP Pty Ltd gave formal notice that it intends to\nappear before the court. The current proceeding is in Australian courts and there are no associated proceedings in the United States. The Company believes\nthat W Capital and Marshall are using this proceeding in Australia as a bad faith attempt to gain leverage in ongoing legal disputes between the companies.\nFor further information, please reference the Marshall and W Capital Australian Loan Disputes found in Part I. Financial Information, Item 1. Financial\nStatements, made part here of and incorporated herein by reference.\n\n On October 17, the Company filed a complaint (No. 2024-2332) in The Court of Common Pleas of Mercer County, PA, against Vertua Property,\nInc. as landlord for the Company\u2019s Sharon, PA property for breach of the lease agreement and wrongful termination, as well as for tortious interference\nwith a business relationship, seeking reinstatement of the lease, compensatory damages, disgorgement of revenue, and exemplary and punitive damages, as\nwell as reimbursement for Plaintiffs\u2019 costs and expenses including attorneys\u2019 fees and costs of suit.\n\n The Company and its subsidiaries have been in the past, and from time to time in the future may be involved in certain litigation related to our\nbusinesses. For example, the Company and its subsidiaries receive letters of demand for payments or other correspondence from time to time which could\nlead to legal proceedings.\n\n\n 41\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 131 of 220\n\nItem 1A. Risk Factors\n\n The Company\u2019s 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,\nwhich was filed on April 1, 2024 and (ii) as disclosed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, which was filed on May\n15, 2024, and (iii) as disclosed in our 8-K filing on March 29, 2024. In addition, the Company is subject to risks related to:\n\n The Company\u2019s expansion into the Artificial Intelligence (\u201cAI\u201d) and High-Performance Computing (\u201cHPC\u201d) markets. While the Company does\nnot run AI and HPC workloads for its own purposes, it offers infrastructure for potential customers. As such, the Company may be indirectly exposed to\nrisks in the AI and HPC space, including:\n\n \u25cf Regulatory Uncertainty. Many countries have not yet established comprehensive AI regulations, creating uncertainty that can impact future\n development, deployment, and compliance costs.\n\n \u25cf Compliance with Privacy Laws. AI companies must address compliance with data protection regulations, such as the EU\u2019s General Data\n Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), as these laws significantly impact AI applications that\n process personal data.\n\n \u25cf Technology and Data Dependencies. There is a risk of dependency on vast datasets for training AI models and obtaining quality data could\n become more difficult due to legal restrictions or competitive factors.\n\n \u25cf Cybersecurity. AI systems, like all other IT systems, are vulnerable to cyber-attacks, data breaches, intellectual property theft, and malicious\n manipulation of AI models.\n\n \u25cf Litigation and Intellectual Property. Intellectual property disputes over algorithms, AI models, and proprietary datasets are common concerns.\n Legal challenges or patent disputes could negatively impact AI companies\u2019 operations.\n\n \u25cf Reputational Risks. Public trust in AI is in flux and could be undermined by high-profile failures, ethical concerns, or regulatory sanctions.\n This could affect consumer adoption and AI companies\u2019 images and reputations.\n\nItem 2. Unregistered Sales of Equity Securities and Use of Proceeds\n\n None\n\nItem 3. Defaults Upon Senior Securities\n\n Celsius Mining LLC loaned $20.00 million to Luna Squares LLC, through a Secured Promissory Note (the \u201cCelsius Promissory Note\u201d), which\nhad a maturity date of August 23, 2023, and a total outstanding balance as of September 30, 2024, of $9.38 million. Luna Squares LLC has not repaid the\nloan 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\nto Celsius Network Ltd. Celsius Network Ltd has notified Luna Squares the default interest is payable. On November 23, 2023, Celsius filed an adversary\nproceeding against Mawson, its subsidiaries Luna Squares LLC and Cosmos Infrastructure LLC, asserting various claims related to the alleged breach of a\nDigital Colocation Agreement. The Company is pursuing counter claims against Celsius. For more details on this dispute, please see the Celsius\nCollocation Agreement Dispute found in Part I. Financial Information, Item 1. Financial Statements, contained in this Form 10-Q and made part here of and\nincorporated herein by reference.\n\n The Company has a Secured Loan Facility Agreement with Marshall Investments GCP Pty Ltd ATF for the Marshall Investments MIG Trust\n(\u201cMarshall\u201d). The loan matured in February 2024 and the total outstanding balance is $10.53 million as of September 30, 2024. MIG No. 1 Pty Ltd, an\nAustralian 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\nPty 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\ncourt appointed liquidation and wind-up process and was deconsolidated for the group from this date.\n\n\n 42\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 132 of 220\n\n On March 19, 2024, Marshall appointed receivers and managers in Australia under the terms of their security relating to their secured loan facility.\nThe direct assets that secure this loan include 5,372 miners and 8 modular data centers (\u201cMDCs\u201d), these assets are held by the MIG No.1 and therefore\nwere included in the deconsolidation. The receiver\u2019s statutory duty includes the obligation to sell the secured assets at market value or, if market value is\nnot known, at the best price reasonably obtainable to maximize the prospects of there being sufficient proceeds available to satisfy the balance of the\noutstanding 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\nMDCs. On June 25, Marshall inspected and inventoried the miners and MDCs located at the Company\u2019s Midland facilities. The company is currently not\nutilizing these miners or MDCs for its operations and has asked Marshall to take these assets out of the Company\u2019s storage. Marshall has not responded to\nthe Company\u2019s ask for these miners and MDCs to be removed from the Company\u2019s storage. The Company also reserves and retains all rights against\nMarshall.\n\n The Company is the guarantor of a Secured Loan Facility Agreement for working capital by Mawson Infrastructure Group Pty Ltd with W Capital\nAdvisors Pty Ltd. As of September 30, 2024, AUD $1.95 million (USD $1.35 million) has been drawn down from this facility. The Secured Loan Facility\nexpired 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\nLoan Facility Agreement was originally with Mawson Infrastructure Group Pty Ltd, an Australian entity which was placed into voluntary administration\nunder Australian law on October 30, 2023 and on November 3, 2023, W Capital Advisors appointed receivers and managers in Australia under the terms of\ntheir security relating to their working capital facility.\n\n The Company has a Secured Convertible Promissory Note with W Capital Advisors Pty Ltd with an outstanding balance of $0.11 million as of\nSeptember 30, 2024. The Convertible Note matured in July 2023. W Capital Advisors did not convert the note, and the Company has repaid the principal\nbalance 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\nJanuary 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,\n2023: (a) principal and interest payable on the Loan Amount advanced to Mawson under a variation deed, amounting to $1.30 million (AUD $1.90\nmillion); (b) the principal amount advanced under convertible note, amounting to $0.50 million; and (c) interest payable on the principal amount advanced\nunder 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\npaid W Capital $0.50 million on March 6, 2024.\n\n On May 31, 2024, W Capital obtained a judgment from the Australian court awarding it a money judgment for USD $0.17 million as unpaid\ninterest under the convertible note after the Company paid in full the principal of $0.50 million, and AUD $0.30 million under a loan deed. On June 12,\n2024, W Capital issued a statutory demand under Australian Law to the Company seeking USD $0.17 million as unpaid interest under a convertible note\nafter the Company paid in full the principal of $0.50 million, and AUD $0.30 million under a loan deed. The Company rejected this demand. Subsequently,\non October 3, 2024, a proceeding before the Federal Court of Australia, New South Wales was filed by W Capital against the Company, seeking a hearing\non November 29, 2024 regarding its claims related to the Company\u2019s solvency under Australian law. The current proceeding is in Australian courts and\nthere are no associated proceedings in the United States. The Company believes that W Capital and Marshall are using this proceeding in Australia as a bad\nfaith attempt to gain leverage in ongoing legal disputes between the parties. For further information, please reference the Marshall and W Capital\nAustralian Loan Disputes found in Part I. Financial Information, Item 1. Financial Statements, made part here of and incorporated herein by reference.\n\n The Company, or its subsidiaries, have not fulfilled specific payment obligations related to the Celsius Promissory Note, Marshall loan, the W\nCapital Working Capital Loan and Secured Convertible Promissory Note mentioned above. Consequently, the creditors associated with these debt facilities\nmay initiate actions as allowed by relevant grace periods. This includes the possibility of opting to expedite the repayment of the principal debt, pursuing\nlegal action against the Company for payment default, raising interest rates to the default or overdue rate, or taking appropriate measures concerning\ncollateral (including appointing a receiver), if applicable. The company reserves and retains all its rights under all applicable laws.\n\nItem 4. Mine Safety Disclosures\n\n Not applicable.\n\nItem 5. Other Information\n\n During the fiscal quarter ended September 30, 2024, no director or officer (as defined in Rule 16a-1(f) promulgated under the Exchange Act) of\nthe Company adopted or terminated any (i) \u201cRule 10b5-1 trading arrangement\u201d as defined in Regulation S-K \u00a7 229.408(a)(1)(i), or (ii) \u201cnon-Rule 10b5-1\ntrading arrangement\u201d as defined in Regulation S-K \u00a7 229.408(c).\n\n\n 43\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 133 of 220\n\nItem 6. Exhibits\n\n3.1 Certificate of Incorporation (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with the SEC on April 5, 2012)\n3.2 Certificate of Amendment to Certificate of Incorporation (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with\n the SEC on July 18, 2013)\n3.3 Certificate of Amendment to Certificate of Incorporation dated November 15, 2017 (Incorporated by reference to Company\u2019s Current\n Report on Form 8-K filed with the SEC on November 21, 2017)\n3.4 Certificate of Amendment to Certificate of Incorporation dated March 1, 2018 (Incorporated by reference to Company\u2019s Current Report on\n Form 8-K filed with the SEC on March 5, 2018)\n3.5 Certificate of Amendment to Certificate of Incorporation dated March 17, 2021 (Incorporated by reference to Company\u2019s Current Report on\n Form 8-K filed with the SEC on March 23, 2021)\n3.6 Certificate of Amendment to Certificate of Incorporation dated June 9, 2021 (Incorporated by reference to Company\u2019s Current Report on\n Form 8-K filed with the SEC on June 14, 2021)\n3.7 Certificate of Amendment to Certificate of Incorporation dated August 11, 2021 (Incorporated by reference to Company\u2019s Current Report\n on Form 8-K filed with the SEC on August 16, 2021)\n3.8 Certificate of Amendment to Certificate of Incorporation dated February 6, 2023\n3.9 Certificate of Registration of a Company of Cosmos Capital Limited ACN 636 458 912 (Incorporated by reference to the Company\u2019s\n Registration Statement on Form S-1 (File No. 333-256947) filed with the SEC on June 9, 2021)\n3.10 Constitution of Cosmos Capital Limited (Incorporated by reference to the Company\u2019s Registration Statement on Form S-1 (File No. 333-\n 256947) filed with the SEC on June 9, 2021)\n3.11 Bylaws (Incorporated by reference to Company\u2019s Current Report on Form 8-K filed with the SEC on May 10, 2013)\n4.1 Form of Common Warrant (Incorporated by reference to the Company\u2019s Current Report on Form 8-K filed with the SEC on May 8, 2023)\n4.2 Form of Pre-Funded Warrant (Incorporated by reference to the Company\u2019s Current Report on Form 8-K filed with the SEC on May 8,\n 2023)\n4.3 Form of Placement Agent Warrant (Incorporated by reference to the Company\u2019s Current Report on Form 8-K filed with the SEC on May 8,\n 2023)\n4.4 Form of Warrant Amendment Agreement dated May 3, 2023 (Incorporated by reference to the Company\u2019s Current Report on Form 8-K\n filed with the SEC on May 8, 2023)\n4.5# Form Of Stock Option Grant Notice And Option Agreement Under Company\u2019s 2024 Omnibus Equity Incentive Plan\n10.1 Customer Service Provider Agreement, dated August 9, 2024, between the Company and BE Global Development Limited (Incorporated\n by reference to the Company\u2019s Current Report on Form 8-K filed with the SEC on August 12, 2024).\n10.2 Lease Amendment between the Company and Jewel Acquisition, LLC dated September 9, 2024, (Incorporated by reference to the\n Company\u2019s Current Report on Form 8-K filed with the SEC on September 11, 2024).\n10.3 Marketing Service Agreement Letter by and between the Company and Outside the Box Capital, Inc., dated September 11, 2024,\n (Incorporated by reference to the Company\u2019s Current Report on Form 8-K filed with the SEC on September 11, 2024).\n31.1* Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.\n31.2* Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.\n32** Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.\n101 The following materials from the Company\u2019s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline\n XBRL (eXtensible Business Reporting Language) includes: (i) Consolidated Balance Sheets as of September 30, 2024 and December 31,\n 2023, (ii) Consolidated Statements of Operations for the three and nine-months ended September 30, 2024 and 2023, (iii) Consolidated\n Statements of Comprehensive Loss for the three and nine-months ended September 30, 2024, and 2023, (iv) Consolidated Statements of\n Cash Flows for the nine-months ended September 30, 2024 and 2023, (v) Consolidated Statements of Stockholders\u2019 Equity for the three\n and nine-months ended September 30, 2024 and 2023, and (vi) Notes to Consolidated Financial Statements\n104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)\n\n * Filed herewith.\n\n ** Furnished herewith.\n\n # Indicates management contract or compensatory plan\n\n\n 44\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 134 of 220\n\n SIGNATURES\n\n Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its\nbehalf by the undersigned, thereunto duly authorized.\n\n Mawson Infrastructure Group Inc.\n\nDate: November 14, 2024 By: /s/ Rahul Mewawalla\n Rahul Mewawalla\n Chief Executive Officer and President\n (Principal Executive Officer)\n\nDate: November 14, 2024 By: /s/ William Harrison\n William Harrison\n Chief Financial Officer\n (Principal Financial and Accounting Officer)\n\n\n 45\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 135 of 220\n\n\n\n\n EXHIBIT D\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 136 of\n Memorandum\n 220 of\n Law Pg 1 of 32\n\n\n\n Michael Sweet, Esq. Martin R. Martos, II (admitted pro hac vice)\n Michael R. Herz, Esq. FOX ROTHSCHILD LLP\n Isaac M. Hoenig, Esq. 321 N. Clark St., Suite 1600\n FOX ROTHSCHILD LLP Chicago, IL 60654\n 101 Park Avenue, 17th Floor Telephone: (312) 517-9200\n New York, NY 10178 Facsimile: (312) 517-9201\n Telephone: (212) 878-7900\n Facsimile: (212) 692-0940\n\n Attorneys for the Mawson Entities\n\n UNITED STATES BANKRUPTCY COURT\n SOUTHERN DISTRICT OF NEW YORK\n\n In re\n Chapter 11\n CELSIUS NETWORK LLC, et al., 1\n Case No. 22-10964 (MG)\n Debtors.\n Jointly Administered\n\n CELSIUS MINING LLC\n\n Plaintiff,\n v. Adv. No. 23-01202 (MG)\n\n MAWSON INFRASTRUCTURE GROUP INC.,\n LUNA SQUARES LLC, and COSMOS\n INFRASTRUCTURE LLC; 2\n\n Defendants.\n\n MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS\u2019 MOTION TO COMPEL\n ARBITRATION AND DISMISS OR STAY ADVERSARY PROCEEDING\n\n\n\n\n 1\n The Debtors in these chapter 11 cases, along with the last four digits of each Debtor\u2019s federal tax identification\n number, are: Celsius Network LLC (2148); Celsius KeyFi LLC (4414); Celsius Lending LLC (8417); Celsius Mining\n LLC (1387); Celsius Network Inc. (1219); Celsius Network Limited (8554); Celsius Networks Lending LLC (3390);\n and Celsius US Holding LLC (7956). The location of Debtor Celsius Network LLC\u2019s principal place of business and\n the Debtors\u2019 service address in these chapter 11 cases is 50 Harrison Street, Suite 209F, Hoboken, New Jersey 07030.\n 2\n The Defendants Mawson Infrastructure Group Inc., Luna Squares LLC, and Cosmos Infrastructure LLC shall be\n referred to hereinafter as the \u201cMawson Entities.\u201d\n\n\n i\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 137 of\n Memorandum\n 220 of\n Law Pg 2 of 32\n\n\n\n TABLE OF CONTENTS\n\n I. INTRODUCTION .............................................................................................................. 1\n\n II. BACKGROUND ................................................................................................................ 2\n\n A. Celsius and Luna Enter the Co-Location Agreement and Promissory Note. ......... 2\n\n B. Celsius Fails to Make Payments Under the Co-Location Agreement. ................... 3\n\n C. Celsius \u201cPauses\u201d Its Deployed Miners and the Deployment of New Miners.\n ................................................................................................................................. 5\n\n D. Celsius Prematurely Exits Georgia to Avoid Taxes. .............................................. 5\n\n E. Celsius Refuses to Deliver Nearly 10,000 Miners. ................................................. 6\n\n F. The Arbitration Clause. ........................................................................................... 7\n\n G. The Complaint in this Adversary Proceeding. ........................................................ 8\n\n III. ARGUMENT ...................................................................................................................... 8\n\n A. The Federal Arbitration Act Requires Arbitration Here. ........................................ 9\n\n B. Nothing in the Bankruptcy Code Requires a Different Result. ............................ 10\n\n (i) Celsius Agreed to Arbitrate ...................................................................... 10\n\n (ii) The Dispute Falls Within the Arbitration Clause and the Parties\n Delegated Questions of Arbitrability to the Arbitrator ............................. 11\n\n (1) Disputes over Arbitrability Are Delegated to the Arbitrator. ....... 11\n\n (2) Even if Disputes over Arbitrability Are Not Delegated,\n Celsius\u2019s Claims Fall Under the Arbitration Provision. ............... 12\n\n (iii) Celsius\u2019s Claims are Non-Core and Must be Arbitrated. ......................... 15\n\n (1) Declaratory Judgment Claim (Count One) ................................... 15\n\n (2) \u201cTurnover\u201d Claims (Count Two and Count Three) ...................... 16\n\n (3) State Law Claims (Count Four Through Count Ten) ................... 18\n\n (iv) The Court Should Dismiss or Stay this Case Pending Arbitration. .......... 19\n\n IV. DEFENDANTS MAY NOT ANSWER OR FILE RULE 12 MOTIONS PENDING\n THIS MOTION ................................................................................................................. 23\n\n\n i\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 138 of\n Memorandum\n 220 of\n Law Pg 3 of 32\n\n\n\n V. CONCLUSION ................................................................................................................. 24\n\n\n\n\n ii\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 139 of\n Memorandum\n 220 of\n Law Pg 4 of 32\n\n\n\n TABLE OF AUTHORITIES\n\n Page(s)\n\n Cases\n\n Acolyte Elec. Corp. v. City of New York,\n 69 B.R. 155 (Bankr. E.D.N.Y. 1986) .......................................................................................17\n\n In re Asousa Partnership,\n 264 B.R. 376 (Bankr. E.D. Pa. 2001) ......................................................................................17\n\n AT&T Mobility LLC v. Concepcion,\n 563 U.S. 333 (2011) ...................................................................................................................9\n\n In re Barney\u2019s, Inc.\n 206 B.R. 336 (S.D.N.Y. 1997).................................................................................................23\n\n Bethlehem Steel Corp. v. Moran Towing Corp. (In re Bethlehem Steel Corp.),\n 390 B.R. 784 (Bankr. S.D.N.Y. 2008) .....................................................................................10\n\n In re Cardali,\n 2010 WL 4791801 (Bankr. S.D.N.Y. Nov. 18, 2010) .............................................................16\n\n In re Charter Co.,\n 913 F.2d 1575 (11th Cir. 1990) ...............................................................................................16\n\n CompuCredit Corp. v. Greenwood,\n 565 U.S. 95 (2012) .....................................................................................................................9\n\n Contec Corp. v. Remote Solution, Co., Ltd.,\n 398 F.3d 205 (2d Cir. 2005).....................................................................................................13\n\n In re Crysen/Montenay Energy Co.,\n 1999 WL 681487 (S.D.N.Y. Aug. 31, 1999) ...........................................................................10\n\n DDK Hotels, LLC v. Williams-Sonoma, Inc.\n 6 F.4th 308 (2d Cir. 2021) .................................................................................................12, 13\n\n Dean Witter Reynolds, Inc. v. Byrd,\n 470 U.S. 213 (1985) .................................................................................................................10\n\n In re Durr Mechanical Construction, Inc.,\n 2021 WL 2460976 (Bankr. S.D.N.Y. Jun. 16, 2021) ..................................................18, 20, 22\n\n Eagle Force Holdings, LLC v. Campbell,\n 187 A.3d 1209 (Del. 2018) ......................................................................................................11\n\n\n\n iii\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 140 of\n Memorandum\n 220 of\n Law Pg 5 of 32\n\n\n\n eCommerce Indus., Inc. v. MWA Intel., Inc., No. CV 7471-VCP,\n 2013 WL 5621678 (Del. Ch. Sept. 30, 2013) ............................................................................4\n\n In re Enron Corp.,\n 2002 WL 32155353 (Bankr. S.D.N.Y. Mar. 19, 2002) ...........................................................19\n\n Galanova v. Morgan Stanley Servs. Grp. Inc.,\n 2023 WL 6198823 (S.D.N.Y. Sept. 22, 2023)...................................................................12, 23\n\n Genesco, Inc. v. T Kakiuchi & Co., Ltd,\n 815 F.2d 840 (2d Cir. 1987).....................................................................................................20\n\n Gilmer v. Interstate/Johnson Lane Corp.,\n 500 U.S. 20 (1991) ...................................................................................................................19\n\n Gordon v. New York Times Emps. Fed. Credit Union,\n 2001 WL 1142174 (S.D.N.Y. Sept. 26, 2001)...........................................................................8\n\n Granite Rock Co. v. Int\u2019l Bhd. of Teamsters,\n 561 U.S. 287 (2010) ...........................................................................................................10, 13\n\n In re Hagerstown Fiber Ltd. P\u2019ship,\n 277 B.R. 181 (Bankr. S.D.N.Y. 2002) ............................................................................. passim\n\n Hechinger Inv. Co. of Del., Inc. v. Allfirst Bank (In re Hechinger Inv. Co., of Del.,\n Inc.),\n 282 B.R. 149 (Bankr. D. Del. 2002) ........................................................................................17\n\n Heller Ehrman LLP v. Gregory Canyon LTD (In re Heller Ehrman LLP),\n 461 B.R. 606 (Bankr. N.D. Cal. 2011) ....................................................................................16\n\n Henry Schein, Inc. v. Archer & White Sales, Inc.,\n 139 S. Ct. 524 (2019) .........................................................................................................11, 12\n\n In re Johnson,\n 215 B.R. 381 (Bankr. N.D. Ill. 1997) ......................................................................................17\n\n JS Barkats, PLLC v. BE, Inc.,\n 2013 WL 444919 (S.D.N.Y Feb. 6, 2013) ...............................................................................23\n\n Katsoris v. WME IMG, LLC,\n 237 F. Supp. 3d 92 (S.D.N.Y. 2017)..................................................................................20, 22\n\n Lamkin v. Morinda Properties Weight Parcel,\n 440 F. App\u2019x 604 (10th Cir. 2011) ..........................................................................................23\n\n\n\n\n iv\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 141 of\n Memorandum\n 220 of\n Law Pg 6 of 32\n\n\n\n Loc. Union 97, Int\u2019l Bhd. of Elec. Workers, AFL-CIO v. Niagara Mohawk Power\n Corp.,\n 67 F.4th 107 (2d Cir. 2023) .........................................................................................12, 13, 14\n\n Maritima de Ecologia, S.A. de C.V. v. Sealion Shipping Ltd.,\n 2011 WL 1465744 (S.D.N.Y. Apr. 15, 2011)..............................................................20, 21, 22\n\n MBNA Am. Bank, N.A. v. Hill,\n 436 F.3d 104 (2d Cir. 2006)...............................................................................................15, 17\n\n Messer v. TX Onshore, LLC (In re Madison Williams and Co., LLC),\n 509 B.R. 791 (Bankr. S.D.N.Y. 2014) .....................................................................................16\n\n MF Glob. Holdings Ltd, 571 B.R. 80, 89 (Bankr. S.D.N.Y. 2017) .........................................10, 19\n\n In re Mobilactive Media, LLC,\n 2013 WL 297950 (Del. Ch. Jan. 25, 2013) ..............................................................................21\n\n Morgan v. Sundance, Inc.,\n 596 U.S. 411 (2022) .................................................................................................................23\n\n In re N. Parent, Inc.,\n 221 B.R. 609 (Bankr. D. Mass. 1998) .....................................................................................17\n\n NASDAQ OMX Group, Inc. v. UBS Securities LLC,\n 770 F.3d 1010 (2d Cir. 2014)...................................................................................................13\n\n In re Olympus Healthcare Group, Inc.,\n 352 B.R. 603 (Bankr. D. Del. 2006) ........................................................................................17\n\n In re Purdue Pharma, L.P.,\n 2021 WL 5178698 (S.D.N.Y. Nov. 8, 2021) ...........................................................................15\n\n Reid v. Tandym Group, LLC,\n --- F. Supp. 3d ---, 2023 WL 6389131 (S.D.N.Y. Sep. 29, 2023) ...........................................13\n\n In re S.W. Bach & Co.,\n 425 B.R. 78 (Bankr. S.D.N.Y. 2010) .......................................................................................14\n\n Shaw Grp. Inc. v. Triplefine Int\u2019l Corp.,\n 322 F.3d 115 (2d Cir. 2003).....................................................................................................10\n\n Shubert v. Stranahan (In re Pa. Gear Corp.),\n 2008 WL 2370169 (Bankr. E.D. Pa. April 22, 2008) ..............................................................17\n\n In re Singer Co. N.V.,\n 2001 WL 984678 (S.D.N.Y. Aug. 27, 2001) ...........................................................................16\n\n\n\n v\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 142 of\n Memorandum\n 220 of\n Law Pg 7 of 32\n\n\n\n In re Try the World, Inc.,\n 2021 WL 3502607 (Bankr. S.D.N.Y. 2021) ................................................................14, 15, 18\n\n In re Try the World, Inc.,\n 2021 WL 35057 .......................................................................................................................14\n\n In re U.S. Lines, Inc.,\n 197 F.3d 631 (2d Cir. 1999).....................................................................................................15\n\n United States v. Inslaw,\n 932 F.2d 1467 (D.C. Cir. 1991) ...............................................................................................17\n\n Weiner\u2019s Inc. v. T.G. & Y. Stores Co.\n (S.D.N.Y. 1996) .......................................................................................................................16\n\n In re Weinstock,\n 1999 WL 342764 (E.D. Pa. 1999) ...........................................................................................17\n\n Wells Fargo Advisors, LLC v. Sappington,\n 884 F.3d 392 (2d Cir. 2018).....................................................................................................13\n\n In re Winimo Realty Corp.,\n 270 B.R. 108 (S.D.N.Y. 2001).................................................................................................16\n\n In re Winstar Communications, Inc.,\n 335 B.R. 556 (Bankr. D. Del. 2005) ........................................................................................17\n\n Statutes\n\n 9 U.S.C. \u00a7 2 ......................................................................................................................................9\n\n 9 U.S.C. \u00a7 3 ..........................................................................................................................4, 19, 20\n\n 9 U.S.C. \u00a7 4 ..................................................................................................................................8, 9\n\n 28 U.S.C. \u00a7 157 ..............................................................................................................................19\n\n 11 U.S.C. \u00a7 542 ...................................................................................................................... passim\n\n Other Authorities\n\n Fed. R. Civ. P. 7 .......................................................................................................................11, 12\n\n Fed. R. Civ. P. 12 ...........................................................................................................................23\n\n 23 Williston on Contracts \u00a7 63:16 (4th ed.).....................................................................................3\n\n\n\n\n vi\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 143 of\n Memorandum\n 220 of\n Law Pg 8 of 32\n\n\n\n I. INTRODUCTION\n\n Celsius Mining LLC stopped paying bills and began breaching contracts with commercial\n\n partners\u2014including the Co-Location Agreement that forms the basis of this adversary action\u2014\n\n long before it filed for bankruptcy. Celsius continued the behavior post-petition. But Celsius did\n\n not reject the Co-Location Agreement. Celsius instead incurred new, post-petition breaches by\n\n refusing to pay invoices and failing to deliver additional Bitcoin miners to the Mawson Entities.\n\n All told, Celsius continued to benefit from operating its miners post-petition at the Mawson\n\n Entities\u2019 facilities, while failing to pay the Mawson Entities millions of dollars.\n\n Desperate to avoid the natural financial consequences of its own breaches, Celsius now\n\n seeks to recast history by blaming the Mawson Entities. Celsius\u2019s claims lack merit and would not\n\n survive judicial scrutiny. But this action cannot proceed for a more fundamental reason: Celsius\n\n \u201cirrevocably and unconditionally\u201d agreed that \u201cany dispute of any nature\u201d \u201crelating in any way\u201d\n\n to the Co-Location Agreement \u201cshall be finally settled by arbitration.\u201d Those contractual\n\n provisions resolve this Motion.\n\n That Celsius disregarded unambiguous arbitration provisions to file this adversary action\n\n is unsurprising given the breach of its payment and other contractual obligations. Nonetheless, the\n\n arbitration provisions in the Co-Location Agreement are binding, valid, and enforceable. There is\n\n no credible dispute that Celsius\u2019s claims\u2014and the Mawson Entities\u2019 corresponding defenses and\n\n counterclaims\u2014fall within the broad scope of those arbitration provisions. And any dispute over\n\n the scope of those provisions is subject to arbitration all the same.\n\n Nothing in the Bankruptcy Code requires a different result. All claims in this adversary\n\n proceeding are retained causes of action derived from contract disputes\u2014overwhelmingly non-\n\n core matters, unrelated to the Bankruptcy Code\u2019s main concerns. Despite the window dressing,\n\n Celsius\u2019s so-called Section 542 claims are just disputed contract claims for which Luna has valid\n\n 1\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 144 of\n Memorandum\n 220 of\n Law Pg 9 of 32\n\n\n\n counterclaims and defenses based on breaches committed by Celsius\u2014among other defenses.\n\n Such claims must be arbitrated because disputed contracts do not constitute core turnover claims.\n\n There is no conflict between the FAA and the Bankruptcy Code. Arbitration is required.\n\n Bluntly, Celsius has no tenable basis for disavowing the arbitration provisions in the Co-\n\n Location Agreement. The Court should compel Celsius to arbitrate its claims and should dismiss\n\n this adversary proceeding or, in the alternative, stay this proceeding pending arbitration.\n\n II. BACKGROUND\n\n A. Celsius and Luna Enter the Co-Location Agreement and Promissory Note.\n\n The Mawson Entities provide services to customers like Celsius who require hosting\n\n capacity for Bitcoin mining devices. 3 Declaration of Timothy Broadfoot \u00b6 2. On February 23,\n\n 2022, Celsius and Luna entered into a Co-Location Agreement. Broadfoot Decl. \u00b6 3; Compl. \u00b6 12,\n\n Ex. A. Pursuant to the Co-Location Agreement, Celsius agreed that a total of 30,000 miners would\n\n be deployed over roughly a one-year time span. Broadfoot Decl. \u00b6 4; Compl. \u00b6 13. The Co-\n\n Location Agreement also required Celsius to make an up-front deposit for those 30,000 miners\n\n and monthly payments at a rate tied to Luna\u2019s monthly power costs plus an operating margin.\n\n Broadfoot Decl. \u00b6 5; Compl. Exs. A (Addendum A), B (revised Addendum A). As set forth in the\n\n Broadfoot Decl. and Exhibits annexed thereto, monthly power costs to operate the miners are\n\n significant. Plus, the deposit was never intended by either party to be held in \u201cescrow\u201d or to be\n\n drawn down against invoices in the normal course, see generally Compl. Ex. A.\u2014and the deposit\n\n was spent on ramp up and energy costs as the parties expected. Broadfoot Decl. at \u00b6 5.\n\n The same day Luna and Celsius signed the Co-Location Agreement (February 23, 2022),\n\n Luna signed a Promissory Note under which Celsius loaned Luna $20,000,000. Compl. \u00b6 17;\n\n\n 3\n Bitcoin mining devices are referred to throughout this Motion as \u201cminers\u201d or \u201cmining rigs.\u201d\n\n\n\n 2\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 145 of\n Memorandum\n 220 of\n Law Pg 10 of 32\n\n\n\n Broadfoot Decl. \u00b6 6. The purpose of the loan was for Luna \u201cto purchase and install modular data\n\n centers and transformers to assist Luna with satisfying its obligations under [the Co-Location\n\n Agreement]. Compl. \u00b6 17; see Broadfoot Decl. \u00b6 7. In turn, revenues and the deposit Luna received\n\n under the Co-Location Agreement would allow Luna to ramp up its facilities and repay the\n\n Promissory Note. The Co-Location Agreement and the Promissory Note were thus part of a single\n\n package agreed to and negotiated in tandem. Compl. \u00b6 17; Broadfoot Decl. \u00b6 7. Together, these\n\n interrelated agreements provided (a) the terms under which Luna would provide host services to\n\n Celsius, (b) the funding needed to build out those services, and (c) the cash-flow needed to repay\n\n the Promissory Note. This integrated set of agreements worked as intended\u2014until Celsius\n\n breached the Co-Location Agreement.\n\n B. Celsius Fails to Make Payments Under the Co-Location Agreement.\n\n Just a few months into the relationship, Celsius breached the Co-Location Agreement by\n\n failing to make required payments. Section 3.6 of the Co-Location Agreement required Celsius to\n\n pay invoices within fifteen days. Compl. Ex. A \u00a7 3.6. Under Section 3.7, \u201call invoices are due upon\n\n receipt and become past due fifteen (15) days after the date of the invoice.\u201d Id. \u00a7 3.7. This term\n\n was a material term of the Co-Location Agreement. See 23 Williston on Contracts \u00a7 63:16 (4th\n\n ed.) (\u201cIt is a material breach [to] fail to pay any substantial amount of the consideration owing\n\n under the contract\u201d); Broadfoot Decl. \u00b6 8. Thus, Celsius\u2019s failure to make millions of dollars in\n\n payments for services received constituted a material breach.\n\n In June and July 2022, Celsius failed to pay Luna\u2019s invoices. Broadfoot Decl. \u00b6\u00b6 9-10.\n\n Celsius then asked for a temporary pause on its active miners to avoid incurring additional service\n\n costs, as well as a pause on deploying any new miners. Infra II.C. But Celsius never cleared its\n\n balances from June and July 2022. In other words, Celsius complains that it was unable to add rigs\n\n to Luna\u2019s facilities during the exact time Celsius was breaching the Co-Location Agreement by\n\n\n 3\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 146 of\n Memorandum\n 220 of\n Law Pg 11 of 32\n\n\n\n not paying for the rigs it had already delivered\u2014and after it asked for a pause on adding miners.\n\n Nonsense. Due to Celsius\u2019s breaches of the Co-Location Agreement, Luna could not run Celsius\n\n rigs or add new rigs to generate revenue regardless of capacity.\n\n Celsius\u2019s failure to make required payments continued after the Petition Date. Broadfoot\n\n Decl. \u00b6\u00b6 11-14. Celsius failed to pay for services provided during December 2022 and again during\n\n June 2023 through August 2023\u2014when the Co-Location Agreement expired. Id. In total, Celsius\n\n failed to pay $6,957,226.91 plus interest on pre-petition and post-petition invoices for services\n\n Luna provided under the Co-Location Agreement. Id. \u00b6 15. Put simply: Celsius\u2019s claim that it\n\n \u201csatisfied all relevant obligations under the Co-Location Agreement,\u201d see, e.g., Compl. \u00b6 87, is a\n\n farce.\n\n Yet Celsius complains that it was unable to deliver new rigs to Mawson. Id. \u00b6\u00b6 24-28.\n\n Celsius was not paying for and\u2014as its bankruptcy would prove\u2014could not pay for the miners\n\n Luna had already deployed. See Compl. Ex. A \u00a7 3. In fact, when asked to deliver the final 10,000\n\n miners required by the Co-Location Agreement in May 2023, Celsius delivered nothing. Infra II.E.\n\n By this time, Celsius\u2019s breaches of the Co-Location Agreement had caused the intended operation\n\n of the Co-Location Agreement and the Promissory Note to disintegrate.\n\n Because the Mawson Entities continued to house and run Celsius rigs that had been\n\n delivered, they incurred associated electricity costs and lost revenues. Celsius\u2019s breaches thus\n\n caused damages that excuse any payments due under the terms of the Promissory Note. Broadfoot\n\n Decl. \u00b6\u00b6 8, 18, 23, 25. Put differently, outstanding amounts due under the Promissory Note (if any)\n\n constitute damages caused by Celsius\u2019s own breaches of the Co-Location Agreement\u2014which\n\n Luna is entitled to keep as damages or to use as a defense to liability. Cf. eCommerce Indus., Inc.\n\n\n\n\n 4\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 147 of\n Memorandum\n 220 of\n Law Pg 12 of 32\n\n\n\n v. MWA Intel., Inc., No. CV 7471-VCP, 2013 WL 5621678, at *47 (Del. Ch. Sept. 30, 2013)\n\n (discussing direct and consequential damages from breach).\n\n C. Celsius \u201cPauses\u201d Its Deployed Miners and the Deployment of New Miners.\n\n In 2022, Luna deployed Celsius\u2019s rigs at two locations: one site in Sandersville, Georgia,\n\n and another site in Midland Pennsylvania. Broadfoot Decl. \u00b6 16. In September 2022, Celsius asked\n\n that the parties enter a \u201cpause agreement\u201d Id. \u00b6 17. The goal of the Celsius \u201cpause\u201d was to shut\n\n down Celsius\u2019s rigs to reduce its power costs and stop the deployment of additional miners. Id.\n\n Celsius could not pay its bills and had already breached the Co-Location Agreement through non-\n\n payment. But now, Celsius needed a break from incurring service fees for its deployed miners and\n\n a stop on deploying new rigs\u2014hardly the ready-to-go narrative Celsius fabricates in its adversary\n\n complaint. With Celsius rigs offline and new deployments paused, the Celsius pause alone cost\n\n Luna and the Mawson Entities millions in post-petition revenue. Id. \u00b6 18.\n\n D. Celsius Prematurely Exits Georgia to Avoid Taxes.\n\n In October 2022, the Mawson Entities sold the Sandersville, Georgia site to a third party.\n\n Id. \u00b6 19. The Mawson Entities likely would not have sold the Georgia facility absent Celsius\u2019s\n\n breaches of the Co-Location Agreement\u2014retaining the fully built-up infrastructure to\n\n accommodate future hosting/mining revenue. Id. \u00b6 20. Although the Mawson Entities were leaving\n\n Georgia, they arranged for Celsius to keep its miners operating there. Id. \u00b6 21. Instead of keeping\n\n its miners at the Georgia site, Celsius chose to move its miners to Pennsylvania to avoid state taxes\n\n in Georgia. Id. \u00b6 22. In an email dated November 23, 2022, Mawson CEO James Manning\n\n informed Celsius Chief Operating Officer Patrick Holert and other Celsius executives that Celsius\n\n miners would be subject to Georgia property taxes if they remained at the Georgia site past\n\n December 31, 2022. Id. \u00b6 22, Ex. 7. Holert responded on December 1, 2022, to confirm: Celsius\n\n wanted \u201cto move [its] 8,820 rigs at the Sandersville, GA site to the Midland, PA site before the\n\n\n 5\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 148 of\n Memorandum\n 220 of\n Law Pg 13 of 32\n\n\n\n end of 2022.\u201d Id. Ex. 7. The move saved Celsius on its state taxes. Id. \u00b6 22. But by choosing to\n\n prematurely exit the Georgia facility, Celsius reduced its total miner deployment by at least 8,820\n\n rigs\u2014and Luna\u2019s related revenues with them. Id. \u00b6 23. In effect, Celsius chose to take nearly 9,000\n\n of its miners offline to save on taxes\u2014and now wants to blame Mawson for those rigs not running.\n\n Celsius\u2019s decision to prematurely leave Georgia, combined with the implementation of the\n\n pause agreement had a significant post-petition monetary impact for the Mawson Entities. Id. It\n\n also reset the Mawson Entities\u2019 ability to deploy all Celsius rigs scheduled under the Co-Location\n\n Agreement. Because Celsius chose not to take advantage of the Georgia capacity that Luna had\n\n arranged, Celsius further contributed to Luna\u2019s losses. Luna\u2019s obligations under the Promissory\n\n Note were now further decoupled from the revenues and deployment deposit the parties\u2019 Co-\n\n Location Agreement was intended to provide as mechanisms for ramp up and repayment. See Id.\n\n \u00b6\u00b6 22-23.\n\n E. Celsius Refuses to Deliver Nearly 10,000 Miners.\n\n Following the Celsius \u201cpause\u201d and Celsius\u2019s premature exit from Georgia, Luna still\n\n deployed about 20,000 Celsius rigs. Id. \u00b6 24. Pursuant to the Co-Location Agreement, Celsius was\n\n required to deliver 30,000 miners to Luna\u2019s facilities. See Compl. Ex. B (revised Addendum A).\n\n In May 2023, Luna asked Celsius to deliver the remaining approximately 10,000 miners to\n\n Mawson\u2019s Midland, Pennsylvania facility. Broadfoot Decl. \u00b6 24; see also Compl. \u00b6 28. Celsius\n\n refused. Broadfoot Decl. \u00b6 24. Celsius thus failed to provide the 30,000 rigs it promised. This\n\n additional, post-petition breach by Celsius had a significant adverse monetary impact for Luna and\n\n the Mawson Entities. Id. \u00b6 25. The Mawson Entities spent millions building the capacity to host\n\n Celsius rigs. Id. And they lost millions more compared to what they should have earned if Celsius\n\n had delivered all 30,000 of the required rigs. These losses again constitute damages that reduce\n\n Luna\u2019s obligation to make Promissory Note payments or excuse those payments altogether.\n\n\n 6\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 149 of\n Memorandum\n 220 of\n Law Pg 14 of 32\n\n\n\n F. The Arbitration Clause.\n\n In the Co-Location Agreement, Celsius agreed to arbitrate \u201cany dispute between the parties\n\n in connection with [the Co-Location Agreement], including any question regarding its existence\n\n validity or termination.\u201d Compl. Ex. A \u00a7 12.8. The Co-Location Agreement further provided that\n\n the parties agreed to \u201csubmit any dispute of any nature between the parties relating in any way\n\n to this agreement\u201d to arbitration. Id. (emphasis added) Section 12.8 of the Co-Location Agreement\n\n provides in full as follows:\n\n\n\n\n 7\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 150 of\n Memorandum\n 220 of\n Law Pg 15 of 32\n\n\n\n\n Compl. Ex. A \u00a7 12.8. These terms are broad, unambiguous, and irrevocable: Celsius must\n\n arbitrate.\n\n G. The Complaint in this Adversary Proceeding.\n\n The Co-Location Agreement expired on its own terms in August 2023, without Celsius or\n\n any other Debtor rejecting or accepting it as an executory contract. 4 Luna opted out of the Plan\n\n releases. Broadfoot Decl. \u00b6 26. This adversary action arises solely from retained causes of action\u2014\n\n at its core, a contract dispute subject to an unambiguous arbitration clause. 5 Yet contrary to the\n\n parties\u2019 binding agreement to submit any disputes related in any way to the Co-Location\n\n Agreement to binding arbitration, Celsius initiated this adversary action on November 21, 2023.\n\n (Adv. Dkt. 1). Celsius served the Mawson Entities on December 1, 2023.\n\n III. ARGUMENT\n\n Celsius agreed to arbitrate \u201cany dispute\u201d of \u201cany nature\u201d \u201crelating in any way\u201d to the Co-\n\n Location Agreement. The arbitration clause is valid, enforceable, and covers the claims asserted\n\n in this adversary proceeding\u2014as well as the Mawson Entities\u2019 corresponding defenses and\n\n counterclaims. The Bankruptcy Code presents no conflict with the FAA\u2019s clear mandate that courts\n\n \u201cshall make an order directing the parties to proceed to arbitration in accordance with the terms of\n\n the agreement.\u201d 9 U.S.C. \u00a7 4.\n\n\n 4\n The fact that the Co-Location Agreement expired in August 2023, does not affect the enforceability of the arbitration\n clause. Gordon v. New York Times Emps. Fed. Credit Union, 2001 WL 1142174, at *2 (S.D.N.Y. Sept. 26, 2001).\n 5\n See Second Plan Supplement [Dkt. 3273] listing the Mawson Entities as \u201cExcluded Parties\u201d and Celsius\u2019s asserted\n claims against them as among the \u201cRetained Causes of Action.\u201d\n\n\n\n 8\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 151 of\n Memorandum\n 220 of\n Law Pg 16 of 32\n\n\n\n All the claims in this adversary proceeding, including Celsius\u2019s so-called claims for\n\n turnover under Section 542 of the Bankruptcy Code, are rooted in a contractual dispute about the\n\n Co-Location Agreement (i.e., breaches and effects of alleged breaches thereof as well as the\n\n damages and related defenses) and are therefore both non-core and subject to arbitration.\n\n Arbitration is mandatory in such circumstances.\n\n Yet even if some of the claims raised in this action were not arbitrable\u2014a decision the\n\n parties delegated to an arbitrator\u2014the Mawson Entities\u2019 defenses and counterclaims to each cause\n\n of action involve the same set of factual and legal questions arising from Celsius\u2019s breaches of the\n\n Co-Location Agreement. Proceeding on common, interrelated factual and legal issues both here\n\n and in arbitration risks inconsistent adjudication and almost guarantees a waste of judicial and\n\n party resources. Indeed, the resolution of legal and factual claims related to breaches of the Co-\n\n Location Agreement in arbitration will leave nothing for this Court to decide later. Accordingly,\n\n the Court should compel Celsius to arbitrate and dismiss this action or, in the alternative, the Court\n\n should stay this matter pending the outcome of any arbitration proceeding.\n\n A. The Federal Arbitration Act Requires Arbitration Here.\n\n The Federal Arbitration Act (\u201cFAA\u201d) governs the enforcement of arbitration agreements.\n\n Section 2 provides that arbitration agreements \u201cshall be valid, irrevocable, and enforceable, save\n\n upon such grounds as exist at law or in equity for the revocation of any contract.\u201d 9 U.S.C. \u00a7 2.\n\n Section 4 of the FAA requires that courts generally \u201cshall\u201d compel arbitration \u201cin accordance with\n\n the terms of the agreement\u201d to arbitrate. Id. \u00a7 4; see CompuCredit Corp. v. Greenwood, 565 U.S.\n\n 95, 98 (2012). Together with the rest of the FAA, these provisions codify the \u201cliberal federal policy\n\n favoring arbitration,\u201d AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (citation\n\n omitted). See also In re Hagerstown Fiber Ltd. P\u2019ship, 277 B.R. 181, 204 (Bankr. S.D.N.Y. 2002)\n\n (observing the \u201cstrong federal policy favoring arbitration.\u201d). Under that liberal policy, \u201cany doubts\n\n\n 9\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 152 of\n Memorandum\n 220 of\n Law Pg 17 of 32\n\n\n\n concerning the scope of arbitral issues should be resolved in favor of arbitration,\u201d Granite Rock\n\n Co. v. Int\u2019l Bhd. of Teamsters, 561 U.S. 287, 298 (2010) (citation omitted).\n\n In short, the FAA \u201cleaves no place for the exercise of discretion.\u201d Dean Witter Reynolds,\n\n Inc. v. Byrd, 470 U.S. 213, 218, 221 (1985). It instead requires courts to \u201crigorously enforce\u201d the\n\n terms of written arbitration agreements. Id. The written terms of the agreement here are plain:\n\n \u201cEACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY . . . SUBMITS ANY\n\n DISPUTE OF ANY NATURE BETWEEN THE PARTIES RELATING IN ANY WAY TO THIS\n\n AGREEMENT TO ARBITRATION . . . .\u201d Celsius must arbitrate its claims. Full Stop.\n\n B. Nothing in the Bankruptcy Code Requires a Different Result.\n\n Courts routinely enforce arbitration clauses in bankruptcy proceedings. See e.g. In re\n\n Crysen/Montenay Energy Co., 1999 WL 681487 at *5 (S.D.N.Y. Aug. 31, 1999) (collecting cases\n\n and noting that \u201c[b]ankruptcy judges regularly compel arbitration\u201d). Courts, including bankruptcy\n\n courts, evaluating a motion to compel arbitration use a four-part test: (i) did the parties agree to\n\n arbitrate; (ii) does the dispute fall within the parties\u2019 arbitration clause; (iii) if federal statutory\n\n claims are raised, did Congress intend those claims to be non-arbitrable; and (iv) if only some\n\n claims are arbitrable, should the court stay the non-arbitrable claims pending arbitration. See MF\n\n Glob. Holdings Ltd., 571 B.R. 80, 89 (Bankr. S.D.N.Y. 2017) (citing Bethlehem Steel Corp. v.\n\n Moran Towing Corp. (In re Bethlehem Steel Corp.), 390 B.R. 784, 789 (Bankr. S.D.N.Y. 2008)).\n\n The Mawson Entities address each factor in turn below.\n\n (i) Celsius Agreed to Arbitrate\n\n Deciding whether there is a valid arbitration agreement is a question of state contract law.\n\n Shaw Grp. Inc. v. Triplefine Int\u2019l Corp., 322 F.3d 115, 120 (2d Cir. 2003). The Co-Location\n\n Agreement selects Delaware Law. Compl. Ex. A, \u00a7 12.8. A valid contract exists under Delaware\n\n law when \u201c(1) the parties intended that the instrument would bind them, demonstrated at least in\n\n\n 10\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 153 of\n Memorandum\n 220 of\n Law Pg 18 of 32\n\n\n\n part by its inclusion of all material terms; (2) these terms are sufficiently definite; and (3) the\n\n putative agreement is supported by legal consideration.\u201d Eagle Force Holdings, LLC v. Campbell,\n\n 187 A.3d 1209, 1229 (Del. 2018). None of these items is in dispute. Celsius executives signed the\n\n Co-Location Agreement. Compl. Ex. A. Celsius does not dispute the validity and legal\n\n consideration of the Co-Location Agreement. Compl. \u00b6 12. And the parties agreed to arbitrate \u201cany\n\n dispute between the parties in connection with [the Co-Location Agreement], including any\n\n question regarding its existence validity or termination.\u201d Compl. Ex. A \u00a7 12.8. Celsius made the\n\n election \u201cIRREVOCABLY AND UNCONDITIONALLY.\u201d Id. Celsius must arbitrate.\n\n (ii) The Dispute Falls Within the Arbitration Clause and the Parties\n Delegated Questions of Arbitrability to the Arbitrator\n\n As detailed above and below, this adversary action falls within the broad scope of the\n\n arbitration provisions at issue. To the extent Celsius disputes that its claims fall within the scope\n\n of the arbitration agreement, the Court must send that dispute to arbitration. Henry Schein, Inc. v.\n\n Archer & White Sales, Inc., 139 S. Ct. 524, 528 (2019). (\u201cWhen the parties\u2019 contract delegates the\n\n arbitrability question to an arbitrator, the courts must respect the parties\u2019 decision as embodied in\n\n the contract.\u201d)\n\n (1) Disputes over Arbitrability Are Delegated to the\n Arbitrator.\n\n When \u201cthe parties\u2019 contract delegates the arbitrability question to an arbitrator, a court may\n\n not override the contract.\u201d Id. The AAA Rules expressly empower arbitrators to decide issues of\n\n arbitrability. AAA COMMERCIAL ARBITRATION RULE 7(a). Rule 7(a) states that the arbitrator \u201cshall\n\n have the power to rule on his or her own jurisdiction, including any objections with respect to the\n\n existence, scope or validity of the arbitration agreement or the arbitrability of any claim or\n\n counterclaim, without any need to refer such matters first to court.\u201d American Arbitration\n\n\n\n\n 11\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 154 of\n Memorandum\n 220 of\n Law Pg 19 of 32\n\n\n\n Association, Commercial Rules and Mediation Procedures (Oct. 1, 2013),\n\n https://www.adr.org/sites/default/files/CommercialRules_Web-Final.pdf (emphasis added). 6\n\n While Courts \u201cshould not assume that the parties agreed to arbitrate unless there is clear\n\n and unmistakable evidence they did so,\u201d incorporation of the AAA Rules as part of an arbitration\n\n agreement \u201cconstitutes clear and unmistakable evidence of the parties\u2019 intent to delegate the\n\n question of arbitrability to the arbitrator\u201d DDK Hotels, LLC v. Williams-Sonoma, Inc. 6 F.4th 308,\n\n 318 (2d Cir. 2021) (internal citations omitted) (collecting cases). Celsius and the Mawson Entities\n\n did exactly that: \u201cthe American Arbitration Association (AAA) Rules \u2026are deemed to be\n\n incorporated by reference to this clause.\u201d Compl. Ex. A \u00a7 12.8. Thus, even if Celsius disputes\n\n whether the arbitration provision covers its claims, questions of arbitrability belong to the\n\n arbitrator. Henry Schein, Inc. 139 S. Ct. at 528-529.\n\n (2) Even if Disputes over Arbitrability Are Not Delegated,\n Celsius\u2019s Claims Fall Under the Arbitration Provision.\n\n Disregarding the parties\u2019 clear and unmistakable intent to delegate disputes over questions\n\n of arbitrability to AAA arbitrators changes nothing. Celsius\u2019s claims fall within the broad scope\n\n of the arbitration provisions in this case. Courts looking to whether an arbitration agreement covers\n\n a particular dispute rely on ordinary principles of contract interpretation. Galanova v. Morgan\n\n Stanley Servs. Grp. Inc., 2023 WL 6198823, at *4 (S.D.N.Y. Sept. 22, 2023) (citing Loc. Union\n\n 97, Int\u2019l Bhd. of Elec. Workers, AFL-CIO v. Niagara Mohawk Power Corp., 67 F.4th 107, 114 (2d\n\n Cir. 2023)). Plus, even if \u201cthe agreement is \u2018ambiguous about whether it covers the dispute at\n\n\n\n\n 6\n The AAA Commercial Arbitration Rules were amended in September 2022, after the Co-Location Agreement was\n signed. Those revised rules did not alter Rule 7(a). See The 2022 AAA Commercial Rules and Mediation Procedures\n Significant Amendments, American Arbitration Association (Sep. 1, 2022), https://www.adr.org/sites/default/\n files/document_repository/AAA409_CommRules_Significant_Amendments_Sept2022.pdf\n\n\n\n 12\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 155 of\n Memorandum\n 220 of\n Law Pg 20 of 32\n\n\n\n hand\u2019, the court may apply a rebuttable \u2018presumption of arbitrability.\u2019\u201d Loc. Union 97, 67 F.4th at\n\n 113 (citing Granite Rock, 561 U.S. at 301).\n\n There is nothing ambiguous about the arbitration provisions here. Compl. Ex. A \u00a7 12.8.\n\n Even so, the arbitration provisions are broad\u2014covering \u201cany dispute of any nature\u201d \u201crelating in\n\n any way to\u201d the Co-Location Agreement. Compl. Ex. A \u00a7 12.8. This clause is unlike the limited\n\n clauses in cases where courts have found that incorporation of AAA rules did not designate issues\n\n of arbitrability to the arbitrator. See, e.g., DDK Hotels, 6 F.4th at 320-21 (arbitration clause applied\n\n only to \u201cDisputed Matters\u201d defined as a specific category of disputes for which Board or Member\n\n Approval was required); NASDAQ OMX Group, Inc. v. UBS Securities LLC, 770 F.3d 1010, 1031\n\n (2d Cir. 2014) (arbitration clause applied to disputes \u201cexcept as may be provided in NASDAQ\n\n OMX Requirements\u201d). Instead, the broad language of the arbitration clause in this case coupled\n\n with incorporation of the AAA rules expressly delegates questions of arbitrability to the arbitrator.\n\n Wells Fargo Advisors, LLC v. Sappington, 884 F.3d 392, 396 (2d Cir. 2018) (contract\n\n incorporating AAA rules and designating \u201cany controversy or dispute arising from employment\n\n relationship\u201d for arbitration delegated question of arbitrability to the arbitrator); Contec Corp. v.\n\n Remote Solution, Co., Ltd., 398 F.3d 205, 208 (2d Cir. 2005) (contract incorporating AAA rules\n\n and designating \u201cany controversy arising with respect to this agreement\u201d for arbitration delegated\n\n question of arbitrability to the arbitrator\u201d); Reid v. Tandym Group, LLC, --- F.Supp.3d ---, 2023\n\n WL 6389131, at *9-10 (S.D.N.Y. Sep. 29, 2023) (same).\n\n As detailed above, Celsius\u2019s claims are subject to arbitration because they arise from and\n\n are related directly to the Co-Location Agreement. See, e.g., supra at IIA-E. Whether as direct\n\n claims or as counterclaims and defenses from Celsius\u2019s breaches of the Co-Location Agreement\u2014\n\n all the claims in this adversary action require the resolution of the same underlying fact and legal\n\n\n\n\n 13\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 156 of\n Memorandum\n 220 of\n Law Pg 21 of 32\n\n\n\n determinations. The alpha and omega of this adversary proceeding is the parties\u2019 respective\n\n conduct under the Co-Location Agreement and the consequences of that conduct. For instance,\n\n Celsius\u2019s breach of the Co-Location Agreement caused damages to Luna that prevented or excused\n\n Luna from complying with the Promissory Note. Breaches of the Co-Location Agreement are\n\n therefore predicates for the breach vel non of the Promissory Note\u2014including whether any\n\n amounts are due thereunder. As such, Celsius\u2019s breaches of the Co-Location Agreement stand as\n\n a legal defense (or at least a set off) against any claim for payment under the Promissory Note.\n\n Finally, if the Court were to conclude that that the arbitration provisions here are\n\n ambiguous as to any of the claims asserted by Celsius, it must apply a presumption of arbitrability\n\n and compel arbitration as to all claims. See Loc. Union 97, 67 F.4th at 113; In re Try the World,\n\n Inc., 2021 WL 3502607, at *8 (Bankr. S.D.N.Y. 2021) (citing In re S.W. Bach & Co., 425 B.R.\n\n 78, 88 (Bankr. S.D.N.Y. 2010)). This presumption applies in the case of any ambiguity here\n\n because the parties\u2019 arbitration agreement, covering \u201cany dispute between the parties in connection\n\n with [the Co-Location Agreement]\u201d or any dispute of any nature between the parties relating in\n\n any way to the [Co-Location Agreement]\u201d is a classically \u201cbroad clause.\u201d See e.g. In re Try the\n\n World, Inc. 2021 WL 35057, at *8 (collecting cases and noting that \u201cin general, courts find that\n\n provisions calling for the arbitration of \u2018any dispute or controversy\u2019 that arises out of\u2019 or is \u2018related\n\n to\u2019 the underlying agreements are broad arbitration clauses\u201d).\n\n All claims in this adversary proceeding fit under the broad arbitration provisions in the Co-\n\n Location Agreement, through which Celsius agreed to submit to arbitration \u201cany dispute of any\n\n nature between the parties relating in any way to [the Co-Location Agreement].\u201d Compl. Ex. A\n\n \u00a7 12.8. This Court is thus bound by the FAA to give effect to the parties\u2019 agreement by dismissing\n\n (or staying) this proceeding to compel arbitration.\n\n\n\n\n 14\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 157 of\n Memorandum\n 220 of\n Law Pg 22 of 32\n\n\n\n (iii) Celsius\u2019s Claims are Non-Core and Must be Arbitrated.\n\n Nothing in the Bankruptcy Code expressly refers to or displaces the FAA. Even assuming\n\n clear \u201cconflict between arbitration and [bankruptcy\u2019s] underlying purposes\u201d would displace the\n\n FAA, MBNA Am. Bank, N.A. v. Hill, 436 F.3d 104, 108 (2d Cir. 2006), however, there is no such\n\n conflict between bankruptcy and arbitration here. Celsius\u2019s claims are classic, non-core claims\n\n arising from underlying contract disputes.\n\n When deciding whether to refuse to compel arbitration, bankruptcy courts look to whether\n\n a claim is core or non-core. If a matter is non-core, courts must compel arbitration. Try the World,\n\n 2021 WL 3502607, at *9; In re Hagerstown Fiber, 277 B.R. at 203 (\u201cIf the dispute is non-core, that\n\n will generally end the inquiry. The bankruptcy court will lack the discretion to refuse to compel\n\n arbitration\u201d). But \u201ceven as to core proceedings, the bankruptcy court will not have discretion to\n\n override an arbitration agreement unless it finds that the proceedings are based on provisions of\n\n the Bankruptcy Code that \u2018inherently conflict\u2019 with the Arbitration Act or that arbitration of the\n\n claim would \u2018necessarily jeopardize\u2019 the objectives of the Bankruptcy Code.\u201d MBNA Am. Bank,\n\n N.A., 436 F.3d at 108 (citing In re U.S. Lines, Inc., 197 F.3d 631, 640 (2d Cir. 1999)). There is no\n\n conflict here.\n\n (1) Declaratory Judgment Claim (Count One)\n\n Celsius seeks a declaration that the Mawson Entities owe approximately $8 million plus\n\n interest on the Promissory Note. Compl. \u00b6\u00b6 58-66. As detailed above, any amounts purportedly\n\n owed under the Promissory Note are subject to the Mawson Entities\u2019 counterclaims and defenses\n\n related to Celsius\u2019s breach of the Co-Location Agreement. Regardless, such declaratory judgment\n\n claims related to contract disputes are non-core and must be submitted to arbitration. In re Purdue\n\n Pharma, L.P., 2021 WL 5178698, at *4 (S.D.N.Y. Nov. 8, 2021) (adversary proceeding seeking a\n\n declaratory judgment as to the parties\u2019 rights under a contract was non-core). Similarly, claims\n\n\n 15\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 158 of\n Memorandum\n 220 of\n Law Pg 23 of 32\n\n\n\n seeking declaratory judgment as to a party\u2019s rights under a contract do not present an inherent\n\n conflict between Code policy and the FAA and thus must be referred to arbitration. In re Winimo\n\n Realty Corp., 270 B.R. 108, 124 (S.D.N.Y. 2001); In re Singer Co. N.V., 2001 WL 984678, at *6\n\n (S.D.N.Y. Aug. 27, 2001).\n\n (2) \u201cTurnover\u201d Claims (Count Two and Count Three)\n\n In Counts Two and Three, Celsius seeks turnover of amounts purportedly owed under the\n\n terms of the Co-Location Agreement and Promissory Note pursuant to 11 U.S.C. \u00a7 542. These\n\n claims are not turnover claims. Celsius has merely dressed its contract claims as faux \u201cturnover\u201d\n\n claims to masquerade as core claims. The Complaint makes clear that Count Two and Count Three\n\n arise from alleged contract breaches, i.e., from claims asserted to liquidate disputed debts. Compl.\n\n \u00b6\u00b667-84. Bankruptcy Courts routinely find turnover claims asserted to liquidate disputed debts\n\n owed under a contract are improper. See In re Cardali, 2010 WL 4791801 at *8 (Bankr. S.D.N.Y.\n\n Nov. 18, 2010) (collecting cases and determining that turnover claim seeking recovery of disputed\n\n money did not raise a unique bankruptcy issue posing an impediment to arbitration); see also\n\n Messer v. TX Onshore, LLC (In re Madison Williams and Co., LLC), 509 B.R. 791, 799 (Bankr.\n\n S.D.N.Y. 2014) (dismissing a turnover claim where defendant disputed plaintiff\u2019s right to recover\n\n damages under the contract).\n\n Courts often observe that \u201cturnover\u201d implies \u201cministerial\u201d action, and claims \u201cwholly\n\n disputed and unliquidated cannot properly be styled an action to \u2018turn over\u2019 estate property.\u201d\n\n Weiner\u2019s Inc. v. T.G. & Y. Stores Co., (S.D.N.Y. 1996); see also In re Charter Co., 913 F.2d 1575,\n\n 1579 (11th Cir. 1990) (\u201cTurnover proceedings are not to be used to liquidate disputed contract\n\n claims.\u201d); Heller Ehrman LLP v. Gregory Canyon LTD (In re Heller Ehrman LLP), 461 B.R. 606,\n\n 607-08 (Bankr. N.D. Cal. 2011) (holding that an \u201caction to recover an account receivable, for\n\n breach of contract, and quantum meruit\u201d is \u201cnot an action for turnover of estate property\u201d because\u201d\n\n\n 16\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 159 of\n Memorandum\n 220 of\n Law Pg 24 of 32\n\n\n\n [t]urnover actions involve the return of undisputed funds\u201d rather than a \u201cclaim for damages itself,\n\n which is not subject to turnover.\u201d); Shubert v. Stranahan (In re Pa. Gear Corp.), 2008 WL\n\n 2370169, at *4 (Bankr. E.D. Pa. April 22, 2008) (\u201cit is settled law that the debtor cannot use the\n\n turnover provisions to liquidate contract disputes or otherwise demand assets whose title is in\n\n dispute.\u201d) (quoting United States v. Inslaw, 932 F.2d 1467, 1472 (D.C. Cir. 1991)). Hechinger Inv.\n\n Co. of Del., Inc. v. Allfirst Bank (In re Hechinger Inv. Co., of Del., Inc.), 282 B.R. 149, 162 (Bankr.\n\n D. Del. 2002) (observing that turnover under section 542 \u201cis not a remedy available to recover\n\n claimed debts which remain unliquidated and/or in dispute.\u201d); In re Asousa Partnership, 264 B.R.\n\n 376, 384 (Bankr. E.D. Pa. 2001) (Turnover \u201ccannot be sued to determine the rights of parties in\n\n legitimate contract disputes.\u201d); In re Weinstock, 1999 WL 342764, at *9 n.14 (E.D. Pa. 1999)\n\n (\u201cTurnover under \u00a7 542 of the Code \u2018is not intended as a remedy to determine disputed rights of\n\n parties to property.\u201d) (citing In re Johnson, 215 B.R. 381, 386 (Bankr. N.D. Ill. 1997)); In re N.\n\n Parent, Inc., 221 B.R. 609, 626 (Bankr. D. Mass. 1998) (It is \u201cwell settled that turnover proceeding\n\n pursuant to \u00a7 542 are limited to those where liability on the underlying debt is not disputed.\u201d).\n\n Notably, \u201cbankruptcy courts do not possess discretion with respect to enforcement of an\n\n arbitration clause in a non-core adversary proceeding.\u201d MBNA America Bank, N.A., 436 F.3d at\n\n 108; In re Winstar Communications, Inc., 335 B.R. 556, 564 (Bankr. D. Del. 2005); see also In re\n\n Olympus Healthcare Group, Inc., 352 B.R. 603, 611 (Bankr. D. Del. 2006) (enforcing arbitration\n\n clause where turnover claim was a disputed claim \u201carising from the contract and the alleged breach\n\n thereof, and are not properly addressed in the form of a \u2018turnover\u2019 action.\u201d). Where amounts owed\n\n to debtors are contested, actions cannot be considered turnover actions. See In re N. Parent, Inc.,\n\n 221 B.R. at 626 (dismissing disputed turnover claim as non-core); Acolyte Elec. Corp. v. City of\n\n New York, 69 B.R. 155, 172 (Bankr. E.D.N.Y. 1986) (where resolution of an action \u201cinvolves state\n\n\n\n\n 17\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 160 of\n Memorandum\n 220 of\n Law Pg 25 of 32\n\n\n\n law determination of the defendant\u2019s liability under the contract it is a step away from a true \u00a7 542\n\n turnover proceeding, and, therefore, does not constitute a core proceeding\u2026\u201d).\n\n Resolution of Celsius\u2019s \u201cturnover\u201d claims requires a decision-maker to determine each\n\n parties\u2019 disputed rights under the relevant contracts. Before a decision-maker can adjudicate\n\n Celsius\u2019s turnover claims, therefore, they must evaluate not only Luna\u2019s purported breaches of the\n\n Co-Location Agreement but also the Mawson Entities\u2019 defenses and counterclaims, which arise\n\n from Celsius\u2019s material breaches of the Co-Location Agreement and which excuse, in whole or in\n\n part, Luna\u2019s obligations under the Promissory Note. In short, because Celsius\u2019s turnover claim is\n\n in dispute and merely seeks to liquidate its breach of contract claim, these claims (Count Two and\n\n Count Three) are non-core, arbitration poses no \u201cinherent conflict\u201d with the Bankruptcy Code, and\n\n arbitration must be compelled. See, e.g., supra at 16-17 (listing cases).\n\n Nor is turnover of disputed amounts needed for Debtors to investigate their affairs, provide\n\n information about the estate to parties in interest, or otherwise administer the estate. Debtors have\n\n confirmed their Chapter 11 Plan, which contemplates that this action will be prosecuted by either\n\n by the Debtors, the Litigation Administrator, or the Plan Administrator post-confirmation. (Bankr.\n\n Dkt. 3273). Administration of Debtors\u2019 Bankruptcy Case thus in no part hinges on resolution of\n\n this dispute. See In re Durr Mechanical Construction, Inc., 2021 WL 2460976, at *11 (Bankr.\n\n S.D.N.Y. Jun. 16, 2021) (compelling arbitration of contract dispute where Debtors were in process\n\n of confirming plan contemplating that action would be pursued post-confirmation).\n\n (3) State Law Claims (Count Four Through Count Ten)\n\n Counts Four through Ten allege state law claims (e.g., breach of contract, breach of\n\n covenant of good faith and fair dealing, state-law fraudulent transfer, and fraud claims, etc.) that\n\n do not derive from the Bankruptcy Code. Compl. \u00b6\u00b6 85-141. These are non-core claims, and thus\n\n the Court has no discretion to refuse to compel arbitration. See Try the World, Inc., 2021 WL\n\n\n 18\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 161 of\n Memorandum\n 220 of\n Law Pg 26 of 32\n\n\n\n 3502607, at *12 (breach of contract action by a debtor against a party to a pre- petition contract is\n\n non-core); In re Enron Corp., 2002 WL 32155353, at *2 (Bankr. S.D.N.Y. Mar. 19, 2002) (\u201can\n\n action based on breach of contract that is brought by a debtor against a party to a pre-petition\n\n contract is non-core when its only effect on the administration of the estate is to augment the assets\n\n of the estate\u201d).\n\n Celsius nonetheless includes a rote assertion that its claims are core because they involve\n\n matters \u201cconcerning the administration of the estate.\u201d Compl. \u00b6 10 (citing 28 U.S.C.\n\n \u00a7\u00a7 157(b)(2)(A)). Celsius is wrong. And no boilerplate recitation can render its catch-all subparts\n\n claims core. Rather, \u201ccourts in this Circuit routinely recognize that bankruptcy disputes solely\n\n invoking the \u2018catch-all subparts (A) and (O) of section 157(b)(2) are typically non-core.\u201d MF\n\n Global, 571 B.R. at 95. Such is the case with Celsius\u2019s claims now.\n\n Yet assuming arguendo that some claims are core\u2014they are not\u2014compelling arbitration\n\n presents no \u201cinherent conflict\u201d with the Bankruptcy Code. See In re Hagerstown Fiber, 277 B.R.\n\n at 205 (claims arising from the parties\u2019 pre-petition contract were core \u201csolely for procedural\n\n reasons\u201d and court was \u201crequired to compel arbitration\u201d). Indeed, Debtors\u2019 confirmed Plan submits\n\n a broad category of plainly core claims to Alternative Dispute Resolution, with an option to select\n\n binding arbitration. (Bankr. Dkt. 3869). Considering the Plan\u2019s ADR procedures, there is no\n\n credible argument that this adversary proceeding, which is based entirely on pre-petition contracts\n\n that the Debtors did not reject, and which involve an unambiguous arbitration clause, would\n\n \u201cnecessarily jeopardize\u201d the objectives of the Bankruptcy Code.\n\n (iv) The Court Should Dismiss or Stay this Case Pending Arbitration.\n\n Whether the Court compels arbitration of some or all of Celsius\u2019s claims, this adversary\n\n proceeding should be dismissed pending the resolution of any arbitration. 9 U.S.C. \u00a7 3; see also\n\n Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991). At minimum, a stay of this\n\n\n 19\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 162 of\n Memorandum\n 220 of\n Law Pg 27 of 32\n\n\n\n adversary proceeding is appropriate. The plain language of the FAA requires a stay of proceedings\n\n whenever \u201cany issue\u201d is \u201creferable to arbitration.\u201d 9 U.S.C. \u00a7 3. The discretionary standard used\n\n by courts in the Second Circuit likewise requires dismissal or a stay. See e.g., Genesco, Inc. v. T\n\n Kakiuchi & Co., Ltd, 815 F.2d 840, 856 (2d Cir. 1987).\n\n Courts in the Second Circuit regularly stay proceedings pending arbitration in\n\n circumstances where, as here, arbitral results will resolve factual issues with a significant bearing\n\n on non-arbitrable claims. For instance, in Maritima de Ecologia, S.A. de C.V. v. Sealion Shipping\n\n Ltd., the Southern District of New York stayed claims related to a contract between the parties that\n\n did not contain an arbitration clause pending arbitration required by a separate agreement. 2011\n\n WL 1465744, at *5 (S.D.N.Y. Apr. 15, 2011); see also Durr, 2021 WL 2460976, at 12 (staying\n\n non-arbitrable claims involving common issues of fact regarding parties\u2019 conduct under HVAC\n\n contract); Katsoris v. WME IMG, LLC, 237 F.Supp.3d 92, 111 (S.D.N.Y. 2017) (staying non-\n\n arbitrable claims considering significant factual overlap with arbitrable claims); In re Hagerstown\n\n Fiber, 277 B.R. at 208 (staying non-arbitrable claims involving common issues of fact). In short,\n\n if arbitrable claims predominate\u2014or a stay would promote judicial economy, avoid confusion and\n\n possible inconsistent results without posing undue hardship or prejudice against the plaintiff\u2014the\n\n stay of non-arbitrable proceedings is required. In re Hagerstown Fiber, 277 B.R. at 199 (citing\n\n Genesco, Genesco, Inc. 815 F.2d at 856).\n\n Here, even if some claims are not subject to arbitration\u2014a decision delegated to the\n\n arbitrator\u2014Celsius\u2019s claims and the Mawson Entities\u2019 corresponding defenses, all flow from\n\n purported failures under the Co-Location Agreement. For instance, Luna\u2019s purported breach of the\n\n Promissory Note was caused by Celsius\u2019s breach of the Co-Location Agreement. Supra at IIA-E.\n\n Common questions of law and fact inherent to the Co-Location Agreement predominate as such.\n\n\n\n\n 20\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 163 of\n Memorandum\n 220 of\n Law Pg 28 of 32\n\n\n\n See In re Hagerstown Fiber, 277 B.R. at 211. Dismissing or staying non-arbitral claims (if any)\n\n will promote judicial economy and avoid the risk of inconsistent results without hardship or\n\n prejudice to the parties for the same reasons. Celsius\u2019s claims require factual and legal\n\n determinations about whether, and to what extent, Celsius and/or Luna breached the Co-Location\n\n Agreement, including the size of any related damages and defenses. Arbitration will thus resolve\n\n substantially all, if not all, the predicate legal and factual questions raised in this matter\u2014leaving\n\n little or nothing for the Court to determine following arbitration.\n\n Indeed, the stay granted in Maritima was based on a similar, if less compelling overlap\n\n than the overlap amongst claims in this case. In Maritima, arbitration of the parties\u2019 first contract\n\n would resolve an important factual question related to the amount of fees due under the second\n\n contract. 2011 WL 1465744, at *5. The same is true here. The court imposed a stay pending\n\n arbitration because the arbitral result, even if not controlling, would \u201chave a significant bearing on\n\n th[e second] case.\u201d Id. Resolution of Celsius\u2019s claims based on the Co-Location Agreement will\n\n resolve crucial factual questions of whether and to what extent Celsius\u2019s breach of the Co-Location\n\n Agreement excuses or reduces Luna\u2019s obligation to make Promissory Note payments.\n\n Put differently, Luna\u2019s defense to the Promissory Note is a component of Luna\u2019s damages\n\n caused by Celsius\u2019s prior material breach of the Co-Location Agreement. See In re Mobilactive\n\n Media, LLC, 2013 WL 297950, at *13 (Del. Ch. Jan. 25, 2013) (discussing prior material breach\n\n under Delaware Law). The factual questions surrounding Celsius\u2019s and the Mawson Entities\u2019\n\n conduct under the Co-Location Agreement, and thus the Mawson Entities\u2019 defenses and\n\n counterclaims, will be resolved as a matter of course during the arbitration of the Co-Location\n\n Agreement claims. Nor will there be any factual issues to be determined after this case is arbitrated.\n\n Either Luna will recover damages or sustain a defense against payment of the Promissory Note\u2014\n\n\n\n\n 21\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 164 of\n Memorandum\n 220 of\n Law Pg 29 of 32\n\n\n\n or at least a set of that determines the amount of the Promissory Note, if any that needs to be paid,\n\n or it will not. Staying this adversary action pending arbitration will thus save judicial and party\n\n resources and minimize the risk of inconsistent judgments. Maritima, 2011 WL 1465744, at *5;\n\n Durr, 2021 WL 2460976, at 12; Katsoris v. WME IMG, LLC, 237 F.Supp.3d at 111; In re\n\n Hagerstown Fiber, 277 B.R. at 208.\n\n * * *\n\n Each of the claims asserted by Celsius arise from the Co-Location Agreement and\n\n Promissory Note executed together on February 23, 2022. These agreements were part of a\n\n cohesive mechanism to facilitate the provision of Bitcoin mining hosting services by Defendants\n\n to Celsius. This undisputed connection is evident from the allegations of the Complaint, the\n\n Broadfoot Declaration and from the terms of the Promissory Note itself. See Compl. \u00b6 17\n\n (\u201cconcurrently with the execution of the Co-Location Agreement, Celsius loaned Luna $20 million\n\n to purchase and install modular data centers and transformers to assist Luna with satisfying its\n\n obligations under that Agreement\u201d); Broadfoot Decl. \u00b6 7; Compl. Ex. C, Promissory Note \u00a7 (xvi).\n\n Furthermore, Celsius\u2019s Promissory Note claims require a determination of Celsius\u2019s\n\n conduct under the Co-Location Agreement. Luna\u2019s obligation to make promissory note payments\n\n (if any) depends on the determination about the timing and scope of Celsius\u2019s breaches of the Co-\n\n Location Agreement. Adjudication of the Co-Location Agreement claims will thus resolve all, if\n\n not substantially all the predicate legal and factual questions raised in this matter. Given the\n\n interrelated nature of the agreements and the related connectedness of the causes of action, granting\n\n a stay as to non-arbitrable claims here will avoid piecemeal litigation of the related factual and\n\n legal issues. See e.g. Durr Mechanical Construction, Inc., 2021 WL 2460976, at 12 (staying non-\n\n arbitrable causes of action where all claims \u201cpertain to various difficulties [Debtor] experienced in\n\n attempting to fulfill its obligations under the Contract); Katsoris v. WME IMG, LLC, 237 F. Supp.\n\n\n 22\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 165 of\n Memorandum\n 220 of\n Law Pg 30 of 32\n\n\n\n 3d 92, 111 (S.D.N.Y. 2017) (staying non-arbitrable claims in given significant factual overlap with\n\n arbitrable claims). The Court should dismiss or stay this case as a result.\n\n IV. Defendants May Not Answer or File Rule 12 Motions Pending This Motion\n\n Defendants respectfully submit that they cannot answer the Complaint or file motions listed\n\n in Fed. R. Civ. P. 12(b) without material risk of waiving their right to arbitrate. In Morgan v.\n\n Sundance, Inc., the U.S. Supreme Court ruled that prejudice is not required for waiver of a right\n\n to stay litigation or compel arbitration under the FAA. 596 U.S. 411 (2022). Morgan thus counsels\n\n that litigants may not undertake acts inconsistent with their rights to stay litigation or compel\n\n arbitration\u2014including by filing merits-based motions or responsive pleadings.\n\n As the Tenth Circuit explained in Lamkin v. Morinda Properties Weight Parcel: \u201crequiring\n\n a party to file an answer denying material allegations in the complaint and asserting potential\n\n affirmative defenses\u2014in short, formally and substantively engaging in the merits of the\n\n litigation\u2014in order to enforce its right not to litigate is a non-sequitur.\u201d 440 F.App\u2019x 604, 607-608\n\n (10th Cir. 2011) (emphasis in original). Thus, a motion to compel arbitration is a permitted pre-\n\n answer motion within Rule 12(b)\u2019s scope. Id. The U.S. District Courts in the Southern District of\n\n New York agree. JS Barkats, PLLC v. BE, Inc., 2013 WL 444919, at *2 (S.D.N.Y Feb. 6, 2013)\n\n (\u201cparties are permitted to file motion to stay and compel arbitration in lieu of an answer or other\n\n dispositive motion); In re Barney\u2019s, Inc. 206 B.R. 336, 341 (S.D.N.Y. 1997) (\u201ca motion to stay\n\n litigation is a pre-answer motion with the scope of Rule 12(b)\u201d). As such, the Court should decide\n\n this Motion and set a reasonable deadline for responsive pleadings if needed thereafter.\n\n * * *\n\n Celsius caused the Mawson Entities millions of dollars in losses because of its repeated\n\n (and varied) breaches of the Co-Location Agreement. Instead of tens of millions of dollars flowing\n\n to the Mawson Entities from the Co-Location Agreement\u2014generating the pipeline deposit and\n\n\n 23\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 166 of\n Memorandum\n 220 of\n Law Pg 31 of 32\n\n\n\n revenues Celsius and Luna expected to be used to allow Luna to pay the Promissory Note\u2014\n\n Celsius\u2019s conduct left tens of millions of dollars in unpaid invoices and lost revenues to pile up on\n\n the Mawson Entities. Undeterred, Celsius demands to be paid without regard to the natural\n\n financial consequences of its own breaches\u2014its obligations undone, failings forgotten.\n\n But whether Celsius\u2019s breaches of the Co-Location Agreement rendered Luna unable to\n\n meet its payment obligations on the Promissory Note or the damages resulting from Celsius\u2019s\n\n breaches offset or excuse the Mawson Entities from performing under the Co-Location Agreement\n\n and the Promissory Note altogether are not questions for this Court. Celsius agreed to arbitrate\n\n \u201cany dispute\u201d \u201cin connection with\u201d the Co-Location Agreement and further agreed to\n\n \u201cIRREVOCABLY AND UNCONDITIONALLY\u201d submit to arbitration \u201cANY DISPUTE OF\n\n ANY NATURE BETWEEN THE PARTIES, RELATING IN ANY WAY\u201d to the agreement.\n\n Compl. Ex. A \u00a7 12.8. All claims in this adversary proceeding relate to the parties\u2019 conduct under\n\n the Co-Location Agreement and will require analyzing the rights and obligations created by the\n\n agreement\u2014as well as the Mawson Entities\u2019 defenses and counterclaims related thereto. Having\n\n bound itself \u201cirrevocably and unconditionally\u201d to arbitrate claims related in any way to the Co-\n\n Location Agreement, Celsius must honor its obligation.\n\n V. Conclusion\n\n Celsius has no tenable basis for disavowing the arbitration provisions in the Co-Location\n\n Agreement. The Court should compel Celsius to arbitrate its claims and should dismiss this\n\n adversary proceeding or, in the alternative, stay this proceeding pending arbitration.\n\n Accordingly, the Mawson Entities respectfully ask the Court to (1) compel Celsius to\n\n arbitrate its claims; and (2)(a) dismiss this action pending the outcome of any arbitration or,\n\n alternatively, (b) stay this action pending the outcome of any arbitration.\n\n //\n\n\n 24\n\f23-01202-mg\n CaseDoc\n 25-50008-MFW\n 11-2 Filed 01/02/24\n Doc 16-1 Entered\n Filed 01/21/25\n 01/02/24 17:14:50\n Page 167 of\n Memorandum\n 220 of\n Law Pg 32 of 32\n\n\n\n Dated: January 2, 2024\n\n Respectfully submitted,\n\n /s/ Michael R. Herz\n FOX ROTHSCHILD LLP\n Michael Sweet, Esq.\n Michael R. Herz, Esq.\n Isaac M. Hoenig, Esq.\n 101 Park Avenue, 17th Floor\n New York, NY 10178\n Telephone: (212) 878-7900\n Facsimile: (212) 692-0940\n Email: msweet@foxrothschild.com\n mherz@foxrothschild.com\n ihoenig@foxrothschild.com\n\n -and-\n\n Martin R. Martos, II (admitted pro hac vice)\n 321 N. Clark St., Suite 1600\n Chicago, IL 60654\n Telephone: (312) 517-9200\n Facsimile: (312) 517-9201\n Email: mmartos@foxrothchild.com\n Attorneys for the Mawson Entities\n\n\n\n\n 25\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 168 of 220\n\n\n\n\n EXHIBIT E\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 169 of 220\n\n\n\n\n Commercial\n Arbitration Rules and Mediation Procedures\n\n Including Procedures for Large, Complex Commercial Disputes\n\n\n\n\n Available online at adr.org/commercial\n\n Rules Amended and Effective September 1, 2022\n\nRules Amended and Effective September 1, 2022. COMMERCIAL RULES 1\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 170 of 220\n R-34. Dispositive Motions\n\n (a) The arbitrator may allow the filing of and make rulings upon a dispositive motion\n only if the arbitrator determines the moving party has shown that the motion is\n likely to succeed and to dispose of or narrow the issues in the case.\n (b) Consistent with the goal of achieving an efficient and economical resolution of the\n dispute, the arbitrator shall consider the time and cost associated with the briefing\n of a dispositive motion in deciding whether to allow any such motion.\n (c) Fees, expenses, and compensation associated with a motion or an application to\n make a motion may be assessed as provided for in Rule R-49(c).\n\n R-35. Evidence\n\n (a) The parties may offer such evidence as is relevant and material to the dispute\n and shall produce such evidence as the arbitrator may deem necessary to an\n understanding and determination of the dispute. Conformity to legal rules of\n evidence shall not be necessary. All evidence shall be taken in the presence of all\n of the arbitrators and all of the parties, except where any of the parties is absent,\n in default, or has waived the right to be present.\n (b) The arbitrator shall determine the admissibility, relevance, and materiality of the\n evidence offered and may exclude evidence deemed by the arbitrator to be\n cumulative or irrelevant.\n (c) The arbitrator shall take into account applicable principles of legal privilege, such\n as those involving the confidentiality of communications between a lawyer and\n client.\n (d) An arbitrator or other person authorized by law to subpoena witnesses or\n documents may do so upon the request of any party or independently.\n\n R-36. Evidence by Written Statements and Post-Hearing Filing of Documents or\n Other Evidence\n\n (a) At a date agreed upon by the parties or ordered by the arbitrator, the parties shall\n give written notice for any witness or expert witness who has provided a written\n witness statement to appear in person at the arbitration hearing for examination.\n If such notice is given, and the witness fails to appear, the arbitrator may disregard\n the written witness statement and/or expert report of the witness or make such\n other order as the arbitrator may consider to be just and reasonable.\n (b) If a witness whose testimony is represented by a party to be essential is unable or\n unwilling to testify at the hearing, either in person or through electronic or other\n means, either party may request that the arbitrator order the witness to appear\n in person for examination before the arbitrator at a time and location where the\n witness is willing and able to appear voluntarily or can legally be compelled to do\n so. Any such order may be conditioned upon payment by the requesting party of\n all reasonable costs associated with such examination.\n\n26 RULES AND MEDIATION PROCEDURES American Arbitration Association\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 171 of 220\n\n\n\n\n EXHIBIT F\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 172 of 220\n\n\n\n\nFrom: Richard Mattiaccio \nSent: Tuesday, December 17, 2024 12:16 PM\nTo: Hille, David; Wofford, Keith; Moeller-Sally, Stephen; Wofford, Keith; Fay, Dylan; Ulloa,\n Ryan; Denver Edwards; Julie Capehart; James Hosking; Yasmine Lahlou\nCc: j.patino@chaffetzlindsey.com; ElizabethRobertson@adr.org; ICDR Garima Deepak, Esq,\n LL.M.\nSubject: [EXT] RULINGS re: SCHEDULING following Status Conference: Celsius and Ionic v.\n Mawson et al: ICDR Case 01-24-0006-4462 -\n\n\n\nAll Counsel,\n\nThank you for your time this morning. It was very helpful to me.\n\nAs discussed, the following are my rulings with respect to scheduling in light of the\npending involuntary bankruptcy proceeding in Delaware with respect to Mawson (only)\nand your advice that there will be a significant court appearance in bankruptcy court on\nJanuary 10, 2025:\n\nDispositive Motions\n The scheduling of dispositive motions is deferred with respect to (a) Celsius\u2019 motion\n against Mawson for failure to satisfy its obligations under the Guaranty, and (b)\n Ionic\u2019s motion to dismiss the Counterclaims that have been asserted jointly by\n Mawson, Luna Squares and Cosmos.\n\n Claimant Celsius\u2019 dispositive motion against Luna Squares for failure to satisfy its\n obligations under the Note shall go forward on the following schedule:\n \uf0b7 December 20, 2024 \u2013 Celsius to file its moving papers\n \uf0b7 January 16, 2025 \u2013 Opposition papers due\n \uf0b7 January 24, 2025 \u2013 Reply papers due\n\nReport on Bankruptcy Court hearing\n Mawson\u2019s counsel will submit to all counsel and the Tribunal, no later than January\n 13, 2025, a report on the bankruptcy proceedings that are scheduled for January 10,\n 2025.\n\nUpdate of Draft PO1 including Procedural Schedule\n\n Counsel for all Parties will meet and confer to modify the Schedule set forth in PO1 to\n accommodate the limited, reasonable delays arising from Mawson\u2019s change of\n counsel and the news of the Mawson involuntary bankruptcy filing. The goals of the\n 1\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 173 of 220\n\n update to the Schedule are to preserve the evidentiary hearing dates set forth in the\n Schedule and to render the intermediate deadlines feasible whether or not Mawson is\n a participant in these proceedings going forward.\n\n I do not recall that we set a deadline for submission of the proposed updates to PO1,\n but I believe it would be reasonable to expect a report with proposed updates to PO1\n by December 30, 2024.\n\nDisclosures\n Any disclosures or supplemental disclosures to be filed by any counsel or any Party on\n account of the appearance of new counsel for Mawson should be filed with the Case\n Manager (not directly with the arbitrator) in accordance with AAA procedures, by\n December 20, 2024.\n\nUpdates to AAA eFile\n Counsel have agreed to cooperate and to work with the Case Manager on an ongoing\n basis to ensure that the AAA eFile for this case contains all filings and exchanges that\n are appropriate for such filings. Please note that the proposer coding of such filings is\n important to ensure that the Arbitrator does not see filings that are not appropriate for\n him to receive directly under AAA Rules and administrative procedures.\n\nAll deadlines set forth herein are presumed to be at 6:00 p.m. New York time on the date\nof the deadline unless counsel agree otherwise and timely inform the Arbitrator of any\nsuch agreement.\n\nKindly let me know as soon as possible if I have misstated or left anything of significance\nout of this e-mail.\n\nThank you in advance for your continued cooperation.\n\nRegards,\n\nRichard Mattiaccio, Sole Arbitrator\nRichard L. Mattiaccio, C Arb. FCIArb, FCollArb\nChartered Arbitrator \u2022 Independent Arbitrator and Mediator\nFellow, College of Commercial Arbitrators\nMember, National Academy of Distinguished Neutrals\nAdjunct Professor, Fordham Law School\nMobile: +1.646.413.2832\nrichardmattiaccio@outlook.com \u2022 www.mattiaccio.com\n\n**************************************************************\n\n\n 2\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 174 of 220\nThis e-mail may contain con\ufb01dential and privileged material for the sole use of the intended recipient. Any review or distribution by others is strictly\nprohibited. If you are not the intended recipient please contact the sender and delete all copies. Thank you\n\n\n\n\n 3\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 175 of 220\n\n\n\n\n EXHIBIT G\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 176 of 220\n\n\n\n\n321 N. Clark Street\nSuite 1600\nChicago, IL 60654\n 312.517.9200 312.517.9201\nWWW.FOXROTHSCHILD.COM\n\n\nMARTIN R. MARTOS, II\nDirect No: 312.517.9291\nEmail: mmartos@foxrothschild.com\n\n\n\n\nVia Email\n\nMr. Richard L. Mattiaccio\nrichardmattiaccio@outlook.com\n\nJanuary 10, 2025\n\n\n\nRe: Celsius Network LTD et al. v. Mawson Infrastructure Group Inc. et al., Case No. 01-\n 24-0006-4462\n\nDear Arbitrator Richard L. Mattiaccio:\n\n Mawson Infrastructure Group, Inc., Luna Squares LLC (\u201cLuna\u201d), and Cosmos\nInfrastructure LLC (\u201cCosmos) (collectively, the \u201cMawson Entities\u201d or \u201cMawson\u201d) have retained\nFox Rothschild to represent them in the above-captioned matter (this \u201cMatter\u201d). Fox Rothschild\nalso represents Mawson related to an involuntary petition filed in the United States Bankruptcy\nCourt for the District of Delaware (Case No. 24-12726). Accordingly, we write foremost to\nintroduce ourselves and to raise two pressing issues related thereto. Please see below for details.\nWe look forward to working with you.\n\n * * *\n First, we understand that Mr. Hosking and his colleagues at Chaffetz Lindsey LLP no\nlonger represent the Mawson Entities in this Matter and thus ask that all future communications\nbe directed to Mawson\u2019s counsel at Fox Rothschild LLP (mmartos@foxrothschild.com and\nihoenig@foxrothschild.com).\n\n By way of additional background, Fox Rothschild LLP briefly appeared at the outset of\nthis Matter but withdrew on August 12, 2024\u2014prior to the selection and appointment of an\narbitrator. Fox Rothschild LLP was not involved in this Matter again until now being retained to\nrepresent the Mawson entities in place of Chaffetz Lindsey LLP. As such, we are presently\nuncertain whether the operative conflict searches and arbitrator disclosures included Fox\nRothschild LLP and the specific Fox Rothschild LLP attorneys expected to work on this Matter.\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 177 of 220\n\n\n\n\nJanuary 10, 2025\nPage 2\n\n\n\n The Fox Rothschild LLP attorneys representing Mawson (including Mawson\u2019s bankruptcy\ncounsel) are: Martin R. Martos II; Isaac Hoenig; Michael R. Herz; Michael A. Sweet; Seth A.\nNiederman; Stephanie Slater-Ward; and Akshay Krishnamani. We kindly request that you perform\nthe necessary conflict checks and update any disclosures as needed\u2014Fox Rothschild LLP will\nconduct a similar search now that it has been retained as counsel in this Matter.\n\n Second, we understand you have been alerted to the filing of an involuntary bankruptcy\npetition related to Mawson but that you have not had the opportunity to receive and review a\nwritten position from Mawson regarding the stay of this Matter pending resolution of proceedings\nin the United States Bankruptcy Court for the District of Delaware. 1 As such, we want to provide\nyou with a full and fair opportunity to do so.\n\n Mawson\u2019s assets include its wholly owned subsidiaries\u2014with and through which it\nconducts its day-to-day activities\u2014and thus the automatic stay designed to protect Mawson during\nthe resolution of the involuntary petition should preclude the advancement of this Matter entirely.\nRegardless, the caselaw demonstrates that claims like those the Claimants seek to advance in this\nMatter against Mawson\u2019s subsidiaries fall under the types of claims that must be stayed.\n\n An extension of an automatic stay is appropriate when the claim against a debtor is\nessentially a claim against a non-debtor, as is the case here, because \u201cthere is such identity between\nthe debtor and the third-party defendant that the debtor may be said to be the real party defendant\nand that a judgment against a third-party defendant will in effect be a judgment or finding against\nthe debtor.\u201d In re Am. Film Techs., Inc., 175 B.R. 847, 851 (Bankr. D. Del. 1994) (quoting A.H.\nRobins v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986)). 2 Additionally, Courts have emphasized\nthat protection under Section 362(a) of the bankruptcy code is applicable to non-debtors when the\nnon-debtor and the debtor \u201cshare an identity of interest such that a suit against the non-debtor is\nessentially a suit against the debtor.\u201d In re W.R. Grace & Co., 386 B.R. 17, 30 (Bankr. D, Del\n2008); See also In re Philadelphia Newspapers, LLC, 407 B.R. 606, 616 (Bankr. E.D.Pa. 2009).\n\n Here, the Mawson Entities are three related entities\u2014Mawson and its wholly owned\nsubsidiaries\u2014that entered into a single transaction with interrelated agreements designed to work\ntogether. No matter. Claimants seek to hold Mawson jointly and severally liable for any judgment\nentered against its subsidiaries and contend that Mawson\u2019s subsidiaries are alter egos of Mawson.\n\n1\n The topic of the involuntary petition and the scope of the automatic stay was raised at a status hearing by prior\ncounsel, without the opportunity for or benefit of prior written submissions or supporting caselaw.\n2\n We cite to caselaw from the 3rd Circuit, as that is the caselaw the bankruptcy court will apply if Mawson is required\nto take additional action in court to prevent the advancement of this Matter.\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 178 of 220\n\n\n\n\nJanuary 10, 2025\nPage 3\n\n\n\nClaimants further contend that property held by Mawson should be recovered as having been\nimproperly transferred to Mawson because of alleged wrongdoing by Mawson\u2019s subsidiaries. The\nclaims at issue in this Matter also involve parent guarantees. And Mawson is paying for the joint\ndefense of this Matter (i.e., it directly requires the use of Mawson\u2019s estate, which is unquestionably\nprotected by the automatic stay). The Mawson Entities thus \u201cshare an identity of interest such that\na suit against the non-debtor is essentially a suit against the debtor\u201d and the continuation of this\nproceeding against Luna and Cosmos is incompatible with the authority of the bankruptcy court\nand the automatic stay. In re W.R. Grace & Co., 386 B.R. at 30. Therefore, Mawson kindly\nrequests that you issue a stay and suspend all deadlines in this Matter pending resolution of\nMawson\u2019s involuntary bankruptcy proceedings. 3\n\n The requested stay is not for purposes of delay, but to preserve the status quo (as well as\nMawson\u2019s assets) to allow for the orderly resolution of proceedings in the bankruptcy court. We\nexpect those proceedings to take approximately 2-4 months. For context, Claimants were notified\nby judicial decision in April 2024 that this Matter would need to be arbitrated. They then delayed\nfiling the arbitration for several months to suit the needs of their own bankruptcy proceedings.\nNevertheless, in the interest of practicality and judicial efficiency, Mawson should not be required\nto seek relief from the bankruptcy court when you are empowered as the arbitrator in this Matter\nto order a temporary stay while the work of the bankruptcy court proceeds. Mawson is happy to\nprovide interim reports on that work if helpful.\n\n Bankruptcy counsel for Mawson (i) notified the Claimants that their continued pursuit of\nthis arbitration\u2014even if limited to Mawson\u2019s wholly owned subsidiaries\u2014is incompatible with\nthe automatic stay in the involuntary proceeding; and (ii) asked Claimants to honor the bankruptcy\ncourt\u2019s authority by agreeing to stay this Matter voluntarily. They declined.\n\n We respectfully request your response by Tuesday, January 14th at 10:00 a.m. ET due to\ntight timelines in the bankruptcy court and upcoming deadlines in this Matter. Please accept our\nsincere apologies for the urgency of this request.\n\n\n\n\n3\n Whether Mawson contests the involuntary petition is irrelevant. If Mawson prevails, this Matter can be resumed\nwith all parties having a full and fair opportunity to be heard. If Mawson is unsuccessful, however, this Matter will\nbe stayed and may have improperly created liabilities that extend directly to Mawson\u2019s estate while requiring Mawson\nto deplete its assets to defend the Matter along the way\u2014to the detriment of all of its creditors.\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 179 of 220\n\n\n\n\nJanuary 10, 2025\nPage 4\n\n\n\n Thank you for your kind attention. We look forward to working with you to achieve a\nfair, efficient and economical resolution of this Matter. If you have any questions or comments,\nplease do not hesitate to contact us.\n\nSincerely,\n\n\n\n\nMartin R. Martos II & Isaac Hoenig\n\nCC:\nDavid Hille\nStephen Moeller-Sally\nKeith H. Wofford\nRyan A. Ulloa\nW. Dylan Fay\nCounsel to Celsius Network Ltd.\n\nDenver G. Edward\nCounsel to Ionic Digital Mining LLC\n\nGarima Deepak\nAAA ICDR\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 180 of 220\n\n\n\n\n EXHIBIT H\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 181 of 220\n\n\n\n\nJanuary 13, 2025\n\nVIA EMAIL\n\nArbitrator Richard Mattiaccio\n61A Cheyenne Lane\nStratford, CT 06614\n\nDear Arbitrator Mattiaccio:\nWe write in response to the letter submitted by counsel to Respondents Mawson, Luna, and\nCosmos on January 10, 2025 (the \u201cJanuary 10 Letter\u201d).\n\nClaimants Celsius Network Limited and Celsius Mining LLC oppose any stay of proceedings\nagainst non-debtors Luna and Cosmos. There is no reason, legal or equitable, for the Tribunal to\ndefer ruling on demands for awards against non-debtors Luna and Cosmos.\n\nFirst, it would be inequitable to stay the arbitration in view of Mawson\u2019s opposition to the\ninvoluntary bankruptcy case. On the same day that Mawson delivered the January 10 Letter to the\nTribunal, it filed an answer to the involuntary petition in the United States Bankruptcy Court for\nthe District of Delaware, Case No. 24-12726 (MFW) [Docket #16], a copy of which is attached\nhereto as Exhibit A (the \u201cAnswer\u201d). In the Answer, Mawson contends that the involuntary case\n\u201cmust be dismissed both procedurally and substantively as a bad faith filing.\u201d Answer, \u00b6 8. To\nsupport its case for dismissal, Mawson has simultaneously commenced discovery, which is likely\nto create significant delays before the involuntary petition can be finally adjudicated. By opposing\nthe involuntary petition, Mawson is also opposing the imposition of the automatic stay, which\nwould be extinguished immediately upon dismissal of the involuntary case. Mawson\u2019s vigorous\nopposition to the involuntary petition is therefore incompatible with any effort to extend the\nautomatic stay to its non-debtor subsidiaries.\n\nSecond, Respondents\u2019 representation of the scope of the automatic stay is legally incorrect. Luna\nand Cosmos \u2013 which are separate corporate entities \u2013 are not \u201cassets\u201d of Mawson intended to be\nprotected by the automatic stay in the involuntary case. Respondents do not dispute that Luna and\nCosmos are non-debtors, and it is black-letter law that the automatic stay does not apply to non-\ndebtors.1 Binding authority holds that this fundamental principle applies to a debtor\u2019s non-debtor\nsubsidiaries. As the Third Circuit Court of Appeals explained in Maritime Elec. Co. v. United\nJersey Bank, 959 F.2d 1194 (3d Cir. 1991), \u201cformal distinctions between debtor-affiliated entities\nare maintained when applying the stay. A proceeding against a non-bankrupt corporation is not\n\n1\n See, e.g., In re Forever 21, Inc., 623 B.R. 53, 63 (Bankr. D. Del. 2020) (\u201cThe automatic stay only protects debtors,\n not non-debtor parties\u201d) (citing Brown v. Jevic, 575 F.3d 322, 328 (3d Cir. 2009); McCartney v. Integra Nat\u2019l\n Bank N., 106 F.3d 506, 510 (3d Cir. 1997)).\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 182 of 220\n\nArbitrator Richard Mattiaccio\nJanuary 13, 2025\n\n\n\nautomatically stayed by the bankruptcy of its principal, and section 362 does not bar an action\nagainst the principal of a debtor-corporation.\u201d Id. at 1205 (citations omitted).2 The Third Circuit\u2019s\nlogic flatly precludes the argument that Luna and Cosmos are assets of Mawson for purposes of\nthe automatic stay.\n\nThird, no extension of the stay as to Luna and Cosmos is currently in effect: while bankruptcy\ncourts sometimes extend the automatic stay to non-debtors, no such extension has been sought\nhere, much less obtained.\n\nFourth, Respondents\u2019 letter incorrectly states the legal standards for obtaining an extension of the\nautomatic stay and ignores the proper procedure for doing so. If the Tribunal is to enter equivalent\nrelief at Respondents\u2019 request, it should do so only based the correct legal standards and with an\nunderstanding of the procedure required by the Bankruptcy Court.\n\nThere are no types of claims against non-debtors that must be stayed. As the Third Circuit observed\nin Maritime, \u201cthe automatic stay is not available to non-bankrupt co-defendants of a debtor, even\nif they are in the same legal or factual nexus with the debtor.\u201d Maritime, 959 F.2d at 1205. Rather,\nbankruptcy courts have extended the stay only in \u201cunusual circumstances.\u201d Forever 21, 623 B.R.\nat 63. Mere allegations of an identity of interest between a debtor and a non-debtor are insufficient\nto merit extension of the automatic stay.\n\nJudge Walrath, the presiding judge in Mawson\u2019s involuntary bankruptcy case, has observed that\nthe \u201cextension\u201d of the automatic stay is actually a form of equitable relief requiring the issuance\nof a separate injunction pursuant to section 105(a) of the Bankruptcy Code. Id. at 64. Accordingly,\nthe only procedurally proper way to seek an extension of the automatic stay is by filing an\nadversary proceeding in the Bankruptcy Court. Id. (rejecting as procedurally improper a debtor\u2019s\nrequests for the extension of the automatic stay to non-debtors in briefing on a motion to dismiss).\nAs Judge Walrath further notes, \u201ccourts generally apply the traditional preliminary injunction test\nwhen deciding whether to issue an injunction pursuant to section 105(a).\u201d Id. In other words, a\ndebtor seeking to obtain an injunction \u201cextending\u201d the automatic stay must show a \u201c\u2018substantial\nlikelihood of success on the merits, irreparable harm to the movant, harm to the movant outweighs\nharm to the nonmovant, and injunctive relief would not violate the public interest.\u2019\u201d Id.\n\nThus, Respondents\u2019 request for the Tribunal to extend the automatic stay is procedurally improper\nand also fails on the merits. Respondents have not \u2013 and cannot \u2013 satisfy the requirements for a\npreliminary injunction. First, the Tribunal has already considered the question of the likelihood\nof success on the merits, when Celsius\u2019s request to file a dispositive motion on Luna\u2019s obligations\nunder the Note was approved. Second, Respondents cannot argue irreparable harm \u2014 as noted,\nMawson is seeking to dismiss the involuntary case against it, which would extinguish the\nautomatic stay and allow Claimants to pursue Mawson itself, as well as Luna and Cosmos. Rather,\nthe harm to Celsius from further delay in its efforts to collect on the Note far outweighs any\n\n2\n See also, Kreisler v. Goldberg, 478 F.3d 209, 215 (4th Cir. 2007) (holding that the automatic stay did not prevent\n a landlord from pursuing an ejectment action against the debtor\u2019s wholly-owned non-debtor subsidiary); and In\n re Winer, 158 B.R. 736, 743 (Bankr. N.D. Ill. 1993) (noting that \u201cthe debtor cannot invoke the automatic stay just\n because the action against the non-debtor subsidiary will impact on the value of the debtor's stock\u201d).\n\n\n\n\n 2\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 183 of 220\n\nArbitrator Richard Mattiaccio\nJanuary 13, 2025\n\n\n\nnegligible harm to Respondents. Respondents need to address the Claimants\u2019 claims whether or\nnot the involuntary petition is granted over Mawson\u2019s objection. Meanwhile, litigation over the\ninvoluntary petition \u2013 especially given Mawson\u2019s discovery demands \u2013 is likely to take several\nmonths or more. Finally, in this case, injunctive relief would violate the public interest because,\namong other reasons, it would reward Respondents for taking inconsistent positions in the\nBankruptcy Court and this arbitration, which undermines the integrity of both proceedings.\n\nFifth, the Tribunal should direct Luna and Cosmos to file any opposition to the pending application\nfor dispositive relief on January 16 as scheduled. For the second time in little more than a month,\nRespondents seek to disrupt the progress of this arbitration \u2013 an arbitration they themselves insisted\nupon \u2013 by shuffling legal counsel. Neither this change of counsel, nor the involuntary petition\nfiled against Respondent Mawson, justifies this latest attempt at delay.\n\nContrary to counsel\u2019s statements in the January 10 Letter that they had not yet had the opportunity\nto present their position on the automatic stay, they in fact strategically declined three separate\nopportunities: first, during the correspondence regarding Respondents\u2019 initial request for a\nsuspension of the arbitration on December 4; second, on December 16, at a meet and confer to\nwhich counsel was expressly invited but declined to attend; and, third, at the Conference on\nDecember 17, 2024, when the Tribunal considered the impact of the involuntary petition on this\narbitration (the \u201cScheduling Conference\u201d). The Tribunal issued rulings on the schedule and set\ndeadlines for Claimant Celsius\u2019s dispositive motion for an award against Luna on the Note. Now\nRespondents wish to reargue the same matters discussed and resolved at the Scheduling\nConference; and seek expanded relief in the form of a complete stay of the arbitration with respect\nto all Respondents, including non-debtors.\n\nGiven counsel\u2019s prior involvement in (and familiarity with) the dispute between Claimants and\nRespondents, and given that counsel passed on the opportunity to address the issue of a stay for\nmore than a month, Claimants believe that no alteration of the current briefing schedule is\nnecessary or appropriate.\n\n * * *\n\nIn short, proceeding with the arbitration does not impinge on the authority of the Bankruptcy Court.\nThe Bankruptcy Court is not currently exercising jurisdiction over Luna, Cosmos or any of their\nrespective assets. And a delay here effectively grants Mawson the equivalent of an injunction\nwhich Mawson has not sought, and likely does not want to seek, in court. It is both at odds with\nthe law and inequitable that Mawson\u2019s subsidiaries should benefit from further delay in this\narbitration, given the inconsistency of the Respondents\u2019 current legal positions, the repeated\ntactical changes in counsel, and their efforts to compel Claimants to the forum of this arbitration.\n\nBased on the foregoing, Claimants Celsius Network Limited and Celsius Mining, LLC respectfully\nrequest that the Tribunal deny Respondents\u2019 request for a stay of the arbitration against Luna and\nCosmos and that Luna and Cosmos be directed to file any opposition to the pending application\nfor dispositive relief on January 16 as scheduled.\n\nIf you have any questions or need any further information, please don\u2019t hesitate to contact me.\n\n\n\n 3\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 184 of 220\n\nArbitrator Richard Mattiaccio\nJanuary 13, 2025\n\n\n\nRespectfully submitted,\n\n\n/s/ David Hille\nDavid Hille\nPartner\nE dhille@whitecase.com\n\n\n\n\n 4\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 185 of 220\n\n\n\n\n EXHIBIT A\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 186 of 220\n\n\n\n\n IN THE UNITED STATES BANKRUPTCY COURT\n FOR THE DISTRICT OF DELAWARE\n\n\n In re:\n Chapter 11\n MAWSON INFRASTRUCTURE GROUP,\n INC. Case No. 24-12726 (MFW)\n\n Alleged Debtor.\n\n\n ALLEGED DEBTOR\u2019S ANSWER TO INVOLUNTARY PETITION\n\n Pursuant to Federal Rule of Bankruptcy Procedure 1011(b), which incorporates Federal\n\nRule of Civil Procedure 12(b), the above-captioned alleged debtor, Mawson Infrastructure Group,\n\nInc. (\u201cMawson\u201d or the \u201cAlleged Debtor\u201d or the \u201cCompany\u201d), 1 answers the involuntary petition\n\n(the \u201cInvoluntary Petition\u201d) filed by petitioning creditors W Capital Advisors Pty Ltd (\u201cW\n\nCapital\u201d), Marshall Investments MIG Pty Ltd (\u201cMarshall Investments\u201d), and Rayra Pty Ltd\n\n(\u201cRayra\u201d and collectively with W Capital and Marshall Investments, the \u201cPetitioning Creditors\u201d\n\nand each a \u201cPetitioning Creditor\u201d), as follows and requests dismissal of the Involuntary Petition\n\nfor the following reasons:\n\n Introduction 2\n\n 1. Mawson generally denies the allegations set forth in the Involuntary Petition and\n\ninsists that the petition was filed in bad faith with the improper purpose to harass and intimidate\n\nMawson. The Involuntary Petition is an extension of ongoing disputes with Mawson\u2019s former\n\nBoard Director and Chief Executive Officer, James Manning (\u201cManning\u201d). As detailed below,\n\nManning has waged a vendetta against Mawson, beginning in his home-turf in Australia, and this\n\n\n1\n Mawson is a Delaware corporation listed on the NASDAQ under MIGI.\n2\n Capitalized terms used in this Introduction, but not defined shall have the meaning ascribed to them as defined\n herein in this answer.\n\n 1\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 187 of 220\n\n\n\n\nInvoluntary Petition, with the assistance of the Petitioning Creditors \u2013 all Australian entities with\n\ndisputed claims \u2013 is Manning\u2019s most recent attempt to harass and intimidate Mawson in an effort\n\nto avoid accounting for various misconduct while he was Board Director and/or Chief Executive\n\nOfficer of Mawson.\n\n 2. Notwithstanding the inappropriate motives, the Involuntary Petition is improper\n\nunder the strict requirements of section 303 of the Bankruptcy Code. Specifically, (i) Mawson is\n\ngenerally paying its debts that are not subject to bona fide disputes as to liability or amount as they\n\nbecome due; (ii) the Petitioning Creditors\u2019 debts are the subject of bona fide disputes as to liability\n\nand amount; and (iii) the circumstances strongly suggest that one of the Petitioning Creditors\u2019 debts\n\n(Rayra) appears to have been acquired from another Petitioning Creditor (Marshall Investments)\n\nfor the purpose of meeting the involuntary petition numerosity requirement.\n\n 3. First, an order for relief can only be entered against a debtor if the petitioning\n\ncreditor proves that \u201cthe debtor is generally not paying such debtor\u2019s debts as such debts become\n\ndue unless such debts are the subject of a bona fide dispute as to liability or amount.\u201d 11 U.S.C.\n\n\u00a7303(h)(1). The burden of establishing that the alleged debtor is not paying its debts as they\n\ngenerally become due is squarely on the petitioning creditors. In re Luxeyard, Inc., 556 B.R. 627,\n\n643 (Bankr. D. Del. 2016) (citing In re A & J Quality Diamonds, Inc., 377 B.R. 460, 463 (Bankr.\n\nS.D.N.Y. 2007) (\u201cthe petitioning creditors have the burden of proving all statutory requirements\n\nof Bankruptcy Code \u00a7 303, including that the debtor is generally not paying its bills on time.\u201d\n\n(emphasis in original)). Mawson denies the allegation in the Involuntary Petition that it is not\n\npaying its undisputed and non-contingent debts as they come due. Accordingly, it is the Petitioning\n\nCreditors\u2019 burden to prove otherwise.\n\n\n\n\n 2\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 188 of 220\n\n\n\n\n 4. Second, Mawson disputes the validity and amounts of the debts that the Petitioning\n\nCreditors assert they are owed. As detailed below, the debts are the product of Manning\u2019s self-\n\ndealing and are subject to dispute, the nature of which disputes were communicated to each of the\n\nfirst two Petitioning Creditors (W Capital and Marshall Investments 3) several months before the\n\nfiling of the Involuntary Petition. The burden of proof is on the petitioning creditor to establish a\n\nprima facie case that there is no bona fide dispute as to both liability and amount. In re AMC\n\nInvestors, LLC, 406 B.R. 478, 484 (Bankr. D. Del. 2009); In re Elverson, 492 B.R. 831, 835 (Bankr.\n\nE.D. Pa. 2013). If there is a dispute as to the amount of the debt owed, then the debt no longer\n\nqualifies for 11 U.S.C. \u00a7 303 purposes. In re Bimini Island Air, Inc., 370 B.R. 408, 413 (Bankr.\n\nS.D. Fla. 2007). There are several issues of genuine material fact and law that bear on the alleged\n\nliability of Mawson to the Petitioning Creditors.\n\n 5. Third, the circumstances surrounding Rayra\u2019s acquisition of its claim by\n\nassignment from Marshall Investments are highly suspect, including (i) the timing of the\n\nassignment, shortly before the filing of the Involuntary Petition and in proximity to when Mawson\n\nsued an entity in which Manning (and/or parties related to Manning) holds an interest and Manning\n\nand W Capital\u2019s (one of the petitioners in this matter) Director and Secretary, Darron Siegfried\n\nWolter, are directors, and (ii) the de minimis amount of the purported assignment. The assignment\n\nto Rayra was for just A$50,000 of Marshall Investment\u2019s purported A$12,073,339 claim. 4 Rayra\u2019s\n\npre-filing assignment amounts to just under $31,000 (U.S. Dollars) as of January 9, 2025, i.e.,\n\n0.41% of the A$12,073,339 disputed debt.\n\n\n\n\n3\n The claim of the third Petitioning Creditor, Rayra, was acquired from Marshall Investments, one of the other\n three petitioning creditors.\n4\n A$ refers to Australian dollars.\n 3\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 189 of 220\n\n\n\n\n 6. More curious, the Assignment Agreement between Rayra and Marshall\n\nInvestments, although referenced as Exhibit A to the Involuntary Petition and required to be filed\n\nwith the petition pursuant to Bankruptcy Rule 1003(a), was not filed until sixteen (16) days after\n\nthe Involuntary Petition was filed, nor was it provided to Mawson\u2019s counsel despite multiple\n\nrequests to the Petitioning Creditors\u2019 counsel beginning eight (8) days before it was filed.\n\n 7. As set forth further herein and as will be revealed through discovery, there is ample\n\nreason to dismiss the Involuntary Petition. In addition to disputes regarding the validity and\n\namounts of the Petitioning Creditors\u2019 purported debts, Manning\u2019s self-dealing and breaches of\n\nfiduciary duties cast doubt on the transactions giving rise to the Petitioning Creditors\u2019 purported\n\ndebts. Indeed, when Mawson began reviewing Manning\u2019s conduct, Manning refused to cooperate\n\nand he subsequently threatened retaliation, including threatening to put Mawson into involuntary\n\nbankruptcy if certain demands were not met.\n\n 8. Accordingly, there are bona fide disputes as to the debts. The Petitioning Creditors\n\nlack the requisite standing, credentials, and good faith motives in order to proceed with this\n\nInvoluntary Petition and it must be dismissed both procedurally and substantively as a bad faith\n\nfiling. Mawson expressly reserves its rights under section 303(i) of the Bankruptcy Code to pursue\n\ncosts, attorneys\u2019 fees, and actual and punitive damages for this improper and retaliatory filing.\n\n The Involuntary Bankruptcy\n\n 9. On December 4, 2024, the Petitioning Creditors, all of whom are Australian\n\nentities, filed the Involuntary Petition [Docket No. 1] seeking relief against the Alleged Debtor\n\nunder chapter 11 of title 11 of the United States Code (the \u201cBankruptcy Code\u201d).\n\n 10. The Involuntary Petition alleges the following debts for the Petitioning Creditors in\n\nthe following amounts above the value of any lien:\n\n\n 4\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 190 of 220\n\n\n\n\n a. W Capital Advisors Pty Ltd. As trustee for the W Capital\n Advisors Fund: A$1,661,552.58 plus interest accruing under the\n Secured Loan Deed and the interest accruing under the certain\n convertible promissory note, dated 8 July 2022 and legal and\n professional services costs.\n\n b. Marshall Investments MIG Pty Ltd as trustee for the Marshall\n Investments MIG Trust: A$12,073,339 plus interest and default\n management fees accruing under the Secured Loan Facility\n Agreement and legal professional services costs.\n\n c. Rayra Pty Ltd as trustee for The Mountainview Trust: A$50,000\n plus interest accruing under the Secured Loan Facility Agreement.\n\n 11. On December 20, 2024, the Petitioning Creditors filed their Corporate Ownership\n\nStatements [Docket Nos. 7, 8 and 9]. Each of the Corporate Ownership Statements were filed and\n\ndated after the Petition Date. 5\n\n 12. On December 30, 2024, the Court entered the Order Approving Stipulation\n\nExtending Time to Respond to Involuntary Petition [Docket No. 12], which extended Mawson\u2019s\n\ndeadline to respond to the Involuntary Petition through and including January 10, 2025. The\n\nPetitioning Creditors and Mawson agreed that within five (5) business days of the filing of any\n\nresponse contesting the Involuntary Petition, the parties would meet and confer to discuss an\n\nappropriate schedule for discovery, briefing, and a hearing.\n\n Factual Background\n\n A. Issues with James Manning\n\n 13. Manning served as Chief Executive Officer (\u201cCEO\u201d) and director of Mawson\n\nInfrastructure Group Pty Ltd (\u201cMIGPL\u201d), an Australian entity, upon its inception in September\n\n\n\n\n5\n Pursuant to Bankruptcy Rule 1010(b), corporate ownership statements must be filed with the involuntary\n petition.\n\n 5\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 191 of 220\n\n\n\n\n2019. 6 In early 2021, MIGPL and its subsidiaries were acquired by Wize Pharma, Inc., a Delaware\n\ncorporation, and subsequently renamed Mawson Infrastructure Group, Inc. on or about March 15,\n\n2021. Following the merger, Manning became CEO and an executive director of Mawson until he\n\nstepped down as CEO on May 22, 2023. Thereafter, Manning served as a non-executive director\n\nfrom July 5, 2023 until August 22, 2023, when he departed Mawson entirely. The reason for\n\nManning\u2019s departure in August 2023 is ostensibly due in large part to Mawson commencing an\n\ninvestigation into Manning\u2019s related party transactions and self-dealing during his tenure as CEO\n\nand Board Director, in an effort to avoid the Company\u2019s inquiries. As an officer and director of\n\nMIGPL and Mawson, Manning was obligated to exercise various fiduciary duties and act in the\n\ninterests of the Company pursuant to Australian and Delaware law, U.S. federal and state securities\n\nlaw, his employment agreement, and the Company\u2019s internal policies, including a Code of Ethics\n\nand a Policy on Related Party Transactions.\n\n 14. On or about March 11, 2024, Mawson\u2019s outside Australian counsel, a global firm\n\nknown for its expertise on such matters, prepared (and sent to Manning\u2019s Australian counsel) a\n\ncomprehensive report (the \u201cReport\u201d) outlining its findings of Manning\u2019s related party transactions\n\nand Mawson\u2019s claims for breach of fiduciary and statutory duties, including under Australian and\n\nDelaware law and the terms of his employment agreement. The Report included preliminary\n\ndiscovery requests from Manning regarding the related party transactions; however, Manning has\n\ncontinually refused to provide any information or cooperate with the Company\u2019s investigation.\n\nUpon information and belief, Petitioning Creditor W Capital and its principal, Darron Siegfried\n\nWolter (\u201cWolter\u201d), are significant players in the related party transactions orchestrated by\n\nManning.\n\n\n6\n Manning was also a director of subsidiaries of MIGPL, including Mawson AU Ptd Ltd and MIG No. 1 Pty\n Ltd.\n 6\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 192 of 220\n\n\n\n\n 15. In particular, Manning pushed Mawson into investing in many businesses and\n\nborrowing money to support those efforts, without Mawson having the full picture about those\n\ninvestments or, perhaps more importantly, knowing who was financially benefitting from them.\n\nSpecifically, those investments in which Manning had an interest. For example, upon information\n\nand belief, from 2021 through 2023, Manning caused Mawson to remit payment of over A$11.4\n\nmillion to Flynt International Cargo Solutions (\u201cFlynt ICS\u201d) for shipping services that Mawson\n\ndid not need. Upon information and belief, Manning did not inform Mawson that he was seeking\n\nand eventually had financial interests in Flynt ICS, nor did he update the Company upon his\n\nsecuring self-serving financial interests with Flynt ICS or seek board approval for his financial\n\ninterests with Flynt ICS despite the substantial payment amounts. It was not until late 2023, shortly\n\nbefore departing the Company as a Director, that Manning admitted to Mawson he was the owner\n\nof Flynt ICS by virtue of Vertua Ltd\u2019s (\u201cVertua\u201d) acquisition of Flynt ICS. Upon further\n\ninformation and belief, Manning is a significant shareholder of Vertua and is a Director of Vertua.\n\nDespite a request from the Mawson board, Manning refused to provide any details in writing\n\nregarding Manning\u2019s interest in Flynt ICS. Manning\u2019s failure to disclose his interests in Flynt ICS\n\nwas a clear breach of Manning\u2019s fiduciary duties under Australian and Delaware law, U.S. federal\n\nand state securities law, and his contractual obligations to Mawson.\n\n 16. Manning also pushed Mawson to engage in related party transactions with First\n\nEquity Advisory Pty Ltd (\u201cFirst Equity Advisory\u201d) and First Equity Tax Pty Ltd (\u201cFirst Equity\n\nTax\u201d). At all relevant times of the transactions, Manning was a director of First Equity Advisory\n\nand First Equity Tax, and thus the transactions personally benefitted him at the expense of Mawson\n\nworking with independent third parties to conduct independent financial and tax advisory work.\n\nUpon information and belief, First Equity Advisory and First Equity Tax are owned by Vertua.\n\n\n 7\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 193 of 220\n\n\n\n\nAgain, Manning\u2019s push to drive Mawson into unnecessary obligations and payments to entities in\n\nwhich he had a personal stake is a breach of Manning\u2019s fiduciary duties under Delaware and\n\nAustralian law, U.S. federal and state securities law, and his contractual obligations to Mawson.\n\n 17. Manning pushed Mawson into other investments to pay hundreds of thousands of\n\ndollars to entities believed to be related to Manning for unnecessary or inflated services including\n\nto Manning Motorsports Pty Ltd, Defender Asset Management, and other possible entities that are\n\nyet to be uncovered given Manning\u2019s repeated refusal to provide information or cooperate with the\n\nCompany. Manning\u2019s improper related-party transactions and self-dealing are believed to be\n\nsubstantial and extensive. Discovery is imperative to understand the full scope of those\n\ntransactions and efforts.\n\n 18. To that end, several requests have been made to Manning to account for his self-\n\ndealing and related party transactions. For example, Mawson Board meeting minutes for August\n\n17, 2023 reflect that Manning informed Mawson\u2019s Board that \u201che was unwilling to attest to his\n\nown related party transactions\u201d and that \u201c[t]he Chairman Greg Martin asked Mr. Manning to\n\nexplain to the Board how he thought that he was properly fulfilling his fiduciary duties. Mr.\n\nManning said he would take the question on notice.\u201d Rather than provide the related party\n\ntransaction information and cooperate as repeatedly requested by Mawson\u2019s Board and Audit\n\nCommittee, Manning tendered his resignation just days later on August 23, 2023. By way of further\n\nexample, on January 18, 2024, Mawson sent Manning a letter formally requesting that he provide\n\na statutory declaration or other attestation with a complete list of all actual and potential conflicts\n\nand related party transactions that involved Manning or any of his affiliates at any time when he\n\nwas a board director or CEO of Mawson and MIGPL. Discovery and information requests were\n\nalso directed to Manning in the aforementioned March 11, 2024 Report. To date, Manning has\n\n\n 8\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 194 of 220\n\n\n\n\nrepeatedly refused to answer all of the discovery and information requests. Discovery in this\n\nproceeding is thus imperative to understand the scope of Manning\u2019s improper conduct and its\n\nconnection to the disputed claims of the Petitioning Creditors.\n\n 19. Since leaving Mawson, Manning has made threats to Mawson, both indirectly and\n\nthrough third parties including, but not limited to, sending threating images of a home on fire to\n\nGreg Martin, a member of the Mawson Board of Directors, contemporaneously with the issuance\n\nof W Capital\u2019s Statutory Demand (defined below); telling a third party that he was going to \u201cburn\n\nMawson to the ground,\u201d and threatening to put Mawson into involuntary bankruptcy if certain\n\ndemands, including for compensation, were not met.\n\n B. W Capital\u2019s Claim\n\n 20. W Capital\u2019s listed address is Suite 303 Level 3, 44 Miller Street, North Sydney,\n\nNSW 2060. As noted, the Director and Secretary of W Capital is Wolter.\n\n 21. As set forth herein, there are multiple connections between W Capital, Wolter, and\n\nManning. Upon information and belief, Wolter has been affiliated with the Manning family for\n\ndecades, including as an employee or affiliate of several of the Manning family\u2019s interests.\n\n 22. Upon information and belief, Wolter holds an interest in or is a board member for\n\nthe following Manning-related entities: (i) CEO of Vertua Opportunities Fund; (ii) board member\n\nof Vertua; and (iii) CEO of Defender Tourism Fund, a division of Defender Asset Management.\n\n 23. Additionally, many of the Manning and Wolter related entities share the same\n\naddress. For example, W Capital, Vertua, and Defender Asset Management all share a same address\n\nat: Suite 303 Level 3, 44 Miller Street, North Sydney, NSW 2060.\n\n 24. Upon information and belief, W Capital\u2019s registered office and principal place of\n\nbusiness was previously listed as First Equity Tax, Unit 501, 97 Pacific Highway North Sydney.\n\n\n 9\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 195 of 220\n\n\n\n\nAs noted above, First Equity Tax is a Manning-related entity. Manning was a director of First\n\nEquity Tax, and First Equity tax was owned by Vertua, which is also a Manning related entity, and\n\nJames Manning is the Managing Partner of First Equity.\n\n 25. With the context of the Manning, W Capital and Wolter relationships in mind,\n\nMawson strongly contests W Capital\u2019s asserted claim and the validity of the underlying loans made\n\nto W Capital, including the terms and provisions, which contain various ambiguities, as well as the\n\nneed for the W Capital debts because they appear to be the product of Manning\u2019s self-dealing. It\n\nis also unclear, what, if any, consideration was received from W Capital in exchange for Mawson,\n\nat Manning\u2019s direction providing a corporate guarantee on September 29, 2022 for a prior loan\n\ndated September 2, 2022. W Capital further claims that Manning promised it at least 1,500,000\n\nrestricted stock units (RSUs) in Mawson; however, Mawson does not have any authorized\n\ndocumentation that would support W Capital\u2019s alleged claim and, despite request, W Capital has\n\nnot come forward with such documentation. Additionally, the transactions with W Capital were\n\ndirectly negotiated by Manning at his own behest; other Mawson directors and senior executives\n\nwere never permitted to participate or engage directly with W Capital.\n\n 26. On June 12, 2024, W Capital made a statutory demand (\u201cStatutory Demand\u201d) under\n\nAustralian law to Mawson for A$368,877.55. Upon information and belief, the W Capital Statutory\n\nDemand was directed by Manning in an effort to improperly retaliate against Mawson for the\n\nclaims and allegations that Mawson has asserted against Manning with respect to his breaches of\n\nfiduciary duty, related party transactions, and self-dealing.\n\n 27. On June 26, 2024, Mawson submitted a formal reply to W Capital\u2019s Statutory\n\nDemand asserting, among other things:\n\n\n\n\n 10\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 196 of 220\n\n\n\n\n \u2022 \u201c\u2026a genuine dispute between W Capital and Mawson regarding the amount of the\n\n debt to which your demand relates\u201d and advising that the Statutory Demand sought\n\n to improperly coerce payment of a disputed amount.\n\n \u2022 \u201cThere are defects in the statutory demand \u2026 and W. Capital\u2019s statutory demand\n\n has been made in bad faith. W Capital knows that this debt is categorically disputed\n\n by Mawson\u2026\u201d.\n\n \u2022 \u201cW Capital is fully aware that the agreements between Mawson and W Capital\n\n have invoked Delaware law in the United States, and that disputes and claims need\n\n to be adjudicated pursuant to applicable law in the United States of America.\u201d\n\n \u2022 \u201c\u2026Mawson has significant damages claims against W Capital to offset any\n\n sums\u2026\u201d\n\n \u2022 \u201cAt all times material hereto, W Capital\u2019s principal, Darron Wolter had and has\n\n close business and personal ties to James Manning, the former CEO of Mawson at\n\n the time this debt was claimed to be created, resulting in the appearance of serious\n\n conflicts of interest, collusion, and self-dealings, which negate the legitimacy of\n\n any financing agreements with Mawson at issue here and raising issues of civil and\n\n criminal liability against W Capital and Mr. Wolter\u2026\u201d\n\n \u2022 \u201cW Capital\u2019s collection attempts of a seriously disputed claim is an abuse of\n\n process, as it is an attempt to coerce a clearly solvent company to pay a disputed\n\n debt.\u201d\n\nThe June 26th formal reply clearly put W Capital on notice of the bona fide dispute as to the amount\n\nof the W Capital alleged debt. A copy of the June 26, 2024 reply is annexed hereto as Exhibit A.\n\n\n\n\n 11\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 197 of 220\n\n\n\n\n 28. As noted herein, Mawson has pushed for many months to get statutorily required\n\ndisclosures and information from Manning and W Capital, but Manning has refused to answer very\n\nbasic questions. In mid-2023 and again on January 18, 2024, the Mawson Board of Directors\n\nrequested that Manning clarify under oath whether he and/or related entities (including debt\n\nproviders) have an interest in W Capital and its affiliates. 7 To date, Manning has repeatedly refused\n\nto answer these requests.\n\n C. Marshall Investments\u2019 Claim\n\n 29. Marshall Investments\u2019 address is Suite 1 Level 12, 53 Martin Place, Sydney, NSW\n\n2000.\n\n 30. Upon information and belief, Manning has connections with Marshall Investments,\n\nincluding with its Managing Director, David Marshall and Chairman, John Marshall. Neither\n\nMarshall Investments nor Manning have disclosed such related party interests to Mawson.\n\n 31. Mawson disputes Marshall Investments\u2019 alleged debt on multiple bases, including:\n\n(i) rights to setoff under Australian and U.S. law (ii) the timing of penalty interest applied by\n\nMarshall; and (iii) improperly treating a force majeure event under the loan facility as a material\n\ndefault.\n\n 32. With respect to the disputed penalty interest calculations, Marshall Investments\n\nissued a statutory demand in Australia on or about May 28, 2024; however, upon information and\n\nbelief, instead of applying the standard commercial interest rate of 8%, Marshall Investments has\n\n\n\n\n7\n Manning\u2019s refusal to respond to these requests has been noted in filings by Mawson with the Securities\n Exchange Commission. See, e.g. Form 8-K dated February 23, 2024, available at\n https://www.sec.gov/ixviewer/ix.html?doc=/Archives/edgar/data/1218683/000117184324000946/f8k_0223\n 24.htm\n\n 12\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 198 of 220\n\n\n\n\nimproperly applied penalty interest at 25% beginning several months prior to issuing the statutory\n\ndemand.\n\n 33. Like W Capital, Marshall Investments is acutely aware of the ongoing disputes that\n\nMawson has with respect to the alleged debt. For example, on June 17, 2024, Mawson submitted\n\na formal reply to Marshall Investments\u2019 Statutory Demand asserting that \u201cthere is a genuine dispute\n\nbetween Marshall Investments \u2026 and Mawson \u2026 regarding the amount of the debt to which your\n\ndemand relates.\u201d A copy of the June 17, 2024 reply is annexed hereto as Exhibit B.\n\n D. Rayra\u2019s Claim:\n\n 34. Upon information and belief, Rayra\u2019s address is Unit 58A, 1183-1187 The Horsley\n\nDr, Wetherill Park, NSW 2164.\n\n 35. Attached to the Involuntary Petition is a declaration (the \u201cItaoui Declaration\u201d) of\n\nRay Itaoui, Director and Company Secretary of Rayra. The Itaoui Declaration was submitted to\n\nexplain the nature of its alleged debts against Mawson, which it acquired shortly before the filing\n\nof the Involuntary Petition.\n\n 36. The Itaoui Declaration explains that Rayra holds claims against Mawson in the\n\naggregate principal amount of at least A$50,000 plus accruing interest based upon its holdings\n\nunder that certain Secured Loan Facility Agreement by and between Marshall Investments and\n\nMIG No. 1 Pty Ltd, dated as of December 9, 2021 (the \u201cLoan Agreement\u201d). Marshall Investments\n\nand the Debtor entered into a Continuing Guaranty, causing the Debtor to act as a guarantor for\n\nthe prompt repayment by MIG No. 1 Pty Ltd of the commitments under the Loan Agreement. See\n\nItaoui Declaration at \u00b6 3.\n\n 37. The Itaoui Declaration further explains that Rayra acquired the holdings under the\n\nLoan Agreement from Marshall Investments pursuant to the assignment \u201cAssignment\n\n\n 13\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 199 of 220\n\n\n\n\nAgreement\u201d) whereby Marshall Investments assigned A$50,000 of its claim to Rayra. The\n\nAssignment Agreement was purportedly signed on October 18, 2024. Despite being referenced as\n\nExhibit A to the Itaoui Declaration, the Assignment Agreement was not filed with the Involuntary\n\nPetition as required by Rule 1003(a) of the Federal Rule of Bankruptcy Procedure (the\n\n\u201cBankruptcy Rules\u201d). The Assignment Agreement was eventually filed sixteen (16) days after the\n\nPetition Date. 8 See Docket No. 6-1. The Itaoui Declaration claims that Rayra \u201cdid not purchase the\n\nclaims for the purpose of commencing this case under the Bankruptcy Code.\u201d Itaoui Declaration\n\nat \u00b6 4.\n\n 38. Mawson has never had any knowledge of or any prior interaction with Rayra.\n\nMawson disputes both the validity of the Assignment Agreement whereby Rayra assumed\n\nA$50,000 of Mawson debt previously held by Marshall Investments and Rayra\u2019s statement that it\n\ndid not purchase its 0.41% interest in the disputed debt for the purpose of commencing this case.\n\nMawson submits that the substance and timing of the Assignment Agreement make the claims in\n\nthe Itaoui Declaration highly suspect.\n\n 39. First, Rayra purportedly purchased A$50,000 of the allegedly overdue and unpaid\n\ndebt at 100 cents on the dollar, which is extremely unusual, and even more so given that the\n\nInvoluntary Petition was filed soon thereafter. Second, Rayra made the purchase on October 18,\n\n2024 \u2013 three (3) days after Mawson filed suit on October 15, 2024 against a Manning-related entity,\n\nVertua Property, Inc., for overbilling, wrongful eviction, and tortious interference. See Court of\n\n\n\n\n8\n Beginning on December 12, 2024, counsel for Mawson made multiple requests to the Petitioning Creditors\u2019\n counsel for a copy of the Assignment Agreement. The Assignment Agreement was not provided in response\n to these requests. The Assignment Agreement was eventually docketed on December 20, 2024 [Docket No.\n 6].\n\n 14\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 200 of 220\n\n\n\n\nCommon Pleas of Mercer County, Pennsylvania Civil Division, Case No. 2024-2332. Second,\n\nRayra acquired the debt from Marshall after Marshall made its Statutory Demand.\n\n 40. The fact that an unrelated party located in Manning\u2019s home-turf of Australia, would\n\npay for a small, but tactically crucial, portion of Marshall Investment\u2019s claim at a 100% rate, and\n\nshortly thereafter join as the necessary third creditor to an Involuntary Petition against Mawson, a\n\ncompany with whom it had no prior relationship and had never done business, suggests more than\n\na mere coincidence. Given the circumstances, discovery is needed to clarify this questionable\n\ntransaction and the underlying motivations.\n\n Answer:\n\n 41. In response to the Allegations set forth in Part 3, Section 11 of the Involuntary\n\nPetition, Mawson responds as follows:\n\n a. Mawson DENIES that the Petitioning Creditors are eligible to file the Petition\n\n under 11 U.S.C. \u00a7 303(b). Section 303(b)(1) of the United States Bankruptcy Code\n\n requires that when a debtor has 12 or more creditors, an involuntary petition may\n\n be filed by three or more entities, each of which hold claims which are \u201cnot\n\n contingent as to liability or the subject of a bona fide dispute as to liability or\n\n amount.\u201d Mawson disputes each of the Petitioning Creditors\u2019 debts as to liability\n\n and/or amount.\n\n b. The Petitioning Creditors checked the box: \u201cThe Debtor is generally not paying its\n\n debts as they become due, unless they are the subject of a bona fide dispute as to\n\n liability or amount.\u201d \u2013 Mawson DENIES this allegation \u2013 Mawson is paying its\n\n debts as they become due, unless they are the subject of a bona fide dispute as to\n\n liability or amount.\n\n\n 15\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 201 of 220\n\n\n\n\n c. The Petitioning Creditors checked the box: \u201cWithin 120 days before the filing of\n\n this petition, a custodian, other than a trustee, receiver, or an agent appointed or\n\n authorized to take charge of less than substantially all of the property of the debtor\n\n for the purpose of enforcing a lien against such property, was appointed or took\n\n possession.\u201d \u2013 Mawson DENIES this allegation \u2013 no custodian has been appointed.\n\n FIRST DEFENSE\n\n 42. The Involuntary Petition fails to state a claim upon which relief may be granted\n\npursuant to Fed.R.Civ.P. 12(b)(6), made applicable herein by Fed.R.Bankr.P. 7012.\n\n SECOND DEFENSE\n\n 43. The Petitioning Creditors\u2019 claims are subject of bona fide disputes as to liability\n\nand amount.\n\n THIRD DEFENSE\n\n 44. Mawson is generally paying its debts that are not subject of a bona fide dispute as\n\nto liability or amount as they become due.\n\n FOURTH DEFENSE\n\n 45. The Involuntary Petition was filed in bad faith. In particular, (i) at least a majority\n\nof the Petitioning Creditors had actual knowledge that Mawson disputes their claims as to liability\n\nand amount; (ii) the Petitioning Creditors failed to conduct sufficient due diligence before filing\n\nthe Involuntary Petition; and (iii) the Involuntary Petition was filed in order to harass and\n\nintimidate Mawson in furtherance of previous threats.\n\n FIFTH DEFENSE\n\n 46. The Petitioning Creditors lack standing to file an involuntary petition against\n\nMawson and therefore, the Court lacks jurisdiction of this proceeding.\n\n\n 16\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 202 of 220\n\n\n\n\n SIXTH DEFENSE\n\n 47. The Involuntary Petition was not commenced by three or more entities holding\n\nnoncontingent, undisputed claims aggregating at least $10,000 more than the value of any lien.\n\n SEVENTH DEFENSE\n\n 48. The claims in the Involuntary Petition are barred by the doctrine of unclean hands.\n\n EIGHTH DEFENSE\n\n 49. Any claims held by the Petitioning Creditors are subject to setoff.\n\n NINTH DEFENSE\n\n 50. The Involuntary Petition and the relief sought in this proposed chapter 11 case is\n\nbarred by the doctrines of laches, waiver, and estoppel.\n\n RESERVATION OF RIGHTS TO SEEK COSTS, ATTORNEYS\u2019 FEES, DAMAGES,\n AND SANCTIONS\n\n 51. Pursuant to 11 U.S.C. \u00a7 303, Mawson reserves its rights to seek recovery of costs,\n\nattorneys\u2019 fees under 11 U.S.C. \u00a7 303(i)(1), actual and punitive damages under 11 U.S.C. \u00a7\n\n303(i)(2), and sanctions under Bankruptcy Rule 9011(c).\n\n 52. 11 U.S.C. \u00a7 303(i) provides as follows:\n\n If the court dismisses a petition under this section other than on consent of\n all petitioners and the debtor, and if the debtor does not waive the right to\n judgment under this subsection, the court may grant judgment\u2014\n\n (1) against the petitioners and in favor of the debtor for\u2014\n\n (A) costs; or\n\n (B) a reasonable attorney\u2019s fee; or\n\n (2) against any petitioner that filed the petition in bad faith, for\u2014\n\n (A) any damages proximately caused by such filing; or\n\n (B) punitive damages.\n\n 17\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 203 of 220\n\n\n\n\n 53. Mawson does not waive the right to judgment under 11 U.S.C. \u00a7 303(i).\n\n RESERVATION OF RIGHTS TO REQUEST A BOND\n\n 54. Mawson reserves the right to request that the Petitioning Creditors be required to\n\npost a bond pursuant to section 303(e) of the Bankruptcy Code. 9 A bond may be particularly\n\nnecessary in this case given the circumstances and that the Petitioning Creditors are all foreign. It\n\nis unclear what assets the Petitioning Creditors have in the United States that would be available\n\nto fund an award under section 303(i)(1) or (2) of the Bankruptcy Code in the event this involuntary\n\ncase is dismissed, including if there is an award for damages for a bad faith filing under section\n\n303(i)(2).\n\n RESERVATION OF RIGHTS AND NEED FOR DISCOVERY\n\n 55. Mawson hereby gives notice that it intends to rely upon such other and further\n\ndefenses as may become available or apparent during the discovery process in this action, and\n\nhereby reserves the right to amend its answer to assert any such defenses. The assertion of the\n\nabove defenses by Mawson are not intended and should not be deemed or construed to alter or\n\nshift any burden of proof Petitioning Creditors may have in connection with the claims asserted in\n\nthe Involuntary Petition.\n\n 56. Mawson further reserves the right, at or before trial, to move to dismiss the\n\nInvoluntary Petition and/or for Summary Judgment, on the ground that the Involuntary Petition\n\nfails to state a claim upon which relief can be granted and/or that Mawson is entitled to judgment\n\nas a matter of law, based on any and all of the above defenses.\n\n\n9\n The Congressional record notes that section 303(e) was enacted to \u201c\u2026discourage frivolous petitions as well\n as the more dangerous spiteful petitions, based on a desire to embarrass the debtor (who may be a competitor\n of a petitioning creditor) or to put the debtor out of business without good cause\u2026\u201d In re Apollo Health\n Street, Inc., 2011 WL 2118230 (Bankr. D.N.J. May 23, 2011) (quoting H. Rep. No. 95-595, 95th Cong., 1st\n Sess. At 323 (1977)).\n 18\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 204 of 220\n\n\n\n\n 57. In the event that the Court does not dismiss the Involuntary Petition immediately,\n\nMawson requires the opportunity to take written discovery and depositions related to, inter alia:\n\n(i) the circumstances surrounding the loans from W Capital and Marshall Investments to Mawson,\n\nincluding with respect to potential self-dealing and related party transactions, conflicts of interest,\n\nand breaches of fiduciary duty by Manning; (ii) for the validity, terms, provisions, and amount of\n\nthe Petitioning Creditors\u2019 claims including with respect to corporate guarantees allegedly provided\n\nto them; (iii) the extent of Manning\u2019s interests and control over W Capital; (iv) collusion between\n\nW Capital and Manning given the relationship between Manning and Wolter; (v) the relationship\n\nbetween Marshall Investments and Manning; (vi) the Petitioning Creditors\u2019 motivation for filing\n\nthe Involuntary Petition; and (vii) the circumstances surrounding the Rayra Assignment\n\nAgreement.\n\n 58. Mawson expressly reserves its right to supplement its discovery requests and targets\n\nas information is uncovered with respect to the Petitioning Creditors and the Involuntary Petition.\n\nWHEREFORE, Mawson demands judgment in its favor as follows:\n\n (a) the Court to enter an order dismissing this petition for the reasons stated above;\n\n (b) find that the Petitioning Creditors acted in bad faith;\n\n (c) awarding costs, reasonable attorneys\u2019 fees, damages caused by the filing, and/or\n punitive damages, as allowable pursuant to 11 U.S.C. \u00a7 303(i); and\n\n (d) granting such other and further relief as the Court deems just and proper.\n\n\n\n\n 19\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 205 of 220\n\n\n\n\nDated: January 10, 2025 FOX ROTHSCHILD LLP\n\n /s/ Seth A. Niederman\n Seth A. Niederman (No. 4588)\n Stephanie Slater Ward (No. 6922)\n 1201 North Market Street, Suite 1200\n Wilmington, DE 19801\n Telephone: (302) 654-7444\n Email: sniederman@foxrothschild.com\n Email: sward@foxrothschild.com\n\n -and-\n\n Michael A. Sweet (pro hac vice admission pending)\n 345 California Street, Suite 2200\n San Francisco, California 94104\n Telephone: (415) 364-5540\n Facsimile: (415) 391-4436\n Email: msweet@foxrothschild.com\n\n -and-\n\n Michael R. Herz (pro hac vice admission pending)\n 49 Market Street\n Morristown, NJ 07960\n Telephone: (973) 548-3330\n Email: mherz@foxrothschild.com\n\n Counsel to the Alleged Debtor\n\n\n\n\n 20\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 206 of 220\n\n\n\n\n Exhibit A\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 207 of 220\n\n\n\n\n Mawson Infrastructure Group Inc\n 950 Railroad Ave., Midland, PA 15059 USA\n\n\n June 26, 2024\n\nVIA EMAIL ONLY\nRanjani Sundar (ranjani.sundar@hfw.com)\nHFW Australia\nLevel 10, 126 Phillip Street\nSydney NSW 2000\n+61 (0)2 9320 4609\n\nRe: Formal reply of Mawson Infrastructure Group, Inc. to the statutory demand\n of W Capital Advisors Pty Ltd dated 12 June 2024\n\nDear Ms. Sundar,\n\nIn response to the statutory demand dated 12 June, 2024 of W Capital Advisors Pty Ltd\n(\u201cW Capital\u201d), Mawson Infrastructure Group, Inc. (\u201cMawson\u201d), replies as follows.\n\nPursuant to the Australian Commonwealth Consolidated Acts (Corporations Act 2001 -\nSect 459H(a)), we assert that there is a genuine dispute between W Capital and\nMawson regarding the amount of the debt to which your demand relates and in good\nfaith therefore refuse to pay it. As per your country\u2019s long-established jurisprudence, for\nexample, Moutere Pty Ltd v Deputy Commissioner of Taxation [2000] NSWSC 379,\n\u201cThe policy underlying Sect 459H is that the statutory demand procedure should not be\nused to coerce a person to pay a disputed amount. A statutory demand is not an\ninstrument of debt collection.\u201d\n\nThere are defects in the statutory demand of your client and W Capital\u2019s statutory\ndemand has been made in bad faith. W Capital knows that this debt is categorically\ndisputed by Mawson and further that pursuant to the Australian Commonwealth\nConsolidated Acts (Corporations Act 2001 - Sect 585), Mawson cannot be considered\ninsolvent.\n\nW Capital is fully aware that the agreements between Mawson and W Capital have\ninvoked Delaware law in the United States, and that disputes and claims need to be\nadjudicated pursuant to applicable law in the United States of America. W Capital\u2019s\nattempt to avail itself of a favorable jurisdiction does not necessitate that Mawson is\nsubject to such jurisdiction. We believe that all disputes and claims between Mawson\nand W Capital have to be adjudicated in the United States.\n\nIn addition, Mawson has significant damage claims against W Capital to offset any\nsums which, in the unlikely event, may be determined by a competent court of law\nhaving jurisdiction over Mawson.\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 208 of 220\n\n\n\n\nAt all times material hereto, W Capital\u2019s principal, Darron Wolter, had and has close\nbusiness and personal ties to James Manning, the former CEO of Mawson at the time\nthis debt was claimed to be created, resulting in the appearance of serious conflicts of\ninterest, collusion, and self-dealings which negate the legitimacy of any financing\nagreements with Mawson at issue here and raising issues of civil and criminal liability\nagainst W Capital and Mr. Wolter pursuant to the Corporations Act 2001, Sects. 181\nand 182, as well as US law. These actions of W Capital also subject it to sanctions in\nthe US pursuant to SEC regulation, the US Department of Treasury, and its Committee\non Foreign Investment regulations, and potential enforcement action by the Department\nof Justice.\n\nMawson as a Delaware incorporated company and listed on a U.S. exchange is subject\nto U.S. law and does not accede to the jurisdiction of Australia by this response or\notherwise. To the contrary however, W Capital by its actions, has acceded to the\npersonal and subject matter jurisdictions of the state and federal courts of the United\nStates and various US regulatory agencies.\n\nAccordingly, under the Corporations Act 2001 \u2013 Sect 459J, there are significant defects\nin W Capital\u2019s demand, and substantial injustice will be caused unless the statutory\ndemand is set aside. W Capital\u2019s collection attempts of a seriously disputed claim is an\nabuse of process, as it is an attempt to coerce a clearly solvent company to pay a\ndisputed debt. Continuing to pursue this demand will expose W Capital to potential\ndamages and sanctions which would offset, if not exceed, any claimed amounts due\nunder the pending statutory demand.\n\nMoreover, several provisions of the agreements between Mawson and W Capital\nremain in dispute. For example, Mawson maintains that the recitation of \u201cassets\u201d in a\nSeptember 29, 2022 guarantee must relate back to a July 8, 2022 guarantee, wherein\nthe collateral was limited to certain bitcoin mining equipment located in the United\nStates. W Capital Advisors has attempted to take the position that \u201call assets\u201d of the\nCompany are subject to the guarantee, which Mawson strongly disagrees with and\ncontinues to dispute. Mawson has raised this critical definitional issue, and several other\nprocedural issues, in opposition to W Capital.\n\nWe hereby respectfully but firmly demand that W Capital\u2019s statutory demand be\nwithdrawn in writing immediately. If W Capital does not set aside its statutory demand,\nMawson will be forced to pursue all claims, damages and remedies against W Capital\nand its principals as applicable under U.S law. Mawson reserves all rights under both\nU.S. and Australian law.\n\nPlease give this reply your prompt and serious attention. It is requested that this reply\nbe forwarded by you to your clients, W Capital Advisors Pty Ltd and its principals and\ninvestors as well as to ASIC and the Australian courts should you risk taking this matter\nfurther.\n\nUnless otherwise authorized by me, you are to direct all further communications only to\nme at the above address or using below contact information, and to no other Mawson\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 209 of 220\n\n\n\n\nentity or any of their employees, directors, officers, agents, representatives, or legal\ncounsel.\n\nFeel free to contact me to discuss this matter further.\n\nVery truly yours,\n\n\nKaliste Saloom\nGeneral Counsel\nMawson Infrastructure Group, Inc.\nKaliste.Saloom@MawsonInc.com\nMobile: +1 (337) 962-5836\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 210 of 220\n\n\n\n\n Exhibit B\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 211 of 220\n\n\n\n\n Mawson Infrastructure Group Inc\n 950 Railroad Ave., Midland, PA 15059 USA\n\n\n\n\n June 17, 2024\n\nVIA EMAIL ONLY\nDaniel Zabow (dzabow@hwle.com.au)\nCourtney McDonald (cmcdonald@hwle.com.au)\nHWL Ebsworth Lawyers\n\nREPLY TO STATUTORY DEMAND \u2013 PRIVILEGED AND CONFIDENTIAL\n\nDear Colleagues,\n\nIn response to your Statutory Demand dated 28 May, 2024, Mawson Infrastructure\nGroup, Inc., replies as follows:\n\nPursuant to the Australian Commonwealth Consolidated Acts (Corporations Act 2001 -\nSECT 459H(a)), we assert that there is a genuine dispute between Marshall\nInvestments GCP Pty Ltd (formerly Marshall Investments MIG Pty Ltd), ACN 655 680\n256 as trustee for Marshall Investments MIG Trust ABN 51 605 110 090 and Mawson\nInfrastructure Group Inc ARBN 649 261 861 (\u201cMawson\u201d) regarding the amount of the\ndebt to which your demand relates. As per Moutere Pty Ltd v Deputy Commissioner of\nTaxation [2000] NSWSC 379, \u201cThe policy underlying Sect 459H is that the statutory\ndemand procedure should not be used to coerce a person to pay a disputed amount. A\nstatutory demand is not an instrument of debt collection.\u201d There is thus a defect in the\nStatutory Demand due to a misstatement of an amount or total. See Section 9 of the\nCorporations Act.\n\nIn particular, we assert that (i) Marshall has miscalculated the amount due by using the\npenalty interest rate of 25% instead of the standard commercial interest rate of 8%; and\n(ii) Marshall has been charging the penalty interest rate improperly and untimely, as it\nhas been charging such penalty interest rate prior to its filing of the Statutory Demand.\n\nFurther, Marshall is in bad faith in making this demand as it is fully aware that Mawson\nis in possession of and is making arrangements to turn over significant collateral in the\nUnited States valued in excess of the sums demanded statutorily. By law of offset, the\ndebt is extinguishable by the mere transfer of such assets. A list of these assets are\nattached hereto.\n\nAccordingly, there are significant defects in Marshall\u2019s demand, and substantial injustice\nwill be caused unless the demand is set aside. We hereby respectfully request, and\ndemand if necessary, that Marshall\u2019s Statutory Demand be withdrawn in writing\nimmediately . If Marshall does not set aside its Statutory Demand, Mawson will not only\nactively and successfully refute any presumptions of insolvency under Australian law in\n\n LEGAL@MAWSONINC.COM\n www.MAWSONINC.com Page 1 of 2\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 212 of 220\n\nMarshall Statutory Demand Reply\nJune 17, 2024\n\nan applicable proceeding but will countersue in an appropriate US court for damages\nbased in fraud and bad faith.\n\nFurthermore, by its actions Marshall has consented to the personal and subject matter\nof the courts of the United States and further litigation will be instituted there should this\nmatter not be amicably resolved.\n\nPlease give this reply your prompt and serious attention, directing all further\ncommunications to me.\n\nFeel free to contact me to discuss this matter further.\n\nVery truly yours,\n\n\nKaliste Saloom\nGeneral Counsel\nMawson Infrastructure Group, Inc.\nKaliste.Saloom@MawsonInc.com\nMobile: (337) 962-5836\n\nEnclosures\n\n\n\n\n Page 2 of 2\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 213 of 220\n\n\n\n\n EXHIBIT I\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 214 of 220\n\n\n\n\nFrom: Richard Mattiaccio \nSent: Monday, January 13, 2025 6:31 PM\nTo: Fay, Dylan; mmartos@foxrothschild.com; Hoenig, Isaac\nCc: Hille, David; Wofford, Keith; Moeller-Sally, Stephen; Ulloa, Ryan;\n dedwards@bradfordedwards.com; ICDR Garima Deepak, Esq, LL.M.\nSubject: [EXT] RE: Celsius Network Ltd. et al v. Mawson Infrastructure Group et al - Case\n 01-24-0006-4462\n\n\n\nCounsel,\n\nMy assumption that there was to be a conference in bankruptcy court tomorrow was\nbased on the information that counsel provided to me. My intention in sending my e-mail\non Saturday was to spare counsel and the parties further brie\ufb01ng on whether to go\nforward with the application pending before me until you could hear from the bankruptcy\ncourt at the conference that seemed to be imminent.\n\nBased on the extensive letter submissions of both sides, the question whether the\nautomatic bankruptcy stay should be extended to the application pending should decided\nby the court. It is, of course, the burden of the party seeking relief to present a timely\napplication to the court.\n\nIn the absence of a contrary determination by the bankruptcy court, the application\npending before me will go forward, except that the brie\ufb01ng schedule is modi\ufb01ed as\nfollows:\n\n \uf0b7 January 20, 2025, 6:00 p.m. \u2013 Opposition papers due\n \uf0b7 January 27, 2025, 6:00 p.m. \u2013 Reply papers due.\n\nNo further modi\ufb01cations to \ufb01ling deadlines will be granted unless I receive notice in\nadvance of a deadline that the bankruptcy court has extended the stay to cover the\npending application.\n\nCordially,\n\nRichard Mattiaccio, Sole Arbitrator\n\n\nRichard L. Mattiaccio, C Arb. FCIArb, FCollArb\n\n\n\n 1\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 215 of 220\n\n\n\n\n EXHIBIT J\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 216 of 220\n\n\n\n\n321 N. Clark Street\nSuite 1600\nChicago, IL 60654\n 312.517.9200 312.517.9201\nWWW.FOXROTHSCHILD.COM\n\n\nMARTIN R. MARTOS, II\nDirect No: 312.517.9291\nEmail: mmartos@foxrothschild.com\n\n\n\n\nVia Email\n\nMr. Richard L. Mattiaccio\nrichardmattiaccio@outlook.com\n\nJanuary 13, 2025\n\n\n\nRe: Celsius Network LTD et al. v. Mawson Infrastructure Group Inc. et al., Case No. 01-\n 24-0006-4462\n\nDear Arbitrator Richard L. Mattiaccio:\n\n On behalf of Mawson Infrastructure Group, Inc., Luna Squares LLC, and Cosmos\nInfrastructure LLC (collectively, the \u201cMawson Entities\u201d or \u201cMawson\u201d), we thank you for your\nattention to our January 10, 2025 correspondence (\u201c1/10/25 Mawson Letter\u201d) and your\ncommitment to this arbitration\u2014particularly over the weekend as your January 11, 2025 Response\ndemonstrates (\u201c1/11/25 Mattiaccio Response\u201d). We also note the January 13, 2025 Letter by\nCelsius (\u201c1/13/25 Celsius Letter\u201d), as well as your January 13, 2025 Response (\u201c1/13/25\nMattiaccio Response\u201d). Because there seems to be some confusion, especially around the\nprocedural posture of the involuntary proceeding and the 1/10/25 Mawson Letter, we write to\nclarify the situation and to advise the Court of the status of the involuntary proceedings in the\nUnited States Bankruptcy Court for the District of Delaware (the \u201cDelaware Bankruptcy Court\u201d).\n\n * * *\n In the 1/11/25 Mattiaccio Response, you refer to a January 14 conference. We have\nconsulted with our colleagues representing Mawson in the Delaware Bankruptcy Court and\nconfirmed that there is no January 14 conference in the involuntary proceedings\u2014nor did\nundersigned, or any counsel for Mawson, represent otherwise. Mawson\u2019s request for your\nresponse to the 1/10/25 Mawson Letter by January 14 at 10:00 a.m. ET arose solely from\nMawson\u2019s need to determine whether it would be forced to file an emergency motion in the\nDelaware Bankruptcy Court, given the previous deadline of January 16 for Mawson to respond to\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 217 of 220\n\n\n\n\nJanuary 13, 2025\nPage 2\n\n\n\nClaimant\u2019s Rule 34 Motion in this Matter (a deadline set prior to undersigned counsel appearing\nin this Matter on January 10, 2025).\n\n There was, however, an omnibus hearing set for January 14 in Celsius\u2019s bankruptcy in the\nUnited States Bankruptcy Court for the Southern District of New York. That is not the bankruptcy\ncourt before which Mawson is proceeding, and that hearing has been adjourned. But, again,\nMawson and its undersigned counsel did not refer to a January 14 conference at all. Mawson\nrequested a response by January 14, with apologies for the urgency, \u201cdue to tight timelines in the\nbankruptcy court and upcoming deadlines in this Matter.\u201d 1/10/25 Mawson Letter at 3.\n\n After receiving the 1/11/25 Mattiaccio Response, undersigned prepared a draft letter to\nyou politely noting that there was no January 14 hearing in the involuntary proceeding. The Court\nhas instead ordered Mawson and the Petitioning Creditors to meet and confer by January 17 on an\nagreed schedule\u2014which will include setting the time for an initial conference during which time\nMawson would be able to seek guidance from the Court on the scope of the stay. Dkt. 12.\nClaimants delivered the 1/13/25 Celsius Letter before counsel for Mawson was able to send its\nown letter, unfortunately.\n\n Had counsel for Celsius alerted counsel for Mawson that the reference in the 1/11/25\nMattiaccio Response was to a now-adjourned date in the Celsius bankruptcy, or otherwise\nattempted to meet and confer at all, Mawson would have agreed to a joint letter clarifying the\nprocedural posture of the involuntary proceeding and seeking your guidance (although we expect\nthe parties would have disagreed on what that guidance should be). The 1/13/25 Mattiaccio\nResponse was sent before Mawson could respond to the 1/13/25 Celsius Letter as well. Regardless,\nthe unavoidable conclusion of the 1/11/25 Mattiaccio Response and 1/13/25 Mattiaccio Response\nis that the Delaware Bankruptcy Court should decide this dispute. Mawson will ask the Delaware\nBankruptcy Court to do just that\u2014but cannot control the Court\u2019s timetable and according to her\nprocedures.\n\n We encourage you to review the 1/10/25 Mawson Letter again. There is no reference to\na January 14 hearing. Mawson sought a response by January 14 so that it could prepare\nan emergency motion in the Delaware Bankruptcy Court, if needed. Your view at the time was\nthat this Matter should wait for a conference with the bankruptcy court to advise as to the scope\nof the stay. See 1/11/25 Mattiaccio Response. Mawson will file its moving papers in the\nDelaware Bankruptcy Court by January 17, 2025.\n\n As you state in the 1/13/25 Mattiaccio Response, \u201cthe question whether the automatic\nbankruptcy stay should be extended to the application pending should decided by the court.\u201d With\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 218 of 220\n\n\n\n\nJanuary 13, 2025\nPage 3\n\n\n\nrespect, however, the 1/13/25 Mattiaccio Response does not provide time for that to occur before\nimposing the deadline for a dispositive motion\u2014and appears to be based on the mistaken\nconclusion that Mawson relied on a January 14 hearing. Accordingly, for the reasons stated herein\nas well as the 1/10/25 Mawson Letter, Mawson requests a stay of this Matter pending the Delaware\nBankruptcy Court\u2019s decision on that question.\n\n * * *\n Thank you for your kind attention. If you have any questions or comments, please do not\nhesitate to contact us.\n\n\n\n\n Sincerely,\n\n\n\n Martin R. Martos II & Isaac Hoenig\n\n\n\nCC:\nDavid Hille\nStephen Moeller-Sally\nKeith H. Wofford\nRyan A. Ulloa\nW. Dylan Fay\nCounsel to Celsius Network Ltd.\n\nDenver G. Edward\nCounsel to Ionic Digital Mining LLC\n\nGarima Deepak\nAAA ICDR\n\fCase 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 219 of 220\n\n\n\n\n EXHIBIT K\n\f Case 25-50008-MFW Doc 16-1 Filed 01/21/25 Page 220 of 220\n\n\n\n\nFrom: Richard Mattiaccio \nSent: Tuesday, January 14, 2025 11:03 AM\nTo: Hoenig, Isaac; Fay, Dylan; Martos, Martin R.\nCc: Hille, David; Wofford, Keith; Moeller-Sally, Stephen; Ulloa, Ryan;\n dedwards@bradfordedwards.com; ICDR Garima Deepak, Esq, LL.M.\nSubject: [EXT] Re: Celsius Network Ltd. et al v. Mawson Infrastructure Group et al - Case\n 01-24-0006-4462\n\n\n\nDear Mr. Hoenig,\n\nRespondents' renewed request for a stay of the application pending before me (for early\ndisposition of the claim against Luna Squares based on the Note,) is denied.\n\nRespondents have been on notice since December 17, 2024, that I would not be deferring\nthe briefing or decision of the pending application against Luna Squares due to the\nreported filing of an involuntary bankruptcy petition against entities other than Luna\nSquares. It was incumbent on Respondents to pursue any appropriate remedies promptly\nin the bankruptcy court if they felt they were entitled to such relief.\n\nMawson's opposition papers are due on January 20, 2025. If I do not receive them by that\ntime, I will proceed to decide the application based on the papers that have been\nsubmitted. That would not be my preference would not be consistent with arbitration's\npromise to be an efficient process.\n\nCordially,\n\nRichard Mattiaccio, Sole Arbitrator\n\n\n\nRichard L. Mattiaccio, C Arb. FCIArb, FCollArb\nChartered Arbitrator \u2022 Independent Arbitrator and Mediator\nFellow, College of Commercial Arbitrators\nMember, National Academy of Distinguished Neutrals\nAdjunct Professor, Fordham Law School\nMobile: +1.646.413.2832\nrichardmattiaccio@outlook.com \u2022 www.mattiaccio.com\n **************************************************************\nThis e-mail may contain confidential and privileged material for the sole use of the intended recipient. Any review or distribution by others is strictly\nprohibited. If you are not the intended recipient please contact the sender and delete all copies. Thank you\n\n\n\n\n 1\n\f","ocr_status":2,"date_upload":"2025-02-10T09:27:12.950807-08:00","document_number":"16","attachment_number":1,"pacer_doc_id":"042022057425","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Exhibit Exhibits A-K","acms_document_guid":""},{"resource_uri":"https://www.courtlistener.com/api/rest/v4/recap-documents/429813238/","id":429813238,"tags":[],"absolute_url":"/docket/69555415/16/2/mawson-infrastructure-group-inc-and-celsius-network-ltd-and-celsius/","date_created":"2025-02-10T09:26:22.889902-08:00","date_modified":"2025-02-11T02:17:47.708526-08:00","sha1":"cd1ba4ebf776ca6ffb31fc1bff8919956e81ac20","page_count":2,"file_size":160211,"filepath_local":"recap/gov.uscourts.deb.195290/gov.uscourts.deb.195290.16.2.pdf","filepath_ia":"https://archive.org/download/gov.uscourts.deb.195290/gov.uscourts.deb.195290.16.2.pdf","ia_upload_failure_count":null,"thumbnail":null,"thumbnail_status":0,"plain_text":" Case 25-50008-MFW Doc 16-2 Filed 01/21/25 Page 1 of 2\n\n\n\n\n IN THE UNITED STATES BANKRUPTCY COURT\n FOR THE DISTRICT OF DELAWARE\n\n In re:\n Chapter 11\n MAWSON INFRASTRUCTURE GROUP,\n INC. Case No. 24-12726 (MFW)\n\n Alleged Debtor.\n\n\n MAWSON INFRASTRUCTURE GROUP,\n INC.\n Plaintiff, Adv. Pro. No. 25-50008 (MFW)\n\n v.\n\n CELSIUS NETWORK LTD., CELSIUS\n MINING LLC, and IONIC DIGITAL\n MINING LLC.\n\n Defendants.\n\n\n CERTIFICATE OF SERVICE\n\n I, Daniel A. O\u2019Brien, hereby certify that on the 21st day of January 2025, a true and correct\ncopy of the foregoing Declaration of Keith H. Wofford in Support of Opposition of Celsius\nNetwork LTD. and Celsius Mining LLC to the Alleged Debtor\u2019s Emergency Motion for a\nTemporary Restraining Order and Preliminary Injunction Extending the Automatic Stay Pursuant\nto 11 U.S.C. \u00a7 105 was served on the parties below in the manner(s) indicated and all ECF\nparticipants in this case were served electronically through the Court\u2019s ECF noticing system.\n\n /s/ Daniel A. O\u2019Brien______ _\n Daniel A. O\u2019Brien (No. 4897)\n\n\nVIA EMAIL\n\nSeth A. Niederman\nStephanie Slater Ward\nFOX ROTHSCHILD LLP\n1201 North Market Street, Suite 1200\nWilmington, DE 19801\nsniederman@foxrothschild.com\nsward@foxrothschild.com\n\f Case 25-50008-MFW Doc 16-2 Filed 01/21/25 Page 2 of 2\n\n\n\n\nMichael A. Sweet\nFOX ROTHSCHILD LLP\n345 California Street, Suite 2200\nSan Francisco, California 94104\nmsweet@foxrothschild.com\n\nMichael R. Herz\nFOX ROTHSCHILD LLP\n49 Market Street\nMorristown, NJ 07960\nmherz@foxrothschild.com\n\nMartin R. Martos, II\nFOX ROTHSCHILD LLP\n321 N. Clark Street, Suite 1600\nChicago, IL 60654\nmmartos@foxrothschild.com\n\nIsaac Hoenig\nFOX ROTHSCHILD LLP\n101 Park Avenue, 17th Floor\nNew York, NY 10178\nihoenig@foxrothschild.com\n\nCounsel to the Alleged Debtor\n\n\n\n\n 2\n\f","ocr_status":2,"date_upload":"2025-02-10T09:27:13.464705-08:00","document_number":"16","attachment_number":2,"pacer_doc_id":"042022057426","is_available":true,"is_free_on_pacer":null,"is_sealed":null,"document_type":2,"description":"Certificate of Service","acms_document_guid":""}],"date_created":"2025-01-21T16:02:58.444703-08:00","date_modified":"2025-03-31T09:20:10.509923-07:00","date_filed":"2025-01-21","time_filed":"17:48:50","entry_number":16,"recap_sequence_number":"2025-01-21.010","pacer_sequence_number":58,"description":"Declaration in Support - Declaration of Keith H. Wofford in Support of Opposition of Celsius Network LTD. and Celsius Mining LLC to the Alleged Debtor's Emergency Motion for a Temporary Restraining Order and Preliminary Injunction Extending the Automatic Stay Pursuant to 11 U.S.C. 105 (related document(s)15) Filed by Celsius Mining LLC, Celsius Network Ltd.. (Attachments: # 1 Exhibit Exhibits A-K # 2 Certificate of Service) (O'Brien, Daniel) (Entered: 01/21/2025)","tags":[]}],"entries_total":"https://www.courtlistener.com/api/rest/v4/docket-entries/?count=on&docket=69555415&page_size=40"}