UNITED STATES
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MAWSON INFRASTRUCTURE GROUP INC.
FORM 10-Q
FOR THE QUARTER ENDED March 31, 2022
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | (unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Trade and other receivables | ||||||||
| Cryptocurrencies | - | |||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Equipment deposits | ||||||||
| Marketable securities | ||||||||
| Security deposits | ||||||||
| Operating lease right-of-use asset | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Trade and other payables | $ | $ | ||||||
| Current portion of operating lease liability | ||||||||
| Current portion of finance lease liability | ||||||||
| Borrowings | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Finance lease liability, net of current portion | ||||||||
| Long-term borrowings | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (note 9) | ||||||||
| Shareholders’ equity: | ||||||||
| Additional paid-in capital; Common stock ( | ||||||||
| Share subscription receivable | ||||||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See Accompanying Notes to Unaudited Condensed Interim Consolidated Financial Statements.
1
MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenues: | ||||||||
| Cryptocurrency mining revenue | ||||||||
| Hosting Co-Location revenue | ||||||||
| Sale of crypto currency mining equipment | ||||||||
| Total revenues | ||||||||
| Less: Cost of revenues (excluding depreciation) | ||||||||
| Gross profit | ||||||||
| Selling, general and administrative | ||||||||
| LO2A write off | ||||||||
| Share based payments | ||||||||
| Depreciation and amortization | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Non-operating income/(expense): | ||||||||
| Gains on foreign currency transactions | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax expense | ||||||||
| Net Loss | ( | ) | ( | ) | ||||
| Less: Net (loss)/profit attributable to non-controlling interests | ( | ) | ||||||
| Net Loss attributed to Mawson Infrastructure Group shareholders | ( | ) | ( | ) | ||||
| Net Loss per share, basic & diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of shares outstanding | ||||||||
See Accompanying Notes to Unaudited Condensed Interim Consolidated Financial Statements
2
MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
For the Three Months Ended March 31, 2022
| Common Stock (#) | Common Stock ($) | Additional Paid-in- Capital | Reserves | Accumulated Other Comprehensive Income/(Loss) | Accumulated Deficit | Total Mawson Stockholders’ Equity | Non- controlling interest | Total Equity | ||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock, stock based compensation | ||||||||||||||||||||||||||||||||||||
| Issuance of warrants | - | |||||||||||||||||||||||||||||||||||
| Issuance of RSU's and stock options | ( | ) | ||||||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||||||||||||||||||
| Non-controlling interest | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
3
For the Three Months Ended March 31, 2021
| Series A Preferred Stock (#) | Series A Preferred Stock ($) | Common Shares (#) | Common Stock (#) | Common Stock ($) | Share Subscription Receivable | Additional Paid-in- Capital | Reserves | Accumulated Other Comprehensive Income/(Loss) | Accumulated Deficit | Total Mawson Stockholders’ Equity | Non- controlling interest | Total Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Exchange of stock and Reverse recapitalization of Wize Pharma Inc | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of offer costs, PIPE transaction | - | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of convertible notes, net of offer costs | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, exercise of warrants | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of IPR&D acquired, net of Business Combination transaction costs | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of RSU's and stock options | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value adjustment of LO2A intellectual property revenue sharing obligation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Non-controlling interest | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
See Accompanying Notes to Unaudited Condensed Interim Consolidated Financial Statements
4
MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| LO2A write offs | ||||||||
| Operating lease expense | ||||||||
| Foreign exchange gain | ||||||||
| Share based payments | ||||||||
| Gain on disposal of fixed assets | ||||||||
| Interest expense | ||||||||
| Investment income | ( | ) | ||||||
| Trade and other receivables | ( | ) | ||||||
| Other current assets | ( | ) | ( | ) | ||||
| Trade and other payables | ||||||||
| Net cash provided by operating activities | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Net payment for the purchase of property and equipment | ( | ) | ( | ) | ||||
| Investment in financial assets | ( | ) | ||||||
| Payment of fixed asset deposits | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from common share issuances | ||||||||
| Proceeds from convertible notes | ||||||||
| Payments of capital issuance costs | ( | ) | ||||||
| Proceeds from borrowings | ||||||||
| Advances made to external companies | ( | ) | ||||||
| Repayment of lease liabilities | ( | ) | ||||||
| Payments of borrowings | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
See Accompanying Notes to Unaudited Condensed Interim Consolidated Financial Statements
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MAWSON INFRASTRUCTURE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – GENERAL
General
Mawson Infrastructure Group, Inc. (the “Company” or “Mawson” or “we”), formerly known as Wize Pharma, Inc, and before that, known as OphthaliX Inc., was incorporated in the State of Delaware on February 10, 2012.
The accompanying consolidated financial statements, including the results of the Company’s subsidiaries; Mawson Infrastructure Group Pty Ltd (“Mawson AU” previously known as Cosmos Capital Limited), Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, MIG No.1 Pty Ltd, Cosmos Asset Management Pty Ltd, Luna Squares LLC, BITTD Pty Ltd, Luna Squares Repairs LLC, Luna Squares Property LLC and Mawson Mining LLC (collectively referred to as the “Group”), have been prepared by the Company, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Wize NC Inc, Occuwize Ltd and Wize Pharma Ltd are subsidiaries of Mawson however these companies have not been consolidated into the financial statements as these are subject to contingent value rights (“CVR”), refer to note 9.
These consolidated, condensed interim financial statements should be read in conjunction with the audited consolidated financial statements of Mawson and subsidiaries as of December 31, 2021, and the notes thereto, included in the Company’s Annual Report on Form 10-K filed March 21, 2022. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The results of the interim period are not necessarily indicative of the results to be expected for the full year ended December 31, 2022. These consolidated condensed interim financial statements reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position, the results of operations and cash flows of the Company for the periods presented.
Mawson,
through its subsidiary Mawson AU, is a ‘Digital Asset Infrastructure’ business, which owns and operates modular data centers
(“MDCs”) based in the United States and Australia. As at March 31, 2021 Mawson AU currently owns and has ordered
Going Concern
Based
on internally prepared forecasted cash flows, combined with the existing cash reserves, which take into consideration what management
of the Group considers reasonable scenarios given the inherent risks and uncertainties described in this Quarterly Report on Form 10-Q,
management believes that the Group will have adequate cash reserves to enable the Group to meet its obligations for at least
6
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and basis of preparation
The accompanying consolidated financial statements of the Company include the accounts of the Company and its wholly or majority owned and controlled subsidiaries. Intercompany investments, balances and transactions have been eliminated in consolidation. Non–controlling interests represents the minority equity investment in the Company’s subsidiaries, plus the minority investors’ share of the net operating results and other components of equity relating to the non–controlling interest.
Any changes in the Company’s ownership interest in a consolidated subsidiary, through additional equity issuances by the consolidated subsidiary or from the Company acquiring the shares from existing shareholders, in which the Company maintains control is recognized as an equity transaction, with appropriate adjustments to both the Company’s additional paid-in capital and the corresponding non-controlling interest.
On March 9, 2021, Mawson AU was acquired by the Company. For accounting purposes, this was accounted for as a reverse asset acquisition with Mawson AU as the accounting acquirer (refer to significant accounting policies below). The result of which is that these financial statements are taken to be a continuation of Mawson AU’s financial statements, with the Company incorporated within the acquisition and therefore the historical financial information of Mawson AU (then known as Cosmos Capital Limited) prior to March 9, 2021, became the historical financial information of Mawson AU, which have been consolidated into the financial statements of the Company.
Use of Estimates and Assumptions
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company evaluates on an ongoing basis its assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made.
These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of income and expenses during the reporting periods. Actual results could differ from those estimates. The Company has considered the following to be significant estimates made by management, including but not limited to, going concern assumptions, estimating the useful lives of fixed assets, realization of long-lived assets, unrealized tax positions and the realization of digital currencies, business combinations, reverse asset acquisition, and the contingent obligation with respect to future revenues.
Critical Accounting Policies
Critical accounting policies are described in the consolidated financial statements for Mawson included in the Company’s 10-K filed March 21, 2022. There have been no changes to critical accounting policies in the three months period ended March 31, 2022, other than the reverse asset acquisition accounting policy which is no longer considered to be a critical accounting policy and has therefore been included in significant accounting policies.
Revenue Recognition – Digital asset mining revenue
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of ASC 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 consideration to which the company expects to 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) identity 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 satisfied a performance obligation.
7
In 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 good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods 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 resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service 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 context of the contract).
There is currently no specific definitive guidance in U.S. GAAP or alternative accounting frameworks for the accounting of managing digital currencies and management has exercised significant judgement in determining appropriate accounting treatment for the recognition of revenue for such operations.
The Company has entered into a contract with mining pools and has undertaken the performance obligation of providing computing power in exchange for non-cash consideration in the form of cryptocurrency. The provision of computing power is the only performance obligation in the Group’s contract with its pool operators. In certain pools the amount of reward for computing power depends on the pool’s success in mining blocks. In other pools, the amount of reward includes no such contingency, although the fees payable to such pools are typically higher as a result. Where the 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 resolved, which is generally when the cryptocurrency is received.
The Company measures the non-cash consideration received at the fair market value of the cryptocurrency received. Management estimates fair value on a daily basis, as the quantity of cryptocurrency received multiplied by the price quoted on the crypto exchanges that the Company uses to dispose of cryptocurrency on the day it was received.
Property and equipment
Property and equipment are stated at cost, net of accumulated depreciation. The cost includes any cost of replacing part of the property and equipment with the original cost of the replaced part being derecognized. All other repair and maintenance costs are recognized in profit or loss 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 if 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 on which control is obtained.
The depreciable amount of fixed assets is depreciated on a straight-line or declining balance basis based on the asset classification, over their useful lives to the economic entity commencing from the time the assets arrive at their destination where they are ready for use. Depreciation is calculated over the following estimated useful lives:
| Financial Asset class | Useful life | Depreciation Method | ||
| Fixtures and Fittings | ||||
| Plant and equipment | ||||
| Modular data center | ||||
| Motor Vehicles | ||||
| Computer equipment | ||||
| Processing Machinery (Miners) | ||||
| Transformers |
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognized.
8
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
The
Company changed its policy in relation to freight costs in relation to processing machines with effect from October 1, 2021. Prior to
this date these costs were expensed to the statement of operations and profit and loss, and afterwards these costs are capitalized into
processing machinery. This change resulted in an increase in processing machines in the balance sheet of $
The Company’s long-lived assets are reviewed for impairment in accordance with Accounting Standards Codification (“ASC”) 360, “Property, Plant and Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset may 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 undiscounted cash flows expected to be generated by the assets. If such asset is considered to be impaired, the impairment to be recognized is measured by 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 fair value less costs to sell. During the periods ended March 31, 2022, and 2021, no impairment losses have been identified.
Share based payments
The Company follows FASB Codification Topic ASC 718-10 Compensation-Stock Compensation. The Company expenses stock-based compensation to employees and non-employees 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 the options using the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. These assumptions are the expected stock volatility, the risk–free interest rate, the expected life of the option, 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 common stock trading prices. Risk–free interest rates are calculated based on the implied yield available on U. S. 10-year Treasury bond.
Significant Accounting Policies
Revenue Recognition - Hosting Co-location revenue
The Company provides power for our co-location hosting customers on a variable basis which is received monthly from the customer based on the power usage at the rate outlined in each customer contract.
We recognize variable power revenue each month as the uncertainty related to the consideration is resolved, power is provided to our customers, and our customers utilize the power (the customer simultaneously receives and consumes the benefits of the Company’s performance).
The customer contracts contain performance obligations, variable consideration in such contracts to be allocated to and recognized in the period to which the consideration relates. Usually this is when it is invoiced, rather than obtaining an estimation of variable consideration at the beginning of the customer contracts.
Customers also are invoiced a fixed monthly fee for maintenance services which include, cleaning, cabling and other services to maintain the customers’ equipment.
Revenue Recognition - Sale of crypto currency mining equipment
Crypto currency mining equipment sales revenue includes revenues related to the sale of Miners. This is recognized as revenue upon delivery to the customer, which is when the control of the Miner transfers. Payments are typically received at the point control transfers or in accordance with payment terms customary to the business.
9
Revenue recognition – equipment sales
The Company earned revenues from the sale of earlier generation cryptocurrency mining units and modular data centers that have been assembled or refurbished for resale (collectively “Hardware”). Revenue from the sale of Hardware is recognized when all of the following conditions are satisfied: (i) persuasive evidence of a sales arrangement exists, (ii) the sales terms are fixed or determinable, (iii) title and risk of loss have transferred, and (iv) payment is received. At the date of sale, the net book value is expensed in cost of revenues.
Cost of revenues:
Cost of revenue consists primarily of expenses that are directly related to providing the Company’s service to its paying customers. These primarily consist of costs associated with operating our co-location facilities such as direct power costs, energy costs (including any carbon offset acquired during the year), freight costs and material costs related to cryptocurrency mining.
Research and development expenses:
Research and development expenses are charged to the statement of comprehensive loss as incurred.
Income taxes:
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance may be established to reduce the deferred tax asset to the level at which it is “more likely than not” that the tax asset or benefits will be realized. Realization of tax benefits of deductible temporary differences and operating loss carryforwards depends on having sufficient taxable income of an appropriate character within the carryback or carryforward periods.
The
Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained upon review
by the taxing authority. Recognized income tax positions are measured at the largest amount that is greater than
Functional currency:
All subsidiaries of Company have a functional currency of United States dollar (“USD”) with the exceptions of Mawson Infrastructure Group Pty Ltd, MIG No.1 Pty Ltd, Cosmos Trading Pty Ltd, BITTD Pty Ltd and Cosmos Asset Management Pty Ltd whose functional currency is the Australian Dollar (“AUD”). The financial statements of foreign businesses have been translated into USD at current exchange rates for balance sheet items and at the average rate for income statement items. Translation of all the consolidated companies’ financial records into USD is required due to the reporting currency for these consolidated financial statements presented as USD and the functional currency of the parent company being that of AUD. Translation adjustments are accumulated in other comprehensive loss. Revenue and expense accounts are converted at prevailing rates throughout the year. Gains or losses on foreign currency transactions and translation adjustments in highly inflationary economies are recorded in income in the period in which they are incurred.
10
Segment Reporting:
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group in deciding how to allocate resources and in assessing performance. Our chief operating decision–making group is composed of the chief executive officer. We currently operate in one segment surrounding our cryptocurrency mining operation.
Cash and cash equivalents:
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, cash held with digital currency exchanges, and other short-term and highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.
Digital Currencies
Digital currencies are included in current assets in the consolidated balance sheets. Digital currencies are classified as indefinite-lived intangible assets in accordance with ASC 350, Intangibles - Goodwill and Other, and are accounted for in connection with the Company’s revenue recognition policy detailed above.
The following table presents the Company’s digital currency (Bitcoin) activities for the quarter ended March 31, 2022, and 2021:
| Three months to March 31, | ||||||||
| 2022 | 2021 | |||||||
| Opening number of Bitcoin held as at December 31, 2021 and 2020 | ||||||||
| Number of Bitcoin added | ||||||||
| Number of Bitcoin sold | ( | ) | ( | ) | ||||
| Closing number of Bitcoin held as at March 31, 2022 and 2021 | ||||||||
Digital currency is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.
The Company’s policy is to dispose of production at the earliest opportunity, the holding period is minimal, usually no more than a few days. 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.
Equipment deposits:
The Company records a prepaid expense for costs paid but not yet incurred. Those expected to be incurred within one year are recognized and shown as equipment deposits. Equipment deposits result from advance payments to suppliers for goods to be received in the future. Equipment deposits are initially recognized as assets at the date the amount is paid, and are subsequently recorded as equipment as the Company takes delivery and control of the equipment from the supplier. Amounts are recognized initially at the amount of the unconditional consideration. They are subsequently measured at cost, less loss allowance.
Reverse Asset Acquisition:
On March 9, 2021, the Company acquired the shares of Cosmos Capital Limited (now known as Mawson Infrastructure Group Pty Ltd and referred to herein as Mawson AU) in a stock for stock exchange. This transaction has been accounted for as a reverse asset acquisition. This transaction reverse asset acquisition and the associated impact is referred to as the “Cosmos Transaction”.
11
Under
the terms of the Cosmos Transaction Bid Implementation Agreement, the Company was required to make share based payments consisting of
up to
Fair value of financial instruments:
The Company accounts for financial instruments under FASB Accounting Standards Codification Topic (“ASC”) 820, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 — 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 markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and
Level 3 — assets and liabilities whose significant value drivers are unobservable. Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management 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 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 determination requires significant management judgment.
Of
the Company’s financial instruments on the Company’s balance sheet as at March 31, 2022, the only item measured and recorded
at fair value is the Marketable Securities of $
Concentrations of credit risk:
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, marketable securities. Cash and cash equivalents and restricted bank deposits are invested in banks in Australia and the U.S. If the counterparty completely failed to perform in accordance with the terms of the contract, is the maximum amount of loss the Company would be the balance. Management believes that the financial institutions that hold the Company’s investments are financially sound and, accordingly, minimal credit risk exists with respect to these investments. The Company has no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
Legal and other contingencies:
The Company accounts for its contingent liabilities in accordance with ASC 450 “Contingencies”. A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Legal costs incurred in connection with loss contingencies are expensed as incurred. As of March 31, 2022, the Company is not a party to any litigation that could have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.
12
Leases:
The Company accounts for its leases under ASC 842, Leases which was effective January 1, 2019. The Company determines if an arrangement is a lease at inception. Using ASC 842 leases are classified as operating or finance leases on the Balance Sheet as a right of use (“ROU”) assets and lease liabilities within current liabilities and long-term liabilities on our consolidated balance sheet. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The Company’s lease does not provide an implicit rate and therefore the Company measured the ROU asset and lease obligation based upon the present value of future minimum lease payments. The Company’s incremental borrowing rate is estimated based on risk-free discount rate for the lease, determined using a period comparable with that of the lease term and in a similar economic environment. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. The Company does not record leases on the consolidated balance sheets with a term of one year or less. The Company does not separate lease and non-lease components but rather account for each separate component as a single lease component for all underlying classes of assets. Where leases contain escalation clauses, rent abatements, or concessions, such as rent holidays and landlord or tenant incentives or allowances, the Company applies them in the determination of straight-line operating lease cost over the lease term.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies and adopted by the Company as of the specified effective date. For information with respect to recent accounting pronouncements, see Note 2 to the consolidated financial statements for Mawson as of December 31, 2021, included in the Company’s Annual Report on Form 10-K filed March 21, 2022, recent accounting pronouncements since that date include:
In March 2022, the FSAB issued ASU update 2022-01—Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. The adoption of ASU 2021-01 did not have a material impact on the Company’s financial statements or disclosures.
In March 2022, the FSAB issued ASU 2022-02—Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The adoption of ASU 2022-02 did not have a material impact on the Company’s financial statements or disclosures.
NOTE 3 – BASIC AND DILUTED NET LOSS PER SHARE
Net loss per common share is calculated in accordance with ASC Topic 260: Earnings Per Share (“ASC 260”). Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding, as they would be anti-dilutive.
Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share as at March 31, 2022 and 2021 are as follows:
| As at March 31, | ||||||||
| 2022 | 2021 | |||||||
| Warrants to purchase common stock | ||||||||
| Options to purchase common stock | ||||||||
| Common stock due to former Cosmos shareholders to be issued pending approval of increase to authorized capital | ||||||||
| Mandatory convertible notes to exchange common stock | ||||||||
| Restricted Stock-Units (“RSUs”) issued under a management equity plan | ||||||||
13
The following table sets forth the computation of basic and diluted loss per share:
| For the three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net Loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted average common shares - basic and diluted | ||||||||
| Loss per common share - basic and diluted | $ | ( | ) | $ | ( | ) | ||
Comparative
weighted average common shares have been revised by the ratio of Mawson AU to the Company shares exchanged in the reverse asset acquisition
in March 2021. Pursuant to that certain Certificate of Amendment to the Certificate of Incorporation of the Company dated August 11,
2021, Mawson executed a 10-for-1 reverse stock split of its outstanding common stock and reduced its authorized common stock to
NOTE 4 – DEPOSIT, PROPERTY AND EQUIPMENT
On
February 5, 2021,
On
August 9, 2021,
During
the three months ended March 31, 2022, $
NOTE 5 – LEASES
Luna Squares LLC leases a 16.35-acre lot in Georgia from the Development Authority of Washington County. The lease term was originally for 1 acre from May 1, 2020, until April 30, 2023. An amendment to the lease and exercise of option to lease four additional acres was signed and became effective February 23, 2021. A further amendment to the lease and exercise of option to lease was signed and became effective August 24, 2021. The Lease Amendment covers an additional 11.35 acres of the property, bringing the total to 16.35 acres under the lease. It also includes 5, 3-year extension options bringing the total lease period to run until 2038.
The
Company leases the headquarters of its business operations at Level 5, 97 Pacific Highway, North Sydney NSW 2060 Australia, being
The
Company leases
On
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 related entity – refer to note 12 for details).
Other than the foregoing leases, the Company does not lease any material assets. The Company believes that these offices and facilities 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 Company believes that it could obtain such offices and facilities at commercially reasonable rates.
14
The Company’s lease costs recognized in the Consolidated Statements of Income and Comprehensive Loss consist of the following:
| For the three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Operating lease charges (1) | $ | $ | ||||||
| Finance lease charges: | ||||||||
| Amortization of right-of-use assets | ||||||||
| Interest on lease obligations | ||||||||
| $ | $ | - | ||||||
| (1) | Included in Selling, General & Administrative Expenses. |
| Operating leases | Finance Leases | |||||||
| 2023 | $ | $ | ||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| Total undiscounted lease obligations | ||||||||
| Less imputed interest | ( | ) | ( | ) | ||||
| Total present value of lease liabilities | ||||||||
| Less current portion of lease liabilities | ( | ) | ( | ) | ||||
| Non-current lease liabilities | $ | $ | ||||||
| Operating leases | Finance Leases | |||||||
| Operating cash flows from operating and finance leases | $ | $ | ||||||
| Weighted-average remaining lease term – operating and finance leases (years) | ||||||||
| Weighted-average discount rate – operating and leases (%) | % | % | ||||||
NOTE 6 – PROPERTY AND EQUIPMENT
Property and equipment, net, consisted of the following:
| March
31, 2022 | December 31, 2021 | |||||||
| Plant and equipment | ||||||||
| Computer equipment | ||||||||
| Furniture & fixtures | ||||||||
| Processing machines (Miners) | ||||||||
| Modular data center | ||||||||
| Motor Vehicles | ||||||||
| Transformers | ||||||||
| Low-cost assets | ||||||||
| Assets under construction | ||||||||
| Total | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | ||||||||
15
The
Company incurred depreciation and amortization expense in the amounts of $
The
Company had additions of $
NOTE 7 – INCOME TAXES
The Company's effective tax rates for the three months ended March 31, 2022 and 2021, were as follows:
| For the three months ended March 31, |
||||||||
| 2022 | 2021 | |||||||
| Effective Tax Rate | |
% | |
% | ||||
The Company's 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 noncontrolling interests. The Company has maintained a full valuation allowance for federal and the majority of its state jurisdictions.
NOTE 8 – STOCKHOLDERS EQUITY
Common Stock
TraDigital
Marketing Group LLC was issued
Under
the terms of the Cosmos Transaction Bid Implementation Agreement the Company made share-based payments under an Incentive Compensation
Program during September 2021 (refer to reverse acquisition accounting policy). Within the March 2022 quarter, five employees converted
these into
During
February 2022, Kyle Hoffman was paid $
Restricted Stock
As of March 31, 2022, there was no restricted stock.
Common Stock Warrants
A summary of the status of the Company’s outstanding stock warrants and changes during the quarter ended March 31, 2022, is as follows:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | ||||||||||
| Outstanding as of December 31, 2021 | ||||||||||||
| Issued | $ | | ||||||||||
| Exercised | ( | ) | ||||||||||
| Expired | ||||||||||||
| Outstanding as of March 31, 2022 | $ | |||||||||||
| Warrants exercisable as of March 31, 2022. | $ | |||||||||||
On
February 23, 2022, Mawson issued to Celsius Mining warrants with an expiry date of
16
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Agreements
| 1. | In connection with the Cosmos Transaction, we issued one CVR to each of our securityholders for each outstanding share of common stock of Mawson, and for each share of common stock of Mawson underlying other convertible securities and warrants, held immediately before the closing of the Cosmos Transaction. Each CVR represents the right to receive a pro rata share of any consideration that we may receive in connection with any successful monetization of our LO2A business, less transaction expenses and customary deductions as detailed in the CVR agreement, including a deduction of up to $ |
| 2. | On August 9, 2021, Infrastructure entered into a second Long-Term Purchase Contract with Canaan for the purchase of |
NOTE 10 – BORROWINGS
Short-term Borrowings
On
October 15, 2021,
Long-term Borrowings
Marshall loan
In
December 2021
17
Celsius loan
On
February 23, 2022, Luna Squares LLC entered into the Co-Location Agreement with Celsius Mining LLC, in connection with this agreement,
Celsius Mining loaned Luna Squares LLC a principal amount of US$
NOTE 11 – RELATED PARTY TRANSACTIONS
On
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 subsidiary entity in which Vertua Ltd has a
NOTE 12 – SUBSEQUENT EVENTS
On May 12, 2022, Luna Squares Texas LLC (a wholly owned subsidiary
of the Company) entered into an Option Agreement and Gross Profit Agreement with JAI TX, LLC and then signed or took and assignment of
4 leases for properties in Texas (all in close proximity) with the intent to develop MDC facilities for mining Bitcoin. Luna Squares Texas
LLC will seek to execute relevant power agreements, however the expectation is that the four locations can provide a combined 120MW of
power. Rent under the leases ranges from $
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of our balance sheets, statements of comprehensive income (loss) and cash flows. The following discussion and analysis of our financial condition and results of operations should be read together with the interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. All amounts are in U.S. dollars.
Throughout this report, unless otherwise designated, the terms “we,” “us,” “our,” the “Company,” “Mawson,” “our company” and the “combined company” refer to Mawson Infrastructure Group Inc., a Delaware corporation, and its direct and indirect subsidiaries, including Mawson Infrastructure Group Pty Ltd, an Australian company (“Mawson AU”), Cosmos Trading Pty Ltd, Cosmos Infrastructure LLC, Cosmos Manager LLC, Cosmos MIG No.1 Pty Ltd, Cosmos Asset Management Pty Ltd, and Luna Squares LLC, BITTD Pty Ltd, Luna Squares Repairs LLC, Luna Squares Property LLC and Mawson Mining LLC . Wize NC Inc, Occuwize Ltd and Wize Pharma Ltd are subsidiaries of Mawson however these companies have not been consolidated into the financial statements are not included when referring to we, us, our or the Company or Mawson as these are subject to contingent value rights (“CVR”), refer to note 9 of the financial statements.
Pursuant to that certain Certificate of Amendment to the Certificate of Incorporation of the Company dated August 11, 2021, Mawson executed a 10-for-1 reverse stock split of its outstanding common stock and reduced its authorized common stock to 120,000,000 shares, as set forth in the Company’s Current Report on Form 8-K filed August 16, 2021. Unless otherwise specified, all Mawson share numbers in this Quarterly Report on Form 10-Q reflect post-reverse stock split numbers.
Forward-Looking Statement Notice
This Quarterly Report on Form 10-Q contains forward-looking statements about our expectations, beliefs or intentions regarding, among other things, our product development efforts, business, financial condition, results of operations, strategies or prospects. In addition, from time to time, our representatives have made or may make forward-looking statements, orally or in writing. Forward-looking statements can be identified by the use of forward-looking words such as “believe,” “expect,” “intend,” “plan,” “may,” “should” or “anticipate” or their negatives or other variations of these words or other comparable words or by the fact that these statements do not relate strictly to historical or current matters. These forward-looking statements may be included in, but are not limited to, various filings made by us with the SEC, press releases or oral statements made by or with the approval of one of our authorized executive officers. Forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements, including, but not limited to, the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2021, and in Part II – Item 1A of this report.
This report identifies important factors which could cause our actual results to differ materially from those indicated by the forward-looking statements, particularly those set forth under Item 1A. “Risk Factors” as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, and in Part II – Item 1A of this report.
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 statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
19
Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:
| ● | the fact that we have incurred operating losses and may continue to do so for the foreseeable future; |
| ● | that we may need to raise additional capital, to meet unexpected liabilities or accelerate growth in a competitive environment, and such capital raising may be costly or difficult to obtain and will dilute current stockholders’ ownership interests; | |
| ● | that we may never become profitable; | |
| ● | competition and technological challenges we may face; | |
| ● | the slowing or stopping of the development or acceptance of digital asset systems; | |
| ● | changes the Bitcoin network’s protocols and software; | |
| ● | any decrease in the incentive for Bitcoin mining; | |
| ● | growth challenges we may face; |
| ● | our ability to obtain and maintain adequate insurance; |
| ● | we may become subject to existing or future government regulations which increase the cost of doing business, or which cause us to cease some or all of our operations; | |
| ● | our exposure to fluctuations in the market value of digital assets, in particular Bitcoin, and the relative attractiveness of those digital assets to investors, speculators, and users payment network services over other solutions; | |
| ● | our reliance on third party manufacturers for Miners and other infrastructure and hardware; | |
| ● | risks relating to the supply chain disruptions due to pandemic (e.g. COVID-19), shortages (computer chips), and geo-political tensions (e.g. China trade bans, war in Ukraine); | |
| ● | climate and climate change risks, including direct risks from storms and floods, but also the implementation of policies which may lead to higher energy costs; |
| ● | political or economic crises motivating large-scale sales of digital assets; | |
| ● | regulatory risks, including local and global governments regulating, or even banning, Bitcoin or Bitcoin mining; | |
| ● | the impact of our business successes or failures on the value of our common stock; | |
| ● | the impact of future stock sales on our stock price; | |
| ● | the potential lack of liquidity, or volatility, of our common stock and warrants; | |
| ● | the potential failure to maintain effective internal controls over financial reporting; | |
| ● | the existence of anti-takeover provisions in our charter documents and Delaware law; | |
| ● | that we do not intend to pay dividends on our common stock; and | |
| ● | competitive companies and technologies within our industry, and outside it (such as central bank digital currencies and quantum computing). |
20
All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date of this report and are expressly qualified in their entirety by the cautionary statements included in this report. Except as required by applicable law, we undertake no obligations to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. In evaluating forward-looking statements, you should consider these risks and uncertainties.
Overview
Mawson is a ‘Digital Asset Infrastructure’ business, which owns and operates (through its majority-owned subsidiary Mawson AU) modular data centers (“MDCs”) in the United States and Australia. We are focused on developing the technology to enable us to own and operate MDCs that are both air-cooled and liquid immersion cooled.
Our primary business is the ownership and operation of Application-Specific Integrated Circuit (“ASIC”) computers known as Miners. We currently operate three sites, with two locations in USA, and a location in Australia, from which we operate our combined business. The Miners are predominately focused on the process of digital mining, specifically for Bitcoin.
We offer ‘hosting’ or ‘co-location’ arrangements to other businesses in the digital asset infrastructure industry the opportunity to have their Miners located within our MDCs, who pay us a fee for the use of our facilities and related services (often based on consumption).
We also sell used crypto currency mining equipment on a periodic basis, subject to prevailing market conditions for used equipment.
As of March 31, 2022
| Existing Operations Online | Order and Purchase Agreements | Cumulative Fleet Fully Deployed | ||||||||||
| Total miners online | 20,697 | - | 20,697 | |||||||||
| Total miners in Transit | - | 2,168 | 2,168 | |||||||||
| Total miners on order | - | 11,000 | 11,000 | |||||||||
| Total miners in storage | 5,360 | - | 5,360 | |||||||||
| Total miners | 26,057 | 13,168 | 39,225 | |||||||||
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 configuration for both ASIC and alternate computing uses.
In addition, our indirect subsidiary, Cosmos Asset Management Pty Ltd (“Cosmos Asset Management”), is the investment manager of the Bitcoin Wholesale Access Fund, a wholesale, unregistered managed investment scheme Bitcoin Wholesale Access Fund invests in and holds Bitcoin for third party investors and is the manager of the Cosmos Global Digital Miners Access ETF, listed on Cboe in Australia under the code DIGA.
Prior LO2A Business
On March 9, 2021, the Company acquired the shares of Mawson AU in a stock for stock exchange (the “Cosmos Transaction”).
Prior to the Cosmos Transaction our main business undertaking was as a clinical-stage biopharmaceutical company focused on the treatment of ophthalmic disorders, including dry eye syndrome (our “LO2A business”). However, as part of the Cosmos Transaction, substantially all of the economic benefits of any successful monetization of our LO2A business, if any, will benefit only the holders of CVR and any contingent 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 carrying amount of $23.96 million has been fully expensed in the consolidated statements of operations for the year ended December 31, 2021.
21
Recent Developments.
On February 23, 2022, Luna Squares LLC entered into the Co-Location Agreement with Celsius Mining LLC (“Celsius Mining”), pursuant to which Luna Squares LLC will provide a hosting facility, electrical power and internet access to Celsius Mining for the purposes of installing, maintaining and operating Celsius Mining’s ASIC machines (cryptocurrency mining equipment) for a monthly services fee based on power consumption, plus an infrastructure fee, plus a market margin. In addition, Celsius Mining loaned Luna Squares LLC a principal amount of US$20,000,000 (“Principal”), for the purpose of funding the infrastructure required to meet the obligations of the Co-Location Agreement, for which Luna Squares LLC issued a Secured Promissory Note (the “Promissory Note”) in the principal amount equal to the Principal. The Promissory Note accrues interest daily at rate of 12% per annum. Luna Squares LLC is required to amortize the loan at a rate of 15% per quarter, with principal repayments starting in the third quarter following the closing. The Promissory Note has a maturity date of August 23, 2023. In the event Luna Squares LLC receives cash proceeds from certain sales of assets, Luna Squares LLC would be required to direct such cash proceeds to Celsius Mining, which will be applied to the outstanding principal and interest under the Promissory Note. The Promissory Note includes customary events of default and remedies. In connection with the transaction, Mawson issued to Celsius Mining, warrants to purchase up to 3,850,000 shares of common stock, par value $0.001 per share, of Mawson at an exercise price of US$6.50 per share. The warrant may be exercised at any time after issuance and until the later to occur of the eighteen (18) month anniversary of issuance and the date on which the Promissory Note has been completely repaid.
On 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 subsidiary entity in which Vertua Ltd has a 100% ownership interest. James Manning, CEO, a director and a significant stockholder of the Company is also a director of Vertua Ltd and has a material interest in the Sharon lease as a large shareholder of Vertua Ltd. The lease contains market standard legal terms, and will be for a term of 5 years, and Luna Squares LLC has 2 options to extend for 5 years each. The Audit Committee of the Company has compared the rent and terms to other arms’ length leases the Company has entered into and formed the view the rent is in line with the market for similar properties. Rent is subject to annual increases equal to the CPI 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 usage, variable additional rent may be payable, with charges ranging from $500 to $10,000 per month, depending on power energized and whether it is available. Upon the recommendation from the Audit Committee, the directors of the Company, other than James Manning, were made aware of the material facts as to Mr. Manning’s interest in the lease and authorized the Company in good faith to enter the lease after determining the lease to be fair to the Company.
COVID-19.
The COVID-19 global pandemic has been unpredictable and unprecedented and is likely to continue to result in significant national and global economic disruption, which may adversely affect our business. The Company relies on equipment supplied by third parties which, like many manufacturing businesses globally, are at risk of supply chain issues. We currently do not expect any material impact on our long-term development, operations, or liquidity due to the COVID-19 pandemic. However, we are actively monitoring this situation and the possible effects on our financial condition, liquidity, operations, suppliers, and industry.
Regulation of Digital Assets
Digital assets and cryptocurrencies have been the source of much regulatory consternation, resulting in differing definitional outcomes without a single unifying statement. We do not believe our mining activities require registration to conduct such activities and accumulate digital assets. Nevertheless it is likely that regulation in the digital asset industry will increase. On March 9, 2022, President Biden issued an executive order that identified the following objectives for future regulation of digital assets in the United States: (1) protect consumers, investors, and businesses, (2) protect financial stability, (3) mitigate the illicit finance and national security risks posed by misuse of digital assets, (4) reinforce United States leadership in the global financial system and in technological and economic competitiveness, (5) promote access to safe and affordable financial services, and (6) support technological advances that promote responsible development and use of digital assets. The executive order was generally received as a positive for the digital asset industry, especially in the United States, as it appears to seek to foster an environment of innovation for digital assets within some reasonable bounds. This can be seen as similar to moves in the Australian government context, where the government has declared that it is seeking to better understand digital assets in order to craft and promulgate better designed regulation, and can be seen as contrasting to the reactions in some jurisdictions, where outright bans and other barriers have been erected against digital assets and cryptocurrencies.
22
In the past it has also been noted that the SEC, the Commodity Futures Trading Commission (“CFTC”), Nasdaq or other governmental or quasi-governmental agency or organization (including similar authorities in other jurisdictions such as Australia) may conclude that our digital asset mining activities involve the offer or sale of “securities”, or ownership of “investment securities”, and we may face regulation under the Securities Act of 1933, as amended (the “Securities Act”) or the Investment Company Act of 1940. Such regulation or the inability to meet the requirements to continue operations, would have a material adverse effect on business, financial condition, results of operations and prospects of our business. Currently in Australia, Bitcoin itself is not considered a financial product nor are digital assets regarded as money or currency for the purpose of Australian law. The effect of any future regulatory change on digital assets or an entity dealing in or holding digital assets is impossible to predict, but such change could be substantial and adverse to our financial returns.
Results of Operations – Three months Ended March 31, 2022 compared to the three months ended March 31, 2021
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenues: | ||||||||
| Cryptocurrency mining revenue | 18,783,842 | 5,120,014 | ||||||
| Hosting Co-Location revenue | 548,948 | - | ||||||
| Sale of crypto currency mining equipment | 91,545 | 1,877,613 | ||||||
| Total revenues | 19,424,335 | 6,997,627 | ||||||
| Less: Cost of revenues (excluding depreciation) | 8,412,360 | 2,372,781 | ||||||
| Gross profit | 11,011,975 | 4,624,846 | ||||||
| Selling, general and administrative | 6,476,945 | 2,631,964 | ||||||
| LO2A write off | - | 23,963,050 | ||||||
| Share based payments | 390,609 | 14,795,403 | ||||||
| Depreciation and amortization | 13,803,032 | 1,314,899 | ||||||
| Total operating expenses | 20,670,586 | 42,705,316 | ||||||
| Loss from operations | (9,658,611 | ) | (38,080,470 | ) | ||||
| Non-operating income/(expense): | ||||||||
| Gains on foreign currency transactions | (699,237 | ) | (661,682 | ) | ||||
| Other income | 24,447 | 472,741 | ||||||
| Interest expense | (1,236,673 | ) | (250,662 | ) | ||||
| Loss before income taxes | (11,570,074 | ) | (38,520,073 | ) | ||||
| Income tax expense | - | - | ||||||
| Net Loss | (11,570,074 | ) | (38,520,073 | ) | ||||
23
Revenues
Cryptocurrency mining revenues from production for the three months ended March 31, 2022 and 2021 were $18.78 million and $5.12 million respectively. This represented an increase of $13.66 million or 267% over the period. The increase in mining revenue for the period was primarily attributable to an increase in the total Bitcoin produced. Bitcoin produced totaled 458.68 in 2022 compared with 123.22 in the 2021 period, or an increase of 272% of Bitcoin produced over the respective period.
Hosting co-location revenue for the three months ended March 31, 2022 and 2021 were $0.55 million and $nil respectively. This increase is due to there being no co-location revenue in the prior period.
Sales of crypto currency mining equipment for the three months ended March 31, 2022, were $0.09 million and $1.88 million respectively.
Operating Cost and Expenses
Our operating costs and expenses include cost of revenues; selling, general and administrative expenses; share based payments; and depreciation and amortization.
Cost of revenues.
Our cost of revenue consists primarily of: direct power costs related to cryptocurrency mining, and cost of mining equipment sold.
Cost of revenues for the three months ended March 31, 2022 and 2021 were $8.41 million and $2.37 million, respectively. The increase in cost of revenue was primarily attributable to: an increase in power costs related to the increase in the deployment and operation of cryptocurrency mining hardware. Included in our cost of revenues is any costs associated with offsetting carbon emissions.
Selling, general and administrative.
Our selling, general and administrative expenses consist primarily of professional and management fees relating to: accounting, payroll, audit, and legal; research and development; and general office expenses.
Selling, general and administrative expenses for the three months ended March 31, 2022 and 2021 were $6.48 million and $2.88 million respectively. The increase in selling, general and administrative expenses were attributable to a number of factors; payroll expenses increased by $1.63 million due to an increase in employee numbers during the year; equipment repair costs increased by $0.68 million; marketing costs increased by $0.40 million; operating lease expense increased by $0.37 million due to the new lease agreements entered into since March 2021; freight expense increased by $0.3 million representing the increase in property and equipment purchases during the year. The remaining increase in expenses relates to the increase in the scale of business operations during the year.
Share based payments.
Share based payments expenses for the three months ended March 31, 2022 and 2021 were $0.39 million and $14.80 respectively. In the three months ended March 31, 2022, share based payments were largely attributable to costs recognized for warrants issued to Celsius Mining LLC amounting to $0.17 million and $0.17 million in relation to long-term incentives for the Company’s leadership team.
Depreciation and amortization.
Depreciation consists primarily of depreciation of cryptocurrency mining hardware and MDC equipment.
Depreciation and amortization for the three months ended March 31, 2022 and 2021 were $13.80 million and $1.31 million, respectively. The increase is primarily attributable to new machines and MDCs which are being procured and have come into the ownership of the Company and the application of the diminishing value method, resulting in a higher depreciation expense in the initial months of mining equipment operation.
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Non-operating expense
Non-operating expenses consist primarily of interest expense and net realized and unrealized losses on foreign currency remeasurement.
During 2022, the realized and unrealized losses on foreign currency transactions were $0.70 million and in prior period there was a loss of $0.61.
Interest expense increased by $0.99 million attributable to the interest costs charged on the loans taken out with Foundry Digital LLC, Marshall Investments MIG Pty Ltd during the year and Celsius Mining LLC.
Net loss available to Common Shareholders
As a result of the foregoing, the Company recognized a net loss of $11.34 million for the three months ended March 31, 2022, compared to a net loss of $38.56 million for the three months ended March 31, 2021.
Non-GAAP Financial Measures
The Company utilizes a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing its overall business performance, for making operating decisions and for forecasting and planning future periods. The Company considers the use of non-GAAP financial measures helpful in assessing its current financial performance, ongoing operations and prospects for the future. While the Company uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, the Company does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, the Company believes that disclosing non-GAAP financial measures to the readers of its financial information provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. Investors are cautioned that there are inherent limitations associated with the use non-GAAP financial measures as an analytical tool. In particular, non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and many of the adjustments to the GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in the company’s financial results for the foreseeable future. In addition, other companies, including other companies in the Company’s industry, may calculate non-GAAP financial measures differently than the Company does, limiting their usefulness as a comparative tool.
The Company is providing supplemental financial measures for (i) non-GAAP adjusted earnings before interest, taxes, depreciation and amortization, or (“adjusted EBITDA”) that excludes the impact of interest, taxes, depreciation, amortization, share-based compensation expense, LO2A write-back, unrealized gains/losses on share of associates, and certain non-recurring expenses. We believe that adjusted EBITDA is useful to investors in comparing our performance across reporting periods on a consistent basis.
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| For the three months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Reconciliation of non-GAAP adjusted EBITDA: | ||||||||
| Net loss: | (11,570,074 | ) | (38,520,073 | ) | ||||
| Share of net loss of associates accounted for using the equity method | - | - | ||||||
| Depreciation and amortization | 13,803,032 | 1,314,899 | ||||||
| Share based payments | 390,609 | 14,795,403 | ||||||
| Unrealized and realized losses/(gain) | 699,237 | 661,682 | ||||||
| Other non-operating revenue | (24,447 | ) | (472,741 | ) | ||||
| Other non-operating expenses | 1,236,673 | - | ||||||
| Tax | - | - | ||||||
| LO2A write-back | - | 23,963,050 | ||||||
| EBITDA (non-GAAP) | 4,535,030 | 1,742,220 | ||||||
Liquidity and Capital Resources
General
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures. For the three month period ended March 31, 2022, we financed our operations primarily through:
| 1. | Net cash provided by operating activities of $5.86 million; | |
| 2. | On January 27, 2021, Cosmos Infrastructure LLC (“Cosmos Infrastructure”) entered into an Equipment Purchase and Finance and Security Agreement with Foundry Digital LLC (“Foundry”) to purchase machinery that will be located at a facility hosted by Compute North LLC (“Compute North”). On February 5, 2021, the term of the agreement was further amended to have a final payment due January 27, 2022. Under the terms of the agreement, Cosmos Infrastructure purchased 500 Whatsminer M30S mining machines, paid a deposit of $264,000, and borrowed a total of $1,056,000. The Company paid in full this original loan balance in January 2022; | |
| 3. | On October 15, 2021, an expansion of the Equipment Finance and Security Agreement was entered into with Foundry to purchase an additional 2000 Whatsminers M30’s delivered in October 2021, $13,185,062 was borrowed, $7,801,933 is owed at March 31, 2022; | |
| 4. | On December 9, 2021, entering into a Secured Loan Facility Agreement with Marshall Investments MIG Pty Ltd (“Marshall”) on December 9, 2021 with a total loan facility of AUD$20 million comprising of three tranches:
Tranche 1- AUD$10.5 million (received in December 2021) Tranche 2- AUD$4.8 million (received in January 2022) Tranche 3- AUD$4.8 million (received in February 2022); and | |
5.
|
On February 23, 2022, Luna Squares LLC entered into the Co-Location Agreement with Celsius Mining LLC, in connection with this agreement, Celsius Mining loaned Luna Squares LLC a principal amount of US$20,000,000, for the purpose of funding the infrastructure required to meet the obligations of the Co-Location Agreement, for which Luna Squares issued a Secured Promissory Note in the principal amount equal to the Principal. The Promissory Note accrues interest daily at rate of 12% per annum. Luna Squares LLC is required to amortize the loan at a rate of 15% per quarter, with principal repayments starting in the third quarter following the closing. The Promissory Note has a maturity date of August 23, 2023. |
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During the quarter we repaid $3.2 million of payments against the historical facilities provided by Foundry.
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 funds, 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. For our business to grow it is expected we will continue investing in mining equipment, we are likely to require additional capital in either the short-term or long-term.
On August 9, 2021, Infrastructure entered into a second Long-Term Purchase Contract with Canaan for the purchase of 15,000 next generation Avalon A1246 ASIC Miners. The purchase price per unit is $4,908 for a total purchase price of $73,620,000. As at March 31, 2022 the Company had paid $54,180,000 in relation to this contract with the remaining balance owed at the end of the quarter.
Working Capital and Cash Flows
As of March 31, 2022, and December 31, 2021, we had cash and cash equivalents balance of $5.80 million and $5.47 million in cash and cash equivalents, respectively.
As of March 31, 2022, and December 31, 2021, the trade receivables balance was $5.04 million and $5.61 million respectively.
As of March 31, 2022, we had $16.04 million of outstanding short-term loans, and as of December 31, 2021, we had $11.10 million of short-term borrowings. The short-term borrowings as of March 31, 2022, relate to the acquisition of cryptocurrency mining equipment, under the Foundry agreements and to the secured Loan Facility Celsius Mining LLC and Marshall Investments MIG Pty Ltd. As of March 31, 2022, and as of December 31, 2021, we had $26.94 million and $7.64 million respectively of outstanding long-term borrowings. The long-term borrowings as of March 31, 2022, primarily relate to the secured Loan Facility Celsius Mining LLC and Marshall Investments MIG Pty Ltd.
As of March 31, 2022, we had negative working capital of $18.65 million and as at December 31, 2021, we had negative working capital of $8.63 million. The increase in working capital was primarily attributable to an increase in the Company’s short term and long-term borrowings during 2022, as compared to 2021.
The following table presents the major components of net cash flows (used in) provided by operating, investing and financing activities for the three month ending March 31, 2022 and 2021:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net cash provided by operating activities | $ | 5,865,759 | $ | 1,871,692 | ||||
| Net cash used in investing activities | $ | (29,661,210 | ) | $ | (21,385,965 | ) | ||
| Net cash provided by financing activities | $ | 23,484,932 | $ | 21,285,694 | ||||
For the three months ended March 31, 2022, net cash provided by operating activities was $5,865,759 and for the three months ended March 31, 2021, net cash provided by operating activities was $1,871,692. The increase in net cash provided by operating activities was primarily attributable to timing differences in trade and other receivables and trade and other payables.
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For the three months ended March 31, 2022 and 2021, net cash used in investing activities was $29,661,210 and $21,385,965, respectively. The increase in net cash used in investing activities was primarily attributable to the increase in the acquisition of cryptocurrency mining equipment.
For the three months ended March 31, 2022 and 2021, net cash provided by financing activities was $23,484,932 and $21,285,694, respectively. The cash provided by financing activities during March 31, 2022 was primarily attributable to proceeds from borrowings.
Critical accounting estimates and estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of income and expenses during the reporting periods. Actual results could differ from those estimates. The Company has considered the following to be significant estimates made by management, including but not limited to:
Going concern assumption- Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
Long-lived assets- Management reviews long-lived assets for impairment whenever events or changes in circumstances have occurred that may affect the recoverability or the estimated useful lives of long-lived assets. Long-lived assets include property and equipment and operating lease right-of-use assets. A long-lived asset may be impaired when the estimated future undiscounted cash flows are less than the carrying amount of the asset. If that comparison indicates that the asset’s carrying value may not be recoverable, the impairment is measured based on the difference between the carrying amount and the estimated fair value of the asset.
Stock based compensation- Management used Black-Scholes to evaluate our awards and will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
As a smaller reporting company, the Company has elected not to provide the disclosure required by this item.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e)) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Annual Report. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2022, due to the material weaknesses in our internal control over financial reporting described below. Management’s assessment of the effectiveness of our disclosure controls and procedures is expressed at a level of reasonable assurance because management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Significant Reliance on Key Individuals. There is inadequate segregation of duties in place related to our financial reporting and other management review and oversight 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 of ability to react in a timely manner to operations issues and meet increased US GAAP/PCAOB/SOX/SEC registrant requirements. In addition, this poses the risk that compliance and other reporting obligations are not adequately dealt with.
Controls over the financial statement close and reporting process. Controls were not adequately designed in the financial statement close and reporting process. This includes controls related to complex and judgmental accounting transactions, account reconciliations and financial statement disclosures.
Information and Technology Controls. There are control deficiencies related to information technology (“IT”) general controls that aggregate into a material weakness. The inadequate design of these IT general and application controls prevent the system from providing complete and accurate information consistent with financial reporting objectives. Deficiencies identified include lack of controls over access to programs and data, program changes, program development, program changes and general IT controls.
Data from third parties. The Company did not properly design or implement controls to ensure that data received from third parties is complete and accurate. Such data is relied on by the Company in determining amounts pertaining to revenue and cryptocurrency assets is complete and accurate.
Notwithstanding the identified material weaknesses and management’s assessment that our internal control over financial reporting was not effective as of March 31, 2022, management believes that the consolidated financial statements included in this quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with generally accepted accounting principles. We rely on the assistance of outside advisors with expertise in these matters in preparing the financial statements.
Remediation
Our Board of Directors and management take internal control over financial reporting and the integrity of our financial statements seriously. Our management continues to work to improve its controls related to our material weaknesses. Since March 9, 2021, with the oversight of senior management and our audit committee, we have begun taking steps and plan to take additional measures to remediate the underlying causes of the identified material weaknesses, primarily through the performance of a risk assessment process; the development and implementation of formal, documented policies and procedures, improved processes and control activities (including an assessment of the segregation of duties); as well as the hiring of additional finance personnel for specific roles such as financial reporting. During the fourth quarter of 2021, we made the following changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting:
| ● | We have developed entity level and process level controls with respect to the preparation and review of our consolidated financial statements as well as transactional level controls over all business processes and IT controls. We have developed process level controls relating to the review of manually prepared analyses and supporting information used to prepare our consolidated financial statements. We are in the process of implementing and validating these controls. At this time, we cannot state whether these controls will prove to be effective. |
However, the material weaknesses in our internal control over financial reporting will not be considered remediated until other information technology general controls and process-level controls operate for a sufficient period of time and can be tested and concluded by management to be designed and operating effectively. We cannot provide any assurance that these 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 to evaluate and work to improve our internal control over financial reporting related to the identified material weaknesses, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above.
Changes in internal control over financial reporting
Except for the remedial measures described above, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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 financial 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 our business.
Item 1A. Risk Factors
There are no material changes to the Company’s risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three month period ended March 31, 2022, in addition to those sales previously disclosed in our filings with the SEC, we have issued and sold the following securities without registration under the Securities Act:
During January of 2022, we issued 5,000 shares of our common stock with a fair market value of $57,500 to TraDigital Marketing Group LLC for consultancy services provided to us.
During February of 2022, we issued 8,787 shares of our common stock with a fair market value of $50,000 to Kyle Hoffman as part of the contingent consideration for the Membership Interest Purchase Agreement we entered with him to acquire his membership interests in Luna Squares LLC.
On February 23, 2022, we issued to Celsius Mining, warrants to purchase up to 3,850,000 shares of our common stock, at an exercise price of US$6.50 per share, in connection with the $20 million loan made by Celsius to Luna Squares LLC in connection with a Customer Equipment and Co-Location Agreement entered into by Celsius and Luna Squares LLC.
We believe that all of 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, since the issuance of the securities by us did not involve a public offering. The offerings were not “public offerings” as defined in Section 4(a)(2) due to the type of investors, the 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 holders 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 of the securities described above.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None
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Item 6. Exhibits
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
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 undersigned, thereunto duly authorized.
| Mawson Infrastructure Group Inc. | ||
| Date: May 16, 2022 | By: | /s/ James Manning |
| James Manning, Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: May 16, 2022 | By: | /s/ Hetal Majithia |
| Hetal Majithia, Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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