Big Digital Energy, Inc 8-K, filed Oct 11, 2022
Big Digital Energy, Inc. (BGDE)
About this 8-K
Big Digital Energy, Inc filed this 8-K on October 11, 2022, reporting on events of October 8, 2022.
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.01: Completed an acquisition or sale of assets
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
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CURRENT REPORT
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Item 1.01 Entry into a Material Definitive Agreement.
On October 8, 2022, Mawson Infrastructure Group Inc. (the “Company”) and its wholly-owned subsidiary, Luna Squares LLC (“Luna”), entered into a First Amendment to Purchase and Sale Agreement (the “Amendment”), whereby Luna, the Company, CleanSpark, Inc. (“CleanSpark”) and CleanSpark’s subsidiary, CSRE Properties Sandersville, LLC (together with CleanSpark, the “Buyer”), agreed to amend certain provisions of the previously announced Purchase and Sale Agreement, dated as of September 8, 2022, by and among the parties (the “PSA”).
Pursuant to the Amendment, (i) the amount of the purchase price to be financed by Luna and evidenced by the Buyer’s issuance of promissory notes was increased from $3.0 million to $6.5 million, (ii) the amount of cash paid by the Buyer to Luna at the closing was decreased from $17.0 million to $13.5 million, (iii) the payment date of the portion of the purchase price financed by Luna and evidenced by promissory notes was moved back from 60 days after the closing to 70 days after the closing, and (iv) certain schedules to the PSA were modified to reflect certain assets no longer being sold as part of the transaction.
The description of the Amendment is only a summary and is qualified in its entirety by reference to the full text of such document, which is filed as an exhibit to this Current Report on Form 8-K and which is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On October 8, 2022, the transactions contemplated by the PSA were consummated (the “PSA Closing,” and such date, the “PSA Closing Date”), including (i) Buyer’s assumption of Luna’s lease for approximately 16.35 acres of real property located in Sandersville, Washington County, Georgia (the “Property”), and purchase from Luna of all personal property situated on the Property, and (ii) Buyer’s payment to Luna of (A) $13.5 million in cash; (B) 1,590,175 shares of common stock, par value $0.001 per share of CleanSpark (the “CleanSpark Common Stock”) (which have a value of $4.8 million based upon the closing price of the CleanSpark Common Stock on October 7, 2022), and (iii) $6.5 million in Luna financing in the form of promissory notes.
The following additional consideration may be payable to Luna following the PSA Closing Date:
i. up to 1,100,890 shares of CleanSpark Common Stock (the “Earn-out Shares”) (which have a value of $4.5 million based upon the volume weighted average price of the CleanSpark Common Stock over the five trading days immediately preceding the signing date of the PSA), based upon the number of modular data centers on the Property occupied by Luna (“Co-location MDCs”) being emptied and made available for use by the Buyer, with 100% of the Earn-Out Shares being available with respect to Co-location MDCs that are emptied on or before the 195th day after the Closing Date, and 84% of the Earn-out Shares being available with respect to Co-location MDCs that are emptied on the 196th day after the Closing Date, and such percentage being reduced by an additional 1 percentage point until 100 days following the 180th day after the Closing Date, after which further shares of CleanSpark Common Stock can no longer be earned; and
ii. up to an additional $2.0 million in a Luna-financed earn-out payable at least 60 days post-closing if the Buyer is able to utilize at least an additional 150 MW of power on the Property by the six month anniversary of the PSA Closing Date. In the event that the Buyer is able to utilize more than 80 MW but less than 230 MW of power on the Property by the six month anniversary of the PSA Closing Date, then Luna will be entitled to a pro rata portion of such earn-out.
On October 8, 2022, the transactions contemplated by the previously announced Equipment Purchase and Sale Agreement (the “EPSA”) by and among the Company, the Company’s wholly owned subsidiary, Cosmos Infrastructure, LLC (the “Miner Seller”), and CleanSpark’s wholly owned subsidiary, CleanSpark GLP, LLC (the “Miner Purchaser”) were consummated (the “EPSA Closing”) and the Miner Purchaser purchased from the Miner Seller, 6,468 application-specific integrated circuit miners (“ASICs”) for up to $9.48 million in cash, to be paid within 15 days after the EPSA Closing.
Item 7.01. Regulation FD Disclosure.
On October 8, 2022, the Company issued a press release announcing the consummation of the Transaction. A copy of this press release is attached hereto as Exhibit 99.1 and is being furnished with this Current Report on Form 8-K (“Current Report”).
The information set forth under Item 7.01 of this Current Report, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of such section. The information in Item 7.01 of this Current Report, including Exhibit 99.1, shall not be incorporated by reference into any filing under the Securities Act or the Exchange Act, regardless of any incorporation by reference language in any such filing, except as expressly set forth by specific reference in such a filing. This Current Report will not be deemed an admission as to the materiality of any information in this Current Report that is required to be disclosed solely pursuant to this Item 7.01.
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Item 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information
The unaudited pro forma condensed combined balance sheet as of June 30, 2022, and the unaudited pro forma condensed combined statement of operations for the 6 months ended June 30, 2022 and the 12 months ended December 31, 2021, giving effect to the Transaction as if it occurred on June 30, 2022, are filed as Exhibit 99.2 hereto and incorporated herein by reference.
(d) Exhibits.
| Exhibit No. | Description | |
| 10.1 | First Amendment to Purchase and Sale Agreement by and among CSRE Properties Sandersville, LLC, Luna Squares LLC, Mawson Infrastructure Group, Inc. and CleanSpark, Inc., dated October 8, 2022.* | |
| 99.1 | Press Release dated October 11, 2022. | |
| 99.2 | Unaudited pro forma condensed combined balance sheet as of June 30, 2022, and the unaudited pro forma condensed combined statement of operations for the 6 months ended June 30, 2022 and the 12 months ended December 31, 2021, giving effect to the Transaction as if it occurred on June 30, 2022. | |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document |
| * | Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. |
The registrant will furnish copies of any such schedules and exhibits to the SEC upon request.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Company cautions that statements in this report that are not a description of historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words referencing future events or circumstances such as “expect,” “intend,” “plan,” “anticipate,” “believe,” and “will,” among others. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. These forward-looking statements are based upon the Company’s current expectations and involve assumptions that may never materialize or may prove to be incorrect. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of various risks and uncertainties, which include the possibility that the full consideration possible under the transaction is not earned or received, the Company’s need and ability to raise additional capital, the development and acceptance of digital asset networks and digital assets and their protocols and software, the reduction in incentives to mine digital assets over time, the costs associated with digital asset mining, the volatility in the value and prices of cryptocurrencies and further or new regulation of digital assets. More detailed information about the risks and uncertainties affecting the Company is contained under the heading “Risk Factors” included in the Company’s Annual Report on Form 10-K filed with the SEC on March 21, 2022, Quarterly Report on Form 10-Q filed with the SEC on August 22, 2022, and in other filings that the Company has made and may make with the SEC in the future. One should not place undue reliance on these forward-looking statements, which speak only as of the date on which they were made. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. The Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made, except as may be required by law.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Mawson Infrastructure Group Inc. | ||
| Date: October 11 2022 | By: | /s/ James Manning |
| James Manning | ||
| Chief Executive Officer | ||
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Exhibit 10.1
FIRST
AMENDMENT TO
PURCHASE AND SALE AGREEMENT
This First Amendment to Purchase and Sale Agreement (this “Amendment”) is effective as of October_, 2022 (the “Effective Date”), by and among CSRE PROPERTIES SANDERSVILLE, LLC, a Georgia limited liability company (“Purchaser”), LUNA SQUARES, LLC (f/k/a Innovative Property Management, LLC), a Delaware limited liability company (“Luna”), MAWSON INFRASTRUCTURE GROUP, INC., a Delaware corporation (“MIG,” and Luna and MIG are collectively referred to as “Seller”), and CLEANSPARK, INC., a Nevada corporation (“Parent”).
RECITALS
A. Seller, Purchaser and Parent have entered into that certain Purchase and Sale Agreement dated September 8, 2022 (the “Agreement”); and
B. Seller, Purchaser and Parent desire to amend the Agreement pursuant to the terms and conditions of this Amendment.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and conditions set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions. Unless otherwise defined in this Amendment, all capitalized terms herein shall have the meanings ascribed to them in the Agreement.
2. Consideration. The parties agree that the consideration for this Amendment consists of the mutual benefits arising from the modifications set out below.
3. Section 3(a) The parties agree that Section 3(a) of the Agreement shall be deleted in its entirety and be replaced with the following:
“(a) At the Closing (as defined in Section 10.1 below), and subject to the satisfaction of the conditions set forth in Section 16 below, Purchaser shall pay Luna the Closing Purchase Price, less a credit against the Cash Consideration, defined below, in the amount of the Earnest Money, defined in Section 4 below, and as adjusted to reflect the prorations provided for herein. Payment of the Purchase Price shall be comprised of the following: (i) Six Million Five Hundred Thousand and No/100 Dollars ($6,500,000.00) in Luna Financing, defined and described in Section 19 below; (ii) the issuance by Parent to Luna (or MIG as its designee, as directed by Luna) of the Closing Parent Shares, such shares having a value of Six Million, Five Hundred Thousand and No/100 Dollars ($6,500,000.00) as of the Effective Date (based upon the volume weighted average price of the Parent Common Stock over the five trading days immediately preceding the Effective Date), in accordance with the terms of this Agreement; and (iii) Thirteen Million Five Hundred Thousand and No/100 Dollars ($13,500,000.00) by wire transfer of immediately available funds (the “Cash Consideration”).”
4. Section 19.01 The parties agree that Section 19.01 of the Agreement shall be deleted in its entirety and be replaced with the following:
“19.01 Seller Financing. Seller shall provide seller financing for a portion of the Purchase Price as described in Section 3 above pursuant to the following terms (the “Seller Financing”). Seller shall provide a loan at Closing in the principal amount of Six Million Five Hundred Thousand and No/100 Dollars ($6,500,000.00) (“Total Loan Amount”). The interest rate shall be eight percent (8%) per annum, compounded monthly on any amounts outstanding. Default interest of 15% per annum will apply to any amounts unpaid when due. The Total Loan Amount with accrued but unpaid interest shall be repaid at the end of seventy (70) days after Closing. The Seller Financing will be evidenced by a secured promissory note substantially in the form in Exhibit “G” (the “Note”) and all obligations due under the Note shall be guaranteed by Parent and secured by a first priority security interest in the assets being sold by Seller to Purchaser, substantially in the form in Exhibit “G” (the “Security Agreement”).”
5. Exhibit G - Note. The Note provided in Exhibit G of the Agreement is deleted in its entirety and replaced with the revised Note attached hereto as Exhibit G.
6. Schedules. Schedules 1, 1.1, 2 and 13.8 of the Agreement are all deleted in their entirety and replaced with Schedules 1, 1.1, 2 and 13.8, respectively, attached hereto.
7. Schedule 13.16. A new Schedule 13.16 is to be added to the Agreement as provided in Schedule 13.16 attached hereto.
8. Binding Agreement. All of the terms and provisions of this Amendment shall be binding upon each party hereto and their respective successors and assigns, and shall inure to the benefit of each party hereto and their respective successors and assigns.
9. Counterparts. This Amendment may be executed in multiple counterparts and transmitted by facsimile, by electronic mail in portable document format (“PDF”) form or by any other electronic means intended to preserve the original graphic and pictorial appearance of a party’s signature, with each such counterpart, facsimile or PDF signature constituting an original and all of which together constituting one and the same original.
10. Authority. The undersigned warrants that the individual executing this Amendment on behalf of such party has the requisite authority to execute this Amendment and to bind such party to all the provisions of this Amendment.
11. Continuing Validity. Except as expressly modified by this Amendment, the terms and conditions of the Agreement will remain unchanged and in full force and effect, and are expressly incorporated by reference in this Amendment. In the event of a conflict between the terms of this Amendment and the Agreement, the terms of this Amendment will prevail.
[SIGNATURES ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the Effective Date.
| PURCHASER: | SELLER: | |||
| CSRE PROPERTIES
SANDERSVILLE, LLC, a Georgia limited liability company |
LUNA SQUARES, LLC (f/k/a Innovative Property Management, LLC), a Delaware limited liability company | |||
| By: CSRE Property Management Company, LLC, | By: | /s/ James Manning | ||
| a Georgia limited liability company, its Manager | James Manning, CEO | |||
| By: | CleanSpark, Inc., a Nevada corporation, its Manager | |||
| By: | /s/ Zachary K. Bradford | |
| Zachary K. Bradford, President |
| PARENT: | PARENT: | |||
| CLEANSPARK, INC. a Nevada corporation | MAWSON INFRASTRUCTURE GROUP, INC., a Delaware corporation | |||
| By: | /s/ Zachary K. Bradford | By: | /s/ James Manning | |
| Zachary K. Bradford, President | James Manning, CEO | |||
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Exhibit 99.1
Mawson Infrastructure Group Inc. announces Completion of the Previously Announced Sale of its Sandersville, Georgia Facility and 6,468 ASIC’s to CleanSpark, Inc. for up to approximately $40 Million1
Mawson is now focused on expansion activities at its Pennsylvania facilities, which, when combined with existing and pipeline sites are capable of operating at up to approximately 12.0 Exahash2 of Self-Mining and Hosting Co-location across 350 megawatts of energy capacity
Atlanta, Georgia and Sydney, Australia — October 11th, 2022 — Mawson Infrastructure Group Inc. (NASDAQ:MIGI) (“Mawson”), a digital infrastructure provider, today announced it has closed on the previously announced transaction with CleanSpark, Inc. (NASDAQ:CLSK) (“CleanSpark”), to sell its Sandersville, Georgia facility, and up to 6,468 ASIC’s for up to a maximum total purchase price of approximately $40 million.1
The Sandersville, Georgia facility was Mawson’s first site built from the ground up and was operating at approximately 80 megawatts at close of the sale to CleanSpark. The exit from Georgia allows Mawson to focus on its expansion in Pennsylvania where the company has two sites in close proximity to each other. The Company expects the Georgia sale will have a positive impact on earnings with a preliminary, unaudited profit on sale of approximately $18 million expected in the fourth quarter 2022.
“The proceeds from the sale of our Georgia facility ensures Mawson is now fully funded for the Midland, Pennsylvania expansion while simultaneously allowing us to reduce our overall debt. Our Midland facility benefits from low cost energy, secured for 5 years under our power purchase agreement (PPA). Our large existing infrastructure capacity ensures we have significant opportunity to continue to build a sustainable business in this tough economic climate. We continue to receive solid inbound enquiry and demand for hosting co-location services and anticipate that as per industry standard new hosting customers will contribute to any additional capital required to establish or build out new or existing facilities.” said James Manning, CEO of Mawson.
After the sale of the Georgia facility, Mawson expects to have Self-Mining and Hosting Co-location of, 4.5 Exahash by Q1, 2023, and 8.0 Exahash by Q4, 2023.
| 1 | Assumes maximum earn outs are achieved, no adjustments are made to the purchase price, and uses the CleanSpark stock price as at October 7, 2022, and rounding. |
| 2 | Assumes all equipment deployed and 100% online, plus the construction of all contracted sites on time, actual results are likely to vary in a negative manner. Construction delays are common and it is rare for all equipment to be deployed and 100% online, however accurate historical downtime averages are difficult to calculate and also may not provide an accurate picture due to differences moving forward. Investors should consider all risk factors related to uptime when considering these figures, which are a best case scenario. The above information is for general information purposes only, and are forward looking statements which should not be relied upon as being necessarily indicative of future results. Please see our Risk Factors in our Annual Report on Form 10-K filed March 21, 2022, under the Sub-Heading Risks Relating to Our Business and Management for important risks related to our Self-Mining. Exahash capacity assumes installation of current generation ASIC Bitcoin Mining hardware including but not limited to Bitmain S19J Pro and XP, MicroBT M30/1, Avalon A1246 assuming approximately 30 megawatt per 1 Exahash. |
Mawson’s existing revised infrastructure capacity comprises:
| Site | MW Capacity | E/H Capacity | Status | |||||||
| Midland, PA | 100 MW | 3.3 | Stage 1 - 50MW online Stage 2 - 50MW construction underway | |||||||
| Sharon, PA | 120 MW | 4.0 | Stage 1 – 12MW – Q4 2022 Stage 2 – 80MW Mid 2023 Stage 3 – 28MW late 2023 | |||||||
| Texas | 120 MW | 4.0 | Site electrical infrastructure in place | |||||||
| New South Wales, Australia | 20 MW | 0.5 | Stage 1 – 16MW online | |||||||
| Tasmania, Australia | 10 MW3 | 0.25 | Stage 1 – 10MW Q1 2023 | |||||||
| TOTAL CAPACITY: | 350 MW | 12.05 EH | ||||||||
James Manning, CEO and Founder of Mawson, said, “We are extremely proud of the Sandersville facility we built from the ground up and the great team which operated the site for Mawson since inception. We believe the modular data center (MDC) approach to digital infrastructure gives us a competitive edge in the design and build of large-scale, low-cost digital asset infrastructure. The sale of the Sandersville facility to CleanSpark allows Mawson to continue to develop world class digital infrastructure, and we will focus on building out our existing and future pipeline infrastructure assets with partnerships in mind.”
Zach Bradford, CEO of CleanSpark, said, “Mawson has built a world-class facility, staffed by an incredible team, and we are looking forward to continuing their work in Sandersville, eventually building this site to its full potential of 230 MW as we work toward our 2023 year-end guidance of 22.4 EH/s, We are equally committed to deepening and developing our relationship with the people of Sandersville as we build sustainable bitcoin infrastructure.”
About Mawson Infrastructure Group, Inc
Mawson Infrastructure Group (NASDAQ: MIGI) is a digital infrastructure provider, with multiple operations throughout the USA and Australia. Mawson’s vertically integrated model is based on a long-term strategy to promote the global transition to the new digital economy. Mawson matches sustainable energy infrastructure with next-generation Mobile Data Center (MDC) solutions, enabling low-cost Bitcoin production and on-demand deployment of infrastructure assets. With a strong focus on shareholder returns and an aligned board and management, Mawson Infrastructure Group is emerging as a global leader in ESG focused Bitcoin mining and digital infrastructure.
For more information, visit: www.mawsoninc.com
| 3 | Under the terms of contract Mawson has rights to 10MW at the Que River Site. Additionally, Mawson has entered into a contract to acquire 33% of the shares in Tasmania Data Infrastructure Pty Ltd, which is seeking to develop a 100% renewable energy Bitcoin Mining facility at the Que River Mine Site in Tasmania, Australia with a total of up to 35 megawatts of energy infrastructure. |
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About CleanSpark, Inc
CleanSpark (NASDAQ: CLSK) is America’s Bitcoin Miner™. Since 2014, we’ve helped people achieve energy independence for their homes and businesses. In 2020, we began applying that expertise to develop sustainable infrastructure for Bitcoin, an essential tool for financial independence and inclusion. We strive to leave the planet better than we found it by sourcing and investing in low-carbon energy, like wind, solar, nuclear, and hydro. We cultivate trust and transparency among our employees, the communities we operate in, and the people around the world who depend on Bitcoin. CleanSpark is a Forbes 2022 America’s Best Small Company and holds the 44th spot on the Financial Times’ List of the 500 Fastest Growing Companies in the Americas.
For more information, visit: www.cleanspark.com
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Mawson cautions that statements in this press release that are not a description of historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words referencing future events or circumstances such as “expect,” “intend,” “plan,” “anticipate,” “believe,” and “will,” among others. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. These forward-looking statements are based upon Mawson’s current expectations and involve assumptions that may never materialize or may prove to be incorrect. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of various risks and uncertainties, which include, without limitation, the possibility that Mawson’s need and ability to raise additional capital, the development and acceptance of digital asset networks and digital assets and their protocols and software, the reduction in incentives to mine digital assets over time, the costs associated with digital asset mining, the volatility in the value and prices of cryptocurrencies and further or new regulation of digital assets. More detailed information about the risks and uncertainties affecting Mawson is contained under the heading “Risk Factors” included in Mawson’s Annual Report on Form 10-K filed with the SEC on March 21, 2022, and Mawson’s Quarterly Report on Form 10-Q filed with the SEC on August 22, 2022, and in other filings Mawson has made and may make with the SEC in the future. One should not place undue reliance on these forward-looking statements, which speak only as of the date on which they were made. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Mawson undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made, except as may be required by law.
Investor Contact:
Brett Maas
646-536-7331
brett@haydenir.com
www.haydenir.com
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Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On October 8, 2022 (the “Closing”), Mawson Infrastructure Group Inc. (“Mawson”) completed the previously announced sale of its lease for approximately 16.35 acres of real property located in Sandersville, Washington County, Georgia (the “Property”), and all personal property situated on the Property (together, the “GA Business”) to CleanSpark, Inc. (the “Purchaser” or “CleanSpark”), pursuant to:
| (i) | a Purchase and Sale Agreement (the “Purchase Agreement”), by and among Mawson, Mawson’s wholly owned subsidiary Luna Squares, LLC (the “Property Seller”), CleanSpark and CleanSpark’s wholly owned subsidiary, CSRE Properties Sandersville, LLC (the “Property Purchaser”), and |
| (ii) | an Equipment Purchase and Sale Agreement (together with the Purchase Agreement, the “Agreements”) by and among Mawson, Mawson’s wholly owned subsidiary, Cosmos Infrastructure, LLC, and CleanSpark’s wholly owned subsidiary, CleanSpark GLP, LLC. |
together, the “GA Sale”.
The GA Business was Mawson’s co-location hosting business and bitcoin mining operation, with capacity to operate Application Specific Circuit servers in its modular data centers based in Sandersville, Georgia, in the United States. On the closing date of the GA Sale, CleanSpark transferred the following consideration to Mawson pursuant to the Purchase Agreement:
| (i) | $13.5 million in cash; |
| (ii) | 1,590,175 shares of common stock, par value $0.001 per share of CleanSpark (the “CleanSpark Common Stock”); |
| (iii) | $6.5 million in vendor financing in the form of promissory notes, which are settled in cash within 60 days of closing; and |
| (iv) | Contingent Revenue of $6.5 million. |
Up to $9.48 million of cash is to be received within 15 days of closing pursuant to the Equipment Purchase and Sale Agreement.
The unaudited pro forma condensed consolidated financial statements presented below have been derived from the historical financial statements of Mawson. While the historical consolidated financial statements reflect the past financial results of the Mawson business, this pro forma information gives effect to the GA Sale and presents the GA Business and other events arising from the GA Sale in accordance with ASC 205, Presentation of Financial Statements (“ASC 205”).
The unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Securities and Exchange Commission Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Release No. 33-10786. Regulation S-X Article 11 requires that pro forma financial information include the following pro forma adjustments to the historical financial information of the registrant:
| ● | Transaction Accounting Adjustments – Adjustments that reflect only the application of required accounting to the acquisition, disposition, or other transaction. |
| ● | Autonomous Entity Adjustments – Adjustments that are necessary to reflect the operations and financial position of the registrant as an autonomous entity when the registrant was previously part of another entity. There are no autonomous entity adjustments included in the unaudited pro forma condensed financial statements. |
The Transaction Accounting Adjustments to reflect the GA Sale includes but are not limited to:
| ● | the separation of the operations, assets (including the equity interests) and liabilities related to GA Business from Mawson and the transfer of those assets (including the equity interests) and liabilities to Purchaser, and |
| ● | the impact of, and transactions contemplated by the GA Sale. |
The transaction accounting adjustments are based on available information and assumptions that Mawson’s management believes are reasonable. However, such adjustments are estimates and actual experience may differ from expectations. There are no autonomous entity adjustments included in the unaudited pro forma condensed consolidated financial statements. Additionally, Regulation S-X Article 11 permits registrants to reflect in the notes to the pro forma financial information forward-looking information that depicts the synergies and dis-synergies identified by management in determining to consummate or integrate the transaction for which pro forma effect is being given. Such adjustments have not been reflected in the notes to the unaudited pro forma condensed consolidated financial statements because Mawson’s management does not believe these adjustments would enhance an understanding of the pro forma effects of the GA Sale.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the period ended June 30, 2022, and for the fiscal year ended December 31, 2021, have been prepared as though the Closing occurred on January 1, 2022 and January 1, 2021 respectively. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2022, has been prepared as though the Closing occurred on June 30, 2022. The unaudited pro forma condensed consolidated financial statements are for illustrative purposes only, do not reflect what Mawson’s financial position and results of operations would have been had the Closing occurred on the dates indicated, are not necessarily indicative of Mawson’s future financial position and future results of operations and do not reflect all actions that may be taken by Mawson after the Closing. For example, the unaudited pro forma condensed statements of operations do not reflect incremental costs Mawson expects to incur to reposition its business following the Closing. These incremental costs primarily relate to dis-synergies from losing certain benefits of scale as a result of the separation of GA Business from Mawson in the form of international finance operations and other functions.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with Mawson’s historical consolidated financial statements and accompanying notes included in its Quarterly Report on Form 10-Q for the period ended June 30, 2022, filed with the SEC on August 22, 2022, its Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 21, 2022. The unaudited pro forma condensed consolidated financial statements constitute forward-looking information, are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated and should be read in conjunction with the accompanying notes thereto.
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Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Six months Period Ended June 30, 2022
| Historical | Transaction Accounting Adjustments | Pro Forma | ||||||||||||||||
| Mawson (A) | GA Business (B) | Pro Forma Adjustments | Notes | Mawson (C) | ||||||||||||||
| Revenues: | ||||||||||||||||||
| Cryptocurrency mining revenue | 34,996,368 | (14,798,307 | ) | - | 20,198,061 | |||||||||||||
| Hosting Co-Location revenue | 4,116,860 | (14,049,982 | ) | 12,303,518 | (D) | 2,370,396 | ||||||||||||
| Sale of crypto currency mining equipment | 91,545 | - | - | 91,545 | ||||||||||||||
| Total revenues | 39,204,773 | (28,848,289 | ) | 12,303,518 | 22,660,002 | |||||||||||||
| Less: Cost of revenues (excluding depreciation) | 22,771,433 | (19,110,690 | ) | - | 3,660,743 | |||||||||||||
| Gross profit | 16,433,340 | (9,737,599 | ) | 12,303,518 | 18,999,259 | |||||||||||||
| Selling, general and administrative | 15,908,034 | (5,941,719 | ) | 1,278,980 | (E) | 11,245,295 | ||||||||||||
| Share based payments | 1,326,844 | (199,027 | ) | - | 1,127,817 | |||||||||||||
| Depreciation and amortization | 29,826,849 | (2,989,475 | ) | - | 26,837,374 | |||||||||||||
| Total operating expenses | 47,061,727 | (9,130,221 | ) | 1,278,980 | 39,210,486 | |||||||||||||
| Changes in fair value of derivative asset | 17,714,357 | - | - | 17,714,357 | ||||||||||||||
| Profit/(Loss) from operations | (12,914,030 | ) | (607,378 | ) | 11,024,538 | (2,496,870 | ) | |||||||||||
| Non-operating income/(expense): | ||||||||||||||||||
| Gains/(Losses) on foreign currency translation | 957,818 | - | - | 957,818 | ||||||||||||||
| Other income/(expense) | 1,889,415 | - | - | 1,889,415 | ||||||||||||||
| Interest expense | (2,801,713 | ) | - | - | (2,801,713 | ) | ||||||||||||
| Impairment of financial assets | (1,107,197 | ) | - | - | (1,107,197 | ) | ||||||||||||
| Profit/(Loss) before income taxes | (13,975,707 | ) | (607,378 | ) | 11,024,538 | (3,558,547 | ) | |||||||||||
| Income tax expenses | - | - | - | - | ||||||||||||||
| Net Profit/(Loss) | (13,975,707 | ) | (607,378 | ) | 11,024,538 | (3,558,547 | ) | |||||||||||
| Less: Net income/(loss) attributable to non-controlling interests | (522,648 | ) | - | - | (522,648 | ) | ||||||||||||
| Net Profit/(Loss) attributed to Mawson Infrastructure Group shareholders | (13,453,059 | ) | (607,378 | ) | 11,024,538 | (3,035,899 | ) | |||||||||||
| Net Profit/(Loss) per share, basic and diluted | (0.19 | ) | (0.04 | ) | ||||||||||||||
| Weighted average number of shares outstanding | 71,970,772 | 71,970,772 | ||||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements
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Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2021
| Historical | Transaction Accounting Adjustments | Pro Forma | ||||||||||||||||
| Mawson (A) | GA Business (B) | Pro Forma Adjustments | Notes | Mawson (C) | ||||||||||||||
| Revenues: | ||||||||||||||||||
| Cryptocurrency mining revenue | 38,446,438 | (15,681,260 | ) | - | 22,765,178 | |||||||||||||
| Hosting Co-Location revenue | 852,954 | (3,984,675 | ) | 3,131,721 | (D) | - | ||||||||||||
| Sale of crypto currency mining equipment | 2,157,651 | - | - | 2,157,651 | ||||||||||||||
| Other revenue | 2,405,613 | (97,350 | ) | - | 2,308,263 | |||||||||||||
| Total revenues | 43,862,656 | (19,763,285 | ) | 3,131,721 | 27,231,092 | |||||||||||||
| Less: Cost of revenues (excluding depreciation) | 9,904,273 | (6,260,271 | ) | - | 3,644,002 | |||||||||||||
| Gross profit | 33,958,383 | (13,503,014 | ) | 3,131,721 | 23,587,090 | |||||||||||||
| Selling, general and administrative | 16,061,088 | (4,486,931 | ) | 1,811,780 | (E) | 13,385,937 | ||||||||||||
| LO2A write off | 23,963,050 | - | - | 23,963,050 | ||||||||||||||
| Share based payments | 22,491,100 | (3,042,363 | ) | - | 19,448,737 | |||||||||||||
| Depreciation and amortization | 14,113,730 | (5,353,966 | ) | - | 8,759,764 | |||||||||||||
| Total operating expenses | 76,628,968 | (12,883,260 | ) | 1,811,780 | 65,557,488 | |||||||||||||
| Profit/(Loss) from operations | (42,670,585 | ) | (619,754 | ) | 1,319,941 | (41,970,398 | ) | |||||||||||
| Non-operating income/(expense): | ||||||||||||||||||
| Gains/(Losses) on foreign currency translation | (932,866 | ) | - | - | (932,866 | ) | ||||||||||||
| Gain on GA Sale | - | - | 18,770,061 | (F) | 18,770,061 | |||||||||||||
| Share of net loss of associates accounted for using the equity method | (368,426 | ) | - | - | (368,426 | ) | ||||||||||||
| Other income/(expense) | 902,629 | - | - | 902,629 | ||||||||||||||
| Interest expense | (1,643,724 | ) | - | - | (1,643,724 | ) | ||||||||||||
| Loss on write off property, plant and equipment | (470,975 | ) | 328,720 | - | (142,255 | ) | ||||||||||||
| Profit/(Loss) before income taxes | (45,183,947 | ) | (291,034 | ) | 20,090,002 | (25,384,979 | ) | |||||||||||
| Income tax expenses | (277,717 | ) | - | - | (277,717 | ) | ||||||||||||
| Net Profit/(Loss) | (45,461,664 | ) | (291,034 | ) | 20,090,002 | (25,662,696 | ) | |||||||||||
| Less: Net income/(loss) attributable to non-controlling interests | (497,944 | ) | (118,970 | ) | - | (616,914 | ) | |||||||||||
| Net Profit/(Loss) attributed to Mawson Infrastructure Group shareholders | (44,963,720 | ) | (172,064 | ) | 20,090,002 | (25,045,782 | ) | |||||||||||
| Net Profit/(Loss) per share, basic and diluted | (0.80 | ) | (0.44 | ) | ||||||||||||||
| Weighted average number of shares outstanding | 56,303,827 | 56,303,827 | ||||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements
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Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2022
| Historical | Transaction Accounting Adjustments | Pro Forma | ||||||||||||||||
| Mawson (A) | GA Business (B) | Pro Forma Adjustments | Notes | Mawson (C) | ||||||||||||||
| ASSETS | ||||||||||||||||||
| Current assets: | ||||||||||||||||||
| Cash and cash equivalents | 2,493,826 | (822,432 | ) | 23,805,576 | (G) | 25,476,970 | ||||||||||||
| Prepaid expenses | 5,292,034 | (5,009 | ) | - | 5,287,025 | |||||||||||||
| Trade and other receivables | 4,211,903 | (444,397 | ) | 444,397 | (H) | 4,211,903 | ||||||||||||
| Cryptocurrencies | 43,967 | - | - | 43,967 | ||||||||||||||
| Total current assets | 12,041,730 | (1,271,838 | ) | 24,249,973 | 35,019,865 | |||||||||||||
| Property and equipment, net | 148,938,221 | (24,962,141 | ) | - | 123,976,080 | |||||||||||||
| Derivative Asset | 17,714,357 | - | - | 17,714,357 | ||||||||||||||
| Equipment deposits | 2,788,722 | - | - | 2,788,722 | ||||||||||||||
| Financial assets | 1,638,027 | - | 16,104,462 | (I) | 17,742,489 | |||||||||||||
| Security deposits | 4,153,184 | (3,018,404 | ) | - | (J) | 1,134,780 | ||||||||||||
| Operating lease right-of-use asset | 4,570,100 | (1,005,969 | ) | - | 3,564,131 | |||||||||||||
| Total assets | 191,844,341 | (30,258,352 | ) | 40,354,435 | 201,940,424 | |||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||
| Current liabilities: | ||||||||||||||||||
| Trade and other payables | 47,046,288 | (14,481,885 | ) | 3,018,404 | (J) | 35,582,807 | ||||||||||||
| Current portion of operating lease liability | 1,451,655 | (222,613 | ) | - | 1,229,042 | |||||||||||||
| Current portion of finance lease liability | 29,643 | - | - | 29,643 | ||||||||||||||
| Borrowings | 19,473,292 | - | - | 19,473,292 | ||||||||||||||
| Total current liabilities | 68,000,878 | (14,704,498 | ) | 3,018,404 | 56,314,784 | |||||||||||||
| Operating lease liability, net of current portion | 3,218,546 | (806,880 | ) | - | 2,411,666 | |||||||||||||
| Finance lease liability, net of current portion | 99,046 | - | - | 99,046 | ||||||||||||||
| Long-term borrowings | 19,404,697 | (14,027 | ) | 14,027 | (K) | 19,404,697 | ||||||||||||
| Total liabilities | 90,723,167 | (15,525,405 | ) | 3,032,431 | 78,230,193 | |||||||||||||
| Shareholders’ equity | - | - | ||||||||||||||||
| Additional paid-in capital | 186,744,313 | - | - | 186,744,313 | ||||||||||||||
| Mawson Net Investment | - | (14,732,947 | ) | 14,732,947 | (L) | - | ||||||||||||
| Accumulated other comprehensive income (loss) | (2,530,052 | ) | - | - | (2,530,052 | ) | ||||||||||||
| Accumulated deficit | (82,952,860 | ) | - | 22,589,057 | (M) | (60,363,803 | ) | |||||||||||
| Total stockholders’ equity | 101,261,401 | (14,732,947 | ) | 37,322,004 | 123,850,458 | |||||||||||||
| Non-controlling interest | (140,227 | ) | - | - | (140,227 | ) | ||||||||||||
| Total liabilities and stockholders’ equity | 191,844,341 | (30,258,352 | ) | 40,354,435 | 201,940,424 | |||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| (A) | The “Historical Mawson” column has been derived from the historical financial statements of Mawson. |
| (B) | The “GA Business” column reflects the disposition of the operations, assets, liabilities, and equity of the GA Business in accordance with ASC 205. |
| (C) | The “Pro Forma Mawson” column is derived by deducting (A) from (B) and adding the “Pro Forma Adjustments” detailed below. |
Adjustments to Unaudited Pro Forma Condensed Statement of Operations
| (D) | Reflects the removal of inter-entity eliminations for the GA Business Hosting revenue, between the GA Business and other entities in the Mawson group. |
| (E) | Reflects the add back of expenses of Mawson group. that are allocated to the GA Business but are not being reduced in the Mawson group after the GA Sale. |
| (F) | A pro forma GAAP gain on disposal is calculated as outlined in the table below. The pro forma gain on disposal is based on GA Business’ historical balance sheet information as of June 30, 2022 except the estimated fair value of CleanSpark common stock (I). The actual gain on disposal will be based on GA Business’ historical balance sheet information as of the Closing and may differ significantly. |
| Estimated net cash proceeds (1) | 22,983,144 | |||
| Estimated contingent cash proceeds (2) | 2,000,000 | |||
| Estimated fair value of contingent Cleanspark Common Stock (I) | 4,500,000 | |||
| Estimated fair value of CleanSpark Common Stock (I) | 5,104,462 | |||
| Vendor financing promissory notes (I) | 6,500,000 | |||
| Net consideration received | 41,087,606 | |||
| Estimated transaction closing costs (3) | 350,000 | |||
| GA Business net assets | 21,967,545 | |||
| Pro forma pre-tax gain on disposal | 18,770,061 | |||
| Estimated income taxes | - | |||
| Pro forma gain on disposal | 18,770,061 |
| (1) | Estimated net cash proceeds have been adjusted for closing levels of cash, indebtedness, debt-like items and working capital. |
| (2) | Contingent cash revenue is expected to be received in 60 days contingent on the performance of certain obligations by Mawson. |
| (3) | Estimated transaction closing costs include incremental costs that are directly attributable to the sale but not reflected in the accompanying unaudited pro forma condensed consolidated statements of operations. These costs are comprised primarily of professional fees (e.g., legal, banking and accounting) that are directly related to the sale of GA Business. |
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Adjustments to Unaudited Pro Forma Condensed Balance Sheet
| (G) | Reflects the addition of Cash from the proceeds from the GA Sale and the add back of cash in the GA Business that is not a part of the GA Sale. |
| (H) | Reflects the addition of trade receivables that are receivable by Mawson and not included in the GA Sale. |
| (I) | Reflects the fair value at September 29, 2022 of $5.1 million for the CleanSpark Common Stock received as consideration for the GA Sale, the $4.5 million of contingent CleanSpark stock, and the promissory notes of $6.5 million. |
| (J) | Reflects the security deposits paid to the City of Sandersville for power deposits that are refundable to Mawson Infrastructure Group Inc. Mawson will utilize these security deposits to offset trade payables to the City. |
| (K) | Reflects a Paycheck Protection Program debt in the Georgia business that is not transferred in the GA Sale and will be repayable by Mawson Infrastructure Group Inc. |
| (L) | Reflects the elimination of the investments made by Mawson into the GA business. This includes any loans and equity it had in the business assets. |
| (M) | Reflects the accounting adjustment of accumulated loss in the Mawson Infrastructure Group Inc. in line with the removal of the GA business. |
Contingent Revenue
The GA Sale has a portion of revenue that is contingent on performance by Mawson Infrastructure Group Inc post closing. The revenue includes $6.5 million of contingent revenue included in the financial statements that consists of $2 million on confirmation of the expansion capacity of the site paid in 60 days, and $4.5 million of CleanSpark shares contingent on the removal of all hosting MDC’s from the site within 196 days.
Subsequent event
The value of the CleanSpark common stock receivable in point (I) above, where a fixed number of common stock is receivable is subject to market price movement. The value stated in the financial statements has been based on the closing price as at September 29, 2022 of $3.21 on the NASDAQ stock exchange, being the latest available price prior to the date of approval of these financial statements. The market price of CleanSpark common stock at the time the consideration is finalized may be materially different to this and thus may give rise to a materially different amount.
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