ITEM 1A. RISK FACTORS.
RISK FACTORS
An investment in our securities involves a high degree of risk. You should consider carefully the following information about these risks, together with the other information contained in this Annual Report, including the risks and uncertainties addressed in the sections entitled “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, before making an investment decision. Our business, prospects, financial condition, and results of operations may be materially and adversely affected as a result of any of the following risks. The value of our securities could decline as a result of any of these risks. You could lose all or part of your investment in our securities. Some of the statements in “RISK FACTORS” are forward-looking statements. The following risk factors are not the only risk factors facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business, prospects, financial condition, and results of operations and it is not possible to predict all risk factors, nor can we assess the impact of all factors on us or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in or implied by any forward-looking statements.
Summary of Risk Factors
Our business is subject to a number of risks, including risks that may adversely affect our business, financial condition, and results of operations. These risks are discussed more fully below and include, but are not limited to, risks related to:
Risks Relating to Our Business and Management
our history of incurring losses;
our need to, and difficulty in, raising additional capital and repossession of collateral securing current loans in default;
the potential of being delisted from Nasdaq;
downturns in the digital assets industry;
inflation;
increased interest rates;
the inability to procure needed hardware;
risks associated with our expansion into the Artificial Intelligence (“AI”) and High-Performance Computing (“HPC”) markets;
the failure or breakdown of mining equipment;
outages and limitations of internet connectivity;
access to reliable and reasonably priced electricity sources;
cyber-security threats;
our ability to obtain proper insurance;
the prices of digital assets;
our reliance on a small number of key employees;
our failure to effectively manage our growth including not growing or improving our current hashrate;
the competitiveness of the digital assets mining, AI and HPC industry;
global climate change and related environmental regulations;
the potential cancellation or withdrawal of required operating and other permits and licenses; and
banks and other financial institutions ceasing to provide services to people in our industry, whether through choice or due to their own insolvency or failure.
Risks Relating to Digital Assets Mining, Bitcoin Price and Technology
changes to the Bitcoin network’s protocols and software;
the manipulation of the blockchain by malicious actors;
failures of the Bitcoin network to be properly monitored and upgraded;
the decrease in the incentive to mine Bitcoin;
an increase in the network difficulty;
the increase of transaction fees related to digital assets;
the downward pressure on the price of Bitcoin created by firms selling their Bitcoin;
political or economic crisis or change;
the fraud or security failures of large digital asset exchanges;
the further development and acceptance of digital asset networks and other digital assets;
future digital asset and digital currency development; and
the development of quantum computing, and other new technologies.
Risks Relating to Laws, Regulatory Frameworks, and Legal Action
regulatory changes and changes in interpretations of existing regulations, including for digital assets like Bitcoin, or Bitcoin mining itself (including the imposition of taxes, limits on mining (or power usage), or new licensing regimes);
our ability to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002;
future developments regarding the treatment of digital assets for U.S. federal income and foreign tax purposes, or other taxes on Bitcoin mining;
regulatory intervention by governments impacting the right to mine, acquire, own, hold, sell, exchange or use Bitcoin or other digital assets;
additional legislation or guidance may be issued by U.S. and non-U.S. governing bodies that may differ significantly from our practices or interpretation of the law, which could have unforeseen effects on our financial condition and results of operations;
legislative, regulatory and litigation threats regarding climate change and energy conservation, legislative, regulatory and litigation threats regarding climate change and energy conservation;
changes to laws regarding the operation of exchanges by third parties may make the business model unsustainable and may lead to an inability to exchange mined Bitcoin for fiat currency efficiently; and
material litigation (including with our lenders and counter-parties counterparties), investigations or enforcement actions by regulators and governmental authorities.
Risks Relating to Our Business and Management
We have incurred operating losses since inception.
During the time we have operated we have incurred net losses. We expect to continue to incur losses for the near future, and these losses may likely increase as we pursue our growth strategy. If we do not achieve our operational objectives, and if we do not generate sufficient cash flow and income, our financial performance and long-term viability may be materially and adversely affected. Our inability to achieve and then maintain profitability would negatively affect our business, financial condition, results of operations and cash flows.
We receive a significant portion of our digital colocation revenues from a limited number of customers. The loss of a major customer could adversely affect our business.
We have in the past and expect to continue to derive a significant portion of our digital colocation revenues from a relatively limited number of customers. The loss of any one or more of these customers, a significant change in their business model, or in their ability to make payments when due, could materially and adversely affect our sales, financial condition and liquidity. These factors are largely beyond our control and the resulting loss in revenues may be difficult or impossible to replace. Recently, we experienced the loss of one of our former most significant colocation customers due to its acquisition by one of our competitors. If we are unsuccessful in offsetting the decline in colocation revenue from this customer with revenue from new colocation customers or other existing customers, our revenues and results of operations could be materially adversely affected.
Changes in our business strategy or restructuring of our businesses may increase our costs or otherwise affect our businesses.
We continually review our operations with a view toward reducing our cost structure, including, but not limited to, reducing our labor cost-to-revenue ratio, improving process and system efficiencies and increasing our revenues and operating margins. Despite these efforts, we have needed and may continue to need to adjust our business strategies to meet these changes, or we may otherwise find it necessary to restructure our operations or particular businesses or assets. When these changes or events occur, we may incur costs to change our business strategy and may need to write down the value of assets or sell certain assets. Additionally, any of these events could result in disruptions or adversely impact our relationships with our workforce, suppliers and customers. In any of these events our costs may increase, and we may have significant charges or losses associated with the write-down or divestiture of assets and our business may be materially and adversely affected.
We will need to raise substantial additional capital to continue our operations and execute our business strategy, meet our debt service obligations and execute our business strategy, and we may not be able to raise adequate capital on a timely basis, on favorable terms, or at all. Our inability to raise sufficient capital would have a material adverse effect on our financial condition and business.
We have a history of losses from operations, we expect potential negative cash flows from our operations to continue for the foreseeable future, and we expect that our net losses will continue for the foreseeable future as we seek to increase the efficiency of our operations, find new colocation customers, and grow the size of our self-mining operations. These circumstances raise substantial doubt about our ability to continue as a going concern. Our financial statements as of December 31, 2025, have been prepared on the basis that we will be able to continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. At December 31, 2025, our accumulated deficit was $252.5 million, our cash and cash equivalents were $13.3 million, we had negative working capital of $31.3 million, and we had an aggregate of $25.2 million of debt.
Advancing our future plans will require substantial additional investment. Based on our current operating plan estimates, we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over the next 12 months from the date of this Annual Report. We will need to raise substantial additional capital in the near term to continue to fund our operations, meet our debt obligations and execute our current business strategy. The amount and timing of our capital needs have and will continue to depend on many factors, as discussed further below as well as under Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources.”
We have several notes in default which can subject collateral to seizure and otherwise impact our ability to use the collateral in our operations as well as affect our ability to raise capital. Additional capital may not be available to us, or even if it is, the cost of such capital may be high or even uncommercial. We may be forced to obtain additional capital when our stock price or trading volume or both are low, or when the general market for digital assets, AI or HPC companies is weak. Raising capital under any of these or similar scenarios, if we can raise any at all, may lead to significant dilution to our existing stockholders. We may be forced to sell assets to raise capital, and we may not be able to realize the full value of those assets at the time of sale.
If we cannot raise adequate additional capital when needed, we may be forced to reorganize or merge with another entity, sell or monetize assets, file for bankruptcy, or cease operations. If we become unable to continue as a going concern, we may have to liquidate our assets, and might realize significantly less than the values at which they are carried on our financial statements, and our stockholders may lose all or part of their investment in our Common Stock.
We are exploring and evaluating strategic options and capital-raising transactions. We cannot assure you that our evaluation of strategic options will result in any particular outcome, and the perceived uncertainties related to Mawson could adversely affect our business and our stockholders.
We expect to continue to consider and evaluate potential strategic options and capital-raising transactions including, among other things, dispositions of certain businesses and assets and significant equity investments in us by third parties. Any capital-raising through equity or convertible debt could result in significant dilution to existing stockholders. In addition, newly issued securities may have rights, preferences, or privileges senior to those of our common shares.
The process of reviewing potential strategic opportunities may be time consuming, distracting and disruptive to our business operations. Our management may devote significant time, and we may incur substantial costs in pursuing, evaluating and negotiating potential strategic options or capital-raising transactions and those efforts may not prove successful on a timely basis, or at all.
Any potential transaction may be dependent on a number of factors that may be beyond our control, for example, market conditions, industry trends or acceptable terms. We may ultimately determine that no transaction is in the best interest of our stockholders and there can be no assurance that we will pursue or enter into any transaction at all. There can be no assurance of the impact to the value of our Common Stock after the announcement or consummation of any strategic transaction. In addition, any perceived uncertainty regarding our future operations may limit our ability to retain or hire qualified personnel.
We do not currently intend to disclose further developments with respect to this process, unless and until our Board of Directors (the “Board”) approves a specific transaction or otherwise concludes the review of strategic options. If we are unable to effectively manage the strategic review process, our business, financial condition, liquidity and results of operations could be adversely affected.
We have experienced management turnover, including turnover of our top executives, which creates uncertainties and could have an adverse effect on our business.
The responsibility of the direction and operation of our business relies heavily on a small number of key people, including our Interim Chief Executive Officer and our Chief Financial Officer. If any of our key employees cease their involvement in our business or, in the unfortunate situation one or more of them are seriously injured or dies, this loss would have a significant and likely adverse impact on us.
We have experienced changes to our executive leadership, including the appointment of Kaliste Saloom as our Interim Chief Executive Officer in June 2025 and departure of Rahul Mewawalla as our Chief Executive Officer and President in July 2025.
Although we have endeavored to implement these management transitions in a non-disruptive manner, such transitions can be inherently difficult to manage and may hamper our ability to meet our financial and operational goals. Such changes may also give rise to uncertainty among our customers, investors, suppliers, employees and others concerning our future direction and performance. Any of the foregoing could result in significant disruptions to our operations and may adversely affect our financial condition, results of operations, cash flows and ability to execute on our business plans.
Inflation in the global economy could negatively impact our business and results of operations.
Inflation in the United States and around the world has risen to levels not experienced in recent decades. Inflation, including rising prices for energy, metals, components, and other inputs as well as rising wages negatively impact our business by increasing our operating costs. As a result of inflation, we have experienced and may continue to experience, cost increases. Although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, financial condition, results of operations, and liquidity could be materially adversely affected. Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.
We or our suppliers may not be able to procure or repair hardware that is required in our operations.
Our business relies on digital assets-specific hardware such as the Miners, and containers in which to operate the Miners, and also more general plant and equipment such as transformers, breakers, power boards exhaust fans, deflectors, monitoring equipment and many other parts. If we are unable to procure such hardware, or replacement parts (at commercial prices, or at all), or they are delayed, our operations may be adversely affected which would likely have a material adverse effect on our business, financial condition, results of operations and prospects. If the manufacturers of such hardware are unable to obtain materials or components themselves, they may experience manufacturing delays or have to cease manufacturing altogether. Supply chain disruptions may also occur from time to time due to a range of factors beyond our control, including, but not limited to, increased costs of labor, freight costs and raw material prices along with a shortage of qualified workers.
There are a small number of major suppliers of Miners globally, and Miner manufacturing is located primarily in China. If we, or our customers, were unable to source Miners from those suppliers (for example due to overwhelming global demand for Miners, or due to geopolitical tensions, or war) at a commercial price, or at all, this would have a materially adverse impact on our business, financial condition, results of operations and prospects. Even if the suppliers have agreed to supply us with Miners, they may fail to supply the Miners due to their inability to manufacture sufficient Miners due to a shortage of components or resources such as semiconductors, a default, insolvency, a change in control, or change of laws (including export/import restrictions, quotas or tariffs).
Trade policies such as export/import restrictions, quotas or tariffs may reduce the ability of our suppliers to supply us with Miners or create a shortage or lack of components necessary for their manufacture or repair. Beginning in 2025, the U.S. government announced significantly increased tariffs on foreign imports into the U.S. from certain countries, including China, Canada and Mexico, and in some cases threatened to impose additional tariffs. In response, several countries have imposed, or threatened to impose, reciprocal tariffs on imports from the U.S. and other retaliatory measures. Miners that we source from China and other mining hardware that we source from outside the U.S. may be subject to these tariffs. If these tariffs are imposed, or if retaliatory trade measures are taken by foreign countries in response to additional tariffs, it could have the impact of increasing the aggregate purchase cost of those commodities or reducing the supply of available commodities, which could have an adverse effect on our business and results of operations.
Additionally, the government of China in particular exerts a high level of influence and control over its economy and businesses (private and state owned). There have been various examples of government policies, decisions, laws and intervention into particular industries. Changes in any of these policies, laws and regulations, or the interpretations thereof, as they relate to the mining hardware suppliers, could have a negative impact on our business.
Additionally, if our electricity suppliers are negatively affected by the international supply chain issues, they may not be able to maintain or grow their facilities and may not be able to supply us with power, or we may be unable to source extra power in the future to enable our growth. This would likely have a material adverse effect on our business, financial condition, results of operations and prospects.
Such supply chain disruptions have the potential to cause material impacts to our operating performance and financial position if the delivery of equipment for our facilities is delayed.
The Company’s expansion into the AI and HPC markets may present increased liability and additional risks to our business.
While the Company does not run AI and HPC workloads for its own purposes, it offers infrastructure for potential customers. As such, the Company may be indirectly exposed to risks in the AI and HPC space, including:
Regulatory Uncertainty. Many countries have not yet established comprehensive AI regulations, creating uncertainty that can impact future development, deployment, and compliance costs.
Compliance with Privacy Laws. AI companies must address compliance with data protection regulations, such as the EU’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), as these laws significantly impact AI applications that process personal data.
Technology and Data Dependencies. There is a risk of dependency on vast datasets for training AI models and obtaining quality data could become more difficult due to legal restrictions or competitive factors.
Cybersecurity. AI systems, like all other IT systems, are vulnerable to cyber-attacks, data breaches, intellectual property theft, and malicious manipulation of AI models.
Litigation and Intellectual Property. Intellectual property disputes over algorithms, AI models, and proprietary datasets are common concerns. Legal challenges or patent disputes could negatively impact AI companies’ operations.
Reputational Risks. Public trust in AI is in flux and could be undermined by high-profile failures, ethical concerns, or regulatory sanctions. This could affect consumer adoption and AI companies’ images and reputations.
Mining equipment is prone to breakdown, fail or become obsolete.
Miners and related mining equipment used to mine digital assets are sophisticated machines and may be operated over two years or longer. They are thus prone to breakdown and may not function at any given time. Any downtime of a significant number of our Miners and mining equipment will have a direct impact on us as they would not be performing their role. This could occur due to an accident on site, or during transportation of a large number of Miners.
A number of factors drive the adoption of ever more efficient Miners in the Bitcoin mining industry, including energy prices, the fact that the Bitcoin algorithm was designed so that as more computing power is added to the network, the difficulty to mine for each block increases, and halving events. Over time older mining equipment becomes less and less profitable, and like most computing hardware, eventually becomes obsolete. Mawson’s fleet has not been materially renewed for a number of years, which means that a number of factors could render its self-mining fleet obsolete, including a significant increase in difficulty, halving events, or simply wear and tear on the machines rendering some or all of them uncommercial, or inoperable.
Any extended outage or limitation of an internet connection at our sites could materially impact our operations and financial performance.
A secure, reliable and fast internet connection is required for our Miners to validate and verify Bitcoin transactions, secure transaction blocks and add those transaction blocks to the Bitcoin blockchain. Any extended downtime, bandwidth limitations or other constraints may reduce our ability to use our Miners support transactions on the Bitcoin network, and therefore reduce our ability to earn block rewards. In addition, global climate change could result in certain types of natural disasters occurring more frequently or with more intense effects. Any such events may result in Miners being subject to internet service disruptions or outages. The effects of any such events could have a material adverse effect on our operating results and financial condition.
Access to reliable electricity sources at reasonable prices is critical to our growth and profitability.
Our operations require significant amounts of electrical power. If we are unable to continue to obtain sufficient electrical power on a cost-effective basis, we may not be able to realize the anticipated benefits of our significant capital investments. If power prices increase this will likely materially impact whether we can generate Bitcoin profitably, and how much net energy benefits we will be entitled to.
Our data infrastructure requires developed land, preferably close to sustainable and reasonably priced electricity sources. If we are unable to acquire rights to use such land or lose the rights to the land we currently lease or occupy, this would likely mean that we would lose access to the relevant supply of electricity. A lack of access to electricity would significantly impact the profitability and viability of our business.
Additionally, our operations could be materially adversely affected by prolonged power outages. The potential physical effects of climate change could result in power outages occurring more frequently. We may have to reduce or cease our operations in the event of an extended power outage, or as a result of the unavailability or increased cost of electrical power. If this were to occur, our business and results of operations could be materially and adversely affected.
Cyber-security threats pose a challenge to our business, including the safekeeping of our digital assets, and a risk of reputational damage.
Mawson, like almost all businesses around the world, is subject to malicious attempts to penetrate its systems. We take measures to protect our operations and our digital and physical assets from unauthorized access, damage or theft; however, it is possible that the security system may not prevent improper access to, or damage or theft of our assets. A security breach could harm our reputation or result in the loss of some or all of our assets, or an inability to operate. A resulting perception that our measures do not adequately protect our assets could adversely affect our business, financial condition, results of operations and prospects.
We routinely liquidate digital assets so as to minimize our risks against theft, loss, destruction or other issues relating to hackers and technological attack of digital assets in our possession. We have methods of monitoring and ensuring that our Miners are directing hashrate to the correct pools and that any Bitcoin produced is sent to the intended recipient. Nevertheless, this security system may still be penetrated and may not be free from defect or immune to acts of God, and any loss due to a security breach, software defect or act of God will be borne by us.
The security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee, or otherwise, and, as a result, an unauthorized party may obtain access to our private keys, data or Bitcoins. Additionally, outside parties may attempt to fraudulently induce employees of ours to disclose sensitive information in order to gain access to our infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our security system occurs, the market perception of the effectiveness of our security system could be harmed, which could adversely affect our business, financial condition, results of operations and prospects. In the event of a security breach, we may also be forced to cease operations, or suffer a reduction in assets, the occurrence of each of which could adversely affect us.
We may not have, or be able to obtain or maintain, relevant business insurance.
Due to the industry in which we operate, we may not be able to obtain or maintain some types of insurance that operators of similar businesses in other industries would usually obtain, at commercially viable premiums, or at all.
The sale of our digital assets to pay expenses at a time of low digital asset prices could adversely affect our business.
We routinely liquidate digital assets. This may mean that we sell digital assets at a time when the prices on the respective digital asset exchange market may be low, which could adversely affect our business, financial condition, results of operations and prospects.
If we fail to grow our hash rate and to effectively manage the renewal of our Miner fleet and other plant and equipment, we may be unable to compete, and our results of operations could suffer.
Generally, a Bitcoin Miner’s chance of solving a block on the Bitcoin blockchain and earning a Bitcoin reward is a function of the Miner’s hash rate (i.e., the amount of computing power devoted to supporting the Bitcoin blockchain), relative to the global network hash rate. As greater adoption of Bitcoin occurs, we expect the demand for Bitcoin will increase further, drawing more mining companies into the industry and thereby increasing the global network hash rate. As new and more powerful Miners are deployed, the global network hash rate will continue to increase, meaning a Miner’s chance of earning Bitcoin rewards will decline unless it deploys additional hash rate at pace with the industry.
Accordingly, to maintain our chances of earning new Bitcoin rewards and remaining competitive in our industry, we must seek to continually add new Miners to grow our hash rate at pace with the growth in the Bitcoin global network hash rate. However, as demand has increased and scarcity in the supply of new Miners has resulted, the price of new Miners has increased sharply, and we expect this process to continue in the future as demand for Bitcoin increases. Therefore, if the price of Bitcoin is not sufficiently high to allow us to fund our hash rate growth through new Miner acquisitions and if we are otherwise unable to access additional capital to acquire these Miners, our hash rate may stagnate, and we may fall behind our competitors. If this happens, our chances of earning new Bitcoin rewards would decline and, as such, our results of operations and financial condition may suffer.
As our digital assets reach the end of useful life (such as our Miner fleet) we will need to plan for their replacement. Replacing our mining fleet will require significant capital which the Company does not currently have. If we are unable to raise sufficient capital and replace or renew our mining fleet, we may not be able to mine for Bitcoin on a commercial basis. This may force us to consider other business options, such as to expand our colocation business, however, even if successful, these alternative business options may not generate the same level of profit or income as self-mining.
Digital assets mining is a highly competitive industry.
The digital assets mining industry is highly competitive, especially for Bitcoin, and there are several competitors who are considerably larger than Mawson, and who have operated for longer in the industry. With this size and operating history likely comes greater resources (financial, human, and technical), greater brand recognition and reputation, stronger business relationships, and economies of scale. We expect existing competitors will expand their operations, new competitors will enter the industry, and some competitors will merge to create even stronger competitors. The digital asset mining industry is global. If the amount of competing computational power in the Bitcoin network increases, then the difficulty of the mining process increases, which may lead to lower Bitcoin rewards for Mawson.
If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, operating results and financial condition could be adversely affected.
Global climate change may have an adverse effect on our business operations and financial position.
Changes in climate and its effect on the environment such as changes in heat, humidity, snow, rainfall, weather patterns, water supplies and shortages, sea level and changing temperatures could have an adverse effect on our operations and financial performance. The potential physical effects of climate change on our operations, if any, are highly uncertain.
Extreme weather events may:
cause damage to one or more of our modular data centers (that house our Miners) and therefore reduce our ability to maximize the performance of or operate the Miners;
affect the delivery times of equipment ordered from our manufacturers and therefore impact our financial forecasts which were scheduled for a certain period of time; or
cause power disruptions or cuts to our Miners, reducing operating times and the performance of the Miners.
Banks and financial institutions may cease to provide financial services to persons involved in digital assets transactions.
Banks and other financial institutions can and have made legal and risk-based decisions to not accept customers such as digital assets investors or businesses that engage in Bitcoin-related activities or that accept Bitcoin as payment. This may be because it would be illegal for them to do so, or in situations where the legal position is unsure, but subject to material risk. If we, or our major business partners (e.g. exchanges, mining pools, or Miner suppliers) are unable to obtain banking services, this will cause material business disruption and loss and damage to our business. If it occurs to a significant number of Bitcoin users, investors and traders, this may lead to a loss of confidence in Bitcoin and its value, leading to a fall in the Bitcoin price.
Risks Relating to Digital Assets and Technology
The digital assets industry and pricing can be volatile.
The pricing of digital assets, such as Bitcoin, has proven to be volatile, characterized by periods of extreme upturns and downturns that have lasted over lengthy time periods multiple times in digital assets’ history. A falling Bitcoin price directly affects our ability to generate revenue, which can affect our ability to meet our financial obligations. Further, volatility in energy prices has often resulted in the major input cost to generate Bitcoin increasing.
The price of Bitcoin can fluctuate due to investment and trading sentiment amongst users, speculators, and investors for a range of reasons, including changes in interest rate settings, or negative or positive publicity (for example due to legal proceedings or losses to Bitcoin investors due to fraud or cyber-attacks on a digital asset exchange or online wallet). Large holders of Bitcoin may be able to effect large price swings, especially if they were to liquidate their holdings, which would likely cause the price of Bitcoin to fall. A fall in the price of Bitcoin will have a negative impact on our revenues. The prices that we receive for our Bitcoin depend on numerous market factors beyond our control. Due to the highly volatile nature of the price of Bitcoin, our historical operating results have fluctuated, and continue to fluctuate, significantly from period to period. Mawson does not use derivatives to hedge Bitcoin prices.
Corporate collapses of important companies in the Bitcoin ecosystem, such as exchanges, funds, lenders, wallet providers and so on, or other digital assets can also have an impact on confidence and the Bitcoin price.
We are also exposed to the effect a falling price can have on our counterparties, including the exchanges we use and our colocation customers. In particular, in July 2022, Celsius Networks, LLC and Celsius Mining LLC, filed for Chapter 11 bankruptcy. A subsidiary of Mawson, Luna Squares LLC, remains an unsecured creditor of Celsius Mining LLC (“Celsius”), with unpaid invoices totaling in excess of $6.9 million.
Subsequent disputes have led to litigation between Celsius entities and Mawson entities, as further discussed in Note 10 – Commitments and Contingencies to the consolidated financial statements included in Item 15. “Exhibits, Financial Statement Schedules” in this Annual Report.
Changes to digital asset network protocols and governance may adversely affect our business.
Bitcoin and other digital asset networks are based on open-source protocols that evolve through decentralized development. Network participants may adopt changes to software, consensus rules, or economic parameters through protocol upgrades or forks. Such changes may impact transaction processing, fee dynamics, and miner incentives. As block rewards decline over time, mining economics are expected to become increasingly dependent on transaction fees, which are inherently variable. Any material changes affecting mining profitability could reduce demand for our colocation services or impact pricing. Since we do not control the development or governance of these networks, any such changes could have a material adverse effect on our business, results of operations, and financial condition.
If a malicious actor or botnet obtains control in excess of 50% of the processing power active on any digital asset network, including the Bitcoin network, it is possible that such actor or botnet could manipulate the blockchain in a manner that adversely affects us.
If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the processing power dedicated to mining on any digital asset network, including the Bitcoin network, it may be able to alter the blockchain by constructing alternate blocks if it is able to solve for such blocks faster than the remainder of the Miners on the blockchain can add valid blocks. In such alternate blocks, the malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new digital assets or transactions using such control. Using alternate blocks, the malicious actor could “double-spend” its own digital assets (i.e., spend the same digital assets in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintains control. To the extent that such malicious actor or botnet does not yield its majority control of the processing power, or the digital asset community does not reject the fraudulent blocks as malicious, reversing any changes made to the blockchain may not be possible. Such changes could materially adversely affect our business, financial condition, results of operations and prospects.
A failure to properly monitor and upgrade the Bitcoin network protocol could damage the Bitcoin network and adversely affect us.
The open-source structure of the digital assets network protocols means that the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol. The Bitcoin network, for example, operates based on an open-source protocol maintained by contributors, largely on the Bitcoin Core project on GitHub. As an open-source project, Bitcoin is not represented by an official organization or authority. As the Bitcoin network protocol is not sold and its use does not generate revenues for contributors, contributors are generally not compensated for maintaining and updating the Bitcoin network protocol. The lack of guaranteed financial incentive for contributors to maintain or develop the Bitcoin network and the lack of guaranteed resources to adequately address emerging or latent issues with the Bitcoin network may reduce incentives to address the issues adequately or in a timely manner. Modification or changes to the Bitcoin protocol by a sufficient number of users (known as a “fork”) may lead to unforeseen bugs or other negative outcomes for Mawson and Miners in general. Changes to our latent issues in a digital asset network which we are mining could materially adversely affect our business, financial condition, results of operations and prospects.
The incentive for Bitcoin mining may decrease over time as the reward decreases.
A Bitcoin halving occurs when block rewards, or the number of Bitcoins entering circulation whenever a block is produced (approximately every 10 minutes), is reduced by half. This occurs on a schedule built into Bitcoin’s programming and happens every 210,000 blocks with the purpose being to issue the total supply of Bitcoin into the market less frequently over time. This supply effect increases Bitcoin’s scarcity, which has, historically, increased its price. When Bitcoin first started, 50 Bitcoins were rewarded to Miners per block produced. The reward has decreased over the years and, the current block reward is 3.125 Bitcoins per block. Halving events will continue until the block reward reaches zero. The process will end with a predetermined total of 21 million Bitcoins being issued, estimated to be around the year 2140. At each prior halving event, the short-term subsequent effect on the Bitcoin price has been an increase in price, however this trend may not continue in the future, in which case, our business, financial condition, results of operations and prospects may be materially adversely affected.
More significant reductions in aggregate hashrate on digital asset networks could result in material, though temporary, delays in block solution confirmation time. Any reduction in confidence in the confirmation process or aggregate hashrate of any digital asset network may negatively impact the value of digital assets, which will adversely impact our business, financial condition, results of operations and prospects.
Increasing network difficulty plays a crucial role in determining the profitability of digital assets and Bitcoin mining.
Essentially, network difficulty refers to the degree of effort required to solve the mathematical problems that validate transactions on the Bitcoin network. For digital assets that use a Proof-of-Work (PoW) validation system such as Bitcoin, creating new digital assets involves Miners using their computers to solve complex mathematical puzzles. In the case of Bitcoin, Miners’ computers, also called nodes, collect and bundle individual transactions into blocks every ten minutes, which is the fixed “block time” of Bitcoin. The computers then compete to solve a complex cryptographic puzzle to be the first to validate the new block for the blockchain. As digital assets like Bitcoin become more popular, the number of computers participating in this peer-to-peer validation network increases. With more participants and more computing power, the so-called “hashpower” of the entire network increases accordingly.
The higher the network difficulty, the more challenging it is to mine new Bitcoins. As a result, mining profitability is directly impacted by changes in difficulty levels. There are several other factors that can influence network difficulty, such as:
1. Network difficulty adjustments: The Bitcoin network adjusts difficulty every 2,016 blocks or approximately every two weeks. The adjustment is based on the total network hash rate, which is the measure of computing power being used to mine on the network. If the hashing power on the network increases, the difficulty level also increases to maintain a consistent rate of new blocks being added to the blockchain. Conversely, if the hashing power decreases, the difficulty level decreases as well. This means that the profitability of mining can be impacted by changes in the number of Miners on the network.
2. Block time: The target block time for Bitcoin is 10 minutes. If blocks are being generated too quickly, the difficulty level will increase to slow down the rate of block creation. Conversely, if blocks are being generated too slowly, the difficulty level will decrease to speed up the rate of block creation.
3. Hardware efficiency: The efficiency of mining hardware can have a significant impact on mining difficulty. More efficient hardware can mine more hashes per second, which increases the hash rate and can cause the difficulty level to rise.
4. Electricity costs: Mining requires a lot of electricity, and the cost of electricity can have a significant impact on mining difficulty. If electricity costs are high, Miners may need to shut down their operations or switch to more efficient hardware to remain profitable.
5. Market conditions: The price of Bitcoin can have a significant impact on mining difficulty. If the price of Bitcoin increases, more Miners may join the network, causing the hash rate to increase and the difficulty level to rise. Conversely, if the price of Bitcoin decreases, some Miners may exit the network, causing the hash rate to drop and the difficulty level to decrease.
6. Halving: Bitcoin undergoes a halving event roughly every four years, where the reward for mining a new block is cut in half. This means that Miners need to mine twice as many blocks to earn the same amount of Bitcoin. This can lead to a drop in hashrate, as some Miners may find it less profitable to continue mining.
An increase in transaction fees could reduce the price of digital assets.
If fees increase for recording transactions on the Bitcoin network, demand for digital assets may decrease and prevent the expansion of the network to retail merchants and commercial businesses, resulting in a reduction in the price of digital assets that could adversely affect our business, financial condition, results of operations and prospects.
Digital assets firms may be forced to sell their Bitcoin or digital assets holdings putting downward pressure on the Bitcoin price.
A professionalized mining operation may be more likely to sell a higher percentage of its newly mined digital assets rapidly if it is operating at a low profit margin. In a low profit margin environment, a higher percentage could be sold into the digital asset exchange market more rapidly, thereby potentially reducing digital asset prices. Lower digital asset prices could result in further tightening of profit margins, particularly for mining operations with higher costs and more limited capital reserves, creating a network effect that may further reduce the price of digital assets until mining operations with higher operating costs become unprofitable and remove mining power from the respective digital asset network. The network effect of reduced profit margins resulting in greater sales of newly mined digital assets could result in a reduction in the price of digital assets that could adversely impact our business, financial condition, results of operations and prospects.
To the extent that the digital asset exchanges / custodians representing a substantial portion of the volume in digital asset trading are involved in fraud or experience security failures or other operational issues, such digital asset exchanges / custodians’ failures may result in a reduction in the price of some or all digital assets and can adversely affect us.
The digital asset exchanges / custodians on which the digital assets trade are relatively new (compared to actors in traditional financial services) and, in most cases, largely unregulated, or subject to little oversight. Furthermore, many digital asset exchanges / custodians (including several of the most prominent USD denominated digital asset exchanges) do not provide the public with significant information regarding their ownership structure, management teams, corporate practices or regulatory compliance. As a result, the marketplace may lose confidence in, or may experience problems relating to, digital asset exchanges / custodians, including prominent exchanges / custodians handling a significant portion of the volume of digital asset trading.
A lack of stability in the digital asset exchange market and the closure or temporary shutdown of digital asset exchanges due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in the digital asset networks and result in greater volatility in digital asset values. These potential consequences of a digital asset exchange’s failure could materially adversely affect our business, financial condition, results of operations and prospects.
The further development and acceptance of digital asset networks and other digital assets, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of digital asset systems may adversely affect us.
Currently, there is relatively small use of Bitcoins and other digital assets in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in us. Digital assets are a relatively new concept and asset class, so there is still some degree of uncertainty and skepticism about their use. Whether their popularity will gain further traction is difficult to predict. If the popularity and use of digital assets diminish and leads to their value decreasing, our business, financial condition, results of operations and prospects may be materially adversely affected.
Future digital assets and digital currency development may lessen the usage of Bitcoin .
Digital asset technology is evolving, and new digital assets can be created. New digital assets competing with Bitcoin may increase in popularity and in turn cause a decline in the value of Bitcoin, which may in turn lead to a decline in the Bitcoin network and our ability to generate revenue from our current mining activities. This may include the development of so-called central bank digital currencies (“CBCDs”). Many governments around the world, and central banks are reportedly considering or studying the potential for CBCDs, including the United States Federal Reserve.
The development of quantum computing threatens the cryptographic protections of blockchain protocols.
Governments and corporations around the world are conducting research and development to produce quantum computers which will be much more powerful than modern computers. The potential capability of quantum computers poses a potential threat to the underlying cryptographic protections that the Bitcoin blockchain protocol relies on, and therefore to the reliability of the blockchain, and may therefore undermine users’ trust in Bitcoin and digital currencies in general. For example, a quantum computer may provide the possibility of decrypting user private keys and forging transaction signatures, undermining the integrity of the blockchain. A loss of trust in the digital currencies due to the ability of quantum computing to undermine security protocols will likely have a material adverse effect on our business, results of operations and financial condition.
Risks Relating to Laws, Regulatory Frameworks, and Legal Action
We are subject to a highly evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our business, reputation, prospects or operations. Obtaining and complying with required government permits and approvals may be time-consuming and costly.
We are required to obtain, and to comply with, numerous permits and licenses from federal, state and local governmental agencies. The process of obtaining and renewing necessary permits and licenses can be lengthy and complex, requiring up to months or years for approval depending on the nature of the permit or license and such process could be further complicated or extended in the event regulations change. In addition, obtaining such permit or license can sometimes result in the establishment of conditions that create a significant ongoing impact to the nature or costs of operations or even make the project or activity for which the permit or license was sought unprofitable or otherwise unattractive. In addition, such permits or licenses may be subject to denial, revocation or modification under various circumstances. Failure to obtain or comply with the conditions of permits or licenses, or failure to comply with applicable laws or regulations, may result in the delay or temporary suspension of our operations and electricity sales or the curtailment of our delivery of electricity to our customers and may subject us to penalties and other sanctions. Although various regulators routinely renew existing permits and licenses, renewal of our existing permits or licenses could be denied or jeopardized by various factors, including failure to provide adequate financial assurance for closure, failure to comply with environmental, health and safety laws and regulations or permit conditions, local community, political or other opposition and executive, legislative or regulatory action. Our inability to procure and comply with the permits and licenses required for these operations, or the cost to us of such procurement or compliance, could have a material adverse effect on us. In addition, new environmental legislation or regulations, if enacted, or changed interpretations of existing laws, may cause activities at our facilities to need to be changed to avoid violating applicable laws and regulations or eliciting claims that historical activities at our facilities violated applicable laws and regulations. In addition to the possible imposition of fines in the case of any such violations, we may be required to undertake significant capital investments and obtain additional operating permits or licenses, which could have a material adverse effect on us.
Digital assets such as Bitcoin are likely to be more highly regulated.
Digital assets have been subject to ongoing scrutiny by regulators and government. It is possible that regulation in the digital asset industry will increase. We cannot be certain of future regulatory developments or interpretations, and it is difficult to list or describe all the risks that Mawson may be subject to in this space. In addition, regulatory actions, as well as any other political developments in the regions with active digital assets trading or mining, may increase our domestic competition as some of those digital assets Miners or new entrants in this market may move their digital assets mining operations or establish new operations in the United States. Furthermore, government scrutiny related to restrictions on digital assets mining facilities and their energy consumption has increased over the past few years as digital assets mining has become more widespread. The consumption of electricity by mining operators may also have a negative environmental impact, including contribution to climate change, which could set the public opinion against allowing the use of electricity for Bitcoin mining activities or create a negative consumer sentiment and perception of Bitcoin. State and federal regulators are increasingly focused on the energy and environmental impact of Bitcoin mining activities. Additionally, if the regulatory and economic environment in Pennsylvania and Ohio were to become less favorable to Bitcoin mining and hosting companies, including by way of increased taxes, means our business, financial condition and results of operations could be adversely affected.
Bitcoin and Bitcoin mining are presently legal in the U.S.; however, they may become illegal in the future, or subject to regulation (such as caps, taxes or licensing regimes).
Regulatory changes or interpretations could require us (or any of our related entities) to register and comply with new regulations, resulting in potentially extraordinary, recurring or non-recurring expenses to continue our digital assets business or enter into new business ventures.
We may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002.
We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Section 404 requires that our management maintain a system of internal control over financial reporting that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It also requires that our management annually evaluate whether our internal control over financial reporting is effective at providing reasonable assurance and to disclose its assessment to investors. Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). During 2025, management devoted significant effort and resources to remediating the material weaknesses in internal control over financial reporting that were identified as of December 31, 2024. Based on management’s evaluation and testing performed during the year ended December 31, 2025, management determined that the controls implemented as part of the remediation plan were appropriately designed and had begun to operate effectively. Management continues to monitor the operating effectiveness of these controls to ensure their sustainability over time.
In addition, while Mawson continues to work on these deficiencies and improve the overall control environment over financial reporting, as a smaller reporting company and non-accelerated filer, we are not subject to the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. However, as we grow, we may become subject to the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.
If we fail to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, the accuracy and timeliness of the filing of our annual and quarterly reports may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Common Stock.
Future developments regarding the treatment of digital assets for U.S. federal income and foreign tax purposes could adversely impact our business.
Globally, many taxation laws, rules and guidelines have not been developed with digital assets in focus. For example, many significant aspects of the U.S. federal income and foreign tax treatment of transactions involving digital assets are uncertain, and it is unclear what guidance may be issued in the future on the treatment of digital asset transactions for U.S. federal income and foreign tax purposes.
There can be no assurance that the IRS or other foreign tax authorities will not alter their position or introduce new laws, regulations or guidance with respect to digital assets. Any such alteration of existing IRS and other foreign tax authority positions or additional guidance regarding digital asset products and transactions could result in adverse tax consequences for our business and could have an adverse effect on the value of digital assets and the broader digital assets markets. In addition, the IRS and other foreign tax authorities may disagree with tax positions that we have taken, which could result in increased tax liabilities. Future technological and operational developments that may arise with respect to digital currencies may increase the uncertainty with respect to the treatment of digital currencies for U.S. federal income and foreign tax purposes.
Another example of an adverse ruling would be if we were classified as a passive foreign investment company (a “PFIC”) for any taxable year. Based on the current and anticipated composition of our income, assets and operations, and our business generally, we do not expect to be treated as a PFIC for the current taxable year or in the foreseeable future. The application of the PFIC rules to digital assets and transactions related thereto is subject to uncertainty. There can be no assurance that Mawson will not be classified as a PFIC for the current taxable year or for any future taxable year. If Mawson is considered a PFIC then there may be negative tax consequences for U.S. holders of our Common Stock, as well as being subject to annual information reporting requirements. U.S. holders may wish to consult their tax advisors about the potential application of the PFIC rules to an investment in our Common Stock.
Regulatory intervention by governments could affect the right to acquire, own, hold, sell, exchange or use Bitcoin or other digital assets.
Governments have and may take regulatory actions to restrict the right to acquire, own, hold, sell, exchange or use Bitcoin or other digital assets. For example, it may be, or may become, illegal to accept payment in Bitcoin for consumer transactions and banking institutions could be barred from accepting deposits of digital assets. Such restrictions would have a negative effect on the value and price of Bitcoin. On the other hand, some governments could decide to subsidize or support certain Bitcoin mining projects, thus adding hash rate to the overall network, and having a material adverse effect on the amount of Bitcoin we may be able to mine, the value of Bitcoin and, consequently, our business, prospects, financial condition and operating results.
Additional legislation or guidance may be issued by U.S. and non-U.S. governing bodies that may differ significantly from our practices or interpretation of the law, which could have unforeseen effects on our financial condition and results of operations.
As digital assets have grown in both popularity and market size, governments around the world have reacted differently to digital assets; certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while in some jurisdictions, such as in the United States, subject the mining, ownership and exchange of digital assets to extensive, and in some cases overlapping, unclear and evolving regulatory requirements. We are subject to various federal, state, and local laws and regulations, including those relating to the generation of power, noise, storage, handling, and disposal of hazardous substances and wastes. Certain of these laws and regulations also impose joint and several liability, without regard to fault, for investigation and cleanup costs on current and former owners and operators of real property and persons who have disposed of or released hazardous substances into the environment. Electricity costs could also be affected due to existing or new regulations on greenhouse gas emissions, whether such regulations apply to all consumers of electricity or just to specified uses, such as Bitcoin mining. These regulations may be federal, state or local. There has been interest in the U.S. federal government and in some state governments in addressing climate change, including through regulation of Bitcoin mining. Past policy proposals to address climate change include measures ranging from taxes on carbon use or generation to energy consumption disclosure regimes to federally imposed limits on greenhouse gas emissions or energy use restrictions specific to Bitcoin mining. It is unclear how any such future legislation and regulation will affect our Pennsylvania and Ohio facilities. The course of future legislation and regulation in the United States remains difficult to predict, and potential increased costs associated with new legislation or regulation cannot be estimated at this time. Given the difficulty of predicting the outcomes of ongoing and future regulatory actions and legislative developments, it is possible that they could have a material adverse effect on our business, prospects or operations.
Legislative, regulatory, and litigation threats regarding climate change and energy conservation could add significant burden, costs and reputational damage to our business.
Changing environmental regulation and public energy policy may expose our business to new risks. Our Bitcoin colocation services and mining operations require a substantial amount of power and can only be successful, and ultimately profitable, if the costs we incur, including for electricity, are lower than the revenue we generate from our operations. As a result, our operations can only be successful if we can obtain sufficient electrical power for that facility on a cost-effective basis. For instance, our plans and strategic initiatives for our Pennsylvania and Ohio facilities are based, in part, on our understanding of current environmental and energy regulations, policies, and initiatives enacted by federal and state regulators. If new regulations are imposed, or if existing regulations are modified, the assumptions we made underlying our plans and strategic initiatives may be inaccurate, and we may incur additional costs to adapt our planned business, if we are able to adapt at all, to such regulations.
In addition, there continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty for our business because the digital assets mining industry, with its high energy demand, may become a target for future environmental and energy regulation. New legislation and increased regulation regarding climate change could impose significant costs on us and our suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations. Further, any future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations. Moreover, we currently participate in energy demand response programs to curtail operations, return capacity to the electrical grid, and receive funds to offset foregone operational revenue when necessary, such as in extreme weather events. Given the political significance and uncertainty around the impact of climate change and how it should be addressed, and energy disclosure and use regulations, we cannot predict how legislation and regulation will affect our financial condition and results of operations in the future in the United States and the states of Pennsylvania and Ohio. Further, even without such regulation, increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change or energy use by us or other companies in our industry could harm our reputation. Any of the foregoing could result in a material adverse effect on our business and financial condition.
Changes to laws regarding the operation of Bitcoin mining and Bitcoin and digital assets exchanges by third parties may make the business model unsustainable and may lead to an inability to exchange mined Bitcoin for fiat currency efficiently. Digital assets mining may be made illegal in certain jurisdictions, including the ones we operate in, which could adversely affect our business prospects and operations.
It is possible that state or federal regulators may seek to impose harsh restrictions or total bans on digital assets mining which may make it impossible for us to do business without relocating our colocation and self-mining operations, which could be very costly and time consuming. Further, although Bitcoin and Bitcoin mining, as well as digital assets generally, are largely unregulated in most countries (including the United States), regulators could undertake new or intensify regulatory actions that could severely restrict the right to mine, acquire, own, hold, sell, or use digital assets or to exchange it for traditional fiat currency such as the United States Dollar. Such restrictions may adversely affect us as the large-scale use of digital assets as a means of exchange is presently confined to certain regions globally. Such circumstances could have a material adverse effect on us, which could have a material adverse effect on our business, prospects, or operations and potentially the value of any Bitcoin or other digital assets we or our colocation customers mine, or otherwise acquire or hold, and thus harm investors. We are unable to predict the nature or extent of new and proposed legislation and regulation affecting the digital assets industry, or the potential impact of the use of digital assets, which could have material adverse effects on our business and our industry more broadly.
We have been subject to material litigation (including with our lenders and counterparties) that are expensive to support, and if resolved adversely, could harm our business, revenue, and financial results.
We have been subject to certain claims and legal proceedings (see Item 3. “Legal Proceedings” for more information about ongoing litigation) and may be subject in the future to claims, legal proceedings, government investigations or enforcement actions, including in the ordinary course of business. Agreements entered into by Mawson sometimes include indemnification provisions which can subject Mawson to costs and damages in the event of a claim against an indemnified third party. Regardless of the merit of particular claims, defending against litigation or responding to government investigations can be expensive, time-consuming, disruptive to operations and distracting to management. If Mawson is unable to successfully defend itself against such claims, then it may become liable to make substantial payments to satisfy judgments, fines or penalties, or alter, delay, limit or cease some or all of its business practices. Mawson may also suffer damage to its brand and reputation as a result of such adverse judgment.
Risks Relating to the Ownership of Our Common Stock and Other Risks
If we fail to comply with the continued listing standards of The Nasdaq Capital Market, we may be delisted and the price of our Common Stock, our ability to access the capital markets and our financial condition could be negatively impacted.
Although our Common Stock is currently listed on The Nasdaq Capital Market, we may not be able to continue to meet the minimum listing requirements of the Nasdaq Stock Market LLC (“Nasdaq”). During 2025, the Company was notified by Nasdaq that the Company was not in compliance with the $35 million market value of listed securities (“MVLS”) requirement set forth in Nasdaq Listing Rule 5550(b) (the “MVLS Rule”) and the $1.00 bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”).
In response, the Company attended a hearing before the Nasdaq Hearings Panel to present its plan to evidence compliance with the Bid Price Rule and the $2.5 million stockholders’ equity requirement set forth in the MVLS Rule as an alternative to the $35 million MVLS requirement. The Company was granted extensions to demonstrate compliance with the MVLS Rule and the Bid Price Rule.
On December 16, 2025, the Company was notified by Nasdaq that it had regained compliance with the Bid Price Rule.
On December 22, 2025, the Company received written notice from the Nasdaq confirming that the Company had regained compliance with the MVLS Rule and would continue being listed on The Nasdaq Capital Market.
Recently, Nasdaq has proposed a new continued listing standard for companies listed on The Nasdaq Capital Market, which would require these companies to maintain a minimum MVLS of at least $5 million. Under this proposal, Nasdaq would suspend trading and immediately delist from Nasdaq the securities of companies that do not satisfy the proposed new MVLS requirement for 30 consecutive business days. Such companies would not have a cure period to regain compliance or be entitled to any stay in effectiveness. The proposed continued listing standard is subject to review and approval by the SEC.
If we fail to comply with the continued listing standards of The Nasdaq Capital Market, we may be delisted and the price of our Common Stock, our ability to access the capital markets and our financial condition could be negatively impacted.
The Company’s business has been and could be negatively affected as a result of actions of activist stockholders, and such activism could adversely affect the strategic direction and business results of the Company.
Publicly traded companies are increasingly subject to campaigns by activist stockholders advocating corporate actions such as operational, governance, management or social changes, financial restructurings, increased borrowings, special dividends, stock repurchases, or sales of assets or entire companies to third parties or to the activist stockholders themselves. The Company has been and may continue to be subject to actions from activist stockholders or others that may not align with its business strategies or may not be in the best interests of all of its stockholders. Actions taken by the Board and management in seeking to maintain constructive engagement with certain stockholders may not be successful to prevent the occurrence of stockholder activist campaigns or changes that adversely affect the strategic direction or business results of the Company.
Mawson has recently been subject to a campaign to take over the Company by Endeavor Blockchain, LLC, Joshua Kilgore, Cody Smith and PM Squared, LLC (collectively, “Endeavor”). Endeavor issued a letter to stockholders of Mawson on January 22, 2026, calling for a change in the Company’s current leadership, strategy and equity capitalization, and announcing its intention to potentially file a preliminary proxy statement to solicit votes for one or more director nominees at the Company’s 2026 annual meeting of stockholders. On March 16, 2026, Endeavor filed a preliminary consent statement with the SEC to solicit consents from stockholders of the Company to, among other things, remove without cause all members of the Board (the “Consent Solicitation”). If the Consent Solicitation is successful, all members of the Board will be removed from office.
In addition, responding to actions by activist stockholders, including the Consent Solicitation, has been, and may continue to be, costly and time-consuming and diverts the attention of the Board, management team, and employees from the management of the Company’s operations and the pursuit of its business strategies. Further, actions of activist stockholders like the Consent Solicitation may cause fluctuations in the Company’s stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of its business. Activist stockholder initiatives and perceived uncertainties as to the Company's future direction, strategy, or leadership created as a consequence of such initiatives may be exploited by the Company’s competitors or result in the loss of potential business opportunities and make it more difficult to attract and retain investors, customers, employees, qualified directors and officers, and business partners.
Changes to the Company’s business as a result of or in response to stockholder activism may not produce the anticipated economic benefits and may harm its reputation with customers, employees, and others, with related adverse economic consequences. Also, the Company has incurred, and may continue to incur, significant expenses related to activist stockholder matters (including, without limitation, legal fees, fees for financial advisors, fees for public relation advisors, and proxy solicitation expenses). If individuals with a specific agenda are elected or appointed to the Board, it may adversely affect the Company’s ability to effectively and timely implement its strategic plan to maximize value for stockholders. Furthermore, if individuals are elected or appointed to the Board who do not agree with the Company’s strategic plan, the ability of the Board to function effectively could be adversely affected. As a result, activist stockholder campaigns could adversely affect the Company’s business, results of operations, financial condition, and share price.
In connection with any activist campaign, the Company may choose to initiate, or may become subject to, litigation, which could serve as a further distraction to the Board, management, and employees and require the Company to incur significant additional costs. For example, on January 20, 2026, the Company filed a Complaint for Violation of Securities Laws, as well as a Motion for Expedited Injunctive Relief, in the United States District Court for the District of Delaware against Endeavor asserting their violation of certain securities laws as described in more in detail in Part I, Item 3. “Legal Proceedings.”
Further, in response to Endeavor’s actions, on February 1, 2026, the Board adopted a stockholder rights plan (the “Rights Plan”) and declared a dividend of one right in respect of each of the Company’s issued and outstanding shares of Common Stock, which will cause substantial dilution to any person or group acquiring 20% or more of the Company’s outstanding Common Stock, or if a person or group with beneficial ownership of 20% or more at the time the adoption of the Rights Agreement is announced acquires any additional shares of Common Stock, without the prior approval of the Board. The Rights Plan is designed to deter the acquisition of actual, de facto, or negative control of the Company by any person or group without appropriately compensating Company stockholders for that control. The Rights Plan may discourage, delay, or prevent a change of control or acquisition of the Company, even if such action may be considered beneficial by some stockholders, and could limit the price that investors would be willing to pay in the future for the Company’s Common Stock.
The Company cannot predict, and no assurances can be given as to, the outcome or timing of any matters relating to the foregoing actions by activist stockholders and its responses thereto or the ultimate effects on its business, liquidity, financial condition, or results of operations.
Endeavor and certain of its affiliates own a large portion of the voting power of our Common Stock. Endeavor’s interests may conflict with ours or those of our other stockholders.
As of March 13, 2026, we believe that Endeavor and certain of its affiliates held 30% of our Common Stock. As a result, Endeavor will have significant influence over future actions requiring stockholder approval, including the actions that may be presented to stockholders in connection with the Consent Solicitation and the election of director nominees (including if the Consent Solicitation is successful), for so long as it continues to own a significant portion of our Common Stock. Accordingly, for such period of time, Endeavor will have significant influence with respect to our management, business plans, and policies, including decisions on whether to raise future capital and decisions on whether to amend our certificate of incorporation and bylaws, which govern the rights attached to our Common Stock. Endeavor may be able to initiate or delay, deter or prevent a change of control and could preclude any unsolicited acquisition of the Company. The concentration of ownership could negatively impact your investment.
Circumstances may occur in which the interests of Endeavor may conflict with the interests of Mawson or those of its other stockholders, and these stockholders may cause us to take actions that align with their interests. Should conflicts of interest arise, we can provide no assurance that these stockholders would act in the best interests of our other stockholders or that any conflicts of interest would be resolved in a manner favorable to our other stockholders.
Our Rights Agreement includes terms and conditions that could discourage a takeover or other transaction that stockholders may consider favorable.
On February 1, 2026, in response to Endeavor’s significant ownership position, our Board adopted a Rights Agreement, dated as of February 2, 2026, between the Company and Computershare Trust Company, N.A., pursuant to which stockholders of record as of the close of business on February 12, 2026 received one right (each, a “Right”) for each outstanding share of Common Stock. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series C Junior Participating Preferred Stock, par value $1.00 per share (the “Preferred Stock”), of the Company at an exercise price of $20.60, subject to adjustment. Under the Rights Agreement, the Rights will become exercisable if a person or group acquires beneficial ownership of 20% or more of Mawson’s outstanding Common Stock, or if a person or group with beneficial ownership of 20% or more at the time the adoption of the Rights Agreement is announced acquires any additional shares of Common Stock, without the prior approval of the Board. In the event that the Rights become exercisable due to such thresholds being triggered or certain other triggers, each Right will entitle its holder to purchase, at the Right’s exercise price, a number of shares of common stock or equivalent securities (including the Common Stock or equivalent securities of an acquiring entity after a change of control upon certain triggers) having a market value at that time equal to twice each Right’s exercise price.
The Board adopted the Rights Agreement to protect the interests of Company stockholders. In general terms, subject to certain enumerated exceptions, it works by imposing significant dilution upon any person or group that acquires beneficial ownership of 20% or more of the shares of Common Stock, or if a person or group with beneficial ownership of 20% or more at the time the adoption of the Rights Agreement is announced acquires any additional shares of Common Stock, without the prior approval of the Board. In general, any person will be deemed to beneficially own any securities (a) as to which such person has any agreement, arrangement or understanding with another person for the purpose of acquiring, holding, voting or disposing of any shares of Common Stock or (b) that are the subject of a derivative transaction or constitute a derivative security. As a result, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult or discourage a merger, tender or exchange offer or other business combination involving the Company that is not approved by the Board. However, neither the Rights Agreement nor the Rights should interfere with any merger, tender or exchange offer or other business combination approved by the Board.
The Rights Agreement is similar to agreements adopted by other public companies in comparable circumstances. It is intended to protect stockholders’ interests, including by providing the Board sufficient time to make informed judgments and take actions that are in the best interests of all of the Company’s stockholders and other stakeholders. Nevertheless, the Rights Agreement may be considered to have certain anti-takeover effects, including potentially discouraging a third party from attempting to obtain a substantial position in the Common Stock or seeking to obtain control of the Company and discouraging a takeover attempt that stockholders may consider favorable or that could result in a premium over the market price of the Common Stock. Even in the absence of a takeover attempt, the Rights Agreement may adversely affect the prevailing market price of the Common Stock if it is viewed as discouraging takeover attempts in the future.
For additional information regarding the Rights Agreement, refer to Refer to Note 14 - Subsequent Events to the consolidated financial statements included in Item 15. “Exhibits, Financial Statement Schedules” in this Annual Report.
The trading price of our Common Stock is likely to continue to be volatile.
The trading price of our Common Stock has been highly volatile and could continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control. Our Common Stock has experienced fluctuations due to market dynamics and the Bitcoin downturn. The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Our Common Stock may be traded by short sellers, which may put pressure on the supply and demand for our Common Stock, further influencing volatility in our market price. Public perception of our company or management and other factors outside of our control may additionally impact Mawson’s stock price.
Our financial results may vary significantly from period to period due to fluctuations in our revenue, operating costs and other factors.
We expect our period-to-period financial results to vary based on a variety of factors, which we anticipate will fluctuate due to external factors such as the Bitcoin price and energy costs, which may not be consistent or linear between periods. As a result of these factors, quarter-to-quarter comparisons of our financial results may not be useful, and that these comparisons cannot be relied upon as indicators of future performance. Moreover, our financial results may not meet the expectations of equity research analysts, ratings agencies or investors, who may be focused only on short-term quarterly financial results. If any of this occurs, the trading price of our stock could fall substantially, either suddenly or over time.
We may fail to meet our publicly announced guidance or other expectations about our business, which could cause our stock price to decline.
We may provide from time-to-time guidance regarding our expected financial and business performance. Correctly identifying key factors affecting business conditions and predicting future events is inherently an uncertain process, and our guidance may not ultimately be accurate and has in the past been inaccurate in certain respects, such as the timing of new exahash. Exahash is a unit of measurement used to describe extremely large amounts of computational power – specifically in Bitcoin mining and other proof-of-work blockchain networks. An exahash (EH) equals one quintillion (1,000,000,000,000,000,000) cryptographic has calculations per second. Our guidance is based on certain assumptions, and may vary from actual results, if our assumptions are not met or are impacted as a result of various risks and uncertainties, the market value of our Common Stock could decline significantly.
