The accompanying notes are an integral part of these unaudited condensed financial statements

MGT CAPITAL INVESTMENTS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per-share amounts)

(Unaudited)

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements

MGT CAPITAL INVESTMENTS, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 20222023 AND 20212022

(Dollars in thousands, except per-share amounts)

(Unaudited)

(Unaudited)The accompanying notes are an integral part of these unaudited condensed financial statements

MGT CAPITAL INVESTMENTS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in thousands, except per-share amounts)

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements

MGT CAPITAL INVESTMENTS, INC.

NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

Note 1. Organization and Basis of Presentation

Organization

MGT Capital Investments, Inc. (“MGT” or the “Company”) is a Delaware corporation incorporated in 2000. MGT was originally incorporated in Utah in 1977. MGT’s corporate office is in Raleigh, North Carolina.

Cryptocurrency miningLaFayette, Georgia.

Current Operations

Cryptocurrency mining

MGT conducts cryptocurrency activities at a company-owned and managed Bitcoin mining facility in LaFayette, Georgia. Located adjacent to a utility substation, the several-acre property has access to about 20 megawatts (MW) of electrical power, half of which is presently utilized by the Company. Business activities are comprised of self-mining operations and leasing space to third parties.

As of March 31, 20222023 and May 13, 2022,15, 2023, the Company owned 430 S17 Antminer Pro (“S17 miners”) and 3735 Antminer S19 Pro Bitcoin miners. All miners are located at our Georgia facility. Over three-quarters of theDue to unfavorable mining economics and various required repairs, all S17 miners require various repairs to be productive. We are in the process of selling our remaining S17 miners, as well aswere non-operational at December 31, 2022, and were exchanged along with loose hash boards, power supplies, and controller boards and other parts.

In addition to its self-mining operations,for the Company leases its owned space to other Bitcoinmore efficient S19 miners and also provides hosting services for ownersin the first quarter of mining equipment. These measures improve utilization of the electrical infrastructure and better insulate us against the volatility of Bitcoin mining.2023.

MGT’s miners are housed in a modified shipping container on the Company’s owned property in Georgia. The entire facility, including the land and improvements, five 2500 KVA 3-phase transformers, three mining containers, and miners, are owned by MGT. We continue to explore ways to grow and maintain our current operations including but not limited to further potential equipment sales and raising capital to acquire the newest generation miners. The Company is also investigating other sites to develop into Bitcoin mining facilities in addition to expansion at its current property.

Leasing operations

In addition to its self-mining operations, the Company leases its owned space to other Bitcoin miners and also provides hosting services for owners of mining equipment. These measures improve utilization of the electrical infrastructure and better insulate us against the volatility of Bitcoin mining.

Basis of presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10–Q and Rule 8 of Regulation S–X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America. However, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial position and operating results have been included in these statements. These unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10–K for the fiscal year ended December 31, 2021,2022, as filed with the Securities and Exchange Commission (“SEC”) on March 31, 2022.2023. Operating results for the three months ended March 31, 20222023 and 20212022 are not necessarily indicative of the results that may be expected for any subsequent quarters or for the year ending December 31, 2022.2023.

COVID-19 Pandemic

TheWhile COVID-19 pandemicstill occurs in the United States, it has disrupted and may continueessentially receded as a serious threat to disrupt our operations and those of our vendors, suppliers and other third parties on which we rely, and we may not be able to obtain new miners or replacement parts for our existing miners in a timely or cost-effective manner, which could materially and adversely affect our business and results of operations.

economy. The extent to which COVID-19 impacts our operations or our ability to obtain financing will depend on future developments which are uncertain and cannot be predicted, including new informationpredicted.

Inflation

Electricity and other prices are vulnerable to inflation which may emerge concerningincrease the severityCompany’s mining costs and operating expenses including the cost of COVID-19 and the actions taken by governments and private businesses to contain COVID-19 to treat its impact, among others. If the disruptions posed by COVID-19 continue for an extended period of time, financial markets may not be available to the Company for raising capital in order to fund future growth. Should the Company not be able to obtain financing in the amounts necessary or under terms which are economically feasible, we may be required to reduce planned future growth and/or the scope of our operations.new state-of-the-art miners.

Note 2. Going Concern and Management’s Plans

The accompanying unaudited condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of March 31, 2022,2023, the Company had incurred significant operating losses since inception and continues to generate losses from operations. As of March 31, 2022,2023, the Company had an accumulated deficit of $421,446429,704. As of March 31, 20222023 MGT’s cash and cash equivalents were $633317.

The Company will require additional funding to grow its operations. Further, depending upon operational profitability, the Company may also need to raise additional funding for ongoing working capital purposes. There can be no assurance however that the Company will be able to raise additional capital as and when needed, or at terms deemed acceptable, if at all. The Company’s ability to raise additional capital is impacted by, among other things, the volatility of Bitcoin mining economics, inflation and high interest rates, the banking crisis, the war in Ukraine, the market for Bitcoin, regulatory developments with respect to cryptocurrencies generally, and the SEC’s ongoing enforcement action against our Chief Executive Officer, botheach of which are highly uncertain, cannot be predicted, and could have an adverse effect on the Company’s business and financial condition.

Since January 2021,2022, the Company has secured working capital through the issuance of a convertible note, the sale of equity and warrants, and the sale of assets.

Such factors raise substantial doubt about the Company’s ability to sustain operations for at least one year from the issuance of these unaudited condensed financial statements. The accompanying unaudited condensed financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 3. Summary of Significant Accounting Policies

Use of estimates and assumptions and critical accounting estimates and assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and also affect the amounts of revenues and expenses reported for each period. Actual results could differ from those which result from using such estimates. Management utilizes various other estimates, including but not limited to determining the estimated lives of long-lived assets, stock compensation, determining the potential impairment of long-lived assets, the fair value of conversion features,warrants issued, the fair value of warrants issued, the recognition of revenue,conversion features, and the valuation allowance for deferred tax assets and other legal claims and contingencies.assets. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period that they are determined to be necessary.

Cash and cash equivalents

The Company considers all highly liquid instruments with an original maturity of three months or less when acquired to be cash equivalents. The Company’s combined accounts were $633317 and $1,230538 as of March 31, 20222023 and December 31, 2021,2022, respectively. Accounts are insured by the FDICFederal Deposit Insurance Corporation (“FDIC”) up to $250 per financial institution. The Company has not experienced any losses in such accounts with these financial institutions. As of March 31, 2022,2023, and December 31, 2021,2022, the Company had $13329 and $98037, respectively, in excess of the FDIC insurance limit.

Accounts Receivable

Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. As of March 31, 2022 and December 31, 2021, we did not believe we needed to reserve for any doubtful accounts, respectively.

Cryptocurrencies

Cryptocurrencies, (including bitcoinBitcoin and bitcoin cash)Bitcoin Cash) are included in current assets in the accompanying balance sheets. Any cryptocurrencies purchased are recorded at cost and cryptocurrencies awarded to the Company through its mining activities are accounted for in connection with the Company’s revenue recognition policy disclosed in this note.

Cryptocurrencies held are accounted for as intangible assets with indefinite useful lives. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured.

In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.

Any purchases of cryptocurrencies by the Company are included within investing activities in the accompanying statements of cash flows, while cryptocurrencies awarded to the Company through its mining activities are included within operating activities on the accompanying statements of cash flows. The sales of cryptocurrencies are included within investing activities in the accompanying statements of cash flows and any realized gains or losses from such sales are included in other income (expense) in the statements of operations. The Company accounts for its gains or losses in accordance with the first in first out (FIFO) method of accounting.

Halving – The Bitcoin blockchain and the cryptocurrency reward for solving a block is subject to periodic incremental halving. Halving is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm. At a predetermined block, the mining reward is cut in half, hence the term “Halving.” A Halving for bitcoin occurred on May 12, 2020, with a revised reward payout of 6.25 Bitcoin per block. Many factors influence the price of Bitcoin and potential increases or decreases in prices in advance of or following a future halving is unknown.

The following table presents the activities of digital currencies for the periods ended March 31, 20222023 and December 31, 2021:2022:

Schedule of Digital Currencies

Leases

The Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term. Variable lease expenses, if any, are recorded when incurred.

InvestmentDerivative Instruments

Available-for-sale securitiesDerivative financial instruments are carriedrecorded in the accompanying balance sheets at fair value. Realizedvalue in accordance with ASC 815. When the Company enters into a financial instrument such as a debt or equity agreement (the “host contract”), the Company assesses whether the economic characteristics of any embedded features are clearly and unrealized gainsclosely related to the primary economic characteristics of the remainder of the host contract. When it is determined that (i) an embedded feature possesses economic characteristics that are not clearly and losses, if any,closely related to the primary economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would meet the definition of a financial derivative instrument, then the embedded feature is bifurcated from the host contract and accounted for as a derivative instrument. The estimated fair value of the derivative feature is recorded in the accompanying balance sheets separately from the carrying value of the host contract. Subsequent changes in the estimated fair value of derivatives are calculated onrecorded as a gain or loss in the specific identification method and are included in other income in theCompany’s statements of operations.

Impairment of long-lived assets

Long-lived assets are reviewed for impairment whenever facts or circumstances either internally or externally may suggest that the carrying value of an asset may not be recoverable, should there be an indication of impairment, we test for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset to the carrying amount of the asset or asset group. Any excess of the carrying value of the asset or asset group over its estimated fair value is recognized as an impairment loss.

Segment Reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly as the company reviews financial information. The Company currently operates in the Digital Currency Blockchain segment with our mining facility located in the United States. The Company also provides hosting services which are also located in the United States. The Company has employees only in the United States and views its operations as one operating segment as management reviews financial information on a consolidated basis in making decisions regarding resource allocations and assessing performance.

Revenue recognition

Cryptocurrency mining

The Company recognizes revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, (“ASC 606”). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

The Company has entered into digital asset mining pools by agreeing to terms and conditions, as may be amended from time to time, with the mining pool operators to provide computing power to the mining pool. The contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. In exchange for providing computing power to the mining pool, the Company is entitled to a fractional share of the fixed cryptocurrency award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are recorded as a component of cost of revenues), for successfully adding a block to the Blockchain. The terms of the agreement provide that neither party can dispute settlement terms after thirty-five35 days following settlement. The Company’s fractional share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm.

Providing computing power to solve complex cryptographic algorithms in support of the Bitcoin Blockchain (in a process known as “solving a block”) is an output of the Company’s ordinary activities. The provision of providing such computing power is the only performance obligation in the Company’s agreements with mining pool operators. The transaction consideration the Company receives, if any, is noncash consideration in the form of digital assets, which the Company measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company has earned the award from the pools. The consideration is alltherefore variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component in these transactions.

Fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of receipt. There is currently no specific definitive guidance under GAAP or alternative accounting framework for the accounting for cryptocurrencies recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the Financial Accounting Standards Board (“FASB”), the Company may be required to change its policies, which could have an effect on the Company’s financial position and results from operations.

Hosting Revenues

We receive revenues from third parties renting capacity at our facility and from hosting miners owned by others. The Company recognized $192 86and $0 192from these sources during the three months ended March 31, 20222023 and 2021,2022, respectively. During the three months ended March 31, 2023 and 2022, two customers accounted for 68%100% and 23%91%, respectively, of hosting revenue.

Income taxes

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and established for all the entities a minimum threshold for financial statement recognition of the benefit of tax positions and requires certain expanded disclosures. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse. The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Loss per share

Basic loss per share is calculated by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated by dividing the net loss attributable to common shareholders by the sum of the weighted average number of common shares outstanding plus potential dilutive common shares outstanding during the period. Potential dilutive securities, comprised of unvested restricted shares, convertible debt convertible preferred stock, stockand warrants, and stock options, are not reflected in diluted net loss per share because such potential shares are anti–dilutive due to the Company’s net loss.

Accordingly, the computation of diluted loss per share for the three months ended March 31, 20222023 excludes 63,416,941 691,073,030shares issuable upon the exercise of outstanding warrants.warrants and 342,277,865 shares issuable upon the conversion of outstanding convertible debt. The computation of diluted loss per share for the three months ended March 31, 20212022 excludes 34,285,714 63,416,941shares issuable under convertible debt.upon the exercise of outstanding warrants.

Fair Value Measure and Disclosures

ASC 820 “Fair Value Measurements and Disclosures” provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

Fair value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

As of March 31, 20222023 and December 31, 2021,2022, the Company had a Level 3 financial instrumentinstruments related to the derivative liabilityliabilities related to the issuance of warrants.warrants and convertible debt.

Management’s evaluation of subsequent events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the review, other than what is described in Note 1211 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.

Reclassification

Certain prior period balances have been reclassified to conform to current year presentation. These reclassifications had no effect on the reported results of operations.

Recent accounting pronouncements

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements, other than those disclosed below.

On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. In addition, CECL made changes to the accounting for available for sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities if management does not intend to sell and does not believe that it is more likely than not, they will be required to sell. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial statements.

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU 2020-06 will have on its financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), (“ASU 2021-04”). This ASU reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. It specifically addresses: (1) how an entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; (2) how an entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange; and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. This ASU is effective for all entities for fiscal years beginning after December 15, 2021. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted, including adoption in an interim period. The adoption of ASU 2021-04 on January 1, 2022 did not have a material impact on the Company’s condensed financial statements or disclosures.

Note 4. Accounts receivable

Accounts receivable balances of $306and $180as of March 31, 2022 and December 31, 2021, respectively, from customers using the Company’s miner hosting and facility rental services. One customer makes up 96% of this balance.

Note 5.4. Property, Plant, and Equipment and Other Assets

Property and equipment consisted of the following:

Schedule of Property and Equipment

The Company recorded depreciation expense of $4856 and $18948 for the three months ended March 31, 20222023 and 2021,2022, respectively. For the three months ended March 31, 20222023 and 2021,2022, respectively, gains on sale of property and equipment of $070 and $10, respectively, were recorded as other non-operating income. For the three months ended March 31, 20222023, we disposed of a total of 50exchanged all our S17 miners which were fully depreciated.depreciated for 35 S19 miners, which resulted in a gain of $70.

Other Assets consisted of the following:

Schedule of Other Assets

The Company has paid $3 related to its office lease in Raleigh, NC.NC which was returned to us in the three months ended March 31, 2023.

Note 6.5. Investment

In December 2021, the Company invested $50 in the form of a convertible promissory note. The note bears annual interest of 8% and matures on December 31, 2024. The note contains certain anti-dilution features with an as-converted ownership of 5%. As of March 31, 2022, the Company determined that book value represented fair value with no adjustment necessary.

Note 7. Notes Payable

December 2020September 2022 Note

On December 8, 2020,September 12, 2022, the Company entered into a securities purchase agreement, pursuant to which itthe Company borrowed $1,335 and in exchange issued a secured convertible promissory note (the “December 2020“September 2022 Note”) in the principal amount of $2301,500 whichwith an original issue discount of $165. Any time prior to a change of control transaction, the September 2022 Note is convertible at the option of the holder, into shares of common stock at a conversion price equal to 7030% of the lowest price for a shareoutstanding shares of the Company’s common stock duringon the ten trading days immediately preceding the applicable conversion.conversion date on a post-conversion basis (the “Conversion Shares”). The Company received consideration of $September 2022 Note matures 200December 31, 2023 for the convertible promissory note. The noteand bears interest at a rate of 86% per annumannum. The September 2022 Note provides for customary events of default, the occurrence of which would result in 110% the principal and matures in twelve months.

The Company determined thatother accrued amounts outstanding under the embedded conversion feature of the convertible promissory note meets the definition of a beneficial conversion featureSeptember 2022 Note to become immediately due and a derivative liability which is accounted for separately. The Company measured the beneficial conversion feature’s intrinsic value on December 8, 2020 and determined that the beneficial conversion feature was valued at $200 which was recorded as a debt discount, and togetherpayable, with the original issue discount of $30, in the aggregate of $230, is being amortized over the life of the loan. The Company measured the derivative liability’s fair value on December 8, 2020 and determined that the derivative liability was valued at $555 which exceeded the intrinsic value of the beneficial conversion feature by $355 and resulted in the Company recording non-cash interest expense of $rate increasing to 35512%.

On June 15, 2021,At inception the holder converted $120 of principal into 4,761,905 shares of common stock valued at $238. AsCompany recorded a result of this conversion, $172 of derivative liability was settled, $86 unamortized debt discount was settledof $1,500 and $32was recordednon-cash interest as loss on settlementaccretion of debt.

On July 27, 2021, the holder converted the remaining $110 of principal and $11 of accrued interest into 6,673,384 shares of common stock valued at $280. As a result of this conversion, $153 of derivative liability was settled, $66 unamortized debt discount was settledof $5,324. During 2022, the Company recorded additional accretion of debt discount of $82, and $72 was recorded as loss on settlementthe total accretion of debt. As ofdebt discount for the year ended December 31, 2021, this note had 2022 was $no 5,406outstanding balance.

. During the three months ended March 2021 Note

On March 5, 2021,31, 2023, the Company entered into a securities purchase agreement with Bucktown Capital, LLC (the “Investor”), pursuant to which the Company issued a convertible promissory note in the original principal amountrecorded accretion of debt discount of $13,210 (the “March 2021 Note”). The March 2021 Note was convertible, at the option of the Investor, into shares of common stock of the Company at a conversion price equal to 70% of the lowest price for a share of common stock during the ten trading days immediately preceding the applicable conversion (the “Conversion Price”); provided, however, in no event was the Conversion Price to be less than $0.04 per share. The March 2021 Note bore interest at a rate of 8% per annum and will mature in twelve months123.

The March 2021 Note was to be funded in tranches, with the initial tranche of $1,210 funded on March 5, 2021 for consideration of $1,000. Six subsequent tranches (five tranches, each for $1,200 and one tranche for $6,000) were to be funded upon the notice of effectiveness of a Registration Statement on Form S-1 covering the common stock issuable in connection with the March 2021 Note. Further, the final tranche required the mutual agreement of the Company and Investor. Until such time as Investor funded the subsequent tranches, the Company would hold a series of Investor Notes that offset any unfunded portion of the March 2021 Note.

The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a beneficial conversion feature. The Company measured the beneficial conversion feature’s intrinsic value on March 5, 2021 and determined that the beneficial conversion feature was valued at $1,000 which was recorded as a debt discount, and together with the original issue discount of $210, in the aggregate of $1,210, is being amortized over the life of the loan.

As a result of the Company failing to meet certain registration requirements under the March 2021 Note, the outstanding balance of the March 2021 Note was automatically increased by 5% on each of July 5, 2021, August 5, 2021, and September 5, 2021 and as part of the exchange agreement an additional 5% on September 30, 2021, prior to the exchange. An additional $270 was recorded as outstanding principal, bringing the outstanding balance prior to the exchange to $1,481.

On September 30, 2021,Additionally, the Company enteredissued to the lender three series of warrants (collectively, the “Warrants”). Each of the Series of Warrants is exercisable into an exchange agreement with60% of the March 2021 Note holder under whichConversion Shares and has a term of three years. The Warrants have exercise prices as follows:

In addition to the warrants described above, the Company has previous warrants outstanding principal balance of $1,481whereby it cannot conclude that it has enough authorized and $60 of accrued interest were exchangedunissued shares to satisfy the settlement requirements for 53,500,000those already outstanding warrants. As a result, the equity environment would be considered tainted, and the conversion feature and the attached warrants to purchase common stock (See Note 7), which wereare treated as a warrant derivative liability. Upon the exchange, the Company settled $1,481 of outstanding principal, $60 of accrued interest, $758 of debt discount, recorded a warrant liability in the amount of $1,221 resulting in a loss on settlement of debt of $438. The derivative was calculated using a share fair value of $0.025 per share, a discount rate of 0.98%, remaining lives of 4.43 years and volatility of 176.1%. As of December 31, 2021, this note had 0 outstanding balance.liabilities.

Derivative Liabilities

The Company valued the derivative liability relating to the embedded conversion feature using the Monte Carlo Simulation Method because of the unknown stock price at the future time of conversion. The Monte Carlo Simulation was calculated using the following assumptions:

Schedule of Monte Carlo Simulation Assumption

The Company’s activity in its convertible debt related derivative liability was as follows for the three months ended March 31, 2022:2023:

 Schedule of Derivative Liability Activity

The Company recorded loss on settlementAs of March 31, 2023, the fair value of the derivative liability in the amount ofwas $417 4,570and $0 for the three months ended March 31, 2022 and 2021, respectively.2023 the Company recorded a loss of $1,347 from the change in fair value of derivative liability as non-operating income in the statements of operations. There was no outstanding derivative liability relating to convertible debt outstanding for the three months ended March 31, 2022.

Warrant Derivative Liabilities

As of March 31, 2023, the fair value of the warrant derivative liabilities was $3,392 and for the three months ended March 31, 2023 the Company recorded a loss of $1,696 from the change in fair value of derivative warrant liability as non-operating expense in the statements of operations. The Company valued the warrant derivative liabilities other than the warrants issued as part of the debt financing using the Black-Scholes option pricing model using the following assumptions as of March 31, 2023: 1) stock price of $0.007, 2) exercise prices of $0.03 - 0.12, 3) remaining lives of 2.35 – 3.31 years, 4) dividend yields of 0%, 5) risk free rates of 3.81 – 4.06%, and 6) volatility of 172.2 – 186.8%. The Company valued the warrant derivative liability relating to warrants issued in the 2022 debt financing using the binomial lattice model because of the variable exercise price with the following assumptions as of March 31, 2023: 1) stock price of $0.007, 2) remaining life of 2.45 years, 3) dividend yield of 0%, 4) risk free rate of 3.94%, and 5) volatility of 183.9%.

As of December 31, 2022, the fair value of the warrant derivative liabilityliabilities was $1,366 1,727and for the three monthsyear ended MarchDecember 31, 2022 the Company recorded a lossgain of $407 $1,726 from the change in fair value of derivative warrant liability as non-operating income in the statements of operations. The Company valued the warrant derivative liability usingliabilities other than the Black-Scholes option pricing model using the following assumptionswarrants issued as of March 31, 2022: 1) stock price of $0.024, 2) exercise prices of $0.05, 3) remaining lives of 3.9 – 4.3 years, 4) dividend yields of 0%, 5) risk free rates of 2.42%, and 6) volatility of 174.5%.

As of December 31, 2021, the fair valuepart of the warrant derivative liability was $1,130 and for the year ended December 31, 2021 the Company recorded a gain of $955 from the change in fair value of derivative warrant liability as non-operating income in the statements of operations. The Company valued the warrant derivative liabilitydebt financing using the Black-Scholes option pricing model using the following assumptions as of December 31, 2021:2022: 1) stock price of $0.0170.004, 2) exercise prices of $0.050.03 - 0.12, 3) remaining lives of 4.22.60 – 4.63.56 years, 4) dividend yields of 0%, 5) risk free rates of 1.264.22%, and 6) volatility of 175.5166.3 - 174.3%. The Company valued the warrant derivative liability relating to warrants issued in the 2022 debt financing using the binomial lattice model because of the variable exercise price with the following assumptions as of December 31, 2022: 1) stock price of $0.004, 2) remaining life of 2.70 years, 3) dividend yield of 0%, 4) risk free rate of 4.22%, and 5) volatility of 174%.

The Company’s activity in its warrant derivative liabilities was as follows for the three months ended March 31, 2023:

Schedule of Warrant Derivative Liabilities

The Company recorded loss on settlement of derivative liability in the amount of $169 for the three months ended March 31, 2023. The Company recorded loss on settlement of derivative liability in the amount of $417 for the three months ended March 31, 2022.

Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the Company’s expected volatility. Increases in expected volatility would generally result in higher fair value measurement. A 10% change in pricing inputs and changes in volatilities and correlation factors would not result in a material change in our Level 3 fair value.

 Schedule of Derivative Liability Fair Value

The following table summarizes the Company’s debt related derivative liability as of March 31, 2022 and December 31, 2021:Note 6. Loans Payable

Schedule of Derivative Liability Fair Value

As part of a payment to the City of LaFayette, the bank erroneously created a note payable in the amount of $200 in respect of the payment instead of drawing funds from the Company’s account at the bank. The note bore no interest and did not have a maturity date. The note was settled with funds from the Company’s account on January 3, 2023.

Note 8.7. Leases

In December 2019, the Company entered ana new office lease in connection with the relocation of its executive office to Raleigh, North Carolina. The Company accounted for thisits new office lease as an operating lease under the guidance of Topic 842. Rent expense under the new lease is $3 per month, with annual increases of 3% during the three-year term. The Company used an incremental borrowing rate of 29.91% based on the weighted average effective interest rate of its outstanding debt. In December 2019,At lease inception, the Company recorded a Right of Use Asset of $79 and a corresponding Lease Liability of $79. The Right to Use Asset is accounted for as an operatingCompany terminated this lease and has a balance, netin the fourth quarter of amortization, of $27 as of March 31, 2022.

On November 1, 2021, the Company entered into a lease agreement to lease a contiguous portion of land to its existing property, as a planting area for trees intended to mitigate noise from the Company’s cryptocurrency mining operations. The agreement callsprovided for yearly installmentsinstallment payments of $3 for the first five years, with an option to extend this lease for another five-year period at a rate not to exceed 105% of the current lease payment. On each anniversary date, the Company willwas required to pay $3 in advance, with payment for the first year paid upon execution of the leaselease.. The Company used an incremental borrowing rate of 8.0% based on the interest rate of incorporated in the most recent promissory note. At lease inception, the Company recorded a Right of Use Asset of $22 and a corresponding Lease Liability of $22. The Right to Use Asset is accounted for as an operatingCompany terminated this lease and hasin the fourth quarter of 2022. As a balance, netresult of amortization,the termination, the Company recorded a loss on the early termination of a land lease in the amount of $218 as of March 31, 2022..

Total future minimum payments required under the lease agreement are as follows:

Schedule of Future Minimum Lease Payment

The Company recorded rent expense of $100 and $910 for the three months ended March 31, 20222023 and 2021,2022, respectively.

At March 31, 2022 the weighted average interest rate for the operating lease was 20.46%. At March 31, 2022, the weighted average remaining lease term for operating lease was 4.6 years. The Company’s lease agreement does not contain any material residual value guarantees or material restrictive covenants.

Note 9.8. Common Stock and Preferred Stock

Common stock

Common Stock Issuances

In connection with the conversion of 115 shares of Series C Preferred Stock during the year ended December 31, 2021 (see Preferred Stock below)On August 5, 2022, the Company issued 29,870,130 shares of common stock.

During the year ended December 31, 2021, in connection with the conversions of $120 and $110, with accrued interest, of the December 2020 convertible note payable (see Note 7), the Company issued 4,761,905 and 6,673,384 shares of common stock, respectively.

On July 21, 2021, as part of a corporate fundraising of $990, net of issuance costs, the Company issued 35,385,70322,800,000 shares of common stock and 35,385,70322,800,000 warrants to purchase common stock (see Warrants below)for consideration of $228.

During the year ended December 31, 2021,2022, 14,270,83318,380,379 warrants with an embedded conversion feature were exercised on a cashless basis for the issuance of 23,500,00074,000,000 shares of common stock (see below).stock.

During the three months ended March 31, 2022,2023, 11,197,9304,157,044 warrants with an embedded conversion feature were exercised on a cashless basis for the issuance of 34,000,00020,000,000 shares of common stock (see below).stock.

Preferred Stock

On January 11, 2019, the Company’s Board of Directors approved the authorization of 10,000 shares of Series B Preferred Stock with a par value of $0.001 and a Stated Value of $100120 each (“Series B Preferred Shares”). The holders of the Series B Preferred Shares shall be entitled to receive, when, as, and if declared by the Board of Directors of the Company, out of funds legally available for such purpose, dividends in cash at the rate of 12% of the Stated Value per annum on each Series B Preferred Share. Such dividends shall be cumulative and shall accrue without interest from the date of issuance of the respective share of the Series B Preferred Shares. Each holder shall also be entitled to vote on all matters submitted to stockholders of the Company and shall be entitled to 55,000 votes for each Series B Preferred Share owned at the record date for the determination of stockholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited. In the event of a liquidation event, any holders of the Series B Preferred Shares shall be entitled to receive, for each Series B Preferred Shares, the Stated Value in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholdersstockholders.. The Series B Preferred Shares are not convertible into shares of the Company’s common stock. No shares of Series B Preferred Shares have been issued or are outstanding.

On April 12, 2019, the Company’s Board of Directors approved the authorization of 200 Series C Preferred Shares with a par value of $0.001 (“Series C Preferred Shares”). The holdersEach Series C Preferred Share was convertible into shares of the Company’s common stock on a variable rate basis. During 2019 and 2020, 190 Series C Preferred Shares have no voting rights, receive no dividends,were issued and are entitled to a liquidation preference equal to the stated value. At any time, the Company may redeem the Series C Preferred Shares at 1.2 times the stated value. Given the rightsubsequently converted into Common Shares. No shares of redemption is solely at the option of the Company, the Series C Preferred Shares are not considered mandatorily redeemable,currently issued and as such are classified in shareholders’ equity on the Company’s balance sheet.outstanding.

Each Series C Preferred Share is convertible into shares of the Company’s common stock in an amount equal to the greater of: (a) 200,000 shares of common stock or (b) the amount derived by dividing the stated value by the product of 0.7 times the market price of the Company’s common stock, defined as the lowest trading price of the Company’s common stock during the ten-day period preceding the conversion date. The holder may not convert any Series C Preferred Shares if the total amount of shares held, together with holdings of its affiliates, following a conversion exceeds 9.99% of the Company’s common stockstock..

The common shares issued upon conversion of the During 2019 and 2020, 190 Series C Preferred Shares have been registered under the Company’s then-effective registration statement on Form S-3. On April 12, 2019, the Company sold 190 Series C Preferred Shares for $1,890, net of issuance costswere issued and on July 15, 2019 sold 10 Series C Preferred Shares for $100. During the second and third quarters of 2019, holderssubsequently converted 50 Series C Preferred Shares into 14,077,092 shares of common stock and 35 Series C Preferred Shares into 13,528,575 shares of common stock, respectively. The remaining 115Common Shares. No shares of Series C Preferred Stock were converted into 29,870,130 shares of common stock during the year ended December 31, 2021.Shares are currently issued and outstanding.

Warrants

On July 21, 2021, as part of a corporate fundraising,August 5, 2022, the Company issuedsold 35,385,70322,800,000 shares of common stock and 35,385,703issued three warrants, each to purchase7,600,0000 shares of common stock for net cash proceedsconsideration of $990228,000 (see above). The warrants were valued at $1,271 which resultedSubject to the terms and adjustments in the recording of a warrant derivative liability in that amount. Non-operating expenseWarrants, the Warrants are exercisable at initial prices of $3060.03, $0.06, and $0.12 was recorded in respect of the value warrant derivative liability of $1,271 in excess of the value of common shares issued of $990.

On September 30, 2021, the Company exchanged the outstanding principal of $1,481 and accrued interest of $60 of the March 2021 Noteper share, for 53,500,000 warrants to purchase common stock (see Note 7).three years from August 5, 2022.

During the year ended December 31, 2021,2022, 14,270,83318,380,379 warrants were exercised on a cashless basis for the issuance of 23,500,00074,000,000 shares of common stock. Upon cashless exercise, the Company calculated the fair value of derivative liability on warrants of $406231, compared it to the fair value of 23,500,00074,000,000 shares of $635988 and recorded a loss on extinguishment of $228757. The Company valued the warrant derivative liability using the Black-Scholes option pricing model using the following assumptions on the date of each exercise: 1) stock prices of $0.0170.007 - $0.0430.019, 2) exercise prices of $0.05, 3) remaining lives of 4.23.5 – 4.34.2 years, 4) dividend yields of 0%, 5) risk free rates of 1.191.53% -1.333.79%, and 6) volatility of 175.7169.28% - 177.2175.6%.

During the three months ended March 31, 2022,2023, 11,197,9304,157,044 warrants were exercised on a cashless basis for the issuance of 34,000,00020,000,000 shares of common stock. Upon cashless exercise, the Company calculated the fair value of derivative liability on warrants of $17131, compared it to the fair value of 34,000,00020,000,000 shares of $588200 and recorded a loss on extinguishment of $417169. The Company valued the warrant derivative liability using the Black-Scholes option pricing model using the following assumptions on the date of each exercise: 1) stock pricesprice of $0.013 - $0.0190.01, 2) exercise pricesprice of $0.05, 3) remaining liveslife of 4.0 – 4.23.1 years, 4) dividend yieldsyield of 0%, 5) risk free ratesrate of 1.53% - 2.103.76%, and 6) volatility of 174.0% - 175.6171.4%.

The following table summarizes information about shares issuable under warrants outstanding during the three months ended March 31, 2022:2023:

Summary of Warrants Outstanding

(*) Of the 12,666,572 and 626,329,010 shares issued during the three months ended March 31, 2023 and the year ended December 31, 2022, respectively and 682,563,502 and 691,073,030 shares outstanding and exercisable at March 31, 2023 and December 31, 2022, respectively, the weighted average exercise price and weighted average remaining life was not included for 616,195,582 and 603,529,010 warrants, respectively because their amount and exercise price is variable. The 12,666,572 warrants issued are a result of an adjustment to the number of X, Y and Z warrants as a result of the terms of the agreement. See Note 5 for the exercise prices of Series X, Y, and Z warrants. Series X, Y, and Z warrants expire on September 11, 2025.

Note 10.9. Commitments and Contingencies

On March 16, 2023 the Company entered into a partnership agreement (the “Partnership Agreement”) and a property lease agreement (the “Lease Agreement, and together with the Partnership Agreement, collectively, the “Agreement”) with another cryptocurrency mining company (“Tenant”). Pursuant to the Lease Agreement, the Company agreed to lease to Tenant portions of the Company’s six acre mining facility in Lafayette, GA in increments of up to 10 spaces that are 40 feet in length and eight feet in height each (“Spaces”), together with related utilities access including electricity of up to one megawatt (“MW”) per Space, for deploying mining equipment, in exchange for rental payments of $5 per Space per month (provided the Spaces are powered) and payment of the electricity costs and deposit requirements arising from the Spaces. In connection with the Lease Agreement, Tenant agreed to make an initial deposit of $229 for the initial electricity deployment for five MW and $40 as a security deposit. The $269 total of security deposits is presented in long-term liabilities.

Pursuant to the Partnership Agreement, the Company agreed to issue Tenant 500,000 shares its common stock per month for each rented Space (the “Monthly Issuances”), and to also issue an additional number of shares of common stock annually equal to 100% of the Monthly Issuances for the applicable year (the “Annual Issuances,” and together with the Monthly Issuances, collectively, the “Issuances”). Further, pursuant to the Partnership Agreement, the Company provided Tenant with the option (the “Option”) to lend MGT up to $1 million evidenced by a convertible promissory note that is convertible into 25% of the Company’s outstanding common stock, assuming all $1 million is lent, on a pro-forma, post-issuance basis (the “Note”), together with an accompanying warrant to purchase 180% of the shares of common stock underlying the Note (the “Warrant”). The terms of the Note and Warrant would be substantially similar to the September 2022 Note and accompanying warrants that were issued by the Company along with that note. If the Option is exercised, the parties may elect to substitute the $1 million purchase price, in whole or in part, with equipment and infrastructure improvements to enable the Company to have access to up to an additional 10 MWs of electricity to the facility’s currently available electrical power capacity. The Company’s facility currently has electrical capacity of up to 10 MW. The Agreement has a term of 24 months.

Legal proceedings

From time-to-time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. During the period covered by this report, there were no material changes to the description of legal proceedings set forth in our Annual Report on Form 10-K, as filed with the SEC on March 31, 2022.

Bitcoin Production Equipment and Operations

In August 2018, the Company entered a collaborative venture with Bit5ive, LLC to develop a fully contained crypto currency mining pod (the “POD5 Agreement”) for a term of five years. In exchange for an initial capital investment as well as engineering and design expertise, the Company receives royalty payments from Bit5ive, LLC. During the three months ended March 31, 2022 and 2021, the Company received royalties and recognized as other income in the Statement of Operations under this agreement of $0 and $7, respectively pursuant to the POD5 Agreement.2023.

Electricity Contract

MGT’s prior electricity agreement with the City of LaFayette expired on September 30, 2021. The Company and City of LaFayette are currently operating on a month-to-month basis without a contract.

Note 11.10. Employee Benefit Plans

The Company maintains defined contribution benefit plans under Section 401(k) of the Internal Revenue Code covering substantially all qualified employees of the Company (the “401(k) Plan”). Under the 401(k) Plan, the Company may make discretionary contributions of up to 100% of employee contributions. During the three months ended March 31, 20222023 and 2021,2022, the Company made contributions to the 401(k) Plan of $3and $3, respectively.

Note 12.11. Subsequent Events

On April 28, 202227, 2023, the Company issued 10,000,0006,000,000 shares of common stock to satisfy a partial cashless exerciseMinerset Farms in accordance with the terms of 2,655,890 warrants issued on September 30, 2021, as detailed in Note 9. As a result of this exercise, the number of warrants outstanding was reduced to 60,761,051.its previously disclosed Partnership Agreement.