{"url_path":"/sec/mgti/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-03-17","source_url":"https://www.sec.gov/Archives/edgar/data/1001601/0001493152-26-010453-index.html","accession_number":"0001493152-26-010453","cik":"0001001601","ticker":"MGTI","issuer_name":"MGT CAPITAL INVESTMENTS, INC.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1001601/0001493152-26-010453-index.html","primary_entity_key":"0001001601","primary_entity_name":"MGT CAPITAL INVESTMENTS, INC."},"word_count":4409,"has_tables":true,"body_markdown":"**Item\n1A. Risk Factors**\n\n \n\nDiscussion\nof our business and operations included in this Annual Report should be read together with the risk factors set forth below. They describe\nvarious risks and uncertainties to which we are or may become subject. These risks and uncertainties, together with other factors described\nelsewhere in this report, have the potential to affect our business, financial condition, results of operations, cash flows, strategies,\nor prospects in a material and adverse manner. New risks may emerge at any time, and we cannot predict those risks or estimate the extent\nto which they may affect our financial performance. Each of the risks described below could adversely impact the value of our securities.\nThese statements, like all statements in this report, speak only as of the date of this Annual Report (unless another date is indicated),\nand we undertake no obligation to update or revise the statements in light of future developments.\n\n \n\n**Summary\nof Risk Factors**\n\n \n\nInvesting\nin our common stock involves a high degree of risk. You should carefully consider the risks summarized below, which are explained in\ndetail in the following pages:\n\n \n\n \n●\nOperational\nStatus: We currently have no active revenue-generating operations following the sale of our mining facility in May 2025.\n\n \n●\nStrategic\nTransition: Our future depends entirely on successfully identifying a redevelopment and use of our existing assets and developing\na successful business strategy, which may not occur on acceptable terms or at all.\n\n \n●\nGoing\nConcern: Our auditors have expressed substantial doubt about our ability to continue as a going concern.\n\n \n●\nManagement\nConcentration: We are dependent on a single executive officer, Jonathan Pfohl, to lead our transition and reporting compliance.\n\n \n●\nCapital\nRequirements: We require significant additional capital to fund operations; future equity issuances will result in substantial dilution.\n\n \n●\nDigital\nAsset Volatility: Our remaining mining equipment and any future crypto-related strategy are subject to the extreme volatility of\nBitcoin prices.\n\n \n●\nMarket\nand Trading Risks: Our stock is quoted on the OTCID Basic Market, is a “penny stock,” and faces limited liquidity.\n\n \n\n**I.\nRisks Related to Our Current Operational Status and Strategic Transition**\n\n** **\n\n**Our\nfuture depends on redeploying our existing assets and identifying and executing new business opportunities.**\n\n \n\nAs\nof March 2025, we ceased all self-mining operations and the lease with our largest hosting customer expired. In May 2025, we sold our\nhosting facility; as a result, we currently have no active revenue-generating operations, and our ability to create shareholder value\ndepends on successfully identifying, acquiring, or developing new business opportunities. The Company is actively pursuing new opportunities,\nincluding economic deployment of the Bitcoin Mining equipment that it continue to own, but there can be no assurance that we will be\nable to successfully identify or consummate any such opportunities on acceptable terms, or at all. Until such time, we will rely on our\navailable resources to fund corporate expenses, and we may need to raise additional capital. Failure to secure new operations or additional\nfinancing would materially and adversely affect our business, financial condition, and results of operations\n\n** **\n\n**Our\nauditors have issued a “going concern” audit opinion expressing substantial doubt about our ability to continue as a going\nconcern.**\n\n \n\nOur\nindependent auditors have indicated in their report on our December 31, 2025 and 2024 financial statements that there is substantial\ndoubt about our ability to continue as a going concern. A “going concern” opinion indicates that the financial statements\nincorporated in this Annual Report have been prepared assuming that we will continue as a going concern for one year from the date the\nfinancial statements are issued and do not include any adjustments to reflect the possible future effects on the recoverability and classification\nof assets, or the amounts and classification of liabilities that may result if we do not continue as a going concern. Therefore, you\nshould not rely on our balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors,\nand potentially be available for distribution to shareholders, in the event of liquidation. As of December 31, 2025, we had an accumulated\ndeficit of $426.7 million and a history of recurring losses. This “going concern” doubt may make it more difficult for us\nto raise capital or enter into strategic transactions. If we are unable to continue as a going concern, you could lose your entire investment.\n\n \n\n**Our\nexecutive leadership has recently changed, and our business is now highly dependent on the continued services of our sole officer, which\npresents a significant risk.**\n\n \n\nEffective\nas of July 1, 2025, Jonathan Pfohl became the Company’s Chief Financial Officer and Interim Chief Executive Officer. Mr. Pfohl\nis currently the only officer of the Company. Our success is highly dependent on the continued services of Mr. Pfohl. The loss of his\nservices, or the diversion of his attention from his management duties for any reason, would leave us without executive leadership, which\ncould significantly disrupt our business and growth opportunities. We do not have key man insurance on his life. The market for highly\nqualified personnel in this industry is very competitive, and we may be unable to attract a suitable replacement in a timely manner,\non favorable terms, or at all.\n\n \n\n**II.\nRisks Related to Digital Assets and Remaining Mining Equipment**\n\n** **\n\n**The\nvalue of our remaining assets and the feasibility of future mining are tied to the volatile price of Bitcoin.**\n\n \n\nWe\ncontinue to own 35 Antminer S19 Pro mining units currently held in storage. The economic viability of redeploying these assets is directly\nimpacted by the market price of Bitcoin, which has experienced extreme volatility in 2025 and we expect it to continue to do so. Any\nsustained decline in Bitcoin prices may render our equipment obsolete or prevent us from restarting profitable operations.\n\n \n\n6\n\n \n\n** **\n\n**Bitcoin\nis subject to Halving, meaning that the Bitcoin rewarded for solving a block will be reduced in the future and its value may not commensurately\nadjust to compensate us for such reductions, and the overall supply of Bitcoin is finite.**\n\n \n\nBitcoin\nis subject to Halving, which is the process by which the Bitcoin reward for solving a block is reduced by 50% every 210,000 blocks that\nare solved. This means that the amount of Bitcoin we (or any other miner) are rewarded for solving a block in the Blockchain is permanently\ncut in half. For example, the last Halving occurred in April 2024, resulting in a revised payout of 3.125 Bitcoin per block solved, down\nfrom the previous reward rate of 6.25 Bitcoin per block solved. There can be no assurance that the price of Bitcoin will sufficiently\nincrease to justify the increasingly high costs of mining for Bitcoin given the Halving feature. If a corresponding and proportionate\nincrease in the trading price of these cryptocurrencies does not follow these anticipated Halving events, the revenue we earn from our\nmining operations will see a corresponding decrease, which would have a material adverse effect on our business and operations. To illustrate,\neven if the price of Bitcoin remains at its price as of today, all other factors being equal (including the same number of miners and\na stable hash rate) our revenue would decrease substantially upon the next Halving.\n\n \n\nFurther,\ndue to the Halving process, unless the underlying code of the Bitcoin Blockchain is altered (which may be unlikely or difficult given\nits decentralized nature), the supply of Bitcoin is finite. Once 21 million Bitcoin have been generated by virtue of solving blocks in\nthe Blockchain, the network will stop producing more. Currently, there are approximately 19.7 million Bitcoin in circulation representing\nabout 94% of the total supply of Bitcoin under the current source code. For the foregoing reasons, the Halving feature exposes us to\ninherent uncertainty and reliance upon the historically volatile price of Bitcoin, rendering an investment in us particularly speculative,\nespecially in the long-term. If the price of Bitcoin does not significantly increase in value, your investment could become worthless.\n\n \n\n**Bitcoin\nmining is subject to risks associated with our need for significant electrical power.**\n\n \n\nOur\nhistorical Bitcoin mining operations required significant amounts of electrical power and increases in energy usage or rates directly\naffected our operating costs. If we are successful in re-establishing our Bitcoin mining operations, we must have access to economical\nelectrical power. Any interruption or loss of access to electricity, or any significant increase in rates, could have materially and\nadversely affected our mining operations and results of operations during the reporting period. Prolonged power outages or unavailability\nof electrical power also has the potential to disrupt operations, reduce mining efficiency, or result in the temporary cessation of mining\nactivity, which would adversely affect our financial performance.\n\n \n\n**III.\nRisks Related to Our Financial Condition and Capital Structure**\n\n \n\n**We\nwill require significant additional capital to fund our transition which will cause substantial dilution.**\n\n \n\nWe\nwill likely continue to operate at a loss, and we expect to need to raise additional capital to expand our operations and pursue our\ngrowth strategies, including potentially the acquisition of new or additional miners, and to respond to competitive pressures or unanticipated\nworking capital requirements. We may not be able to obtain additional debt or equity financing on favorable terms, if at all, which could\nimpair our growth and adversely affect our existing operations. If we raise additional equity financing, our stockholders may experience\nsignificant dilution of their ownership interests, and the per-share value of our common stock could decline. Furthermore, if we engage\nin additional debt financing, the holders of such debt would have priority over the holders of common stock on order of liquidation preference.\nWe may be required to accept terms that restrict our ability to incur additional indebtedness or take other actions including terms that\nrequire us to maintain specified liquidity or other ratios that could otherwise not be in the interests of our stockholders.\n\n \n\n**Our\ncommon stock is deemed a “penny stock,” which makes it more difficult for our investors to sell their shares.**\n\n \n\nOur\ncommon stock is subject to the “penny stock” rules adopted under Section 15(g) of the Securities Exchange Act of 1934 (the\n“Exchange Act”). The penny stock rules generally apply to companies whose common stock trades at less than $5.00 per share,\nsubject to specific exceptions. Such exceptions include among others any equity security listed on a national securities exchange and\nany equity security issued by an issuer that has (i) net tangible assets of at least $2,000, if such issuer has been in continuous operation\nfor three years, (ii) net tangible assets of at least $5,000, if such issuer has been in continuous operation for less than three years,\nor (iii) average annual revenue of at least $6,000 for the last three years. The “penny stock” designation requires any broker-dealer\nselling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and\ndetermine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of broker dealers to solicit\npurchases of our common stock and therefore reduce its liquidity.\n\n \n\nMoreover,\nas a result of apparent regulatory pressure from the SEC and the Financial Industry Regulatory Authority, a growing number of broker-dealers\ndecline to permit investors, or otherwise make it difficult, to purchase and sell “penny stocks.” The “penny stock”\ndesignation may have a depressive effect upon our common stock price. If we remain subject to the penny stock rules for any significant\nperiod, it could have an adverse effect on the market, if any, for our securities. Because our common stock is subject to the penny stock\nrules, investors will find it more difficult to dispose of our securities.\n\n \n\n**Our\namended and restated certificate of incorporation allows for our board to create new series of preferred stock without further approval\nby our shareholders, which could adversely affect the rights of the holders of our common stock.**\n\n \n\nOur\nboard of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors\nalso has the authority to issue preferred stock without further shareholder approval. As a result, our board of directors could authorize\nthe issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, provide holders\nof the preferred anti-dilution protection, the right to receive dividend payments before dividends are distributed to the holders of\ncommon stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In\naddition, our board of directors could authorize the issuance of a series of preferred stock that has greater voting power than our common\nstock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution\nto our existing shareholders.\n\n \n\n**Substantial\nfuture sales of our common stock by us or by our existing shareholders could cause our stock price to fall.**\n\n \n\nAdditional\nequity financings or other share issuances by us, including shares issued in connection with strategic alliances and corporate partnering\ntransactions, and shares issued on the conversion of outstanding notes could adversely affect the market price of our common stock. Sales\nby existing shareholders of a large number of shares of our common stock in the public market or the perception that additional sales\ncould occur could cause the market price of our common stock to drop.\n\n7\n\n \n\n \n\n**There\nare substantial risks related to ownership of our common stock.**\n\n \n\nThe\nmarket price of our common stock is highly volatile and could fluctuate widely in price in response to various factors, many of which\nare beyond our control, including the following:\n\n \n\n \n●\nchanges\nin our industry including changes which adversely affect Bitcoin;\n\n \n●\nthe\ncontinued volatility of the price of Bitcoin;\n\n \n●\nour\nability to obtain working capital financing;\n\n \n●\nprogress\nand publications of the commercial acceptance of Bitcoin and other cryptocurrencies;\n\n \n●\nadditions\nor departures of key personnel including our executive officers;\n\n \n●\nsales\nof our common stock;\n\n \n●\nany\npublic announcement of entering into new agreements and terms thereof;\n\n \n●\nconversion\nof our convertible notes and the subsequent sale of the underlying common stock;\n\n \n●\nbusiness\ndisruptions caused by earthquakes, tornadoes or other natural disasters;  \n\n \n●\nour\nability to execute our business plan;\n\n \n●\noperating\nresults that fall below expectations;\n\n \n●\nloss\nof any strategic relationship;\n\n \n●\nadverse\nregulatory developments; and\n\n \n●\neconomic\nand other external factors.\n\n \n\nIn\naddition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the\noperating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of\nour common stock. As a result, you may be unable to resell your shares at a desired price.\n\n \n\n**IV.\nGeneral Risk Factors**\n\n** **\n\n**The\nCompany’s internal control of financial reporting has material weaknesses.**\n\n \n\nDue\nto the small size of the Company, the Company does not maintain sufficient segregation of duties to ensure the processing, review and\nauthorization of all transactions including non-routine transactions.\n\n** **\n\n**The\nBitcoin we may mine may be subject to loss, damage, theft or restriction on access.**\n\n \n\nThere\nis a risk that some or all of the Bitcoin we mine could be lost or stolen. In general, cryptocurrencies are stored in cryptocurrency\nsites commonly referred to as “wallets” by holders of cryptocurrencies which may be accessed to exchange a holder’s\ncryptocurrency assets. Access to our Bitcoin could also be restricted by cybercrime (such as a denial-of-service attack). While we take\nsteps to attempt to secure the Bitcoin we hold, there can be no assurance our efforts to protect our digital assets will be successful.\n\n \n\nHackers\nor malicious actors may launch attacks to steal, compromise or secure cryptocurrencies, such as by attacking the cryptocurrency network\nsource code, exchange miners, third-party platforms, cold and hot storage locations or software, or by other means. Any of these events\nmay adversely affect our operations and, consequently, our ability to generate revenue and become profitable. The loss or destruction\nof a private key required to access our digital wallets may be irreversible and we may be denied access for all time to our Bitcoin holdings.\nOur loss of access to our private keys or our experience of a data loss relating to our digital wallets could adversely affect our business.\n\n \n\nCryptocurrencies\nare controllable only by the possessor of both the unique public and private keys relating to the local or online digital wallet in which\nthey are held, which wallet’s public key or address is reflected in the network’s public Blockchain. We are required to publish\nthe public key relating to digital wallets in use when we verify the receipt of transfers and disseminate such information into the network,\nbut we will need to safeguard the private keys relating to such digital wallets. To the extent such private keys are lost, destroyed\nor otherwise compromised, we will be unable to access our Bitcoin rewards and such private keys may not be capable of being restored\nby any network. Any loss of private keys relating to digital wallets used to store our mined Bitcoin could have a material adverse effect\non our results of operations and ability to continue as a going concern, which could have a material adverse effect on our business,\nprospects or operations and potentially the value of any Bitcoin we mine.\n\n \n\n**Incorrect\nor fraudulent cryptocurrency transactions may be irreversible.**\n\n \n\nCryptocurrency\ntransactions are irrevocable and stolen or incorrectly transferred cryptocurrencies may be irretrievable. As a result, any incorrectly\nexecuted or fraudulent cryptocurrency transactions, such as a result of a cybersecurity breach against our Bitcoin holdings, could adversely\naffect our investments and assets. This is because cryptocurrency transactions are not, from an administrative perspective, reversible\nwithout the consent and active participation of the recipient of the cryptocurrencies from the transaction. Once a transaction has been\nverified and recorded in a block that is added to a Blockchain, an incorrect transfer of a cryptocurrency or a theft thereof generally\nwill not be reversible and we may not have sufficient recourse to recover our losses from any such transfer or theft. Further, it is\npossible that, through computer or human error, or through theft or criminal action, our cryptocurrency rewards could be transferred\nin incorrect amounts or to unauthorized third parties, or to uncontrolled accounts. If an errant or fraudulent transaction in our Bitcoin\nwere to occur, we would have very limited means of seeking to reverse the transaction or seek recourse. To the extent that we are unable\nto recover our losses from such action, error or theft, such events could have a material adverse effect on our business.\n\n \n\n**Security\nthreats to us could result in a loss of Company’s Bitcoin holdings.**\n\n \n\nSecurity\nbreaches, computer malware and computer hacking attacks have been a prevalent concern in the Bitcoin exchange market since the launch\nof the Bitcoin network. Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems,\nor to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent\ntransmission of computer viruses, could harm our business operations or result in loss of our Bitcoin and lost revenue. Furthermore,\nwe believe that to the extent we hold greater amounts of Bitcoin, we may become a more appealing target for security threats such as\nhackers and malware.\n\n \n\n8\n\n \n\n \n\nThe\nsecurity system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee\nof ours, or otherwise, and, as a result, an unauthorized party may obtain access to our, private keys, data or Bitcoins. Additionally,\noutside parties may attempt to fraudulently induce employees of ours to disclose sensitive information in order to gain access to our\ninfrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently,\nor may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, we may\nbe unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our security\nsystem occurs, the market perception of the effectiveness of our security system could be harmed, which could adversely affect an investment\nin us. In the event of a security breach, we may be forced to cease operations, or suffer a reduction in our digital assets, the occurrence\nof each of which could adversely affect an investment in us.\n\n** **\n\n**We\nhave not paid cash dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to\nthe value of our common stock.**\n\n \n\nWe\nhave never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends\non our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as\nour board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your\ninvestment will only occur if our stock price appreciates.\n\n** **\n\n**Our director and officer\nliability insurance may not be sufficient to cover all potential liabilities and we may be required to incur substantial costs to maintain\nor renew such coverage.**\n\n \n\nWe\nhave recently obtained a new directors’ and officers’ (“D&O”) liability insurance policy; however, we cannot assure you\nthat this coverage will be adequate to protect us against all claims that may be brought against our directors and officers. This policy\ncontains certain retentions and exclusions, and the limits of liability may not be sufficient to cover the costs of defense, settlements,\nor judgments in the event of complex or multiple legal proceedings.\n\n \n\nFurthermore, given our financial\ncondition and historical involvement in the digital asset industry, we may find it difficult and expensive to maintain or renew this\ninsurance in the future. We may be required to accept reduced policy limits or incur substantially higher premiums to obtain similar\ncoverage. If our insurance coverage is **exhausted**or if a claim is excluded from coverage, **the Company**has\nobligations to indemnify current and former directors and employees, which would require the use of our existing cash resources and could\nhave a material adverse effect on our financial condition.\n\n** **\n\n**We\nare subject to the information and reporting requirements of the Securities Exchange Act of 1934, and other federal securities laws,\nincluding compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).**\n\n \n\nThe\ncosts of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to shareholders\nwill cause our expenses to be higher than they would have been if we were privately held. It may be time-consuming, difficult and costly\nfor us to develop, implement and maintain the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need\nto hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal\ncontrols and reporting procedures.\n\n \n\n**Public\ncompany compliance may make it more difficult to attract and retain officers and directors.**\n\n \n\nThe Sarbanes-Oxley Act and rules implemented by the SEC have required changes\nin corporate governance practices of public companies. As a public company, we expect these rules and regulations to increase our compliance\ncosts and make certain activities more time-consuming and costly. The impact of the SEC’s July 25, 2017 report on Digital Securities\n(the “DAO Report”) as well as enforcement actions will increase our compliance and legal costs. As a public company, it remains\ndifficult and expensive for us to maintain and renew our director and officer liability insurance. in the future and we may be required\nto accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. Accounting and\nother evolving treatment of cryptocurrencies by the SEC and others could continue to pose challenges and risks to our business, including\nenhanced disclosure obligations and resulting costs. As a result, it may be more difficult for us to attract and retain qualified persons\nto serve on our board of directors or as executive officers, and to maintain insurance at reasonable rates, or at all.\n\n \n\n**Economic\ndownturns and market conditions beyond our control could adversely affect our business, financial condition and results of operations.**\n\n \n\nWe\nwill need to raise additional capital to fund our working capital needs and business plan. Our ability to obtain financing, if and when\nnecessary, may be impaired by such factors as the capital markets (both in general and in the particular industry in which we operate),\nthe national and global economies and the condition of the market for microcap securities. Further, factors such as high inflation, increased\ncentral bank interest rates in response, the geopolitical conflict in Ukraine and the Middle East and potential economic downturns including\nthe recession we may be entering combined with investor uncertainties may increase our requirements for capital, particularly if such\neconomic downturn persists for an extended period of time, and may limit or hinder our ability to obtain the funding we require. If the\namount of capital we are able to raise from financing activities, together with any revenues we may generate from future operations,\nis not sufficient to satisfy our capital needs, we may be required to reduce or cease our operations, divest our assets at unattractive\nprices or obtain financing on unattractive terms. Further, the terms of securities we issue in future capital raising transactions may\nbe more favorable to new investors, and may include liquidation preferences, superior voting rights or the issuance of other derivative\nsecurities, which could have a further dilutive effect on or subordinate the rights of existing investors. To the extent we incur indebtedness\nto raise capital, the terms of such indebtedness may impose restrictive covenants or operational limitations that hinder our business\nand would provide the holder(s) with a priority over our stockholders in our assets in the event of a liquidation, if convertible into\nshares of common stock, would also pose the risk of dilution. If any of the foregoing should happen, our stockholders could lose some\nor all of their investment.\n\n \n\n9\n\n \n\n \n\n**For\nthese reasons and others, an investment in our securities is risky and you should invest only if you can withstand a total loss of, and\nwide fluctuations in, the value of your investment.**"}