{"url_path":"/sec/mgti/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations**","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":5295,"has_tables":true,"body_markdown":"**Item\n7. Management’s Discussion and Analysis of Financial Condition and Results of Operations**\n\n \n\n**Overview**\n\n \n\nMGT\nhistorically operated in the Bitcoin mining and hosting industry. Our previous business model was dependent on the economics of digital\nasset mining, including the price of Bitcoin, electricity costs, and access to competitive hosting capacity. During the fiscal year ended\nDecember 31, 2025, our operations underwent a significant strategic transition resulting from the cessation of active mining operations\nand the sale of our primary operating facility.\n\n \n\nFollowing\nthe expiration of our primary hosting customer lease in March 2025, the Company discontinued all self-mining activities. On May 13, 2025,\nthe Company completed the sale of its LaFayette, Georgia facility for $1.35 million. This sale included land, containers, and electrical\ninfrastructure associated with our former hosting and mining operations. As a result of these developments, the Company currently does\nnot have active revenue-generating operations. We continue to own approximately 35 Antminer S19 Pro miners, which have been relocated\nto storage pending management’s determination of their future use or redeployment.\n\n \n\nManagement\nis currently engaged in an active strategic review process to determine the Company’s future direction. Our near-term priorities\nfocus on the following core objectives:\n\n \n\n \n●\nMaintaining\nCompliance: Prioritizing the resolution of delays in SEC periodic reporting to regain and maintain full reporting status and corporate\ngood standing.\n\n \n●\nCapital\nFormation and Liquidity: Raising appropriate capital to meet operating needs for a minimum of 12 months while actively managing remaining\ncorporate infrastructure to minimize overhead.\n\n \n●\nMarket\nPosition: Evaluating opportunities to enhance our equity market position, including potential exchange listings and broker-dealer\nquotation status.\n\n \n●\nStrategic\nAlternatives: Identifying and executing new ventures, which may include potential mergers, acquisitions, or entry into alternative\nbusiness lines that leverage our historical expertise in digital assets and technology infrastructure.\n\n \n\nWhile\nwe continue to evaluate various strategic options, including potential partnerships and business combinations, these discussions are\nexploratory and have not resulted in any binding agreements as of the date of this report. Management does not view MGT as a passive\nholding or investment entity, but rather as an operating public company in a strategic transition phase.\n\n \n\n11\n\n \n\n** **\n\n**Critical\naccounting policies and estimates**\n\n \n\n**Use\nof estimates and assumptions and critical accounting estimates and assumptions**\n\n \n\nThe\npreparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect\nthe reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial\nstatements and also affect the amounts of revenues and expenses reported for each period. Actual results could differ from those which\nresult from using such estimates. Management utilizes various other estimates, including but not limited to determining the estimated\nlives of long-lived assets, determining the potential impairment of long-lived assets, the fair value of conversion features, valuation\nof derivative liabilities and the valuation allowance for deferred tax assets. The results of any changes in accounting estimates are\nreflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically,\nand the effects of revisions are reflected in the period that they are determined to be necessary.\n\n \n\n**Property\nand Equipment**\n\n \n\nProperty\nand equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight–line method on the\nvarious asset classes over their estimated useful lives, which range from one to ten years when placed in service. The cost of repairs\nand maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of,\nthe cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the\nyear of disposition.\n\n \n\n**Revenue\nrecognition**\n\n \n\n*Revenue\nrecognition*\n\n* *\n\n*General*\n\n* *\n\nThe\nCompany recognizes revenue in accordance with Accounting Standards Codification 606, *Revenue from Contracts with Customers (“ASC\n606”)*. ASC 606 establishes a principles-based framework for recognizing revenue that depicts the transfer of promised goods\nor services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those\ngoods or services. As of March 2025, the Company ceased all active revenue-generating operations related to cryptocurrency mining and\nhosting activities. Accordingly, the following policies primarily relate to historical and comparative periods presented in these financial\nstatements and any limited residual activities during the fiscal year ended December 31, 2025.\n\n \n\n*Crypto\nasset mining (Historical and Comparative)*\n\n \n\nThe\nCompany recognizes revenue under ASC 606. The core principle of the revenue standard is that a company should recognize revenue to depict\nthe transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to\nbe entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:\n\n \n\n \n●\nStep\n1: Identify the contract with the customer\n\n \n●\nStep\n2: Identify the performance obligations in the contract \n\n \n●\nStep\n3: Determine the transaction price  \n\n \n●\nStep\n4: Allocate the transaction price to the performance obligations in the contract  \n\n \n●\nStep\n5: Recognize revenue when the Company satisfies a performance obligation  \n\n \n\nIn\norder to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in\nthe contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of\na “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: The customer can\nbenefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e.,\nthe good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is\nseparately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the\ncontext of the contract).\n\n \n\nIf\na 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\nis identified that is distinct.\n\n \n\nThe\ntransaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods\nor services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.\nWhen determining the transaction price, an entity must consider the effects of all of the following:\n\n \n\n \n●\nVariable\nconsideration  \n\n \n●\nConstraining\nestimates of variable consideration  \n\n \n●\nThe\nexistence of a significant financing component in the contract  \n\n \n●\nNoncash\nconsideration  \n\n \n●\nConsideration\npayable to a customer  \n\n \n\nVariable\nconsideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of\ncumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.\nThe transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price\nallocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time\nas appropriate.\n\n \n\nThe\nCompany earns Bitcoin mining revenue from two primary sources: the operation of its owned miners and the operation of third-party owned\nminers that the Company has concluded are subject to abandonment. Historically, the Company participated in third-party operated digital\nasset mining pools in which it contributed computing power in exchange for a proportional share of cryptocurrency rewards generated by\nthe pool. The Company has entered into digital asset mining pools by executing contracts, as amended from time to time, with the mining\npool operators to provide computing power to the mining pool. The contracts are terminable at any time by either party and the Company’s\nenforceable right to compensation only begins when the Company provides computing power to the mining pool operator. The Company’s\nperformance obligation under these arrangements was the continuous provision of computing power to the mining pool operator. In exchange,\nthe Company received non-cash consideration in the form of Bitcoin representing its proportional share of the total cryptocurrency rewards\nearned by the mining pool during the applicable period. The Company’s share was generally based on the proportion of computing\npower the Company contributed to the mining pool relative to the total computing power contributed by all mining pool participants.\n\n \n\nIn exchange for providing computing power, the Company is entitled to a fractional share of the fixed\ncryptocurrency award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are\nrecorded as a component of cost of revenues), for successfully adding a block to the Blockchain. The terms of the agreement provide\nthat neither party can dispute settlement terms after thirty-five days following settlement. The Company’s fractional share is\nbased on the proportion of computing power the Company contributed to the mining pool operator to the total computing power\ncontributed by all mining pool participants in solving the current algorithm.\n\n \n\n12\n\n \n\n \n\nProviding\ncomputing power to solve complex cryptographic algorithms in support of the Bitcoin Blockchain (in a process known as “solving\na block”) is an output of the Company’s ordinary activities. The provision of providing such computing power is the only\nperformance obligation in the Company’s agreements with mining pool operators. The transaction consideration the Company\nreceives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially\ndifferent than the fair value at contract inception or the time the Company has earned the award from the pool the cs. The consideration\nis all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is\nconstrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company\nreceives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing\ncomponent in these transactions.\n\n \n\nFair\nvalue of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of\nreceipt. In 2023, the FASB issued ASU 2023-08, which addresses the accounting and disclosure requirements for certain crypto assets.\nThe new guidance requires entities to subsequently measure certain crypto assets at fair value, with changes in fair value recorded\nin net income in each reporting period. In addition, entities are required to provide additional disclosures about the holdings of\ncertain crypto assets. The ASU’s amendments are effective for fiscal years beginning after December 15, 2024, including\ninterim periods within those years. There was no specific definitive guidance under GAAP or alternative accounting framework for the\naccounting for cryptocurrencies recognized as revenue or held, prior to the issuance of ASU 2023-08 and management has exercised\nsignificant judgment in determining the appropriate accounting treatment for the current year. The Company evaluated the impact of\nASU 2023-08 and determined that the standard did not have a material impact on its financial statements.\n\n \n\n*Hosting\nRevenues (Historical and Comparative)*\n\n \n\nWe\nreceived revenues from third parties renting capacity at our facility and from hosting miners owned by others. Under these\narrangements, the Company provided hosting services that included supplying electrical power, infrastructure support, monitoring,\nand operational maintenance for third-party mining equipment located within the Company’s facilities. The Company recognized\n$58 and $179 from these sources during the years ended December 31, 2025 and 2024, respectively. During the years ended December 31,\n2025 and 2024, one customer accounted for 100% of hosting revenue in 2025, and two customers accounted for 91% of hosting revenue in\n2024. After a hosting agreement expires, the Company no longer recognizes hosting revenue for the related miners.\n\n \n\n**Gain\n(Loss) on Modification/Extinguishment of Debt**\n\n \n\nIn\naccordance with ASC 470, a modification or an exchange of debt instruments that adds or eliminates a conversion option that was substantive\nat the date of the modification or exchange is considered a substantive change and is measured and accounted for as extinguishment of\nthe original instrument along with the recognition of a gain/loss. Additionally, under ASC 470, a substantive modification of a debt\ninstrument is deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash\nflows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows\nunder the terms of the original instrument. A substantive modification is accounted for as an extinguishment of the original instrument\nalong with the recognition of a gain/loss. For the year ended December 31, 2024 the Company recorded a gain of $15 from the settlement\nof debt and extinguishment of convertible debt as non-operating income in the statements of operations.\n\n \n\nThe\nCompany reviewed the 2025 Note restructuring transaction under ASC 470-50 and concluded that the revised terms do not constitute a substantial\nmodification. Accordingly, the transaction is accounted for as a modification of the existing November 2024 Note. The value of the equity\nin the transaction was $50 and recorded as a debt discount in accordance with ASC 470. The conversion feature added by the modification\nwas determined to be non-substantive under ASC 470. No gain or loss was recognized as a result of the modification. The note continues\nto be carried at its previous amortized cost basis, adjusted for the $50 debt discount, which will be amortized over the remaining term\nof the note. For the year ended December 31, 2025, the Company recorded $6 in accretion of debt discount.\n\n \n\n**Fair\nValue Measurements and Disclosures**\n\n \n\nASC\n820 “Fair Value Measurements and Disclosures” provides the framework for measuring fair value. That framework provides a\nfair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest\npriority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority\nto unobservable inputs (Level 3 measurements).\n\n \n\nFair\nvalue is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a\nliability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined based on\nassumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize\nthe inputs in measuring fair value as follows:\n\n \n\n \n●\nLevel\n1 Quoted prices in active markets for identical assets or liabilities.\n\n \n \n \n\n \n●\nLevel\n2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities\nin markets that are not active, or other inputs that are observable, either directly or indirectly.\n\n \n \n \n\n \n●\nLevel\n3 Significant unobservable inputs that cannot be corroborated by market data.\n\n \n\nThe\nCompany had no Level 3 financial instruments outstanding at December 31, 2025 or 2024.\n\n \n\n**Recent\naccounting pronouncements**\n\n \n\nNote\n3 to our audited financial statements appearing elsewhere in this report includes Recent Accounting Pronouncements.\n\n \n\n13\n\n \n\n** **\n\n**Results\nof operations**\n\n \n\n*Years\nended December 31, 2025 and 2024*\n\n \n\n*Revenues*\n\n \n\nOur\nrevenues for the year ended December 31, 2025 decreased by $235, or 73%, to $87 as compared to $322 for the year ended December 31, 2024.\n\n \n\nOur\nrevenue was derived from cryptocurrency mining which totaled $29 during 2025. The decrease in revenue compared to the prior year reflects\nlower Bitcoin production, resulting from a reduction in mining activity for a significant portion of the year. For the year ended December\n31, 2024, approximately 62% of our mining revenue was from abandoned equipment. We also receive revenues from third parties renting capacity\nat our facility and from hosting miners owned by others. The Company recognized $58 and $179 from these sources during the years ended\nDecember 31, 2025 and 2024, respectively. The decrease in hosting services revenue reflects the expiration of the Company’s only\ncustomer lease in March 2025, as well as a reduction in hosting customers and billings compared to the prior year.\n\n \n\n*Operating\nExpenses*\n\n \n\nOperating\nexpenses for the year ended December 31, 2025 decreased by $562, or 39%, to $884 as compared to $1,446 for the year ended December 31,\n2024. The decrease in operating expenses was comprised of a decrease in cost of revenues of $306 and decrease in general and administrative\nexpenses of $256.\n\n \n\nThe\ndecrease in cost of revenues of $306, or 77% to $89 as compared to $395 for the year ended December 31, 2024, was primarily due to a\ndecrease in electricity costs of $154 and depreciation of $156. The decrease in general and administrative expenses of $256, or 24% to\n$795 as compared to $1,051 for the year ended December 31, 2024, was primarily due to a decrease in legal, consulting and payroll expenses.\n\n \n\n*Other\nIncome and Expense*\n\n \n\nFor\nthe year ended December 31, 2025, non–operating income of $578 primarily consisted of a gain on sale of property and equipment\nof $676, and other income of $51, partially offset by interest expense of $149.\n\n \n\nFor\nthe year ended December 31, 2024, non–operating income of $6,645 primarily consisted of a gain from the settlement of debt, derivative\nand warrant liabilities of $7,141, and other income of $6, partially offset by interest expense of $303 and accretion of debt discount\nof $199.\n\n \n\n**Liquidity\nand capital resources**\n\n \n\n*Sources\nof Liquidity*\n\n \n\nWe\nhave historically financed our business through the sale of debt and equity interests.\n\n \n\nOn\nNovember 1, 2024, the Company completed a comprehensive debt restructuring (the “Project Nickel Transaction”) that consolidated\nprior convertible instruments and short-term loans into new non-convertible notes. As part of this transaction, the Company issued (i)\na new promissory note with a principal balance of $1,620, bearing interest at 8% per annum and maturing December 31, 2025, and (ii) a\nnew non-convertible promissory note with a principal balance of $240, bearing interest at 8% per annum and maturing December 31, 2025.\nThe restructuring also eliminated all previously outstanding derivative liabilities and preferred stock, simplifying the Company’s\ncapital structure.\n\n \n\nOn\nMarch 15, 2025, the Company’s lease with its primary hosting customer expired, and the Company discontinued its own self-mining\noperations at the LaFayette, Georgia facility. The related lease and partnership arrangements ceased, and the Company’s remaining\nself-mining equipment was placed in storage pending evaluation of redeployment alternatives.\n\n \n\nOn\nMay 13, 2025, the Company completed the sale of its cryptocurrency mining and hosting facility located in LaFayette, Georgia to CSRE\nProperties LLC for $1,350. The sale included all structures, containers, and electrical infrastructure associated with prior hosting\nand mining operations. The Company used $662 of the proceeds to repay principal and accrued interest on its outstanding debt. The transaction\ngenerated a $676 gain on sale. The sale of the LaFayette facility provided critical liquidity used primarily to reduce outstanding indebtedness\nand stabilize the Company’s financial position. Management determined that the disposal was a liquidity-driven event and not indicative\nof a strategic change in business direction as contemplated by ASC 205-20.\n\n \n\nOn\nSeptember 22, 2025, the Company entered into a note exchange transaction with our secured lender. As part of the transaction, we issued\na new secured convertible promissory note in the principal amount of $1,220 with a maturity date of December 31, 2027, in exchange for\nthe surrender and cancellation of our prior secured note that was originally scheduled to mature on December 31, 2025. We also issued\n500,000,000 shares of common stock as additional consideration to the lender. The Company accounted for this transaction as a modification\nof the existing secured note rather than an extinguishment under ASC 470-50; no gain or loss was recognized. This transaction extended\nour secured debt maturity by approximately two years, providing additional time to execute our operational plans and reducing short-term\nliquidity pressure. No cash was used to complete the transaction.\n\n \n\nOn\nSeptember 23, 2025, we issued shares of our common stock to a director, our Interim CEO & CFO, and an employee. These issuances reduced\naccrued liabilities and resulted in non-cash compensation expense where applicable. Because our common stock carries a par value of $0.001,\nthe par-value requirement resulted in corresponding adjustments to additional paid-in capital. These equity issuances did not require\nthe use of cash and increased total stockholders’ equity. These equity grants did not impact our cash position, as the obligations\nwere satisfied through the issuance of common stock. The settlement of the director’s accrued fees reduced current liabilities,\nand the compensation-related grants resulted in non-cash expenses recorded during the period. We continue to evaluate the use of equity-based\narrangements, where appropriate, to conserve cash while aligning compensation with Company performance and service requirements.\n\n \n\nOn\nDecember 23, 2025, we initiated a common stock offering to raise up to $1,000 at $0.001 per share from accredited investors. The offering\nis exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D thereunder.\nAt December 31, 2025, we had raised $300 and issued 300,000,000 shares of common stock. The offering closed on January 29, 2026 with\nthe company raising $675 and issuing a total of 675,000,000 common shares.\n\n \n\n14\n\n \n\n \n\n**Going\nConcern**\n\n** **\n\nThe\naccompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the\nrealization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred operating losses\nsince inception and continues to generate losses from operations. For the year ended December 31, 2025, the Company had a net loss of\n$219 and cash used in operating activities of $991. As of December 31, 2025, the Company had an accumulated deficit of $426,737, cash\nand cash equivalents of $103, and our working capital deficit was $1,105. Following the cessation of digital-asset mining operations\nin March 2025 and the sale of the LaFayette, Georgia facility in May 2025, the Company currently does not have active revenue-generating\noperations.\n\n \n\nThese\nfactors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least\none year from the date of the issuance of the financial statements included in this report. Management’s plans to mitigate these\nconditions include continuing to raise capital through debt and equity issuances and pursuing strategic initiatives, including potential\nbusiness combinations or partnerships. However, there can be no assurance that the Company will be able to raise additional capital or\nexecute these plans on acceptable terms, if at all. Since January 2023, we have raised approximately $2,675 through convertible notes,\nthe sale of equity and warrants, proceeds from asset sales, and related-party financing. Management also implemented certain modifications\nto simplify our capital structure and extend debt maturities to provide additional near-term financial and strategic flexibility.\n\n \n\nThe\nfinancial statements do not include any adjustments that might result from the outcome of this uncertainty. For further information regarding\nthe Company’s ability to continue as a going concern and management’s plans, see Note 2, “Summary of Significant Accounting Policies\n– Going Concern and Management’s Plans,” in the Notes to the Financial Statements.\n\n \n\n*Common\nStock Issuances*\n\n \n\nOn\nJuly 14, 2025, the Company filed a Preliminary Information Statement on Schedule 14C to increase its authorized common stock and authorize\na reverse stock split within a range of ratios to be determined by the Board. The Definitive Information Statement was filed on July\n25, 2025, and mailed to shareholders of record on August 7, 2025. The amendment to the Certificate of Incorporation increasing authorized\ncommon stock to 10 billion shares became effective in Delaware on August 25, 2025.\n\n \n\nOn\nSeptember 22, 2025, the Company issued 500,000,000 shares of common stock as part of restructuring its 2024 Notes. The issuance was exempt\nfrom registration under Section 3(a)(9) of the Securities Act of 1933, as amended. (See *Note 6- Notes Payable* for accounting treatment\nunder ASC 470-50.)\n\n \n\nAdditionally,\non September 22, 2025, the Company issued 650,000,000 shares of common stock upon conversion of 650,000 shares of Series D Preferred\nStock. The converted shares represented all outstanding Series D Preferred Stock. The issuance was exempt from registration under Section\n3(a)(9) of the Securities Act of 1933, as amended.\n\n \n\nOn\nSeptember 23, 2025, the Company issued (i) 100,000,000 shares of common stock valued at $10 to its Interim CEO and CFO, Jonathan M. Pfohl,\n(ii) 100,000,000 shares of common stock valued at $10 to another employee, and (iii) 500,000,000 shares of common stock to Director Michael\nOnghai in exchange for or waiver of $56 in outstanding director fees. The issuance was exempt from registration under Section 4(a)(2)\nof the Securities Act of 1933, as amended.\n\n \n\nIn\nDecember 2025, the company issued 300,000,000 shares of common stock to accredited investors that participated in a private placement\nfor an aggregate of $300. The issuance was exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended,\nand Rule 506(b) of Regulation D thereunder.\n\n \n\n*Debt\nFinancing*\n\n \n\nOn\nDecember 19, 2023, the Company exchanged its existing note payable new note with substantially the same terms with the exception of a\nmaturity date of December 31, 2024 and with a conversion feature based on a 40% of the Company’s common stock in a fully diluted\nbasis (the “December 2023 Note”). The principal balance of the December 2023 Note was $1,579, had a debt discount of $257,\nand bears interest at a rate of 6% per annum. On November 1, 2024, the Company exchanged the December 2023 Note for a new note with no\nconversion features (the “November 2024 Note”), in the principal amount of $1,620 with an annual interest rate of 8%, and\na maturity date of December 31, 2025 and 750,000,000 shares of common stock. The company recorded interest expense of $72 for the year\nending December 31, 2024 for this note.\n\n \n\nOn\nNovember 20, 2023, the lender of December 2023 Notes provided the Company with a non-convertible loan in the amount of $25. The loan\nbears interest at an annual rate of 8% and the maturity date was November 19, 2024. On March 6, 2024, the lender of the and December\n2023 Notes provided the Company with a non-convertible loan in the amount of $125. The loan bears interest at an annual rate of 8% and\nthe maturity date is March 5, 2025. On April 30, 2024, the lender of the December 2023 Notes provided the company with a non-convertible\nloan in the amount of $50. The loan bears interest at an annual rate of 8% and the maturity date is April 30, 2025. On November 1, 2024,\nthe lender consolidated and exchanged such notes, including interest owed for an aggregate outstanding balance of $242 (“New Promissory\nNote”). The New Promissory Note bears interest at an annual rate of 8% and the maturity date is December 31, 2025. During the year\nended December 31, 2024, the Company recorded interest expense in the amount of $0.3 with respect to these loans. On May 13, 2025, the\nCompany used $262 of the cash proceeds from the sale of its LaFayette, Georgia facility to make full repayment of principal and accrued\ninterest on the New Promissory Note. For the New Promissory Note, the Company recorded interest expense of $9 and $0 for the years ending\nDecember 31, 2025 and 2024, respectively.\n\n \n\nAdditionally,\non May 13, 2025, the Company used $400 of the cash proceeds from the sale of its LaFayette, Georgia facility to make a partial repayment\nof principal and accrued interest on the November 2024 Note. After this payment, the outstanding principal balance was $1,220. The November\n2024 Note was exchanged for a new Convertible Note of equal face value in September 2025 (refer to “*September 2025 Note”\nsection disclosed below*).\n\n \n\nOn\nSeptember 22, 2025, the Company entered into a Secured Exchange Note Exchange Agreement with November 2024 Note holder, pursuant to which\nthe parties agreed to exchange the Company’s outstanding November 2024 Note. As of the exchange date, the November 2024 Note had\nan outstanding principal balance of $1,220, bore interest at 8% per annum, and was scheduled to mature on December 31, 2025. Under the\nExchange Agreement, the holder surrendered the 2024 Note in exchange for (i) a new secured convertible promissory note (the “September\n2025 Note”) issued in the principal amount of $1,220, bearing interest at 8% per annum and maturing on December 31, 2027, and (ii)\n500,000,000 shares of the Company’s common stock. The equity consideration was valued at $0.0001 per share, resulting in a fair\nvalue of $50 as of the issuance date. The September 2025 Note is convertible into common shares at $0.001 per share. The company recorded\ninterest expense of $27 and $0 for the years ending December 31, 2025 and 2024, respectively for this note.\n\n \n\n15\n\n \n\n \n\nThe\nCompany reviewed the transaction under ASC 470-50 and concluded that the revised terms do not constitute a substantial modification.\nAccordingly, the transaction is accounted for as a modification of the existing November 2024 Note. The value of the equity in the transaction\nwas $50 and recorded as a debt discount in accordance with ASC 470. The conversion feature added by the modification was determined to\nbe non-substantive under ASC 470. No gain or loss was recognized as a result of the modification. The note continues to be carried at\nits previous amortized cost basis, adjusted for the $50 debt discount, which will be amortized over the remaining term of the note. For\nthe year ended December 31, 2025, the Company recorded $6 in accretion of debt discount. As of December 31, 2025, the carrying value\nof the Note was $1,176, net of unamortized discount of $44.\n\n \n\n*Cash\nFlows*\n\n* *\n\n  \n\n**Year\nended**\n\n**December\n31,**\n \n\n  \n2025  \n2024 \n\nCash\nprovided by / (used in) \n    \n   \n\nOperating\nactivities \n$(991) \n$(547)\n\nInvesting\nactivities \n 1,350  \n - \n\nFinancing\nactivities \n (262) \n 545 \n\nNet\nincrease (decrease) in cash and cash equivalents \n$97  \n$(2)\n\n \n\n*Operating\nactivities*\n\n \n\nNet\ncash used in operating activities was $991 for the year ended December 31, 2025 as compared to $547 for the year ended December 31, 2024.\nThe amount in 2025 primarily consisted of a net loss of $219, offset by non-cash adjustments of $611 (including: depreciation expense\nof $39, non-cash stock-based compensation of $20, accretion of debt discount of $6, and a gain on the sale of property and equipment\nof $(676), and decreased by a change in working capital excluding cash of ($161). The amount in 2024 primarily consisted of net income\nof $5,521 offset by non-cash adjustments of $(6,507) (including: depreciation expense of $194, interest of $211, gain on settlement of\ndebt of $15, warrant liabilities and derivative liabilities of ($7,126), accretion of debt discount of $199 and decreased by a change\nin working capital excluding cash of 441.\n\n \n\n*Investing\nactivities*\n\n \n\nNet\ncash provided by investing activities was $1,350 for the year ended December 31, 2025 as compared to $0 for the year ended December 31, 2024.\nThe amount in 2025 consisted of proceeds from sale of property and equipment of $1,350.\n\n \n\n*Financing\nactivities*\n\n \n\nDuring\nthe year ended December 31, 2025, cash used in financing activities totaled $262, which consisted of $688 in repayments of loans\npayable, partially offset by $26 in proceeds from loans payable, $300 in proceeds from the sale of stock under the equity purchase\nagreement and $100 from the issuance of stock under the lease agreement. During the year ended December 31, 2024, cash provided by\nfinancing activities totaled $545 which includes $420 from the issuance of stock under the lease agreement and $125 from proceeds\nfrom loans payable.\n\n \n\n*Off–balance\nsheet arrangements*\n\n \n\nAs\nof December 31, 2025, we had no obligations, assets or liabilities which would be considered off–balance sheet arrangements. We\ndo not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to\nas variable interest entities, which would have been established for the purpose of facilitating off–balance sheet arrangements."}