0001493152-21-012749.txt : 20210524 0001493152-21-012749.hdr.sgml : 20210524 20210524172108 ACCESSION NUMBER: 0001493152-21-012749 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 55 CONFORMED PERIOD OF REPORT: 20210331 FILED AS OF DATE: 20210524 DATE AS OF CHANGE: 20210524 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MGT CAPITAL INVESTMENTS, INC. CENTRAL INDEX KEY: 0001001601 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 134148725 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-32698 FILM NUMBER: 21956196 BUSINESS ADDRESS: STREET 1: 150 FAYETTEVILLE STREET, STREET 2: SUITE 1110 CITY: RALEIGH STATE: NC ZIP: 27601 BUSINESS PHONE: (914) 630-7430 MAIL ADDRESS: STREET 1: 150 FAYETTEVILLE STREET, STREET 2: SUITE 1110 CITY: RALEIGH STATE: NC ZIP: 27601 FORMER COMPANY: FORMER CONFORMED NAME: MGT CAPITAL INVESTMENTS INC DATE OF NAME CHANGE: 20070117 FORMER COMPANY: FORMER CONFORMED NAME: MEDICSIGHT INC DATE OF NAME CHANGE: 20021113 FORMER COMPANY: FORMER CONFORMED NAME: HTTP TECHNOLOGY INC DATE OF NAME CHANGE: 20001016 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10–Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2021

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission file number: 001–32698

 

MGT CAPITAL INVESTMENTS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   13–4148725
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

150 Fayetteville Street, Suite 1110

Raleigh, NC 27601

(Address of principal executive offices)

 

(914) 630–7430

(Registrant’s telephone number, including area code)

 

Shares registered pursuant to section 12(b) of the Act: None.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S–T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non–accelerated filer [X] Smaller reporting company [X]
  Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act).

 

Yes [  ] No [X]

 

As of May 24, 2021, there were 536,649,910 shares of the registrant’s Common stock, $0.001 par value per share, issued and outstanding.

 

 

 

 
 

 

MGT CAPITAL INVESTMENTS, INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2021

 

TABLE OF CONTENTS

 

  Page
PART I. FINANCIAL INFORMATION  
Item 1. Financial statements  
Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020 1
Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2021 and 2020 2
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the three months ended March 31, 2021 and 2020 3
Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2021 and 2020 4
Notes to the Unaudited Condensed Consolidated Financial Statements 5
Item 2. Management’s discussion and analysis of financial condition and results of operations 18
Item 3. Quantitative and qualitative disclosures about market risk 24
Item 4. Controls and procedures 24
PART II. OTHER INFORMATION 25
Item 1. Legal proceedings 25
Item 1A. Risk factors 25
Item 2. Unregistered sales of equity securities and use of proceeds 25
Item 3. Defaults upon senior securities 26
Item 4. Mine safety disclosures 26
Item 5. Other information 26
Item 6. Exhibits 26
Signatures 27

 

i
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per-share amounts)

 

   March 31, 2021   December 31, 2020 
   (Unaudited)     
         
Assets          
Current assets          
Cash and cash equivalents  $1,188   $236 
Prepaid expenses and other current assets   12    10 
Intangible digital assets   6    4 
Total current assets   1,206    250 
           
Non-current assets          
Property and equipment, at cost, net   1,553    1,872 
Right of use asset, operating lease, net of accumulated amortization   51    56 
Other assets   123    123 
Total assets  $2,933   $2,301 
           
Liabilities and Stockholders’ Equity          
Current liabilities          
Accounts payable  $1,562   $1,261 
Accrued expenses and other payables   30    242 
Note payable, net of discount   67    5 
Operating lease liability   26    23 
Derivative liability   313    246 
Total current liabilities   1,998    1,777 
           
Non-current liabilities          
SBA PPP Note          
Operating lease liability   25    33 
Total liabilities   2,023    1,810 
           
Commitments and Contingencies (Note 9)          
           
Stockholders’ Equity          
Undesignated preferred stock, $0.001 par value, 8,489,800 shares authorized. No shares issued and outstanding at March 31, 2021 and December 31, 2020.   -    - 
Series B preferred stock, $0.001 par value, 10,000 shares authorized. No shares issued or outstanding at March 31, 2021 and December 31, 2020.   -    - 
Series C convertible preferred stock, $0.001 par value, 200 share authorized. 0 and 115 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively   -    - 
Common stock, $0.001 par value; 2,500,000,000 shares authorized; 536,649,911 and 506,779,781 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively.   537    507 
Additional paid-in capital   419,343    418,373 
Accumulated deficit   (418,970)   (418,389)
Total stockholders’ equity   910    491 
           
Total Liabilities and Stockholders’ Equity  $2,933   $2,301 

 

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

 

1
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per-share amounts)

(Unaudited)

 

   For the Three Months Ended March 31, 
   2021   2020 
         
Revenue  $293   $677 
           
Operating expenses          
Cost of revenue   250    605 
General and administrative   485    1,030 
Total operating expenses   735    1,635 
           
Operating loss   (442)   (958)
           
Other non-operating income (expense)          
Interest (expense) income   (11)   10 
Change in fair value of liability   -    15 
Change in fair value of derivative liability   (67)     
Accretion of debt discount   (62)   (421)
Gain (loss) on sale of property and equipment   1    30 
Total non-operating expense   (139)   (366)
           
Net loss   (581)   (1,324)
           
Net loss attributable to common stockholders  $(581)  $(1,324)
Per-share data          
Basic and diluted loss per share  $(0.00)  $(0.00)
           
Weighted average number of common shares outstanding   528,684,542    425,051,549 

 

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

 

2
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Dollars in thousands, except per-share amounts)

(Unaudited)

 

   Preferred Stock   Common Stock   Additional Paid-In   Accumulated  

Total Stockholders’

(Deficit)

 
   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
Balance at January 1, 2021   115   $-    506,779,781   $507   $418,373   $(418,389)  $491 
Stock based compensation - employee restricted stock   -    -         -         -    - 
Common stock issued on conversion of Preferred C shares   (115)   -    29,870,130    30    (30)   -    - 
Beneficial conversion feature                       1,000         1,000 
Net loss   -    -         -    -    (581)   (581)
Balance at March 31, 2021 (unaudited)   -   $-    536,649,911   $537   $419,343   $(418,970)  $910 
                                    
                                    
Balance at January 1, 2020   115   $-    413,701,289   $414   $417,315   $(414,502)  $3,227 
Stock based compensation - employee restricted stock   -    -         -    220    -    220 
Common stock issued on conversion of note payable   -    -    32,747,157    33    317    -    350 
Net loss   -    -         -    -    (1,324)   (1,324)
Balance at March 31, 2020 (unaudited)   115   $-    446,448,446   $447   $417,852   $(415,826)  $2,473 

 

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

 

3
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands, except per-share amounts)

(Unaudited)

 

   For the Three Months Ended March 31, 
   2021   2020 
Cash Flows From Operating Activities          
Net loss  $(581)  $(1,324)
Adjustments to reconcile net loss to net cash used in operating activities          
Depreciation   189    342 
Gain on sale of property and equipment   (1)   (30)
Change in fair value of liability   67    (15)
Stock-based compensation expense   -    220 
Amortization of note discount   62    421 
Change in operating assets and liabilities          
Prepaid expenses and other current assets   (2)   57 
Intangible digital assets   (2)   6 
Management agreement termination liability   -    (44)
Right of use asset   5    9 
Operating lease liability   (5)   (9)
Accounts payable   301    453 
Accrued expenses   (212)   97 
Net cash provided by (used) in operating activities   (179)   183 
           
Cash Flows From Investing Activities          
Purchase of property and equipment        (343)
Proceeds from sale of property and equipment   131      
Deposits made on property and equipment   -    (38)
Net cash provided by (used in) investing activities   131    (381)
           
Cash Flows From Financing Activities          
Proceeds from convertible note payable   1,000    - 
Net cash provided by financing activities   1,000    - 
           
Net change in cash and cash equivalents   952    (198)
           
Cash and cash equivalents, beginning of period   236    216 
Cash and cash equivalents, end of period  $1,188   $18 
           
Supplemental disclosure of cash flow information          
Cash paid for interest  $-    $  
Cash paid for income tax  $-   $- 
           
Non-cash investing and financing activities          
Conversion of notes payable into common stock  $-   $350 
Discount related to convertible promissory note  $1,000    $  

 

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

 

4
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED 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”) was incorporated in Delaware in 2000. MGT was originally incorporated in Utah in 1977. MGT is comprised of the parent company and its wholly owned subsidiary MGT Sweden AB. MGT’s corporate office is in Raleigh, North Carolina.

 

Cryptocurrency mining

 

Current Operations

 

The Company owned approximately 649 Antminer S17 Pro Bitcoin miners at its Company-owned and managed facility located in LaFayette, GA as of May 24, 2021. All miners were purchased from Bitmaintech Pte. Ltd., a Singapore limited company (“Bitmain”), and are collectively rated at approximately 30 Ph/s in computing power. Bitmain has acknowledged manufacturing defects, combined with inadequate repair facilities, rendering approximately one half of our miners in need of repair or replacement. The Company has begun using a third party repair facility to repair its non-working hash boards and expects the process to be complete in the third calendar quarter of this year. While initial batches of repaired hash boards have shown a very high success rate, there can be no guaranty that all future repairs will be as successful. The Company’s miners are housed in three modified shipping containers. A utility substation, adjacent to the several acre property, has access to over 20 megawatts (MW) of low-cost power. The Company’s current electrical load is estimated at slightly under 1.0 MW. The entire facility, including the land, two 2500 KVA 3-phase transformers, the mining containers, and miners, are owned by MGT. As the Company is presently using only a portion of the built-out available electrical load, it is exploring ways to grow and maintain its current operations including but not limited to further equipment sales, leasing space to other Bitcoin miners, and raising capital to acquire newest generation miners.

 

Basis of presentation

 

The accompanying unaudited condensed consolidated 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 10 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 consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10–K for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”) on April 15, 2021. Operating results for the three months ended March 31, 2021 and 2020 are not necessarily indicative of the results that may be expected for any subsequent quarters or for the year ending December 31, 2021.

 

COVID-19 Pandemic

 

The COVID-19 pandemic represents a fluid situation that presents a wide range of potential impacts of varying durations for different global geographies, including locations where we have offices, employees, customers, vendors and other suppliers and business partners.

 

Like most US-based businesses, the COVID-19 pandemic and efforts to mitigate the same began to have impacts on our business in March 2020. By that time, much of our first fiscal quarter was completed.

 

In light of broader macro-economic risks and already known impacts on certain industries, we have taken, and continue to take targeted steps to lower our operating expenses because of the COVID-19 pandemic. We continue to monitor the impacts of COVID-19 on our operations closely and this situation could change based on a significant number of factors that are not entirely within our control and are discussed in this and other sections of this Quarterly Report on Form 10-Q.

 

5
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

 

To date, travel restrictions and border closures have not materially impacted our ability to operate. However, if such restrictions become more severe, they could negatively impact those activities in a way that would harm our business over the long term. Travel restrictions impacting people can restrain our ability to operate, but at present we do not expect these restrictions on personal travel to be material to our business operations or financial results.

 

Like most companies, we have taken a range of actions with respect to how we operate to assure we comply with government restrictions and guidelines as well as best practices to protect the health and well-being of our employees. However, the impacts of COVID-19 and efforts to mitigate the same have remained unpredictable and it remains possible that challenges may arise in the future.

 

Note 2. Going Concern and Management’s Plans

 

The accompanying unaudited condensed consolidated 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, 2021, the Company had incurred significant operating losses since inception and continues to generate losses from operations. As of March 31, 2021, the Company had an accumulated deficit of $418,970. As of March 31, 2021 MGT’s cash and cash equivalents were $1,188.

 

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 when needed, or at terms deemed acceptable, if at all. The Company’s ability to raise additional capital is impacted by the volatility of Bitcoin mining economics and the SEC’s ongoing enforcement action against our Chief Executive Officer, both 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, the Company has secured working capital through the issuance of a convertible note, 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 consolidated financial statements. The accompanying unaudited condensed consolidated 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

 

Principles of consolidation

 

The unaudited condensed consolidated financial statements include the accounts of MGT and MGT Sweden AB. All intercompany transactions and balances have been eliminated.

 

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, the recognition of revenue, the valuation allowance for deferred tax assets and other legal claims and contingencies. 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.

 

6
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

 

Revenue recognition

 

The Company’s primary revenue stream is related to the mining of digital currencies. The Company derives its revenue by solving “blocks” to be added to the blockchain and providing transaction verification services within the digital currency network of Bitcoin, commonly termed “cryptocurrency mining.” In consideration for these services, the Company receives digital currency (“Coins”). The Coins are recorded as revenue, using the average spot price of Bitcoin on the date of receipt. The Coins are recorded on the balance sheet as an intangible digital asset valued at the lower of cost or net realizable value. Net realizable value adjustments, to adjust the value of Coins to market value, are included in cost of revenue on the Company’s consolidated statement of operations. Further, any gain or loss on the sale of Coins would be recorded to costs of revenue. Costs of revenue include electricity costs, equipment and infrastructure depreciation, and net realizable value adjustments.

 

The Company also recognizes a royalty participation upon the sale of certain containers manufactured by Bit5ive LLC of Miami, Florida (the “Pod5ive Containers”) under the terms of a five-year collaboration agreement entered in August 2018.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight–line method on the various asset classes over their estimated useful lives, which range from one to ten years when placed in service. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. Deposits on property and equipment are initially classified as Other Assets and upon delivery, installation and full payment, the assets are classified as property and equipment on the consolidated balance sheet.

 

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, stock 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.

 

7
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

 

Accordingly, the computation of diluted loss per share for the three months ended March 31, 2021 excludes 34,285,714 shares issuable upon conversion of convertible debt. The computation of diluted loss per share for the three months ended March 31, 2020 excludes 266,667 unvested restricted shares, 68,904,286 shares issuable upon conversion of convertible debt, and 126,373,626 shares issuable under preferred stock.

 

Stock–based compensation

 

The Company applies ASC 718-10, “Share- Based Payment,” which requires the measurement and recognition of compensation expenses for all share based payment awards made to employees and directors including employee stock options under the Company’s stock plans and equity awards issued to non-employees based on estimated fair values.

 

ASC 718-10 requires companies to estimate the fair value of equity-based option awards on the date of grant using an option-pricing model. The fair value of the award is recognized as an expense on a straight-line basis over the requisite service periods in the Company’s consolidated statements of comprehensive loss.

 

Restricted stock awards are granted at the discretion of the compensation committee of the board of directors of the Company (the “Board of Directors”). These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a 12 to 24-month period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of the Company’s common stock on the grant date.

 

The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of the Company’s common stock over the expected term of the option. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term.

 

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards require the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. The Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest.

 

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:

 

  Level 1 Quoted prices in active markets for identical assets or liabilities.
  Level 2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.
  Level 3 Significant unobservable inputs that cannot be corroborated by market data.

 

As of March 31, 2021, and December 31, 2020, the Company had a Level 3 financial instrument related to the derivative liability related to the issuance of convertible notes.

 

8
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

 

Gain (Loss) on Modification/Extinguishment of Debt

 

In accordance with ASC 470, a modification or an exchange of debt instruments that adds or eliminates a conversion option that was substantive at the date of the modification or exchange is considered a substantive change and is measured and accounted for as extinguishment of the original instrument along with the recognition of a gain/loss. Additionally, under ASC 470, a substantive modification of a debt instrument is deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. A substantive modification is accounted for as an extinguishment of the original instrument along with the recognition of a gain/loss.

 

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 $1,188 and $236 as of March 31, 2021 and December 31, 2020, respectively. Accounts are insured by the FDIC up to $250,000 per financial institution. The Company has not experienced any losses in such accounts with these financial institutions. As of March 31, 2021, and December 31, 2020, the Company had $938 and $0, respectively, in excess over the FDIC insurance limit.

 

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 consolidated financial statements, other than those disclosed below.

 

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.

 

Derivative Instruments

 

Derivative financial instruments are recorded in the accompanying consolidated balance sheets at fair value 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 closely 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 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 consolidated balance sheets separately from the carrying value of the host contract. Subsequent changes in the estimated fair value of derivatives are recorded as a gain or loss in the Company’s consolidated 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.

 

9
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

 

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 11 – 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 consolidated financial statements.

 

Digital Currencies

 

Digital currencies are included in current assets in the condensed consolidated balance sheets. Digital currencies are recorded at the lower of cost or net realizable value.

 

Net realizable value adjustments, to adjust the value of Coins to market value, are included in cost of revenue on the Company’s consolidated statement of operations. Further, any gain or loss on the sale of Coins would be recorded to costs of revenue. Costs of revenue include hosting fees, equipment and infrastructure depreciation, net realizable value adjustments, and electricity costs.

 

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. 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 three months ended March 31, 2021:

 

Digital currencies at December 31, 2020  $4 
Additions of digital currencies from mining   286 
Payment of digital currencies to management partners   - 
Realized gain on sale of digital currencies   (6)
Net realizable value adjustment   (1)
Sale of digital currencies   (277)
Digital currencies at March 31, 2021  $6 

 

Note 4. Property, Plant, and Equipment and Other Assets

 

Property and equipment consisted of the following:

 

   As of 
   March 31, 2021   December 31, 2020 
Land  $55   $57 
Computer hardware and software   10    10 
Bitcoin mining machines   1,180    1,206 
Infrastructure   905    905 
Containers   403    550 
Leasehold improvements   4    4 
Property and equipment, gross   2,557    2,732 
Less: Accumulated depreciation   (1,004)   (860)
Property and equipment, net  $1,553   $1,872 

 

10
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

 

The Company recorded depreciation expense of $189 and $342 for the three months ended March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021 and 2020, gains on sale of property and equipment of $1 and $30, respectively were recorded as other non-operating expenses relating to the sale and disposition of Antminer S17 Pro and S9 Bitcoin miners and a container.

 

Other Assets consisted of the following:

 

   As of 
   March 31, 2021   December 31, 2020 
         
Security deposits  $123   $123 
Other Assets  $123   $123 

 

The Company has paid $120 in security deposits related to its electrical contract, see Note 9, and $3 related to its office lease in Raleigh, NC.

 

Note 5. Notes Payable

 

June 2018 Note

 

On June 1, 2018, the Company entered into a note purchase agreement with an accredited investor, pursuant to which the Company issued an unsecured promissory note in the amount of $3,600 (the “June 2018 Note”) for consideration of $3,000. The outstanding balance was to be made in nine equal monthly installments beginning August 1, 2018, with an initial maturity date of April 1, 2019, with no prepayment penalty. Upon an event of default, the outstanding balance of the promissory note would immediately increase by 120% and become immediately due and payable. Prior to 2020, this note was amended 5 times.

 

11
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

 

During the year ended December 31, 2020, the Company issued 93,078,492 shares of its common stock upon the conversion of $929 in outstanding principal, reducing the outstanding principal balance to $0 as of December 31, 2020.

 

December 2020 Note

 

On December 8, 2020, the Company entered into a securities purchase agreement pursuant to which it issued a convertible promissory note in the principal amount of $230 which is convertible, at the option of the holder, into shares of common stock 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 Company received consideration of $200 for the convertible promissory note. The note bears interest at a rate of 8% per annum and matures in twelve months.

 

The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a beneficial conversion feature 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 together 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 $355.

 

As of March 31, 2021, the fair value of the derivative liability was $313 and for the three months ended March 31, 2021 the Company recorded a loss of $67 from the change in fair value of derivative liability as non-operating expense in the consolidated statements of operations. As of December 31, 2020, the fair value of the derivative liability was $246. The Company valued the derivative liability using the Black-Scholes option pricing model using the following assumptions as of March 31, 2021 and December 31, 2020, respectively: 1) stock prices of $0.075 and $0.04, 2) conversion prices of $0.042 and $0.025, 3) remaining lives of .69 and 0.94 years, 4) dividend yields of 0%, 5) risk free rates of 0.05% and 0.10%, and 6) volatility of 237.34% and 167.36%.

 

March 2021 Note

 

On March 5, 2021, the Company entered into a securities purchase agreement, pursuant to which the Company issued a convertible promissory note in the original principal amount of $13,210 (the “March 2021 Note”). The March 2021 Note is 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 shall the Conversion Price be less than $0.04 per share. The March 2021 Note bears interest at a rate of 8% per annum and will mature in twelve months.

 

The March 2021 Note will 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) will 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 requires the mutual agreement of the Company and Investor. Until such time as Investor has funded the subsequent tranches, the Company will hold a series of Investor Notes that offset any unfunded portion of the March 2021 Note.

 

12
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

 

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.

 

Derivative Liabilities

 

The Company’s activity in its derivative liability was as follows for the three months ended March 31, 2021:

 

Balance of derivative liability at December 31, 2020  $246 
Change in fair value recognized in non-operating expense   67 
Balance of derivative liability at March 31, 2021  $313 

 

The Company did not have any derivative liability activity during the three months ended March 31, 2020.

 

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.

 

The following table summarizes the Company’s derivative as of March 31, 2021:

 

   March 31, 2021 
   Level 1   Level 2    Level 3   Fair Value 
                 
Liabilities                    
Derivative liability  $-   $-   $313   $313 

 

The following table summarizes the Company’s derivative as of December 31, 2020:

 

   December 31, 2020 
   Level 1   Level 2   Level 3   Fair Value 
                 
Liabilities                    
Derivative liability  $-   $-   $246   $246 

 

13
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

 

U.S. Small Business Administration-Paycheck Protection Plan

 

On April 16, 2020, we entered into a promissory note with Aquesta Bank for $108 (the “PPP Loan”) in connection with the Paycheck Protection Program (“PPP”) offered by the U.S. Small Business Administration (the “SBA”). The PPP Loan had terms including an interest rate of 1% per annum, with monthly installments of $6 commencing on November 1, 2021 through its maturity on April 1, 2023. The principal amount of the PPP Loan is forgiven if the loan proceeds are used to pay for payroll costs, rent and utilities costs over the 24-week period after the loan is made. Not more than 40% of the forgiven amount may be used for non-payroll costs. In addition, in July 2020, the Company received $3 from the SBA as a COVID-19 Economic Injury Disaster Loan Advance (the “EIDL Advance”)

 

On April 1, 2021, the Company received notice of forgiveness from the SBA in the amount of $108 in relation to the PPP Loan as the Company used all proceeds from the PPP Loan to maintain payroll and other allowable expenses. Further, pursuant to an SBA Procedural Notice in December 2020, the EIDL Advance was also forgiven. The Company has concluded that the PPP Loan and EIDL Advance represent, in substance, a government grant that is forgiven in its entirety. As such, in accordance with International Accounting Standards (“IAS”) 20, “Accounting for Government Grants and Disclosure of Government Assistance,” the Company has recognized the entire PPP Loan and EIDL Advance amount of $111 as grant income, which is included in other non-operating income (expense) in the consolidated statement of operations for the year ended December 31, 2020.

 

Notes payable consisted of the following:

 

   As of March 31, 2021 
   Principal   Discount   Net 
December 2020 Note  $230   $(201)  $29 
March 2021 Note   1,210    (1,172)   38 
Total notes payable  $1,460   $(1,373)  $67 

 

   As of December 31, 2020 
   Principal   Discount   Net 
Total notes payable-December 2020 Note  $230   $(225)  $5 

 

During the three months ended March 31, 2021 and 2020, the Company recorded accretion of debt discount of $62 and $0, respectively.

 

Note 6. Leases

 

In December 2019, the Company entered an office lease in connection with the relocation of its executive office to Raleigh, North Carolina. The Company accounted for this 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, 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 operating lease and has a balance, net of amortization, of $51 as of March 31, 2021.

 

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

 

   Amount 
Remainder of 2021  $28 
2022   38 
Total undiscounted minimum future lease payments  $66 
Less Imputed interest   (15)
Present value of operating lease liabilities  $51 
Disclosed as:     
Current portion  $26 
Non-current portion   25 
   $51 

 

The Company recorded rent expense of $9 and $9 for the three months ended March 31, 2021 and 2020, respectively.

 

14
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

 

At March 31, 2021, the weighted average remaining lease term for operating lease was 1.7 years. The Company’s lease agreement does not contain any material residual value guarantees or material restrictive covenants.

 

Note 7. Common Stock and Preferred Stock

 

Common stock

 

Other Common Stock Issuances

 

In connection with the conversion of 115 shares of Series C Preferred Stock during the three months ended March 31, 2021 (see Preferred Stock below) the Company issued 29,870,130 shares of common 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 $100 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 stockholders. 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 holders of the Series C Preferred Shares have no voting rights, receive no dividends, 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 right of redemption is solely at the option of the Company, the Series C Preferred Shares are not considered mandatorily redeemable, and as such are classified in shareholders’ equity on the Company’s consolidated balance sheet.

 

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 stock.

 

15
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

 

The common shares issued upon conversion of the 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 costs and on July 15, 2019 sold 10 Series C Preferred Shares for $100. During the second and third quarters of 2019, holders 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. 115 shares of Series C Preferred Stock were issued and outstanding as of December 31, 2020.

 

On January 28, 2021 and February 18, 2021, the Company issued 2,597,403 and 27,272,727 shares of the Company’s common stock, respectively, in connection with the conversion of 10 and 105 shares of the Company’s Series C Convertible Preferred Stock. Following these conversions, the Company has no Series C Preferred issued or outstanding.

 

Note 8. Stock–Based Compensation

 

Issuance of restricted common stock – directors, officers and employees

 

The Company’s activity in restricted common stock was as follows for the three months ended March 31, 2021:

 

   Number of shares   Weighted average
grant date fair
value
 
Non–vested at December 31, 2020   33,333   $0.04 
Granted   -   $- 
Vested   (33,333)  $0.04 
Non–vested at March 31, 2021   -   $- 

 

For the three months ended March 31, 2021 and 2020, the Company has recorded $0 and $220, in employee and director stock–based compensation expense, which is a component of general and administrative expenses in the consolidated statement of operations.

 

As of March 31, 2021, there was no unamortized stock-based compensation costs related to restricted share arrangements.

 

Stock options

 

Under the terms of the stock option agreement, all options expired on January 31, 2020. As of March 31, 2021, there are no outstanding or exercisable stock options.

 

Note 9. Commitments and Contingencies

 

Legal proceedings

 

The Company is subject, from time to time, to various legal proceedings that are incidental to the conduct of its business. The Company is not involved in any pending legal proceeding that it believes would reasonably be expected to have a material adverse effect on its financial condition or results of operations, except as previously disclosed in our Annual Report on Form 10-K, as filed with the SEC on April 15, 2021.

 

Bitcoin Production Equipment and Operations

 

On August 14, 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. Pursuant to the POD5 Agreement, the Company assists with the design and development of the POD5 Containers. The Company retains naming rights to the pods and receives royalty payments from Bit5ive, LLC in exchange for an initial capital investment as well as engineering and design expertise. During the three months ended March 31, 2021 and 2020 the Company received royalties and recognized revenue under this agreement of $7 and $3, respectively.

 

16
 

 

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per–share amounts)

 

Electricity Contract

 

In June 2019, the Company entered into a two-year contract for electric power with the City of Lafayette, Georgia, a municipal corporation of the State of Georgia (“the City”). The Company makes monthly payments based upon electricity consumed, at a negotiated kilowatt per hour rate, inclusive of transmission charges and exclusive of state and local sales taxes. Over time, the Company is entitled to utilize a load of 10 megawatts. For each month, the Company estimates its expected electric load, and should the actual load drop below 90% of this estimate, the City reserves the right to impose a modest penalty to the hourly kilowatt rate for electricity consumed.

 

In connection with this agreement, the Company paid a $154 security deposit, which was reduced to $120 in June 2020. The new amount is classified as Other Assets in the Company’s consolidated balance sheet as March 31, 2021.

 

This agreement expires on September 30, 2021, and the Company has begun negotiations for an extension or new contract. There can be no assurance that that the Company and City will reach agreement with acceptable price and volume metrics, if at all.

 

Management Agreement Termination Liability

 

On August 31, 2019, the Company entered into two Settlement and Termination Agreements (the “Settlement Agreements”) to management agreements it entered in 2017 with two accredited investors (together the “Users”). Under the terms of the Settlement Agreements, the Company paid the Users a percentage of profits (“Settlement Distribution”) of Bitcoin mining as defined in the Settlement Agreements. The estimated present value of the Settlement Distributions of $337 was recorded as termination expense with an offsetting liability on August 31, 2019. Since two of the components of the Settlement Distribution, Bitcoin price and Difficulty Rate, as defined in the Settlement Agreements, are based on market conditions, the liability was adjusted to fair value on a quarterly basis and any changes were recorded in the statement of operations. As such, the liability is considered a Level 3 financial instrument. During the three months ended March 31, 2020, the Company recognized a gain on the change in the fair value of $15 based on the change of Bitcoin price and Difficulty Rate, and along with the monthly Settlement Distributions valued at $43, the liability was reduced to $58 as of March 31, 2020. Based on the terms of the Settlement Agreements, Settlement Distributions terminated on September 30, 2020.

 

Note 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, 2021 and 2020, the Company made contributions to the 401(k) Plan of $3 and $4, respectively.

 

Note 11. Subsequent Events

 

On April 1, 2021, the Company received notice from the SBA that the Company’s PPP Loan was forgiven in its entirety in the amount of $108.

 

17
 

 

Item 2. Management’s discussion and analysis of financial condition and results of operations

 

This Quarterly Report on Form 10–Q contains forward–looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward–looking statements. The statements contained herein that are not purely historical are forward–looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward–looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “estimates,” “should,” “expect,” “guidance,” “project,” “intend,” “plan,” “believe” and similar expressions or variations intended to identify forward–looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward–looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward–looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10–K for the fiscal year ended December 31, 2020 as filed with the Securities and Exchange Commission (“SEC”) on April 15, 2021, in addition to other public reports we filed with the SEC. The forward–looking statements set forth herein speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward–looking statements to reflect events or circumstances after the date of such statements.

 

Executive summary

 

MGT Capital Investments, Inc. (“MGT” or the “Company”) was incorporated in Delaware in 2000. MGT was originally incorporated in Utah in 1977. MGT is comprised of the parent company and its wholly owned subsidiary MGT Sweden AB. MGT’s corporate office is in Raleigh, North Carolina.

 

All dollar figures set forth in this Quarterly Report on Form 10-Q are in thousands, except per-share amounts.

 

Current Operations

 

The Company owned approximately 649 Antminer S17 Pro Bitcoin miners at its Company-owned and managed facility located in LaFayette, GA as of May 24, 2021. All miners were purchased from Bitmaintech Pte. Ltd., a Singapore limited company (“Bitmain”), and are collectively rated at approximately 30 Ph/s in computing power. Bitmain has acknowledged manufacturing defects, combined with inadequate repair facilities, rendering approximately one half of our miners in need of repair or replacement. The Company has begun using a third party repair facility to repair its non-working hash boards and expects the process to be complete in the third calendar quarter of this year. While initial batches of repaired hash boards have shown a very high success rate, there can be no guaranty that all future repairs will be as successful. The Company’s miners are housed in three modified shipping containers. A utility substation, adjacent to the several acre property, has access to over 20 megawatts (MW) of low-cost power. The Company’s current electrical load is estimated at slightly under 1.0 MW. The entire facility, including the land, two 2500 KVA 3-phase transformers, the mining containers, and miners, are owned by MGT. As the Company is presently using only a portion of the built-out available electrical load, it is exploring ways to grow and maintain its current operations including but not limited to further equipment sales, leasing space to other Bitcoin miners, and raising capital to acquire newest generation miners.

 

Critical accounting policies and estimates

 

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The notes to the unaudited condensed consolidated financial statements contained in this Quarterly Report describe our significant accounting policies used in the preparation of the unaudited condensed consolidated financial statements. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. We continually evaluate our critical accounting policies and estimates.

 

18
 

 

We believe the critical accounting policies listed below reflect significant judgments, estimates and assumptions used in the preparation of our unaudited condensed consolidated financial statements.

 

Revenue recognition

 

The Company’s primary revenue stream is related to the mining of digital currencies. The Company derives its revenue by solving “blocks” to be added to the blockchain and providing transaction verification services within the digital currency network of Bitcoin, commonly termed “cryptocurrency mining.” In consideration for these services, the Company receives digital currency (“Coins”). The Coins are recorded as revenue, using the average spot price of Bitcoin on the date of receipt. The Coins are recorded on the balance sheet as an intangible digital asset valued at the lower of cost or net realizable value. Net realizable value adjustments, to adjust the value of Coins to market value, are included in cost of revenue on the Company’s consolidated statement of operations. Further, any gain or loss on the sale of Coins would be recorded to costs of revenue. Costs of revenue include electricity costs, equipment and infrastructure depreciation, and net realizable value adjustments.

 

The Company also recognizes a royalty participation upon the sale of certain containers manufactured by Bit5ive LLC of Miami, Florida (the “Pod5ive Containers”) under the terms of a collaboration agreement entered in August 2018.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight–line method on the various asset classes over their estimated useful lives, which range from one to ten years when placed in service. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. Deposits on property and equipment are initially classified as Other Assets and upon delivery, installation and full payment, the assets are classified as property and equipment on the consolidated balance sheet.

 

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.

 

Stock–based compensation

 

The Company recognizes compensation expense for all equity–based payments in accordance with ASC 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.

 

Restricted stock awards are granted at the discretion of the compensation committee of the board of directors of the Company (the “Board of Directors”). These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a 12 to 24-month period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of the Company’s common stock on the grant date.

 

19
 

 

The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of the Company’s common stock over the expected term of the option. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term.

 

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. The Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest.

 

The Company accounts for share–based payments granted to non–employees in accordance with ASC 718-10, “Share-Based Payment,” which requires the measurement and recognition of compensation expenses for all share based payment awards made to employees and directors including employee stock options under the Company’s stock plans and equity awards issued to non-employees based on estimated fair values.

 

ASC 718-10 requires companies to estimate the fair value of equity-based option awards on the date of grant using an option-pricing model. The fair value of the award is recognized as an expense on a straight-line basis over the requisite service periods in the Company’s consolidated statements of comprehensive loss.

 

Recent accounting pronouncements

 

See Note 3 to our unaudited condensed consolidated financial statements appearing in Part I, Item 1 of this Quarterly Report for Recent Accounting Pronouncements.

 

Results of operations

 

Three months ended March 31, 2021 and 2020

 

Revenues

 

Our revenues for the three months ended March 31, 2021 decreased by $384, or 57%, to $293, as compared to $677 for the three months ended March 31, 2020. Our revenue is primarily derived from cryptocurrency mining. The decrease in revenues is a result of lower Bitcoins mined due to fewer miners in operations and higher difficulty rate, offset by increased Bitcoin prices.

 

The Company is also entitled to a royalty from the sale of the Pod5ive Containers. During March 31, 2021 and 2020, the Company recognized $7 and $3 respectively, in royalties under this agreement due to a higher number of Pod5ive Container sales.

 

Operating Expenses

 

Operating expenses for the three months ended March 31, 2021 decreased by $900, or 55%, to $735, as compared to $1,635 for the three months ended March 31, 2020. The decrease in operating expenses was primarily due to a decrease in general and administrative expenses of $545, primarily from a decrease in legal and professional fees, as well as a decrease of $355 in cost of revenue from lower electricity usage.

 

The decrease in general and administrative expenses of $545 or 53%, to $485, as compared to $1,030 for the three months ended March 31, 2020, was primarily due to a decrease in stock-based compensation of $220 based on fewer shares issued or vested, a decrease in payroll and related expenses of $123, a decrease in consulting fees in the amount of $82, and a decrease of legal and professional fees in the amount of $397. The decrease of $355 in cost of revenue is primarily from lower electricity usage due to having fewer bitcoin miners in operation.

 

20
 

 

Other Income and Expense

 

For the three months ended March 31, 2021, non–operating income and expenses consisted primarily interest expense of $11, accretion of debt discount of $62 and change in fair value of derivative of $67, and a gain on sale of property and equipment of $1. During the comparable period ended March 31, 2020, non–operating income and expenses consisted of interest income of $10, accretion of debt discount of $421, a gain from the change in the fair value of the liability associated with the termination of the management agreements of $15 and a gain on sale of property and equipment of $30.

 

Liquidity and capital resources

 

Sources of Liquidity

 

We have historically financed our business through the sale of debt and equity interests. We have incurred significant operating losses since inception and continue to generate losses from operations and as of March 31, 2021 have an accumulated deficit of $418,970. At March 31, 2021, our cash and cash equivalents were $1,188, and our working capital deficit was $792. As of March 31, 2021, we had $1,440 of convertible promissory notes outstanding.

 

In January 2020, management completed the initial phase of its plan to consolidate its activities in Company-owned and managed facilities, executing on its expansion model to secure low cost power and grow its cryptocurrency assets. In connection with this plan, the Company terminated its management agreements and its third-party hosting arrangements in 2019. The Company will need to raise additional funding to grow its operations and to pay current maturities of debt. There can be no assurance however that the Company will be able to raise additional capital when needed, or at terms deemed acceptable, if at all. The Company’s ability to raise additional capital will also be impacted by the volatility of Bitcoin and the ongoing SEC enforcement action against our Chief Executive Officer, both of which are highly uncertain, cannot be predicted and could have an adverse effect on the Company’s business and financial condition. The issuance of any additional shares of Common Stock, preferred stock or convertible securities could be substantially dilutive to our shareholders. 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 consolidated financial statements. The accompanying unaudited condensed consolidated 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.

 

The price of Bitcoin is volatile, and fluctuations are expected. Declines in the price of Bitcoin have had a negative impact on our operating results and liquidity and could harm the price of our common stock. Movements may be influenced by various factors, including, but not limited to, government regulation, security breaches experienced by service providers, as well as political and economic uncertainties around the world. Since we record revenue based on the price of earned Bitcoin and we may retain such Bitcoin as an asset or as payment for future expenses, the relative value of such revenues may fluctuate, as will the value of any Bitcoin we retain. The low and high exchange price per Bitcoin for the year ending December 31, 2020, as reported by Blockchain.info, were approximately $5 and $29 respectively. During the period January 1, 2021 through March 31, 2021, the price of Bitcoin remained very volatile, with a low and high exchange price per Bitcoin of approximately $31 and $61, respectively.

 

The supply of Bitcoin is finite. Once 21 million Bitcoin are generated, the network will stop producing more. Currently, there are approximately 19 million Bitcoin in circulation, or 90% of the total supply of Bitcoin. Within the Bitcoin protocol is an event referred to as Halving where the Bitcoin reward provided upon mining a block is reduced by 50%. Halvings are scheduled to occur once every 210,000 blocks, or roughly every four years, until the maximum supply of 21 million Bitcoin is reached. The third Halving occurred on May 11, 2020, with a revised reward payout of 6.25 Bitcoin per block, down from the previous reward payout of 12.5 Bitcoin per block

 

Given a stable hash rate, a Halving reduces the number of new Bitcoin being generated by the network. While the effect is to limit the supply of new coins, it has no impact on the quantity of total Bitcoin outstanding. As a result, the price of Bitcoin could rise or fall based on overall investor and consumer demand. Should the price of Bitcoin remain unchanged after the next Halving, the Company’s revenue would be reduced by 50%, with a much larger negative impact to profit.

 

Our primary source of operating funds has been through debt and equity financing.

 

21
 

 

COVID-19 pandemic:

 

The COVID-19 pandemic represents a fluid situation that presents a wide range of potential impacts of varying durations for different global geographies, including locations where we have offices, employees, customers, vendors and other suppliers and business partners.

 

Like most US-based businesses, the COVID-19 pandemic and efforts to mitigate the same began to have impacts on our business in March 2020. By that time, much of our first fiscal quarter was completed.

 

In light of broader macro-economic risks and already known impacts on certain industries, we have taken, and continue to take targeted steps to lower our operating expenses because of the COVID-19 pandemic. We continue to monitor the impacts of COVID-19 on our operations closely and this situation could change based on a significant number of factors that are not entirely within our control and are discussed in this and other sections of this quarterly report on Form 10-Q.

 

To date, travel restrictions and border closures have not materially impacted our ability to operate. However, if such restrictions become more severe, they could negatively impact those activities in a way that would harm our business over the long term. Travel restrictions impacting people can restrain our ability to operate, but at present we do not expect these restrictions on personal travel to be material to our business operations or financial results.

 

Like most companies, we have taken a range of actions with respect to how we operate to assure we comply with government restrictions and guidelines as well as best practices to protect the health and well-being of our employees. However, the impacts of COVID-19 and efforts to mitigate the same have remained unpredictable and it remains possible that challenges may arise in the future.

 

U.S. Small Business Administration-Paycheck Protection Plan

 

On April 16, 2020, we entered into a promissory note (the “PPP Loan”) with Aquesta Bank for $108 in connection with the Paycheck Protection Program (“PPP”) offered by the U.S. Small Business Administration (the “SBA”). The PPP Loan had terms including an interest rate of 1% per annum, with monthly installments of $6 commencing on November 1, 2021 through its maturity on April 1, 2023. The principal amount of the PPP Loan is forgiven if the loan proceeds are used to pay for payroll costs, rent and utilities costs over the 24-week period after the loan is made. Not more than 40% of the forgiven amount may be used for non-payroll costs. In addition, in July 2020, the Company received $3 from the SBA as a COVID-19 Economic Injury Disaster Loan Advance (the “EIDL Advance”)

 

On April 1, 2021, the Company received notice of forgiveness from the SBA in the amount of $108 in relation to the PPP Loan as the Company used all proceeds from the PPP Loan to maintain payroll and other allowable expenses. Further, pursuant to an SBA Procedural Notice in December 2020, the EIDL Advance was also forgiven. The Company has concluded that the PPP Loan and EIDL Advance represent, in substance, a government grant that is forgiven in its entirety. As such, in accordance with International Accounting Standards (“IAS”) 20, “Accounting for Government Grants and Disclosure of Government Assistance,” the Company has recognized the entire PPP Loan and EIDL Advance amount of $111 as grant income, which is included in other non-operating income (expense) in the consolidated statement of operations for the year ended December 31, 2020.

 

22
 

 

Cash Flows

 

   Three Months ended March 31, 
   2021   2020 
Cash provided by / (used in)          
Operating activities  $(179)  $183 
Investing activities   131    (381)
Financing activities   1,000    - 
Net increase (decrease) in cash and cash equivalents  $952   $(198)

 

Operating activities

 

Net cash used in operating activities was $179 for the three months ended March 31, 2021 as compared to net cash provided by operating activities of $183 for the three months ended March 31, 2020. Cash used in operating activities for the three months ended March 31, 2021 primarily consisted of a net loss of $581, offset by non-cash charges of $317 which includes depreciation of $189, change in fair value of derivative liability of $67, amortization of note discount of $62, offset by a gain from sale of property and equipment of $1, and cash provided by a change in working capital of $85.

 

Net cash provided by operating activities of $183 for the three months ended March 31, 2020 primarily consisted of a net loss of $1,324, offset by non-cash charges of $938, which includes depreciation of $342, stock-based compensation of $220 and amortization of note discount of $421, partially offset by a change in fair value of derivative liability of $15 and a gain from sale of property and equipment of $30, and cash provided by a change in working capital of $569.

 

Investing activities

 

Net cash provided by investing activities was $131 for the three months ended March 31, 2021 which consisted of proceeds from the sale of property and equipment.

 

Net cash used in investing activities was $381 for the three months ended March 31, 2020 which consisted of purchases of property and equipment of $343 and deposits made on property and equipment of $38.

 

Financing activities

 

During the three months ended March 31, 2021, cash provided by financing activities totaled $1,000 from proceeds of the issuance of a convertible promissory note.

 

During the three months ended March 31, 2020 there was no cash provided by or used in financing activities.

 

23
 

 

Off–balance sheet arrangements

 

As of March 31, 2021, we had no obligations, assets or liabilities which would be considered off–balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off–balance sheet arrangements.

 

Item 3. Quantitative and qualitative disclosures about market risk

 

The Company is not exposed to market risk related to interest rates on foreign currencies.

 

Item 4. Controls and procedures

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures designed to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. As required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer (our principal executive) and Chief Financial Officer (our principal financial officer and principal accounting officer) carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2021. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in paragraph (e) of Rules 13a-15 and 15d-15 under the Exchange Act) were not effective as March 31, 2021.

 

Limitations on Internal Control over Financial Reporting

 

An internal control system over financial reporting has inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

 

Management’s Quarterly Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process used to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles in the United States. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles in the United States, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

24
 

 

Under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer and principal accounting officer), we performed a complete documentation of the Company’s significant processes and key controls, and conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of March 31, 2021.

 

Changes in Internal Control over Financial Reporting

 

During the quarter ended March 31, 2021, there were no changes to internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

Item 1. Legal proceedings

 

The Company is subject, from time to time, to various legal proceedings that are incidental to the conduct of its business. The Company is not involved in any pending legal proceeding that it believes would reasonably be expected to have a material adverse effect on its financial condition or results of operations, except as previously disclosed in our Annual Report on Form 10-K, as filed with the SEC on April 15, 2021.

 

Item 1A. Risk factors

 

There are no additional risk factors other than those discussed in our Annual Report on Form 10–K, as filed with the SEC on April 15, 2021.

 

Item 2. Unregistered sales of equity securities and use of proceeds

 

On January 28, 2021 and February 18, 2021, the Company issued 2,597,403 and 27,272,727 shares of the Company’s common stock, respectively, to Chicago Venture Partners L.P., a Utah limited partnership, and Uptown Capital LLC, a Utah limited liability company, in connection with the conversion of 10 and 105 shares of the Company’s Series C Convertible Preferred Stock (the “Series C Preferred”). Following these conversions, the Company has no Series C Preferred issued or outstanding.

 

On March 5, 2021, the Company entered into a securities purchase agreement, pursuant to which the Company issued a convertible promissory note in the original principal amount of $13,210 (the “March 2021 Note”). The March 2021 Note is 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 shall the Conversion Price be less than $0.04 per share. The March 2021 Note bears interest at a rate of 8% per annum and will mature in twelve months.

 

The March 2021 Note will 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) will 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 requires the mutual agreement of the Company and Investor. Until such time as Investor has funded the subsequent tranches, the Company will hold a series of Investor Notes that offset any unfunded portion of the March 2021 Note.

 

In issuing the securities described above, the Company relied upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

 

25
 

 

Item 3. Defaults upon senior securities

 

None.

 

Item 4. Mine safety disclosures

 

Not applicable.

 

Item 5. Other information

 

None.

 

Item 6. Exhibits

 

10.1   Securities Purchase Agreement dated March 5, 2021 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on March 8, 2021).
     
10.2   Convertible Promissory Note in favor of Bucktown Capital, LLC dated March 5, 2021 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on March 8, 2021).
     
10.3   Form of Investor Note (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on March 8, 2021).
     
31   Certification pursuant to Section 302 of the Sarbanes–Oxley Act of 2002 of Principal Executive Officer and Principal Financial Officer*
     
32   Certification pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 of Principal Executive Officer and Principal Financial Officer*
     
101.INS   XBRL Instance Document*
101.SCH   XBRL Taxonomy Extension Schema*
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB   XBRL Taxonomy Extension Labels Linkbase Document*
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document*
     
*   Filed herewith

 

26
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  MGT CAPITAL INVESTMENTS, INC
     
Date: May 24, 2021 By: /s/ Robert B. Ladd
    Robert B. Ladd
    President, Chief Executive Officer and Acting Chief Financial Officer
    (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

27

EX-31 2 ex31.htm

 

Exhibit 31

 

CERTIFICATION PURSUANT TO SARBANES–OXLEY ACT OF 2002

 

I, Robert B. Ladd, certify that:

 

1. I have reviewed this quarterly report on Form 10–Q of MGT Capital Investments, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 24, 2021 By: /s/ Robert B. Ladd
    Robert B. Ladd
    President, Chief Executive Officer and Acting Chief Financial Officer
    (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

 

EX-32 3 ex32.htm

 

Exhibit 32

 

CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES–OXLEY ACT OF 2002

 

In connection with the Quarterly Report of MGT Capital Investments, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
     
  2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: May 24, 2021 By: /s/ Robert B. Ladd
    Robert B. Ladd
    President, Chief Executive Officer and Acting Chief Financial Officer
    (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

 

 

 

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Stock based compensation - employee restricted stock
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Net loss (581) (581)
Balance at Mar. 31, 2021 $ 537 $ 419,343 $ (418,970) $ 910
Balance, shares at Mar. 31, 2021 536,649,911      
XML 15 R6.htm IDEA: XBRL DOCUMENT v3.21.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Cash Flows From Operating Activities    
Net loss $ (581) $ (1,324)
Adjustments to reconcile net loss to net cash used in operating activities    
Depreciation 189 342
Gain on sale of property and equipment (1) (30)
Change in fair value of liability 67 (15)
Stock-based compensation expense 220
Amortization of note discount 62 421
Change in operating assets and liabilities    
Prepaid expenses and other current assets (2) 57
Intangible digital assets (2) 6
Management agreement termination liability (44)
Right of use asset 5 9
Operating lease liability (5) (9)
Accounts payable 301 453
Accrued expenses (212) 97
Net cash provided by (used) in operating activities (179) 183
Cash Flows From Investing Activities    
Purchase of property and equipment (343)
Proceeds from sale of property and equipment 131  
Deposits made on property and equipment (38)
Net cash provided by (used in) investing activities 131 (381)
Cash Flows From Financing Activities    
Proceeds from convertible note payable 1,000
Net cash provided by financing activities 1,000
Net change in cash and cash equivalents 952 (198)
Cash and cash equivalents, beginning of period 236 216
Cash and cash equivalents, end of period 1,188 18
Supplemental disclosure of cash flow information    
Cash paid for interest
Cash paid for income tax
Non-cash investing and financing activities    
Conversion of notes payable into common stock $ 350
Discount related to convertible promissory note $ 1,000  
XML 16 R7.htm IDEA: XBRL DOCUMENT v3.21.1
Organization and Basis of Presentation
3 Months Ended
Mar. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Basis of Presentation

Note 1. Organization and Basis of Presentation

 

Organization

 

MGT Capital Investments, Inc. (“MGT” or the “Company”) was incorporated in Delaware in 2000. MGT was originally incorporated in Utah in 1977. MGT is comprised of the parent company and its wholly owned subsidiary MGT Sweden AB. MGT’s corporate office is in Raleigh, North Carolina.

 

Cryptocurrency mining

 

Current Operations

 

The Company owned approximately 649 Antminer S17 Pro Bitcoin miners at its Company-owned and managed facility located in LaFayette, GA as of May 24, 2021. All miners were purchased from Bitmaintech Pte. Ltd., a Singapore limited company (“Bitmain”), and are collectively rated at approximately 30 Ph/s in computing power. Bitmain has acknowledged manufacturing defects, combined with inadequate repair facilities, rendering approximately one half of our miners in need of repair or replacement. The Company has begun using a third party repair facility to repair its non-working hash boards and expects the process to be complete in the third calendar quarter of this year. While initial batches of repaired hash boards have shown a very high success rate, there can be no guaranty that all future repairs will be as successful. The Company’s miners are housed in three modified shipping containers. A utility substation, adjacent to the several acre property, has access to over 20 megawatts (MW) of low-cost power. The Company’s current electrical load is estimated at slightly under 1.0 MW. The entire facility, including the land, two 2500 KVA 3-phase transformers, the mining containers, and miners, are owned by MGT. As the Company is presently using only a portion of the built-out available electrical load, it is exploring ways to grow and maintain its current operations including but not limited to further equipment sales, leasing space to other Bitcoin miners, and raising capital to acquire newest generation miners.

 

Basis of presentation

 

The accompanying unaudited condensed consolidated 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 10 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 consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10–K for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”) on April 15, 2021. Operating results for the three months ended March 31, 2021 and 2020 are not necessarily indicative of the results that may be expected for any subsequent quarters or for the year ending December 31, 2021.

 

COVID-19 Pandemic

 

The COVID-19 pandemic represents a fluid situation that presents a wide range of potential impacts of varying durations for different global geographies, including locations where we have offices, employees, customers, vendors and other suppliers and business partners.

 

Like most US-based businesses, the COVID-19 pandemic and efforts to mitigate the same began to have impacts on our business in March 2020. By that time, much of our first fiscal quarter was completed.

 

In light of broader macro-economic risks and already known impacts on certain industries, we have taken, and continue to take targeted steps to lower our operating expenses because of the COVID-19 pandemic. We continue to monitor the impacts of COVID-19 on our operations closely and this situation could change based on a significant number of factors that are not entirely within our control and are discussed in this and other sections of this Quarterly Report on Form 10-Q.

 

To date, travel restrictions and border closures have not materially impacted our ability to operate. However, if such restrictions become more severe, they could negatively impact those activities in a way that would harm our business over the long term. Travel restrictions impacting people can restrain our ability to operate, but at present we do not expect these restrictions on personal travel to be material to our business operations or financial results.

 

Like most companies, we have taken a range of actions with respect to how we operate to assure we comply with government restrictions and guidelines as well as best practices to protect the health and well-being of our employees. However, the impacts of COVID-19 and efforts to mitigate the same have remained unpredictable and it remains possible that challenges may arise in the future.

XML 17 R8.htm IDEA: XBRL DOCUMENT v3.21.1
Going Concern and Management's Plans
3 Months Ended
Mar. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern and Management's Plans

Note 2. Going Concern and Management’s Plans

 

The accompanying unaudited condensed consolidated 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, 2021, the Company had incurred significant operating losses since inception and continues to generate losses from operations. As of March 31, 2021, the Company had an accumulated deficit of $418,970. As of March 31, 2021 MGT’s cash and cash equivalents were $1,188.

 

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 when needed, or at terms deemed acceptable, if at all. The Company’s ability to raise additional capital is impacted by the volatility of Bitcoin mining economics and the SEC’s ongoing enforcement action against our Chief Executive Officer, both 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, the Company has secured working capital through the issuance of a convertible note, 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 consolidated financial statements. The accompanying unaudited condensed consolidated 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.

XML 18 R9.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 3. Summary of Significant Accounting Policies

 

Principles of consolidation

 

The unaudited condensed consolidated financial statements include the accounts of MGT and MGT Sweden AB. All intercompany transactions and balances have been eliminated.

 

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, the recognition of revenue, the valuation allowance for deferred tax assets and other legal claims and contingencies. 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.

 

Revenue recognition

 

The Company’s primary revenue stream is related to the mining of digital currencies. The Company derives its revenue by solving “blocks” to be added to the blockchain and providing transaction verification services within the digital currency network of Bitcoin, commonly termed “cryptocurrency mining.” In consideration for these services, the Company receives digital currency (“Coins”). The Coins are recorded as revenue, using the average spot price of Bitcoin on the date of receipt. The Coins are recorded on the balance sheet as an intangible digital asset valued at the lower of cost or net realizable value. Net realizable value adjustments, to adjust the value of Coins to market value, are included in cost of revenue on the Company’s consolidated statement of operations. Further, any gain or loss on the sale of Coins would be recorded to costs of revenue. Costs of revenue include electricity costs, equipment and infrastructure depreciation, and net realizable value adjustments.

 

The Company also recognizes a royalty participation upon the sale of certain containers manufactured by Bit5ive LLC of Miami, Florida (the “Pod5ive Containers”) under the terms of a five-year collaboration agreement entered in August 2018.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight–line method on the various asset classes over their estimated useful lives, which range from one to ten years when placed in service. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. Deposits on property and equipment are initially classified as Other Assets and upon delivery, installation and full payment, the assets are classified as property and equipment on the consolidated balance sheet.

 

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, stock 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, 2021 excludes 34,285,714 shares issuable upon conversion of convertible debt. The computation of diluted loss per share for the three months ended March 31, 2020 excludes 266,667 unvested restricted shares, 68,904,286 shares issuable upon conversion of convertible debt, and 126,373,626 shares issuable under preferred stock.

 

Stock–based compensation

 

The Company applies ASC 718-10, “Share- Based Payment,” which requires the measurement and recognition of compensation expenses for all share based payment awards made to employees and directors including employee stock options under the Company’s stock plans and equity awards issued to non-employees based on estimated fair values.

 

ASC 718-10 requires companies to estimate the fair value of equity-based option awards on the date of grant using an option-pricing model. The fair value of the award is recognized as an expense on a straight-line basis over the requisite service periods in the Company’s consolidated statements of comprehensive loss.

 

Restricted stock awards are granted at the discretion of the compensation committee of the board of directors of the Company (the “Board of Directors”). These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a 12 to 24-month period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of the Company’s common stock on the grant date.

 

The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of the Company’s common stock over the expected term of the option. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term.

 

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards require the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. The Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest.

 

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:

 

  Level 1 Quoted prices in active markets for identical assets or liabilities.
  Level 2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.
  Level 3 Significant unobservable inputs that cannot be corroborated by market data.

 

As of March 31, 2021, and December 31, 2020, the Company had a Level 3 financial instrument related to the derivative liability related to the issuance of convertible notes.

 

Gain (Loss) on Modification/Extinguishment of Debt

 

In accordance with ASC 470, a modification or an exchange of debt instruments that adds or eliminates a conversion option that was substantive at the date of the modification or exchange is considered a substantive change and is measured and accounted for as extinguishment of the original instrument along with the recognition of a gain/loss. Additionally, under ASC 470, a substantive modification of a debt instrument is deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. A substantive modification is accounted for as an extinguishment of the original instrument along with the recognition of a gain/loss.

 

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 $1,188 and $236 as of March 31, 2021 and December 31, 2020, respectively. Accounts are insured by the FDIC up to $250,000 per financial institution. The Company has not experienced any losses in such accounts with these financial institutions. As of March 31, 2021, and December 31, 2020, the Company had $938 and $0, respectively, in excess over the FDIC insurance limit.

 

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 consolidated financial statements, other than those disclosed below.

 

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.

 

Derivative Instruments

 

The Company evaluates its convertible notes and warrants to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815. The result of this accounting treatment is that the fair value of the embedded derivative is recorded as a liability and marked-to-market each balance sheet date. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

 

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.

 

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 11 – 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 consolidated financial statements.

 

Digital Currencies

 

Digital currencies are included in current assets in the condensed consolidated balance sheets. Digital currencies are recorded at the lower of cost or net realizable value.

 

Net realizable value adjustments, to adjust the value of Coins to market value, are included in cost of revenue on the Company’s consolidated statement of operations. Further, any gain or loss on the sale of Coins would be recorded to costs of revenue. Costs of revenue include hosting fees, equipment and infrastructure depreciation, net realizable value adjustments, and electricity costs.

 

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. 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 three months ended March 31, 2021:

 

Digital currencies at December 31, 2020   $ 4  
Additions of digital currencies from mining     286  
Payment of digital currencies to management partners     -  
Realized gain on sale of digital currencies     (6 )
Net realizable value adjustment     (1 )
Sale of digital currencies     (277 )
Digital currencies at March 31, 2021   $ 6  
XML 19 R10.htm IDEA: XBRL DOCUMENT v3.21.1
Property, Plant, and Equipment and Other Assets
3 Months Ended
Mar. 31, 2021
Property, Plant and Equipment [Abstract]  
Property, Plant, and Equipment and Other Assets

Note 4. Property, Plant, and Equipment and Other Assets

 

Property and equipment consisted of the following:

 

    As of  
    March 31, 2021     December 31, 2020  
Land   $ 55     $ 57  
Computer hardware and software     10       10  
Bitcoin mining machines     1,180       1,206  
Infrastructure     905       905  
Containers     403       550  
Leasehold improvements     4       4  
Property and equipment, gross     2,557       2,732  
Less: Accumulated depreciation     (1,004 )     (860 )
Property and equipment, net   $ 1,553     $ 1,872  

 

The Company recorded depreciation expense of $189 and $342 for the three months ended March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021 and 2020, gains on sale of property and equipment of $1 and $30, respectively were recorded as other non-operating expenses relating to the sale and disposition of Antminer S17 Pro and S9 Bitcoin miners and a container.

 

Other Assets consisted of the following:

 

    As of  
    March 31, 2021     December 31, 2020  
             
Security deposits   $ 123     $ 123  
Other Assets   $ 123     $ 123  

 

The Company has paid $120 in security deposits related to its electrical contract, see Note 9, and $3 related to its office lease in Raleigh, NC.

XML 20 R11.htm IDEA: XBRL DOCUMENT v3.21.1
Notes Payable
3 Months Ended
Mar. 31, 2021
Debt Disclosure [Abstract]  
Notes Payable

Note 5. Notes Payable

 

June 2018 Note

 

On June 1, 2018, the Company entered into a note purchase agreement with an accredited investor, pursuant to which the Company issued an unsecured promissory note in the amount of $3,600 (the “June 2018 Note”) for consideration of $3,000. The outstanding balance was to be made in nine equal monthly installments beginning August 1, 2018, with an initial maturity date of April 1, 2019, with no prepayment penalty. Upon an event of default, the outstanding balance of the promissory note would immediately increase by 120% and become immediately due and payable. Prior to 2020, this note was amended 5 times.

 

During the year ended December 31, 2020, the Company issued 93,078,492 shares of its common stock upon the conversion of $929 in outstanding principal, reducing the outstanding principal balance to $0 as of December 31, 2020.

 

December 2020 Note

 

On December 8, 2020, the Company entered into a securities purchase agreement pursuant to which it issued a convertible promissory note in the principal amount of $230 which is convertible, at the option of the holder, into shares of common stock 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 Company received consideration of $200 for the convertible promissory note. The note bears interest at a rate of 8% per annum and matures in twelve months.

 

The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a beneficial conversion feature 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 together 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 $355.

 

As of March 31, 2021, the fair value of the derivative liability was $313 and for the three months ended March 31, 2021 the Company recorded a loss of $67 from the change in fair value of derivative liability as non-operating expense in the consolidated statements of operations. As of December 31, 2020, the fair value of the derivative liability was $246. The Company valued the derivative liability using the Black-Scholes option pricing model using the following assumptions as of March 31, 2021 and December 31, 2020, respectively: 1) stock prices of $0.075 and $0.04, 2) conversion prices of $0.042 and $0.025, 3) remaining lives of .69 and 0.94 years, 4) dividend yields of 0%, 5) risk free rates of 0.05% and 0.10%, and 6) volatility of 237.34% and 167.36%.

 

March 2021 Note

 

On March 5, 2021, the Company entered into a securities purchase agreement, pursuant to which the Company issued a convertible promissory note in the original principal amount of $13,210 (the “March 2021 Note”). The March 2021 Note is 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 shall the Conversion Price be less than $0.04 per share. The March 2021 Note bears interest at a rate of 8% per annum and will mature in twelve months.

 

The March 2021 Note will 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) will 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 requires the mutual agreement of the Company and Investor. Until such time as Investor has funded the subsequent tranches, the Company will 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.

 

Derivative Liabilities

 

The Company’s activity in its derivative liability was as follows for the three months ended March 31, 2021:

 

Balance of derivative liability at December 31, 2020   $ 246  
Change in fair value recognized in non-operating expense     67  
Balance of derivative liability at March 31, 2021   $ 313  

 

The Company did not have any derivative liability activity during the three months ended March 31, 2020.

 

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.

 

The following table summarizes the Company’s derivative as of March 31, 2021:

 

    March 31, 2021  
    Level 1     Level 2      Level 3     Fair Value  
                         
Liabilities                                
Derivative liability   $ -     $ -     $ 313     $ 313  

 

The following table summarizes the Company’s derivative as of December 31, 2020:

 

    December 31, 2020  
    Level 1     Level 2     Level 3     Fair Value  
                         
Liabilities                                
Derivative liability   $ -     $ -     $ 246     $ 246  

 

U.S. Small Business Administration-Paycheck Protection Plan

 

On April 16, 2020, we entered into a promissory note with Aquesta Bank for $108 (the “PPP Loan”) in connection with the Paycheck Protection Program (“PPP”) offered by the U.S. Small Business Administration (the “SBA”). The PPP Loan had terms including an interest rate of 1% per annum, with monthly installments of $6 commencing on November 1, 2021 through its maturity on April 1, 2023. The principal amount of the PPP Loan is forgiven if the loan proceeds are used to pay for payroll costs, rent and utilities costs over the 24-week period after the loan is made. Not more than 40% of the forgiven amount may be used for non-payroll costs. In addition, in July 2020, the Company received $3 from the SBA as a COVID-19 Economic Injury Disaster Loan Advance (the “EIDL Advance”)

 

On April 1, 2021, the Company received notice of forgiveness from the SBA in the amount of $108 in relation to the PPP Loan as the Company used all proceeds from the PPP Loan to maintain payroll and other allowable expenses. Further, pursuant to an SBA Procedural Notice in December 2020, the EIDL Advance was also forgiven. The Company has concluded that the PPP Loan and EIDL Advance represent, in substance, a government grant that is forgiven in its entirety. As such, in accordance with International Accounting Standards (“IAS”) 20, “Accounting for Government Grants and Disclosure of Government Assistance,” the Company has recognized the entire PPP Loan and EIDL Advance amount of $111 as grant income, which is included in other non-operating income (expense) in the consolidated statement of operations for the year ended December 31, 2020.

 

Notes payable consisted of the following:

 

    As of March 31, 2021  
    Principal     Discount     Net  
December 2020 Note   $ 230     $ (201 )   $ 29  
March 2021 Note     1,210       (1,172 )     38  
Total notes payable   $ 1,460     $ (1,373 )   $ 67  

 

    As of December 31, 2020  
    Principal     Discount     Net  
Total notes payable-December 2020 Note   $ 230     $ (225 )   $ 5  
                         

 

During the three months ended March 31, 2021 and 2020, the Company recorded accretion of debt discount of $62 and $0, respectively.

XML 21 R12.htm IDEA: XBRL DOCUMENT v3.21.1
Leases
3 Months Ended
Mar. 31, 2021
Leases [Abstract]  
Leases

Note 6. Leases

 

In December 2019, the Company entered an office lease in connection with the relocation of its executive office to Raleigh, North Carolina. The Company accounted for this 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, 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 operating lease and has a balance, net of amortization, of $51 as of March 31, 2021.

 

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

 

    Amount  
Remainder of 2021   $ 28  
2022     38  
Total undiscounted minimum future lease payments   $ 66  
Less Imputed interest     (15 )
Present value of operating lease liabilities   $ 51  
Disclosed as:        
Current portion   $ 26  
Non-current portion     25  
    $ 51  

 

The Company recorded rent expense of $9 and $9 for the three months ended March 31, 2021 and 2020, respectively.

 

At March 31, 2021, the weighted average remaining lease term for operating lease was 1.7 years. The Company’s lease agreement does not contain any material residual value guarantees or material restrictive covenants.

XML 22 R13.htm IDEA: XBRL DOCUMENT v3.21.1
Common Stock and Preferred Stock
3 Months Ended
Mar. 31, 2021
Equity [Abstract]  
Common Stock and Preferred Stock

Note 7. Common Stock and Preferred Stock

 

Common stock

 

Other Common Stock Issuances

 

In connection with the conversion of 115 shares of Series C Preferred Stock during the three months ended March 31, 2021 (see Preferred Stock below) the Company issued 29,870,130 shares of common 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 $100 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 stockholders. 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 holders of the Series C Preferred Shares have no voting rights, receive no dividends, 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 right of redemption is solely at the option of the Company, the Series C Preferred Shares are not considered mandatorily redeemable, and as such are classified in shareholders’ equity on the Company’s consolidated balance sheet.

 

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 stock.

 

The common shares issued upon conversion of the 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 costs and on July 15, 2019 sold 10 Series C Preferred Shares for $100. During the second and third quarters of 2019, holders 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. 115 shares of Series C Preferred Stock were issued and outstanding as of December 31, 2020.

 

On January 28, 2021 and February 18, 2021, the Company issued 2,597,403 and 27,272,727 shares of the Company’s common stock, respectively, in connection with the conversion of 10 and 105 shares of the Company’s Series C Convertible Preferred Stock. Following these conversions, the Company has no Series C Preferred issued or outstanding.

XML 23 R14.htm IDEA: XBRL DOCUMENT v3.21.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2021
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation

Note 8. Stock–Based Compensation

 

Issuance of restricted common stock – directors, officers and employees

 

The Company’s activity in restricted common stock was as follows for the three months ended March 31, 2021:

 

    Number of shares     Weighted average
grant date fair
value
 
Non–vested at December 31, 2020     33,333     $ 0.04  
Granted     -     $ -  
Vested     (33,333 )   $ 0.04  
Non–vested at March 31, 2021     -     $ -  

 

For the three months ended March 31, 2021 and 2020, the Company has recorded $0 and $220, in employee and director stock–based compensation expense, which is a component of general and administrative expenses in the consolidated statement of operations.

 

As of March 31, 2021, there was no unamortized stock-based compensation costs related to restricted share arrangements.

 

Stock options

 

Under the terms of the stock option agreement, all options expired on January 31, 2020. As of March 31, 2021, there are no outstanding or exercisable stock options.

XML 24 R15.htm IDEA: XBRL DOCUMENT v3.21.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 9. Commitments and Contingencies

 

Legal proceedings

 

The Company is subject, from time to time, to various legal proceedings that are incidental to the conduct of its business. The Company is not involved in any pending legal proceeding that it believes would reasonably be expected to have a material adverse effect on its financial condition or results of operations, except as previously disclosed in our Annual Report on Form 10-K, as filed with the SEC on April 15, 2021.

 

Bitcoin Production Equipment and Operations

 

On August 14, 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. Pursuant to the POD5 Agreement, the Company assists with the design and development of the POD5 Containers. The Company retains naming rights to the pods and receives royalty payments from Bit5ive, LLC in exchange for an initial capital investment as well as engineering and design expertise. During the three months ended March 31, 2021 and 2020 the Company received royalties and recognized revenue under this agreement of $7 and $3, respectively.

 

Electricity Contract

 

In June 2019, the Company entered into a two-year contract for electric power with the City of Lafayette, Georgia, a municipal corporation of the State of Georgia (“the City”). The Company makes monthly payments based upon electricity consumed, at a negotiated kilowatt per hour rate, inclusive of transmission charges and exclusive of state and local sales taxes. Over time, the Company is entitled to utilize a load of 10 megawatts. For each month, the Company estimates its expected electric load, and should the actual load drop below 90% of this estimate, the City reserves the right to impose a modest penalty to the hourly kilowatt rate for electricity consumed.

 

In connection with this agreement, the Company paid a $154 security deposit, which was reduced to $120 in June 2020. The new amount is classified as Other Assets in the Company’s consolidated balance sheet as March 31, 2021.

 

This agreement expires on September 30, 2021, and the Company has begun negotiations for an extension or new contract. There can be no assurance that that the Company and City will reach agreement with acceptable price and volume metrics, if at all.

 

Management Agreement Termination Liability

 

On August 31, 2019, the Company entered into two Settlement and Termination Agreements (the “Settlement Agreements”) to management agreements it entered in 2017 with two accredited investors (together the “Users”). Under the terms of the Settlement Agreements, the Company paid the Users a percentage of profits (“Settlement Distribution”) of Bitcoin mining as defined in the Settlement Agreements. The estimated present value of the Settlement Distributions of $337 was recorded as termination expense with an offsetting liability on August 31, 2019. Since two of the components of the Settlement Distribution, Bitcoin price and Difficulty Rate, as defined in the Settlement Agreements, are based on market conditions, the liability was adjusted to fair value on a quarterly basis and any changes were recorded in the statement of operations. As such, the liability is considered a Level 3 financial instrument. During the three months ended March 31, 2020, the Company recognized a gain on the change in the fair value of $15 based on the change of Bitcoin price and Difficulty Rate, and along with the monthly Settlement Distributions valued at $43, the liability was reduced to $58 as of March 31, 2020. Based on the terms of the Settlement Agreements, Settlement Distributions terminated on September 30, 2020.

XML 25 R16.htm IDEA: XBRL DOCUMENT v3.21.1
Employee Benefit Plans
3 Months Ended
Mar. 31, 2021
Retirement Benefits [Abstract]  
Employee Benefit Plans

Note 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, 2021 and 2020, the Company made contributions to the 401(k) Plan of $3 and $4, respectively.

XML 26 R17.htm IDEA: XBRL DOCUMENT v3.21.1
Subsequent Events
3 Months Ended
Mar. 31, 2021
Subsequent Events [Abstract]  
Subsequent Events

Note 11. Subsequent Events

 

On April 1, 2021, the Company received notice from the SBA that the Company’s PPP Loan was forgiven in its entirety in the amount of $108.

XML 27 R18.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Principles of Consolidation

Principles of consolidation

 

The unaudited condensed consolidated financial statements include the accounts of MGT and MGT Sweden AB. All intercompany transactions and balances have been eliminated.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

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, the recognition of revenue, the valuation allowance for deferred tax assets and other legal claims and contingencies. 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.

Revenue Recognition

Revenue recognition

 

The Company’s primary revenue stream is related to the mining of digital currencies. The Company derives its revenue by solving “blocks” to be added to the blockchain and providing transaction verification services within the digital currency network of Bitcoin, commonly termed “cryptocurrency mining.” In consideration for these services, the Company receives digital currency (“Coins”). The Coins are recorded as revenue, using the average spot price of Bitcoin on the date of receipt. The Coins are recorded on the balance sheet as an intangible digital asset valued at the lower of cost or net realizable value. Net realizable value adjustments, to adjust the value of Coins to market value, are included in cost of revenue on the Company’s consolidated statement of operations. Further, any gain or loss on the sale of Coins would be recorded to costs of revenue. Costs of revenue include electricity costs, equipment and infrastructure depreciation, and net realizable value adjustments.

 

The Company also recognizes a royalty participation upon the sale of certain containers manufactured by Bit5ive LLC of Miami, Florida (the “Pod5ive Containers”) under the terms of a five-year collaboration agreement entered in August 2018.

Property and Equipment

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight–line method on the various asset classes over their estimated useful lives, which range from one to ten years when placed in service. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. Deposits on property and equipment are initially classified as Other Assets and upon delivery, installation and full payment, the assets are classified as property and equipment on the consolidated balance sheet.

Income Taxes

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

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, stock 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, 2021 excludes 34,285,714 shares issuable upon conversion of convertible debt. The computation of diluted loss per share for the three months ended March 31, 2020 excludes 266,667 unvested restricted shares, 68,904,286 shares issuable upon conversion of convertible debt, and 126,373,626 shares issuable under preferred stock.

Stock-based Compensation

Stock–based compensation

 

The Company applies ASC 718-10, “Share- Based Payment,” which requires the measurement and recognition of compensation expenses for all share based payment awards made to employees and directors including employee stock options under the Company’s stock plans and equity awards issued to non-employees based on estimated fair values.

 

ASC 718-10 requires companies to estimate the fair value of equity-based option awards on the date of grant using an option-pricing model. The fair value of the award is recognized as an expense on a straight-line basis over the requisite service periods in the Company’s consolidated statements of comprehensive loss.

 

Restricted stock awards are granted at the discretion of the compensation committee of the board of directors of the Company (the “Board of Directors”). These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a 12 to 24-month period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of the Company’s common stock on the grant date.

 

The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of the Company’s common stock over the expected term of the option. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term.

 

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards require the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. The Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest.

Fair Value Measure and Disclosures

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:

 

  Level 1 Quoted prices in active markets for identical assets or liabilities.
  Level 2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.
  Level 3 Significant unobservable inputs that cannot be corroborated by market data.

 

As of March 31, 2021, and December 31, 2020, the Company had a Level 3 financial instrument related to the derivative liability related to the issuance of convertible notes.

Gain (loss) On Modification/extinguishment of Debt

Gain (Loss) on Modification/Extinguishment of Debt

 

In accordance with ASC 470, a modification or an exchange of debt instruments that adds or eliminates a conversion option that was substantive at the date of the modification or exchange is considered a substantive change and is measured and accounted for as extinguishment of the original instrument along with the recognition of a gain/loss. Additionally, under ASC 470, a substantive modification of a debt instrument is deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. A substantive modification is accounted for as an extinguishment of the original instrument along with the recognition of a gain/loss.

Cash and Cash Equivalents

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 $1,188 and $236 as of March 31, 2021 and December 31, 2020, respectively. Accounts are insured by the FDIC up to $250,000 per financial institution. The Company has not experienced any losses in such accounts with these financial institutions. As of March 31, 2021, and December 31, 2020, the Company had $938 and $0, respectively, in excess over the FDIC insurance limit.

Recent Accounting Pronouncements

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 consolidated financial statements, other than those disclosed below.

 

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.

Derivative Instruments

Derivative Instruments

 

The Company evaluates its convertible notes and warrants to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815. The result of this accounting treatment is that the fair value of the embedded derivative is recorded as a liability and marked-to-market each balance sheet date. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

Impairment of Long-lived Assets

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.

Management's Evaluation of Subsequent Events

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 11 – 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 consolidated financial statements.

Digital Currencies

Digital Currencies

 

Digital currencies are included in current assets in the condensed consolidated balance sheets. Digital currencies are recorded at the lower of cost or net realizable value.

 

Net realizable value adjustments, to adjust the value of Coins to market value, are included in cost of revenue on the Company’s consolidated statement of operations. Further, any gain or loss on the sale of Coins would be recorded to costs of revenue. Costs of revenue include hosting fees, equipment and infrastructure depreciation, net realizable value adjustments, and electricity costs.

 

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. 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 three months ended March 31, 2021:

 

Digital currencies at December 31, 2020   $ 4  
Additions of digital currencies from mining     286  
Payment of digital currencies to management partners     -  
Realized gain on sale of digital currencies     (6 )
Net realizable value adjustment     (1 )
Sale of digital currencies     (277 )
Digital currencies at March 31, 2021   $ 6  
XML 28 R19.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Schedule of Digital Currencies

The following table presents the activities of digital currencies for the three months ended March 31, 2021:

 

Digital currencies at December 31, 2020   $ 4  
Additions of digital currencies from mining     286  
Payment of digital currencies to management partners     -  
Realized gain on sale of digital currencies     (6 )
Net realizable value adjustment     (1 )
Sale of digital currencies     (277 )
Digital currencies at March 31, 2021   $ 6  
XML 29 R20.htm IDEA: XBRL DOCUMENT v3.21.1
Property, Plant, and Equipment and Other Assets (Tables)
3 Months Ended
Mar. 31, 2021
Property, Plant and Equipment [Abstract]  
Schedule of Property and Equipment

Property and equipment consisted of the following:

 

    As of  
    March 31, 2021     December 31, 2020  
Land   $ 55     $ 57  
Computer hardware and software     10       10  
Bitcoin mining machines     1,180       1,206  
Infrastructure     905       905  
Containers     403       550  
Leasehold improvements     4       4  
Property and equipment, gross     2,557       2,732  
Less: Accumulated depreciation     (1,004 )     (860 )
Property and equipment, net   $ 1,553     $ 1,872  
Schedule of Other Assets

Other Assets consisted of the following:

 

    As of  
    March 31, 2021     December 31, 2020  
             
Security deposits   $ 123     $ 123  
Other Assets   $ 123     $ 123  
XML 30 R21.htm IDEA: XBRL DOCUMENT v3.21.1
Notes Payable (Tables)
3 Months Ended
Mar. 31, 2021
Debt Disclosure [Abstract]  
Schedule of Derivative Liability Activity

The Company’s activity in its derivative liability was as follows for the three months ended March 31, 2021:

 

Balance of derivative liability at December 31, 2020   $ 246  
Change in fair value recognized in non-operating expense     67  
Balance of derivative liability at March 31, 2021   $ 313  
Schedule of Derivative Liability Fair Value

The following table summarizes the Company’s derivative as of March 31, 2021:

 

    March 31, 2021  
    Level 1     Level 2      Level 3     Fair Value  
                         
Liabilities                                
Derivative liability   $ -     $ -     $ 313     $ 313  

 

The following table summarizes the Company’s derivative as of December 31, 2020:

 

    December 31, 2020  
    Level 1     Level 2     Level 3     Fair Value  
                         
Liabilities                                
Derivative liability   $ -     $ -     $ 246     $ 246  
Schedule of Notes Payable

Notes payable consisted of the following:

 

    As of March 31, 2021  
    Principal     Discount     Net  
December 2020 Note   $ 230     $ (201 )   $ 29  
March 2021 Note     1,210       (1,172 )     38  
Total notes payable   $ 1,460     $ (1,373 )   $ 67  

 

    As of December 31, 2020  
    Principal     Discount     Net  
Total notes payable-December 2020 Note   $ 230     $ (225 )   $ 5  
XML 31 R22.htm IDEA: XBRL DOCUMENT v3.21.1
Leases (Tables)
3 Months Ended
Mar. 31, 2021
Leases [Abstract]  
Schedule of Future Minimum Lease Payment

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

 

    Amount  
Remainder of 2021   $ 28  
2022     38  
Total undiscounted minimum future lease payments   $ 66  
Less Imputed interest     (15 )
Present value of operating lease liabilities   $ 51  
Disclosed as:        
Current portion   $ 26  
Non-current portion     25  
    $ 51  
XML 32 R23.htm IDEA: XBRL DOCUMENT v3.21.1
Stock-Based Compensation (Tables)
3 Months Ended
Mar. 31, 2021
Share-based Payment Arrangement [Abstract]  
Schedule of Restricted Common Stock Activity

The Company’s activity in restricted common stock was as follows for the three months ended March 31, 2021:

 

    Number of shares     Weighted average
grant date fair
value
 
Non–vested at December 31, 2020     33,333     $ 0.04  
Granted     -     $ -  
Vested     (33,333 )   $ 0.04  
Non–vested at March 31, 2021     -     $ -  
XML 33 R24.htm IDEA: XBRL DOCUMENT v3.21.1
Going Concern and Management's Plans (Details Narrative) - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]    
Accumulated deficit $ (418,970) $ (418,389)
Cash and cash equivalents $ 1,188 $ 236
XML 34 R25.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Dec. 31, 2020
Summary Of Significant Accounting Policies [Line Items]    
Antidilutive securities excluded from computation of earnings per share, amount 34,285,714  
Cash and cash equivalents $ 1,188 $ 236
Cash, FDIC insured amount $ 938 $ 0
Unvested Restricted Stock [Member]    
Summary Of Significant Accounting Policies [Line Items]    
Antidilutive securities excluded from computation of earnings per share, amount 266,667  
Conversion of Convertible Debt [Member]    
Summary Of Significant Accounting Policies [Line Items]    
Antidilutive securities excluded from computation of earnings per share, amount 68,904,286  
Convertible Preferred Stock [Member]    
Summary Of Significant Accounting Policies [Line Items]    
Antidilutive securities excluded from computation of earnings per share, amount 126,373,626  
Minimum [Member]    
Summary Of Significant Accounting Policies [Line Items]    
Estimated useful lives for property and equipment P1Y  
Restricted stock awards vested period 12 months  
Maximum [Member]    
Summary Of Significant Accounting Policies [Line Items]    
Estimated useful lives for property and equipment P10Y  
Restricted stock awards vested period 24 months  
Cash, FDIC insured amount $ 250  
XML 35 R26.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies - Schedule of Digital Currencies (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2021
USD ($)
Accounting Policies [Abstract]  
Digital currencies, Beginning balance $ 4
Additions of digital currencies from mining 286
Payment of digital currencies to management partners
Realized gain on sale of digital currencies (6)
Net realizable value adjustment (1)
Sale of digital currencies (277)
Digital currencies, Ending balance $ 6
XML 36 R27.htm IDEA: XBRL DOCUMENT v3.21.1
Property, Plant, and Equipment and Other Assets (Details Narrative) - USD ($)
$ in Thousands
1 Months Ended 3 Months Ended
Sep. 30, 2019
Mar. 31, 2021
Mar. 31, 2020
Depreciation expense   $ 189 $ 342
Gain (loss) on disposition of property plant equipment   $ 1 $ 30
Electrical Contract [Member]      
Payments for deposits $ 120    
XML 37 R28.htm IDEA: XBRL DOCUMENT v3.21.1
Property, Plant, and Equipment and Other Assets - Schedule of Property and Equipment (Details) - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
Property and equipment, gross $ 2,557 $ 2,732
Less: Accumulated depreciation (1,004) (860)
Property and equipment, net 1,553 1,872
Land [Member]    
Property and equipment, gross 55 57
Computer Hardware and Software [Member]    
Property and equipment, gross 10 10
Bitcoin Mining Machines [Member]    
Property and equipment, gross 1,180 1,206
Infrastructures [Member]    
Property and equipment, gross 905 905
Containers [Member]    
Property and equipment, gross 403 550
Leasehold Improvements [Member]    
Property and equipment, gross $ 4 $ 4
XML 38 R29.htm IDEA: XBRL DOCUMENT v3.21.1
Property, Plant, and Equipment and Other Assets - Schedule of Other Assets (Details) - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
Property, Plant and Equipment [Abstract]    
Security deposits $ 123 $ 123
Other Assets $ 123 $ 123
XML 39 R30.htm IDEA: XBRL DOCUMENT v3.21.1
Notes Payable (Details Narrative)
$ in Thousands
3 Months Ended 12 Months Ended
Apr. 02, 2021
USD ($)
Apr. 01, 2021
USD ($)
Mar. 05, 2021
USD ($)
$ / shares
Dec. 08, 2020
USD ($)
Apr. 16, 2020
USD ($)
Apr. 12, 2019
Jun. 01, 2018
USD ($)
Mar. 31, 2021
USD ($)
$ / shares
Mar. 31, 2020
USD ($)
Dec. 31, 2020
USD ($)
$ / shares
shares
Percentage of common stock           9.99%        
Accretion of debt discount               $ 62 $ 421  
Change in fair value recognized in non-operating income (expense)               67    
Current liabilities               1,998   $ 1,777
Subsequent Event [Member]                    
Debt forgiveness amount $ 108                  
Convertible Promissory Note [Member]                    
Debt discount     $ 1,000              
Amortization of debt discount     210              
Accretion of debt discount     1,210              
Convertible Promissory Note [Member] | Securities Purchase Agreement [Member]                    
Unsecured promissory notes     $ 13,210              
Debt instrument accrued interest rate     8.00%              
Debt instrument, term     12 months              
Debt instrument, conversion price per shares | $ / shares     $ 0.04              
Debt conversion price, percentage     0.70%              
Convertible Promissory Note [Member] | Security Purchase Agreement [Member] | Initial Tranche [Member]                    
Unsecured promissory notes     $ 1,210              
Convertible Promissory Note [Member] | Security Purchase Agreement [Member] | One Tranche [Member]                    
Unsecured promissory notes     1,200              
Convertible Promissory Note [Member] | Security Purchase Agreement [Member] | TwoTranche [Member]                    
Unsecured promissory notes     1,200              
Convertible Promissory Note [Member] | Security Purchase Agreement [Member] | Three Tranche [Member]                    
Unsecured promissory notes     1,200              
Convertible Promissory Note [Member] | Security Purchase Agreement [Member] | Four Tranche [Member]                    
Unsecured promissory notes     1,200              
Convertible Promissory Note [Member] | Security Purchase Agreement [Member] | Five Tranche [Member]                    
Unsecured promissory notes     1,200              
Convertible Promissory Note [Member] | Security Purchase Agreement [Member] | Six Tranche [Member]                    
Unsecured promissory notes     $ 6,000              
PPP Loan [Member] | Subsequent Event [Member]                    
Debt forgiveness amount   $ 108                
PPP Loan [Member] | Aquesta Bank [Member]                    
Unsecured promissory notes         $ 108          
Maturity date of notes         Apr. 01, 2023          
Debt instrument accrued interest rate         1.00%          
Debt monthly payments         $ 6          
Debt description         Not more than 40% of the forgiven amount may be used for non-payroll costs.          
Current liabilities                   3
Non-current liabilities                   111
Shares Issued Upon Conversion [Member]                    
Unsecured promissory notes                   $ 0
Debt conversion, shares issued | shares                   93,078,492
Debt conversion, amount                   $ 929
June 2018 Note [Member]                    
Unsecured promissory notes             $ 3,600      
Notes payable             $ 3,000      
Maturity date of notes             Apr. 01, 2019      
Percentage of common stock             120.00%      
December 2020 Note [Member]                    
Notes payable       $ 230            
Percentage of common stock       70.00%            
Debt discount       $ 200            
Debt instrument accrued interest rate       8.00%            
Amortization of debt discount       $ 30            
Accretion of debt discount       230            
Derivative liability       555       $ 313    
Beneficial conversion feature       355            
Interest expense, debt       $ 355            
Change in fair value recognized in non-operating income (expense)                   $ 309
December 2020 Note [Member] | Stock Prices [Member]                    
Debt instrument, measurement input | $ / shares               0.075   0.04
December 2020 Note [Member] | Conversion Price [Member]                    
Debt instrument, measurement input | $ / shares               0.042   0.025
December 2020 Note [Member] | Remaining Lives [Member]                    
Debt instrument, term               8 months 9 days   11 months 8 days
December 2020 Note [Member] | Dividend Yields [Member]                    
Debt instrument, measurement input               0.00   0.00
December 2020 Note [Member] | Risk Free Rates [Member]                    
Debt instrument, measurement input               0.0005   0.0010
December 2020 Note [Member] | Volatility [Member]                    
Debt instrument, measurement input               2.3734   1.6736
XML 40 R31.htm IDEA: XBRL DOCUMENT v3.21.1
Notes Payable - Schedule of Derivative Liability Activity (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2021
USD ($)
Debt Disclosure [Abstract]  
Balance of derivative liability beginning $ 246
Change in fair value recognized in non-operating income (expense) 67
Balance of derivative liability ending $ 313
XML 41 R32.htm IDEA: XBRL DOCUMENT v3.21.1
Notes Payable - Schedule of Derivative Liability Fair Value (Details) - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
Derivative liability $ 313 $ 246
Fair Value, Inputs, Level 1 [Member]    
Derivative liability
Fair Value, Inputs, Level 2 [Member]    
Derivative liability
Fair Value, Inputs, Level 3 [Member]    
Derivative liability $ 313 $ 246
XML 42 R33.htm IDEA: XBRL DOCUMENT v3.21.1
Notes Payable - Schedule of Notes Payable (Details) - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
December 2020 Note [Member]    
Principal $ 230 $ 230
Discount (201) (225)
Net 29 $ 5
March 2021 Note [Member]    
Principal 1,210  
Discount (1,172)  
Net 38  
Total Notes Payable [Member]    
Principal 1,460  
Discount (1,373)  
Net $ 67  
XML 43 R34.htm IDEA: XBRL DOCUMENT v3.21.1
Leases (Details Narrative) - USD ($)
$ in Thousands
1 Months Ended 3 Months Ended
Dec. 31, 2019
Mar. 31, 2021
Mar. 31, 2020
Dec. 31, 2020
Operating Leases Commitments And Security Deposit [Line Items]        
Monthly rent   $ 9 $ 9  
Right of use asset $ 79 51   $ 56
Lease liability 79 $ 51    
Operating lease, weighted average remaining lease term   1 year 8 months 12 days    
New Office Lease [Member]        
Operating Leases Commitments And Security Deposit [Line Items]        
Monthly rent $ 3      
Percentage of annual increases 3.00%      
Operating lease term 3 years      
Incremental borrowing rate 29.91%      
XML 44 R35.htm IDEA: XBRL DOCUMENT v3.21.1
Leases - Schedule of Future Minimum Lease Payment (Details) - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
Dec. 31, 2019
Leases [Abstract]      
Remainder of 2021 $ 28    
2022 38    
Total undiscounted minimum future lease payments 66    
Less Imputed interest (15)    
Present value of operating lease liabilities 51    
Current portion 26 $ 23  
Non-current portion 25 $ 33  
Total lease payment $ 51   $ 79
XML 45 R36.htm IDEA: XBRL DOCUMENT v3.21.1
Common Stock and Preferred Stock (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Feb. 18, 2021
Jan. 28, 2021
Jul. 15, 2019
Apr. 12, 2019
Jan. 11, 2019
Mar. 31, 2021
Sep. 30, 2019
Jun. 30, 2019
Dec. 31, 2020
Conversion of stock shares converted       200,000          
Preferred stock, voting rights       The holders of the Series C Preferred Shares have no voting rights, receive no dividends, 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.          
Percentage of average trading volume of common stock       9.99%          
Conversion of stock, description       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.          
Preferred Stock [Member]                  
Stock issued during period shares     10 190          
Stock issued during period, value     $ 100 $ 1,890          
Preferred Stock [Member]                  
Stock issued during period shares               50  
Stock issued during period, value               $ 14,077,092  
Common Stock [Member]                  
Stock issued during period shares             35    
Stock issued during period, value             $ 13,528,575    
Series C Convertible Preferred Stock [Member]                  
Stock issued during period shares 27,272,727 2,597,403       29,870,130      
Conversion of stock shares converted           115      
Preferred stock, shares issued             115
Preferred stock, shares outstanding             115
Debt conversion, shares issued 105 10              
Series B Preferred Stock [Member]                  
Preferred stock, shares authorized           10,000     10,000
Preferred stock, par value           $ 0.001     $ 0.001
Preferred stock, value              
Preferred stock, shares issued              
Preferred stock, shares outstanding              
Series B Preferred Stock [Member] | Board of Directors [Member]                  
Preferred stock, shares authorized         10,000        
Preferred stock, par value         $ 0.001        
Preferred stock, value         $ 100        
Preferred stock, dividend rate, percentage         12.00%        
Preferred stock, voting rights         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 stockholders. 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.        
Series C Convertible Preferred Stock [Member]                  
Preferred stock, shares authorized       200   200     200
Preferred stock, par value       $ 0.001   $ 0.001     $ 0.001
Preferred stock, value              
Preferred stock, shares issued           0     115
Preferred stock, shares outstanding           0     115
XML 46 R37.htm IDEA: XBRL DOCUMENT v3.21.1
Stock-Based Compensation (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock based compensation $ 220
Stock Option [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based payment award, options, outstanding, number  
Stock option, weighted average exercise price  
Employee and Director [Member] | Selling General and Administrative Expenses [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock based compensation $ 0 $ 220
Stock option expired term Jan. 31, 2020  
XML 47 R38.htm IDEA: XBRL DOCUMENT v3.21.1
Stock-Based Compensation - Schedule of Restricted Common Stock Activity (Details)
3 Months Ended
Mar. 31, 2021
$ / shares
shares
Share-based Payment Arrangement [Abstract]  
Number of shares Non-vested, Beginning Balance | shares 33,333
Number of shares, Granted | shares
Number of shares, Vested | shares (33,333)
Number of shares Non-vested, Ending Balance | shares
Weighted average grant date fair value Non-vested, Beginning Balance | $ / shares $ 0.04
Weighted average grant date fair value, Granted | $ / shares
Weighted average grant date fair value, Vested | $ / shares 0.04
Weighted average grant date fair value Non-vested, Ending Balance | $ / shares
XML 48 R39.htm IDEA: XBRL DOCUMENT v3.21.1
Commitments and Contingencies (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Jun. 30, 2020
Aug. 31, 2019
Jun. 30, 2019
Operating Leases Commitments And Security Deposit [Line Items]          
Recognized revenue $ 293 $ 677      
Security deposit     $ 120   $ 154
POD5 Agreement [Member] | Bit5ive, LLC [Member]          
Operating Leases Commitments And Security Deposit [Line Items]          
Recognized revenue $ 7 3      
Two Settlement and Termination Agreements [Member]          
Operating Leases Commitments And Security Deposit [Line Items]          
Present value of settlement distributions       $ 337  
Gain loss on change in fair value   15      
Loss contingency liability   58      
Two Settlement and Termination Agreements [Member] | Monthly Settlement of Distributions [Member]          
Operating Leases Commitments And Security Deposit [Line Items]          
Present value of settlement distributions   $ 43      
XML 49 R40.htm IDEA: XBRL DOCUMENT v3.21.1
Employee Benefit Plans (Details Narrative) - 401(k) Plan [Member] - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Employee contribution amount $ 3 $ 4
Maximum [Member]    
Employee contribution percentage 100.00%  
XML 50 R41.htm IDEA: XBRL DOCUMENT v3.21.1
Subsequent Events (Details Narrative)
$ in Thousands
Apr. 02, 2021
USD ($)
Subsequent Event [Member]  
Debt forgiveness amount $ 108
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