MGT Capital Investments, Inc. Annual Report 2013

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FY2013 Annual Report · MGT Capital Investments, Inc.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10–K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2013

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

MGT CAPITAL INVESTMENTS, INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction
of Incorporation or Organization)

0–26886
(Commission
File Number)

13–4148725
(I.R.S. Employer
Identification No.)

500 Mamaroneck Avenue, Suite 204, Harrison, NY 10528, USA
(Address of principal executive offices, including zip code)

914–630–7431
(Registrant’s Telephone Number, Including Area Code)

Securities registered under section 12(b) of the Exchange Act: Common Stock, par value $0.001 per share

Securities registered under section 12(g) of the Exchange Act: Not applicable

Name of each exchange on which registered: NYSE MKT

Indicate by check mark if the Registrant is a well–known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required to file), 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 and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers is not contained herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10–K or any amendment to this
Form 10–K. ¨

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

Large Accelerated Filer ¨

Non–accelerated Filer ¨
(Do not check if smaller reporting company)

Accelerated filer ¨

Smaller reporting company x

Indicate by check mark whether the Registrant is a shell Company (as defined in Rule 12b–2 of the Act). Yes ¨ No x

As of June 30, 2013, the last day of the registrant’s most recently completed second fiscal quarter; the aggregate market value of the

registrant’s Common Stock held by non–affiliates of the registrant was approximately $26,303,084.

As of March 28, 2014, the registrant had outstanding 8,866,686 shares of Common Stock, $0.001 par value

Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4

Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B

Item 10
Item 11
Item 12
Item 13
Item 14

Item 15

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARIES

INDEX

PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information

PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services

PART IV
Exhibits and Financial Statement Schedules
SIGNATURES

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NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10–K, including the section entitled “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in Item 7, contains forward–looking statements that involve risks and uncertainties, as well as assumptions that, if
they never materialize or prove incorrect, could cause the results of MGT Capital Investments, Inc. and its consolidated subsidiaries (the
“Company”) to differ materially from those expressed or implied by such forward–looking statements. The words “anticipates,” “believes,”
“estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward–looking
statements, although not all forward–looking statements contain these identifying words. All statements other than statements of historical fact
are statements that could be deemed forward–looking statements, including any projections of revenue, gross margin, expenses, earnings or
losses from operations, our ability to enforce and monetize our patents, synergies or other financial items; any statements of the plans,
strategies and objectives of management for future operations, the execution of restructuring plans; any statements concerning the likelihood of
success of our patent enforcement litigation; any statement concerning developments, any statements regarding future economic conditions or
performance; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. The risks,
uncertainties and assumptions referred to above include the performance of contracts by partners; employee management issues; the difficulty
of aligning expense levels with revenue changes; and other risks that are described herein, including but not limited to the specific risks areas
discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this report, and that are
otherwise described from time to time in the Company’s periodic disclosure statements and for reports filed with the Securities and Exchange
Commission. The Company assumes no obligation and does not intend to update these forward–looking statements.

Item 1. Business

PART I

MGT Capital Investments, Inc. (“MGT,” “the Company,” “we,” “us”) is a Delaware corporation, incorporated in 2000. The
Company was originally incorporated in Utah in 1977. MGT is comprised of the parent company, majority–owned subsidiary MGT Gaming,
Inc. (“MGT Gaming”) and wholly–owned subsidiaries Medicsight, Inc. (“Medicsight”), MGT Studios, Inc. (f/k/a MGT Capital Solutions,
Inc.) (“MGT Studios”) including its wholly–owned subsidiary Avcom, Inc. and its majority owned subsidiary M2P Americas, Inc., and
MGT Sports, Inc. (“MGT Sports”) including its majority owned subsidiary FanTD LLC, (“FanTD”). Our Corporate office is located in
Harrison, New York.

MGT and its subsidiaries are engaged in the business of acquiring, developing and monetizing assets in the online and mobile

gaming space, as well as the casino industry.

MGT Gaming owns U.S. Patents 7,892,088 and 8,550,554 (the “‘088 and ‘554 patents,” respectively), both entitled "Gaming
Device Having a Second Separate Bonusing Event” and both relating to casino gaming systems in which a second game played on an
interactive sign is triggered once specific events occur in a first game. On November 2, 2012, MGT Gaming filed a lawsuit (No. 3:12–cv–
741) in the United States District Court for the Southern District of Mississippi alleging patent infringement. The lawsuit alleges the
defendants Caesars Entertainment Corporation (NASDAQ GS: CZR), MGM Resorts International, Inc. (NYSE: MGM), WMS Gaming, Inc.
– a subsidiary of WMS Industries, Inc. (NYSE: WMS), Penn National Gaming, Inc. (NASDAQ GS: PENN), Scientific Games Corporation
(NASDAQ: SGMS), and Aruze Gaming America, Inc. either manufacture, sell or lease gaming systems in violation of MGT Gaming's patent
rights, or operate casinos that offer gaming systems in violation of MGT Gaming's ‘088 patent. An amended version of the complaint added
the '554 patent, which is a continuation of the ‘088 patent. The allegedly infringing products manufactured, distributed, used, sold and/or
offered for sale by defendants include at least those identified under the trade names: "Pirate Battle," "Battleship," "Clue, "Amazon Fishing,"
“Star Trek Battle Stations," "Castle King," "Monopoly Bigger Event," and "Paradise Fishing."

On October 23, 2013 the U.S. District Court severed the originally filed action into three separate actions: MGT Gaming, Inc. v.
WMS Gaming, Inc. and Caesars Entertainment Corporation (No. 3:13–cv–691, MGT Gaming, Inc. v WMS Gaming Inc. and MGM Resorts
International, Inc. (No. 3:13–cv–692), and MGT Gaming, Inc. v Aruze Gaming America, Inc. and Penn National Gaming Inc. (No. 3:13–cv–
693). On November 4, 2013 the District Court consolidated the three severed cases for discovery purposes. The Defendants in all three
actions filed counterclaims denying infringement and asserting invalidity of both patents–in–suit. MGT Gaming filed appropriate responses to
those counterclaims, reasserting the validity and infringement of the ‘088 and ‘554 patents

On November 4, 2013, Aruze also voluntarily dismissed its separate action in Nevada which had sought a declaratory judgment that

Aruze does not infringe the '088 Patent and/or that the '088 Patent is invalid or unenforceable.

On November 4, 2013, WMS filed a Petition for Inter Parties Review ("IPR") with the United States Patent and Trademark Office
("PTO"), challenging the patent–in–suit and, on November 7, 2013, filed motions to stay litigation in both WMS actions during the IPR
proceedings. Those motions were denied by the District Court on December 13, 2013. MGT Gaming’s Preliminary Response was due and
filed on February 19, 2014.

On November 21, 2013, WMS filed a Petition for a Writ of Mandamus with the U.S. Court of Appeals for the Federal Circuit to
reverse the decision of the district court in refusing to transfer venue to the Northern District of Illinois. The mandamus proceedings have been
fully briefed by all parties and await decision by the appellate court.

On January 27, 2014, the U.S. District Court issued a Docket Order setting a Markman Hearing (also known as a claims
construction hearing) for September 25, 2014 in Jackson, Mississippi before the Honorable District Judge Carlton W. Reeves for all three
severed cases.

Medicsight was the owner of intellectual property relating to a medical imaging software product. The Company also has developed
an automated carbon dioxide insufflation device and receives royalties on a per–unit basis from an international manufacturer. On June 30,
2013, the Company completed the sale of Medicsight’s global patent portfolio to Samsung Electronics Co., Ltd. for gross proceeds of $1.5
million.

Strategy

MGT and its subsidiaries are engaged in the business of acquiring, developing and monetizing assets in the online and mobile
gaming space, as well as the casino industry. The Company’s acquisition strategy is designed to obtain control of assets with a focus on risk
mitigation coupled with large potential upside. We plan to build our portfolio by seeking out large social and real money gaming opportunities
via extensive research and analysis. Next, we will attempt to secure controlling interests for modest cash and/or stock outlays. MGT then
budgets and funds operating costs to develop business operations and tries to motivate sellers with equity upside. While the ultimate objective
is to operate businesses for free cash flow, there may be opportunities where we sell or otherwise monetize certain assets.

There can be no assurance that any acquisitions will occur at all, or that any such acquisitions will be accretive to earnings, book
value and other financial metrics, or that any such acquisitions will generate positive returns for Company shareholders. Furthermore, it is
contemplated that any acquisitions may require the Company to raise capital; such capital may not be available on terms acceptable to the
Company, if at all.

Intellectual property

MGT Gaming owns two U. S. patents covering certain features of casino slot machines. Both patents are being asserted against
alleged infringers in various actions in federal court in Mississippi. We have elected to reduce our financial exposure by entering into a
contingency arrangement with a nationally recognized law firm; this arrangement also reduces the potential recovery via legal judgments or
settlements. While the Company is optimistic with respect to prevailing in court and the potential damages, the outcome of our patent
enforcement actions cannot be predicted with any certainty nor can the timetable.

In 2013, MGT sold its portfolio of medical patents to Samsung for $1.5 million.

Competition

MGT encounters intense competition in all its businesses, in many cases from larger companies with greater financial resources. For
example, Zynga, Inc. (NASDAQ: ZNGA) and Caesars Acquisition Company (NASDAQ: CACQ) both focus on social and real money
online gaming. With respect to our patent infringement activities, the named defendants in our lawsuits include much larger companies such
Scientific Games Corporation (NASDAQ: SGMS).

Employees

Currently, the Company and its subsidiaries have 15 full–time employees. None of our employees is represented by a union and we

believe our relationships with our employees are good.

Available information

MGT maintains a website at www.mgtci.com. The Company makes available free of charge, our annual report on Form 10–K,
Quarterly Reports on Form 10–Q and current reports on Form 8–K, including any amendments to the foregoing reports, as soon as is
reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission or the SEC.
These materials along with our Code of Business Conduct and Ethics are also available through our corporate website at www.mgtci.com. A
copy of this Annual Report on Form 10–K (“Annual report”) is located at the Securities and Exchange Commission’s Public Reference
Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling
the SEC at 1–800–SEC–0330. The public may also download these materials from the Securities and Exchange Commission’s website at
http://www.sec.gov. Any amendments to, and waivers of, our Code of Business Conduct and Ethics will be posted on our corporate website.
The Company is not including the information contained at www.mgtci.com as a part of this Annual Report.

Item 1A. Risk factors

Discussion of our business and operations included in this Annual Report on Form 10–K should be read together with the risk
factors set forth below. They describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties,
together with other factors described elsewhere in this report, have the potential to affect our business, financial condition, results of
operations, cash flows, strategies or prospects in a material and adverse manner. New risks may emerge at any time, and we cannot predict
those risks or estimate the extent to which they may affect our financial performance. Each of the risks described below could adversely impact
the value of our securities. These statements, like all statements in this report, speak only as of the date of this report (unless another date is
indicated), and we undertake no obligation to update or revise the statements in light of future developments.

We cannot assure you that we will be successful in commercializing any of the Company’s products or if any of our products are

commercialized, that they will be profitable for the Company.

The Company has only had a limited operating history and generates limited revenue from operations upon which an evaluation of
our prospects can be made. The Company’s prospects must be considered keeping in mind the risks, expenses and difficulties frequently
encountered in the establishment of a new business in a constantly changing industry. There can be no assurance that the Company will be
able to achieve profitable operations in the foreseeable future, if at all.

The Company has identified a number of specific risk areas that may affect our operations and results in the future:

Company specific risks

Our acquisition activities may disrupt our ongoing business, may involve increased expenses and may present risks not contemplated

at the time of the transactions.

We have acquired, and may continue to acquire, companies, products and technologies that complement our strategic direction.

Acquisitions involve significant risks and uncertainties, including:

diversion of management time and a shift of focus from operating the businesses to issues related to integration and
administration;

inability to successfully integrate the acquired technology and operations into our business and maintain uniform standards,
controls, policies and procedures;

challenges retaining the key employees, customers and other business partners of the acquired business; inability to realize
synergies expected to result from an acquisition;

an impairment of acquired goodwill and other intangible assets in future periods would result in a charge to earnings in the period
in which the write–down occurs; the internal control environment of an acquired entity may not be consistent with our standards
and may require significant time and resources to improve;

in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the
particular economic, currency, political and regulatory risks associated with specific countries;

and liability for activities of the acquired companies before the acquisition, including violations of laws, rules and regulations,
commercial disputes, tax liabilities and other known and unknown liabilities.

Because acquisitions are inherently risky, our transactions may not be successful and may, in some cases, harm our operating results

or financial condition.

The mobile game application business is still developing, and our efforts to develop mobile games may prove unsuccessful, or even if

successful, it may take more time than we anticipate to achieve significant revenues from this activity because, among other reasons:

· we may have difficulty optimizing the monetization of our mobile games due to our relatively limited experience creating games

that include micro–transaction capabilities, advertising and offers;

· we intend to continue to develop substantially all of our games based upon our own intellectual property, rather than well–known
licensed brands, and we may encounter difficulties in generating sufficient consumer interest in and downloads of our games,
particularly since we have had relatively limited success generating significant revenues from games based on our own intellectual
property;

· man well–funded public and private companies have released, or plan to release, mobile games, and this competition will make it

more difficult for us to differentiate our games and derive significant revenues from them;

· mobile games have a relatively limited history, and it is unclear how popular this style of game will become or remain or its

revenue potential;

our mobile strategy assumes that a large number of players will download our games because they are free and that we will
subsequently be able to effectively monetize the games; however, players may not widely download our games for a variety of
reasons, including poor consumer reviews or other negative publicity, ineffective or insufficient marketing efforts, lack of
sufficient community features, lack of prominent storefront featuring and the relatively large file size of some of our games—our
thick–client games often utilize a significant amount of the available memory on a user’s device, and due to the inherent limitations
of the smartphone platforms and telecommunications networks, which only allow applications that are less than 50 megabytes to
be downloaded over a carrier’s wireless network, players must download one of our thick–client games either via a wireless
Internet (Wi–Fi) connection or initially to their computer and then side–loaded to their device;

even if our games are widely downloaded, we may fail to retain users or optimize the monetization of these games for a variety of
reasons, including poor game design or quality, lack of community features, gameplay issues such as game unavailability, long
load times or an unexpected termination of the game due to data server or other technical issues, or our failure to effectively
respond and adapt to changing user preferences through game updates;

the billing and provisioning capabilities of some smartphones and tablets are currently not optimized to enable users to purchase
games or make in–app purchases, which make it difficult for users of these smartphones and tablets to purchase our games or
make in–app purchases and could reduce our addressable market, at least in the short term; and

the Federal Trade Commission has indicated that it intends to review issues related to in–app purchases, particularly with respect
to games that are marketed primarily to minors, and the commission might issue rules significantly restricting or even prohibiting
in–app purchases or name us as a defendant in a future class–action lawsuit.

If we do not achieve a sufficient return on our investment with respect to this business model, it will negatively affect our operating

results and may require us to make change to our business strategy.

The markets in which we operate are highly competitive, and many of our competitors have significantly greater resources than we

do.

Developing, distributing and selling mobile games is a highly competitive business, characterized by frequent product introductions
and rapidly emerging new platforms, technologies and storefronts. For end users, we compete primarily on the basis of game quality, brand
and customer reviews. We compete for promotional and storefront placement based on these factors, as well as our relationship with the digital
storefront owner, historical performance, perception of sales potential and relationships with licensors of brands and other intellectual
property. For content and brand licensors, we compete based on royalty and other economic terms, perceptions of development quality,
porting abilities, speed of execution, distribution breadth and relationships with storefront owners or carriers. We also compete for experienced
and talented employees.

We compete with a continually increasing number of companies, including Zynga, King Digital, Soul & Vibe Interactive, DeNA,
Gree, Nexon, and Glu. In addition, given the open nature of the development and distribution for smartphones and tablets, we also compete or
will compete with a vast number of small companies and individuals who are able to create and launch games and other content for these
devices using relatively limited resources and with relatively limited start–up time or expertise.

Some of our competitors and our potential competitors have one or more advantages over us, either globally or in particular

geographic markets, which include:

significantly greater financial resources;

greater experience with the mobile games business model and more effective game monetization;

stronger brand and consumer recognition regionally or worldwide;

greater experience integrating community features into their games and increasing the revenues derived from their users;

the capacity to leverage their marketing expenditures across a broader portfolio of mobile and non–mobile products;

larger installed customer bases from related platforms, such as console gaming or social networking websites, to which they can
market and sell mobile games;

· more substantial intellectual property of their own from which they can develop games without having to pay royalties;

lower labor and development costs and better overall economies of scale;

greater platform–specific focus, experience and expertise; and

broader global distribution and presence.

If we are unable to compete effectively or we are not as successful as our competitors in our target markets, our sales could decline,
our margins could decline and we could lose market share, any of which would materially harm our business, operating results and financial
condition.

Consumer tastes are continually changing and are often unpredictable, and we compete for consumer discretionary spending against

other forms of entertainment; if we fail to develop and publish new mobile games that achieve market acceptance, our sales would suffer.

Our mobile game business depends on developing and publishing mobile games that consumers will want to download and spend
time and money playing. We must continue to invest significant resources in research and development, analytics and marketing to introduce
new games and continue to update our successful mobile games, and we often must make decisions about these matters well in advance of
product release to timely implement them. Our success depends, in part, on unpredictable and volatile factors beyond our control, including
consumer preferences, competing games, new mobile platforms and the availability of other entertainment activities. If our games and related
applications do not meet consumer expectations, or they are not brought to market in a timely and effective manner, our business, operating
results and financial condition would be harmed. Even if our games are successfully introduced and initially adopted, a failure to continue to
update them with compelling content or a subsequent shift in the entertainment preferences of consumers could cause a decline in our games’
popularity that could materially reduce our revenues and harm our business, operating results and financial condition. Furthermore, we
compete for the discretionary spending of consumers, who face a vast array of entertainment choices, including games played on personal
computers and consoles, television, movies, sports and the Internet. If we are unable to sustain sufficient interest in our games compared to
other forms of entertainment, our business and financial results would be seriously harmed.

If we do not successfully establish and maintain awareness of our brand and games, if we incur excessive expenses promoting and
maintaining our brand or our games or if our games contains defects or objectionable content, our operating results and financial condition
could be harmed.

We believe that establishing and maintaining our brand is critical to establishing a direct relationship with end users who purchase
our products from direct–to–consumer channels and to maintaining our existing relationships with distributors and content licensors, as well
as potentially developing new such relationships. Increasing awareness of our brand and recognition of our games is particularly important in
connection with our strategic focus of developing games based on our own intellectual property. Our ability to promote our brand and increase
recognition of our games depends on our ability to develop high–quality, engaging games. If consumers, digital storefront owners and
branded content owners do not perceive our existing games as high–quality or if we introduce new games that are not favorably received by
them, then we may not succeed in building brand recognition and brand loyalty in the marketplace. In addition, globalizing and extending our
brand and recognition of our games is costly and involves extensive management time to execute successfully, particularly as we expand our
efforts to increase awareness of our brand and games among international consumers. Although we have significantly increased our sales and
marketing expenditures in connection with the launch of our games, these efforts may not succeed in increasing awareness of our brand or the
new games. If we fail to increase and maintain brand awareness and consumer recognition of our games, our potential revenues could be
limited, our costs could increase and our business, operating results and financial condition could suffer.

If we fail to deliver our games at the same time as new mobile devices are commercially introduced, our sales may suffer.

Our business depends, in part, on the commercial introduction of new mobile devices with enhanced features, including larger,
higher resolution color screens, improved audio quality, and greater processing power, memory, battery life and storage. For example, the
introduction of new and more powerful versions of Apple’s iPhone and iPad and devices based on Google’s Android operating system, have
helped drive the growth of the mobile games market. In addition, consumers generally purchase the majority of content, such as our games, for
a new device within a few months of purchasing it. We do not control the timing of these device launches. Some manufacturers give us access
to their mobile devices prior to commercial release. If one or more major manufacturers were to stop providing us access to new device models
prior to commercial release, we might be unable to introduce games that are compatible with the new device when the device is first
commercially released, and we might be unable to make compatible games for a substantial period following the device release. If we do not
adequately build into our title plan the demand for games for a particular mobile device or experience game launch delays, we miss the
opportunity to sell games when new mobile devices are shipped or our end users upgrade to a new mobile device, our revenues would likely
decline and our business, operating results and financial condition would likely suffer.

We will need additional capital to continue our operation.

We may need to obtain additional financing for advertising, promotion and acquisition of additional products. The Company is

constantly looking for new sources of revenue that will help fund our business. There can be no assurances that this will be achieved.

If we successfully raise additional funds through the issuance of debt, we will be required to service that debt and are likely to
become subject to restrictive covenants and other restrictions contained in the instruments governing that debt, which may limit our operational
flexibility. If we raise additional funds through the issuance of equity securities, then those securities may have rights, preferences or
privileges senior to the rights of holders of our common stock, and holders of our common stock will experience dilution.

We cannot be certain that such additional debt or equity financing will be available to us on favorable terms when required, or at all.
If we cannot raise funds in a timely manner, or on acceptable terms, we may not be able to promote our brand, develop or enhance our
products and services, take advantage of future opportunities or respond to competitive pressures or unexpected requirements, and we may be
required to reduce or limit operations.

The effect of the proposed "Unlawful Internet Gambling Funding Prohibition Act."

During the 2003 fiscal year, the House Judiciary Committee of the US Government approved HR21 "Unlawful Internet Gambling
Funding Prohibition Act". This bill creates a new crime of accepting financial instruments, such as credit cards or electronic fund transfers, for
debts incurred in illegal internet gambling. The bill enables state and federal Attorneys General to request that injunctions be issued to any
party, such as financial institutions and internet service providers, to assist in the prevention or restraint of illegal internet gambling. This bill
still needs to be ratified by the Senate before it becomes passed as law. We may be affected by this bill and therefore the Company's revenue
stream may be affected.

Compliance with state rules and regulations.

Various states have laws restricting gambling. The Company believes that we are in compliance with the rules and regulations in the
states we operate. However, there can be no assurance that the state officials will have the same view. In the event that we are accused of
violating such gambling laws and restrictions, our gaming business may be disallowed or prohibited in these states. Furthermore, there can be
no assurance that no new rules and regulations restricting our business will be adopted in the states we operate. If such restrictive rules and
regulations are adopted, we may incur additional costs in complying with the rules and regulations or we may have to cease operation in these
state(s).

We have capacity constraints and system development risks that could damage our customer relations or inhibit our possible growth,

and we may need to expand our management systems and controls quickly, which may increase our cost of operations.

Our success and our ability to provide high quality customer service largely depends on the efficient and uninterrupted operation of
our computer and communications systems and the computers and communication systems of our third party vendors in order to
accommodate any significant numbers or increases in the numbers of consumers using our service. Our success also depends upon our and
our vendors' abilities to rapidly expand transaction–processing systems and network infrastructure without any systems interruptions in order
to accommodate any significant increases in use of our service.

We and our service providers may experience periodic systems interruptions and infrastructure failures, which we believe will cause
customer dissatisfaction and may adversely affect our results of operations. Limitations of technology infrastructure may prevent us from
maximizing our business opportunities.

We cannot assure you that our and our vendors' data repositories, financial systems and other technology resources will be secure
from security breaches or sabotage, especially as technology changes and becomes more sophisticated. In addition, many of our and our
vendors' software systems are custom–developed and we and our vendors rely on employees and certain third–party contractors to develop
and maintain these systems. If certain of these employees or contractors become unavailable, we and our vendors may experience difficulty in
improving and maintaining these systems. Furthermore, we expect that we and our vendors may continue to be required to manage multiple
relationships with various software and equipment vendors whose technologies may not be compatible, as well as relationships with other
third parties to maintain and enhance their technology infrastructures. Failure to achieve or maintain high capacity data transmission and
security without system downtime and to achieve improvements in their transaction processing systems and network infrastructure could have
a materially adverse effect on our business and results of operations.

Increased security risks of online commerce may deter future use of our website, which may adversely affect our ability to generate

revenue.

Concerns over the security of transactions conducted on the internet and the privacy of consumers may also inhibit the growth of the
internet and other online services generally, and online commerce in particular. Failure to prevent security breaches could significantly harm
our business and results of operations. We cannot be certain that advances in computer capabilities, new discoveries in the field of
cryptography, or other developments will not result in a compromise or breach of the algorithms used to protect our transaction data. Anyone
who is able to circumvent our or our vendors' security measures could misappropriate proprietary information, cause interruptions in our
operations or damage our brand and reputation. We may be required to incur significant costs to protect against security breaches or to alleviate
problems caused by breaches. Any well–publicized compromise of security could deter people from using the internet to conduct transactions
that involve transmitting confidential information or downloading sensitive materials, which would have a material adverse effect on our
business.

We face the risk of system failures, which would disrupt our operations.

A disaster could severely damage our business and results of operations because our services could be interrupted for an

indeterminate length of time. Our operations depend upon our ability to maintain and protect our computer systems.

Our systems and operations are vulnerable to damage or interruption from fire, floods, earthquakes, hurricanes, power loss,
telecommunications failures, break–ins, sabotage and similar events. The occurrence of a natural disaster or unanticipated problems at our
principal business headquarters or at a third–party facility could cause interruptions or delays in our business, loss of data or render us unable
to provide our services. In addition, failure of a third–party facility to provide the data communications capacity required by us, as a result of
human error, natural disaster or other operational disruptions, could cause interruptions in our service. The occurrence of any or all of these
events could adversely affect our reputation, brand and business.

We face risks of claims from third parties for intellectual property infringement that could adversely affect our business.

Our services operate in part by making internet services and content available to our users. This creates the potential for claims to be
made against us, either directly or through contractual indemnification provisions with third parties. These claims might, for example, be made
for defamation, negligence, copyright, trademark or patent infringement, personal injury, invasion of privacy or other legal theories. Any
claims could result in costly litigation and be time consuming to defend, divert management's attention and resources, cause delays in releasing
new or upgrading existing services or require us to enter into royalty or licensing agreements.

Litigation regarding intellectual property rights is common in the internet and software industries. We expect that internet
technologies and software products and services may be increasingly subject to third–party infringement claims as the number of competitors
in our industry segment grows and the functionality of products in different industry segments overlaps. There can be no assurance that our
services do not or will not in the future infringe the intellectual property rights of third parties. Royalty or licensing agreements, if required,
may not be available on acceptable terms, if at all. A successful claim of infringement against us and our failure or inability to license the
infringed or similar technology could adversely affect our business.

Our success and ability to compete are substantially dependent upon our technology and data resources, which we intend to protect
through a combination of patent, copyright, trade secret and/or trademark law. We currently have no patents or trademarks issued to date on
our technology and there can be no assurances that we will be successful in securing them when necessary.

We may not be able to protect our internet domain name, which is important to our branding strategy.

Our internet domain name, www.fanthrowdown.com, is an extremely important part of our business. Governmental agencies and
their designees generally regulate the acquisition and maintenance of domain names. The regulation of domain names in the United States and
in foreign countries may be subject to change. Governing bodies may establish additional top–level domains, appoint additional domain name
registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire or maintain relevant domain names
in all countries in which we conduct business. Furthermore, the relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear. Therefore, we may be unable to prevent third parties from acquiring domain names that
are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights.

If we are unable to maintain our popularity with third party search engines then our customer base, and therefore, our revenue will

not continue to grow.

Due to our limited capital we do not run large advertising campaigns. We are, therefore, reliant on third party search engines such as
Google and Yahoo! to provide prospective customers with links to facilitate traffic to our internet domain. We believe that these search engines
are important in order to facilitate broad market acceptance of our service and thus enhance our sales. We continue to look for new methods to
optimize our ranking position with various internet search engines, including the maintenance of reciprocal links with complementary third
party sites.

Our financial position and results of operations will vary depending on a number of factors, most of which are out of our control.

We anticipate that our operating results will vary widely depending on a number of factors, some of which are beyond our control.

These factors are likely to include:

demand for our online services by consumers;

costs of attracting consumers to our website, including costs of receiving exposure on third–party websites;

costs related to forming strategic relationships;

loss of strategic relationships;

our ability to significantly increase our distribution channels;

competition from companies offering same or similar products and services and from companies with much deeper financial,
technical, marketing and human resources;

the amount and timing of operating costs and capital expenditures relating to expansion of our operations;

costs and delays in introducing new services and improvements to existing services;

changes in the growth rate of internet usage and acceptance by consumers of electronic commerce; and

changes and introduction of new software e.g. pop up blockers.

Because we have a limited operating history, it is difficult to accurately forecast the revenues that will be generated from our current

and proposed future product offerings.

If we are unable to meet the changing needs of our industry, our ability to compete will be adversely affected.

We operate in an intensely competitive industry. To remain competitive, we must be capable of enhancing and improving the
functionality and features of our online services. The internet gaming industry is rapidly changing. If competitors introduce new products and
services embodying new technologies, or if new industry standards and practices emerge, our existing services, technology and systems may
become obsolete. There can be no assurances that we will be successful in responding quickly, cost effectively and adequately to new
developments or that funds will be available to respond at all. Any failure by us to respond effectively would significantly harm our business,
operating results and financial condition.

Our future success will depend on our ability to accomplish the following:

license and develop leading technologies useful in our business;

develop and enhance our existing products and services;

develop new services and technologies that address the increasingly sophisticated and varied needs of prospective consumers; and

respond to technological advances and emerging industry standards and practices on a cost–effective and timely basis.

Developing internet services and other proprietary technology entails significant technical and business risks, as well as substantial
costs. We may use new technologies ineffectively, or we may fail to adapt our services, transaction processing systems and network
infrastructure to user requirements or emerging industry standards. If our operations face material delays in introducing new services, products
and enhancements, our users may forego the use of our services and use those of our competitors. These factors could have a material adverse
effect on our financial position and results of operations.

Our business may be subject to government regulation and legal uncertainties that may increase the costs of operating our web

portal, limit our ability to attract users, or interfere with future operations of the Company.

There are currently few laws or regulations directly applicable to access to, or commerce on, the internet. Due to the increasing
popularity and use of the internet, it is possible that laws and regulations may be adopted, covering issues such as user privacy, defamation,
pricing, taxation, content regulation, quality of products and services, and intellectual property ownership and infringement. Such legislation
could expose the Company to substantial liability as well as dampen the growth in use of the internet, decrease the acceptance of the internet as
a communications and commercial medium, or require the Company to incur significant expenses in complying with any new regulations.

The applicability to the internet of existing laws governing issues such as gambling, property ownership, copyright, defamation,
obscenity and personal privacy is uncertain. The Company may be subject to claims that our services violate such laws. Any new legislation or
regulation in the United States or abroad or the application of existing laws and regulations to the internet could damage our business. In
addition, because legislation and other regulations relating to online games vary by jurisdiction, from state to state and from country to country,
it is difficult for us to ensure that our players are accessing our portal from a jurisdiction where it is legal to play our games. We therefore,
cannot ensure that we will not be subject to enforcement actions as a result of this uncertainty and difficulty in controlling access.

In addition, our business may be indirectly affected by our suppliers or customers who may be subject to such legislation. Increased
regulation of the internet may decrease the growth in the use of the internet or hamper the development of internet commerce and online
entertainment, which could decrease the demand for our services, increase our cost of doing business or otherwise have a material adverse
effect on our business, results of operations and financial condition.

New legislation, regulations or court rulings related to enforcing patents could harm our business and operating results.

If Congress, the USPTO or the courts implement new legislation, regulations or rulings that impact the patent enforcement process
or the rights of patent holders, these changes could negatively affect our business model. For example, limitations on the ability to bring patent
enforcement claims, limitations on potential liability for patent infringement, lower evidentiary standards for invalidating patents, increases in
the cost to resolve patent disputes and other similar developments could negatively affect our ability to assert our patent or other intellectual
property rights.

In addition, on September 16, 2011, the Leahy–Smith America Invents Act (or the Leahy–Smith Act), was signed into law. The
Leahy–Smith Act includes a number of significant changes to United States patent law. These changes include provisions that affect the way
patent applications will be prosecuted and may also affect patent litigation. The USPTO is currently developing regulations and procedures to
govern administration of the Leahy–Smith Act, and many of the substantive changes to patent law associated with the Leahy–Smith Act will
not become effective until one year or 18 months after enactment. Accordingly, it is too early to tell what, if any, impact the Leahy–Smith Act
will have on the operation of our business. However, the Leahy–Smith Act and its implementation could increase the uncertainties and costs
surrounding the prosecution of patent applications and the enforcement or defense of our issued patents, all of which could have a material
adverse effect on our business and financial condition.

Further, and in general, it is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be
proposed, or whether any of the proposals will become enacted as laws. Compliance with any new or existing laws or regulations could be
difficult and expensive, affect the manner in which we conduct our business and negatively impact our business, prospects, financial condition
and results of operations.

If we are unable to license or otherwise monetize our intellectual property or generate revenue and profit through those assets, there

is a significant risk that our intellectual property monetization strategy will fail.

Effective June 1, 2012, we acquired an interest in the ‘088 Patent, entitled “Gaming Device Having a Second Separate Bonusing
Event” that we plan to license or otherwise monetize. On August 6, 2013, the Company was issued United States Patent number 8,500,554
entitled, "Gaming Device Having a Second Bonusing Event" (the "554 Patent"). The '554 Patent is a continuation of the key patent already
owned by the Company. If our efforts to generate revenue from the ‘088 Patent fail, we will incur significant losses and may be unable to
acquire additional intellectual property assets. If this occurs, our patent monetization strategy will likely fail.

We plan to commence additional legal proceedings against companies in the gaming industry to enforce our intellectual property
rights, and we expect such litigation to be time–consuming, which may adversely affect our financial condition and ability to operate our
business.

To license or otherwise monetize the ‘088 Patent, we have commenced legal proceedings against the owners of gaming devices
pursuant to which we allege that such companies infringed on the Patent. Our viability will be highly dependent on the outcome of this
litigation, and there is a risk that we may be unable to achieve the results that we desire from such litigation, which failure would harm our
overall business. In addition, the potential defendants in the litigation are much larger than us and have substantially greater resources, which
could make our litigation efforts more difficult.

Disputes regarding the assertion of patents and other intellectual property rights are highly complex and technical. Once initiated, we
may be forced to litigate against others to enforce or defend our intellectual property rights or to determine the validity and scope of other
parties’ proprietary rights. The defendants or other third parties involved in potential lawsuits may allege defenses and/or file counterclaims in
an effort to avoid or limit liability and damages for patent infringement. If such defenses or counterclaims are successful, they may preclude
our ability to derive licensing revenue from our patents. A negative outcome of any such litigation, or one or more claims contained within any
such litigation, could materially and adversely impact our business.

While we believe that the ‘088 Patent is infringed upon by certain companies, there is a risk that a court will find the ‘088 Patent
invalid, not infringed or unenforceable and/or that the U.S. Patent and Trademark Office (“USPTO”) will either invalidate the ‘088 Patent
or materially narrow the scope of its claims during the course of a re–examination. In addition, even with a positive trial court verdict, the
‘088 Patent may be invalidated, found not to be infringed or rendered unenforceable on appeal. This risk may occur in litigations we bring. If
this were to occur, it would have a material adverse effect on the viability of the Company and our operations.

We believe that certain gaming companies infringe on the ‘088 Patent, but recognize that obtaining and collecting a judgment against
such infringers may be difficult or impossible. Patent litigation is inherently risky and the outcome is uncertain. Some of the parties that we
believe infringe on the ‘088 Patent are large and well–financed companies with substantially greater resources than us. We believe that these
parties would devote a substantial amount of resources in an attempt to avoid or limit a finding that they are liable for infringing on the ‘088
Patent or, in the event liability is found, to avoid or limit the amount of associated damages.

In addition there is a risk that these parties may file re–examinations or other proceedings with the USPTO or other government

agencies in an attempt to invalidate, narrow the scope or render unenforceable the ‘088 Patent.

At this time, we cannot predict the outcome of such litigation or administrative action, and if we are unsuccessful in our litigation

efforts for any reason, our business would be significantly harmed.

Moreover, in connection with any of our present or future patent enforcement actions, it is possible that a defendant may claim and/or
a court may rule that we have violated statutory authority, regulatory authority, federal rules, local court rules, or governing standards relating
to the substantive or procedural aspects of such enforcement actions. In such event, a court may issue monetary sanctions against us or award
attorneys’ fees and/or expenses to one or more of the defendants, which could be material, and if we are required to pay such monetary
sanctions, attorneys’ fees and/or expenses, such payment could materially harm our operating results and financial position.

In addition, it is difficult in general to predict the outcome of patent enforcement litigation at the trial level. There is a higher rate of
appeals in patent enforcement litigation than more standard business litigation. Such appeals are expensive and time–consuming, and the
outcomes of such appeals are sometimes unpredictable, resulting in increased costs and reduced or delayed revenue.

Finally, we believe that the more prevalent patent enforcement actions become, the more difficult it will be for us to license the ‘088
Patent without engaging in litigation. As a result, we may need to increase the number of our patent enforcement actions to cause infringing
companies to license the ‘088 Patent or pay damages for lost royalties. This will adversely affect our operating results due to the high costs of
litigation and the uncertainty of the results.

The protection of our intellectual property may be uncertain and we may face claims of others.

Although we have received patents and have filed patent applications with respect to certain aspects of our technology, we generally
do not rely on patent protection with respect to our products and technologies. Instead, we rely primarily on a combination of trade secret and
copyright law, employee and third party non–disclosure agreements and other protective measures to protect intellectual property rights
pertaining to our products and technologies. Such measures may not provide meaningful protection of our trade secrets, know how or other
intellectual property in the event of any unauthorized use, misappropriation or disclosure. Others may independently develop similar
technologies or duplicate our technologies. In addition, to the extent that we apply for any patents, such applications may not result in issued
patents or, if issued, such patents may not be valid or of value. Third parties could, in the future, assert infringement or misappropriation
claims against us with respect to our current or future products and technologies, or we may need to assert claims of infringement against third
parties. Any infringement or misappropriation claim by us or against us could place significant strain on our financial resources, divert
management’s attention from our business and harm our reputation. The costs of prosecuting or defending an intellectual property claim could
be substantial and could adversely affect our business, even if we are ultimately successful in prosecuting or defending any such claims. If our
products or technologies are found to infringe the rights of a third party, we could be required to pay significant damages or license fees or
cease production, any of which could have material adverse effect on our business. If a claim is brought against us, or we ultimately prove
unsuccessful on the claims on our merits, this could have a material adverse effect on our business, financial condition, results of operations
and future prospects.

Our acquisitions of additional patent assets may be time consuming, complex and costly, which could adversely affect our operating

results.

Acquisitions of patent or other intellectual property assets, which are and will be critical to our business plan, are often time
consuming, complex and costly to consummate. We may utilize many different transaction structures in such acquisitions and the terms of
such acquisition agreements tend to be heavily negotiated. As a result, we expect to incur significant operating expenses and will likely be
required to raise capital during the negotiation process even if the acquisition is ultimately not consummated. Even if we are able to acquire
particular patent assets, there is no guarantee that we will generate sufficient revenue related to those patent assets to offset the acquisition
costs. While we will seek to conduct confirmatory due diligence on the patent assets we are considering for acquisition, we may acquire patent
assets from a seller who does not have proper title to those assets. In those cases, we may be required to spend significant resources to defend
our interest in the patent assets and, if we are not successful, our acquisition may be invalid, in which case we could lose part or all of our
investment in the assets.

We may also identify patent or other intellectual property assets that cost more than we are prepared to spend with our own capital
resources. We may incur significant costs to organize and negotiate a structured acquisition that does not ultimately result in an acquisition of
any patent assets or, if consummated, proves to be unprofitable for us. These higher costs could adversely affect our operating results.

In addition, we may acquire patents and technologies that are in the early stages of adoption in the commercial, industrial and
consumer markets. Demand for some of these technologies will likely be untested and may be subject to fluctuation based upon the rate at
which our licensees will adopt our patents and technologies in their products and services. As a result, there can be no assurance as to whether
technologies we acquire or develop will have value that we can monetize.

In certain acquisitions of patent assets, we may seek to defer payment or finance a portion of the acquisition price. This approach may

put us at a competitive disadvantage and could result in harm to our business.

We have limited capital and may seek to negotiate acquisitions of patent or other intellectual property assets to defer, where possible,
payments or we may seek to finance a portion of the acquisition price. These types of debt financing or deferred payment arrangements may
not be as attractive to sellers of patent assets as it would be to receive the full purchase price for those assets in cash at the closing of the
acquisition. As a result, we may not compete effectively against other companies in the market for acquiring patent assets, many of whom have
greater cash resources than we have. In addition, any failure to satisfy our debt repayment obligations may result in adverse consequences to
our operating results.

Any failure to maintain or protect our patent assets or other intellectual property rights could significantly impair our return on

investment from such assets and harm our brand, our business and our operating results.

Our ability to compete in the intellectual property market largely depends on the superiority, uniqueness and value of our acquired
patent assets and other intellectual property. To protect our proprietary rights, we will rely on a combination of patent, trademark, copyright
and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions. No assurances
can be given that any of the measures we undertake to protect and maintain our intellectual property assets will have any measure of success.

Following the acquisition of patent assets, we will likely be required to spend significant time and resources to maintain the
effectiveness of those assets by paying maintenance fees and making filings with the USPTO. We may acquire patent assets, including patent
applications, which require us to spend resources to prosecute the applications with the USPTO. Further, there is a material risk that patent
related claims (such as, for example, infringement claims (and/or claims for indemnification resulting therefrom), unenforceability claims, or
invalidity claims) will be asserted or prosecuted against us, and such assertions or prosecutions could materially and adversely affect our
business. Regardless of whether any such claims are valid or can be successfully asserted, defending such claims could cause us to incur
significant costs and could divert resources away from our other activities.

Despite our efforts to protect our intellectual property rights, any of the following or similar occurrences may reduce the value of our

intellectual property:

our applications for patents, trademarks and copyrights may not be granted and, if granted, may be challenged or invalidated;

issued trademarks, copyrights, or patents may not provide us with any competitive advantages versus potentially infringing
parties;

our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology; or

our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or
superior to those we acquire and/or prosecute.

Moreover, we may not be able to effectively protect our intellectual property rights in certain foreign countries where we may do
business in the future or from which competitors may operate. If we fail to maintain, defend or prosecute our patent assets properly, the value
of those assets would be reduced or eliminated, and our business would be harmed.

We are a developing company with limited revenues from operations.

We have incurred significant operating losses since inception and generate limited revenues from operations. As a result, we have
generated negative cash flows from operations and have an accumulated deficit of $293,833 as of December 31, 2013. We are operating in a
developing industry based on a new technology and our primary source of funds to date has been through the issuance of securities and
borrowing funds. There can be no assurance that management’s efforts will be successful or that the products we develop and market will be
accepted by consumers. If our products are ultimately unsuccessful in the market, this could have a material adverse effect on our business,
financial condition, results of operations and future prospects.

We face financial risks as we are a developing company.

We have incurred significant operating losses since inception and have limited revenue from operations. As a result, we have
generated negative cash flows from operations and our cash balances continue to reduce. While we are optimistic and believe appropriate
actions are being taken to mitigate this, there can be no assurance that attempts to reduce cash outflows will be successful and this could have a
material adverse effect on our business, financial condition, results of operations.

We may fail to attract and retain qualified personnel.

There is intense competition from other companies, research and academic institutions, government entities and other organizations
for qualified personnel in the areas of our activities. If we fail to identify, attract, retain and motivate these highly skilled personnel, we may be
unable to continue our marketing and development activities, and this could have a material adverse effect on our business, financial condition,
results of operations and future prospects.

If we do not effectively manage changes in our business, these changes could place a significant strain on our management and

operations.

To manage our growth successfully, we must continue to improve and expand our systems and infrastructure in a timely and
efficient manner. Our controls, systems, procedures and resources may not be adequate to support a changing and growing company. If our
management fails to respond effectively to changes and growth in our business, including acquisitions, this could have a material adverse
effect on our business, financial condition, results of operations and future prospects.

General market risks

We may not be able to access credit.

We face the risk that we may not be able to access credit, either from lenders or suppliers. Failure to access credit from any of these

sources could have a material adverse effect on our business, financial condition, results of operations and future prospects.

We may not be able to maintain effective internal controls.

If we fail to maintain the adequacy of our internal accounting controls, as such standards are modified, supplemented or amended
from time to time, we may not be able to ensure that we can conclude on an on–going basis that we have effective internal controls over
financial reporting in accordance with Section 404. Failure to achieve and maintain an effective internal control environment could cause us to
face regulatory action and also cause investors to lose confidence in our reported financial information, either of which could have a material
adverse effect on our business, financial condition, results of operations and future prospects.

Securities market risks

Our stock price and trading volume may be volatile, which could result in losses for our stockholders.

The equity markets may experience periods of volatility, which could result in highly variable and unpredictable pricing of equity
securities. The market price of our Common Stock could change in ways that may or may not be related to our business, our industry or our
operating performance and financial condition and could negatively affect our share price or result in fluctuations in the price or trading volume
of our Common Stock. We cannot predict the potential impact of these periods of volatility on the price of our Common Stock. The Company
cannot assure you that the market price of our Common Stock will not fluctuate or decline significantly in the future.

If our Common Stock is delisted from the NYSE MKT LLC, the Company would be subject to the risks relating to penny stocks.

If our Common Stock were to be delisted from trading on the NYSE MKT LLC and the trading price of the Common Stock were
below $5.00 per share on the date the Common Stock were delisted, trading in our Common Stock would also be subject to the requirements
of certain rules promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These rules require additional
disclosure by broker–dealers in connection with any trades involving a stock defined as a "penny stock" and impose various sales practice
requirements on broker–dealers who sell penny stocks to persons other than established customers and accredited investors, generally
institutions. These additional requirements may discourage broker–dealers from effecting transactions in securities that are classified as penny
stocks, which could severely limit the market price and liquidity of such securities and the ability of purchasers to sell such securities in the
secondary market. A penny stock is defined generally as any non–exchange listed equity security that has a market price of less than $5.00 per
share, subject to certain exceptions.

If we need additional capital to fund our growing operations, we may not be able to obtain sufficient capital and may be forced to limit

the scope of our operations

As we implement our growth strategies, we may experience increased capital needs. We may not, however, have sufficient capital to
fund our future operations without additional capital investments. If adequate additional financing is not available on reasonable terms or at all,
we may not be able to carry out our corporate strategy and we would be forced to modify our business plans (e.g., limit our expansion, limit
our marketing efforts and/or decrease or eliminate capital expenditures), any of which may adversely affect our financial condition, results of
operations and cash flow. Such reduction could materially adversely affect our business and our ability to compete.

Our capital needs will depend on numerous factors, including, without limitation, (i) our profitability, (ii) our ability to respond to a
release of competitive products by our competitors, and (iii) the amount of our capital expenditures, including acquisitions. Moreover, the
costs involved may exceed those originally contemplated. Cost savings and other economic benefits expected may not materialize as a result of
any cost overruns or changes in market circumstances. Failure to obtain intended economic benefits could adversely affect our business,
financial condition and operating performances.

We need to manage growth in operations to maximize our potential growth and achieve our expected revenues. Our failure to manage

growth can cause a disruption of our operations that may result in the failure to generate revenues at levels we expect.

In order to maximize potential growth in our current markets, we may have to expand our operations. Such expansion will place a
significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to
improve our financial controls, operating procedures and management information systems. We will also need to effectively train, motivate,
and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the
revenues we expect.

We encounter competition in our business, and any failure to compete effectively could adversely affect our results of operations.

We anticipate that our competitors will continue to expand and seek to obtain additional market share with competitive price and
performance characteristics. Aggressive expansion of our competitors or the entrance of new competitors into our markets could have a
material adverse effect on our business, results of operations and financial condition.

If we do not compete successfully against new and existing competitors, we may lose our market share, and our operating results may

be adversely affected.

We compete with other companies that may reach our target audience by means that are more effective than our current strategy.
Further, if such other competitors have a long operating history, large product and service suites, more capital resources and broad
international or local recognition, our operating results may be adversely affected if we cannot successfully compete.

We may not be able to respond to changing consumer preferences and our sales may decline.

We operate in markets that are subject to change, including changes in customer preferences. New fads, trends and shifts in gaming
could affect the type of customers that will visit and play our sites. Content in which we have invested significant resources may fail to meet
consumer demand at the time. A decrease in the level of exposure or popularity could result in a loss in sales which could have a material
adverse effect on our business, prospects and financial condition.

We could face a variety of risks of expanding into a new business.

Risks of our entry into the new business line of digital media, include, without limitation: (i) potential diversion of management’s
attention and other resources, including available cash, from our existing businesses; (ii) unanticipated liabilities or contingencies; (iii) the need
for additional capital and other resources to expand into this new line of business; and (iv) inefficient combination or integration of operational
and management systems and controls. Entry into a new line of business may also subject us to new laws and regulations with which we are
not familiar, and may lead to increased litigation and regulatory risk. Further, our business model and strategy are still evolving and are
continually being reviewed and revised, and we may not be able to successfully implement our business model and strategy. We may not be
able to attract a sufficiently large number of audience or customers, or recover costs incurred for developing and marketing these products or
services. If we are unable to successfully implement our growth strategies, our revenue and profitability may not grow as we expect, our
competitiveness may be materially and adversely affected, and our reputation and business may be harmed.

In developing and marketing the new business of digital media, we may invest significant time and resources. Initial timetables for
the introduction and development of our digital media business may not be achieved and price and profitability targets may not prove feasible.
Furthermore, any new line of business could have a significant impact on the effectiveness of our system of internal controls. Failure to
successfully manage these risks in the development and implementation of our new digital media business could have a material adverse effect
on our business, results of operations and financial condition.

Item 1B. Unresolved staff comments

Not applicable.

Item 2. Properties

Our principal corporate office currently occupies 2,718 square feet of office space at 500 Mamaroneck Avenue, Suite 204, Harrison,
New York under a lease that expires on November 30, 2014. The Company leases two additional spaces in Saratoga, NY (occupied by
FanTD) and New York City, NY (occupied by MGT Studios) under leases which expire on October 31, 2014, and June 31, 2014,
respectively. The Company believes our office is in good condition and is sufficient to conduct our operations.

Item 3. Legal proceedings

MGT Gaming owns U.S. Patents 7,892,088 and 8,500,554 (the “‘088 and ‘554 patents,” respectively), both entitled "Gaming
Device Having a Second Separate Bonusing Event and both relating to casino gaming systems in which a second game played on an
interactive sign is triggered once specific events occur in a first game. On November 2, 2012, MGT Gaming filed a lawsuit (No. 3:12–cv–
741) in the United States District Court for the Southern District of Mississippi alleging patent infringement. The lawsuit alleges the
defendants Caesars Entertainment Corporation (NASDAQ GS: CZR), MGM Resorts International, Inc. (NYSE: MGM), WMS Gaming, Inc.
– a subsidiary of WMS Industries, Inc. (NYSE: WMS), Penn National Gaming, Inc. (NASDAQ GS: PENN), and Aruze Gaming America,
Inc. either manufacture, sell or lease gaming systems in violation of MGT Gaming's patent rights, or operate casinos that offer gaming systems
in violation of MGT Gaming's ‘088 patent. An amended version of the complaint added the '54 patent, which is a continuation of the ‘088
patent. The allegedly infringing products manufactured, distributed, used, sold and/or offered for sale by defendants include at least those
identified under the trade names: "Pirate Battle," "Battleship," "Clue, "Amazon Fishing," “Star Trek Battle Stations," "Castle King,"
"Monopoly Bigger Event," and "Paradise Fishing."

On November 4, 2013, Aruze also voluntarily dismissed its separate action in Nevada which had sought a declaratory judgment that

Aruze does not infringe the '088 Patent and/or that the '088 Patent is invalid or unenforceable.

On November 21, 2013 WMS filed a Petition for a Writ of Mandamus with the U.S. Court of Appeals for the Federal Circuit to
reverse the decision of the district court in refusing to transfer venue to the Northern District of Illinois. The mandamus proceedings have been
fully briefed by all parties and await decision by the appellate court.

On January 27, 2014 the District Court issued a Docket Order setting a Markman Hearing (also known as a claims construction

hearing) for September 25, 2014 in Jackson, Mississippi before the Honorable District Judge Carlton W. Reeves for all three severed cases

Item 4. Mine safety disclosures

None.

PART II

Item 5. Market for registrant’s common equity, related stockholder matters and issuer’s purchases of equity securities

Market information

Our Common Stock is traded on the NYSE MKT LLC (the “Exchange”) under the symbol “MGT”.

The following table sets forth the high and low last reported sales prices (adjusted for the 1–for–500 reverse stock split of the
Company’s outstanding Common Stock, immediately followed by a forward stock split of the Company’s outstanding Common Stock, at an
exchange ratio of 15–for–1 shares of the Company’s outstanding Common Stock, effected March 21, 2012) of our Common Stock for each
quarterly period during 2013, and 2012.

2013
Fourth Quarter
Third Quarter
Second Quarter
First Quarter

2012
Fourth Quarter
Third Quarter
Second Quarter
First Quarter

High

Low

3.77 $
5.02
5.29
3.90

6.99 $
6.05
6.59
3.15

2.70
3.45
3.05
2.76

2.93
4.24
1.95
1.33

On March 28, 2014, the Company’s Common Stock closed on the Exchange at $1.93 per share.

As of March 28, 2014, there were 388 stockholders of record of our Common Stock.

Dividends

The Company has never declared or paid cash dividends on its Common Stock or Convertible Preferred Series A stock and has no

intention to do so in the foreseeable future.

Recent sales of unregistered securities

For the period October 31, 2013 through December 16, 2013, the Company issued an aggregate 32,500 restricted shares of

Common Stock, to consultants and advisors for services rendered.

For the year ending December 31, 2013, the Company issued an aggregate 21,394 shares of Convertible Preferred Series A stock, as

dividend shares to record shareholders.

On December 2, 2013, the Company issued 100,000 restricted shares of Common Stock, in connection with a Settlement Agreement
(the “Settlement Agreement”). Pursuant to the Settlement Agreement, both parties agreed to the following: (i) the Company’s obligation to
grant the Warrant and to issue the underlying Common Stock, and Century’s right to receive the Warrant and the underlying Common Stock is
cancelled, (ii) Century will make a cash payment to the Company of $100 and (iii) the Company will issue to Century 100,000 shares of
Common Stock subject to NYSE MKT exchange approval. These shares were subsequently issued on December 26, 2013. The stock was
valued at $301, using the closing market price on December 2, 2013. Proceeds under the Settlement Agreement were received December 10,
201.

The above issuances were made in reliance on an exemption from registration set forth in Section 4(2) of the Securities Act. The

issuances did not result in any proceeds to the Company.

Purchases of equity securities by the issuer

There were no repurchases of the Company’s Common Stock during the year ended December 31, 2013.

Item 6. Selected financial data.

Not applicable.

Item 7. Management’s discussion and analysis of financial condition and results of operations

Executive summary

MGT and its subsidiaries are primarily engaged in the business of acquiring, developing and monetizing assets in the online and

mobile gaming space as well as the casino industry.

On April 16, 2013, the Company entered into an Asset Purchase Agreement to acquire certain assets and liabilities of Digital Angel
Corporation, a developer and publisher of mobile games designed for tablets and smartphones. The transaction closed on April 30, 2013. On
September 30, 2013, the Company entered into a nonexclusive license with Gammaker PTY to further develop and market such games in
exchange for a 10% share of the gross revenues generated by Gammaker on such games.

On May 20, 2013, MGT Sports completed the acquisition of 63% of the outstanding membership interests of FanTD LLC. FanTD
operates a daily fantasy sports website at www.fanthrowdown.com. Launched in 2012, FanThrowdown.com offers players the opportunity to
participate in real money daily fantasy gameplay for the NFL, MLB, NCAA (basketball & football), NHL, NBA and professional golf.
Players select a roster of athletes across most popular sports, and winnings are determined by the same–day performance of these rosters.
Daily fantasy sports compress the timeframe of traditional fantasy sports from multi–month seasons into 24–hour periods.

On September 3, 2013, the Company entered into a Contribution and Sale Agreement (the “Contribution Agreement”) by and among
the Company, Gioia Systems, and LLC (“Gioia”) and MGT Interactive, LLC (“MGT Interactive”) whereby MGT Interactive acquired certain
assets from Gioia which was the inventor and owner of a proprietary method of card shuffling for the online poker market. Trademarked
under the name Real Deal Poker, the technology uses patented shuffling machines, along with permutation re–sequencing, allowing for the
creation of up to 16,000 decks per minute in real time. The acquisition includes seven (7) U.S. Patents and several Internet URL addresses,
including www.RealDealPoker.com. The information contained in such website is not part of this annual report. Pursuant to the Contribution
Agreement, Gioia contributed the assets to MGT Interactive in exchange for a 49% interest in MGT Interactive and MGT contributed $200 to
MGT Interactive in exchange for a 51% interest in MGT Interactive. The $200 contributed by the Company shall be utilized as working
capital, which shall be used to cover the direct and associated costs relating to the achievement of a certification from Gaming Laboratories
International (“GLI”). The Company has the right to acquire an additional 14% ownership interest in MGT Interactive from Gioia in exchange
for a purchase price of $300 after GLI certification is obtained. Gioia, in turn, will have the right to re–acquire the 14% interest for a period of
three years at a purchase price of $500. Gioia shall have the right to certain royalty payments from the gross rake payments, and any licensing
or royalty income received by MGT Interactive.

On November 11, 2013, the Company entered into an Agreement and Plan of Reorganization (the “Agreement”) with MGT Capital
Solutions, Inc., a wholly owned subsidiary of the Company, Avcom, Inc. and the shareholders and option holders of Avcom, Inc. (“Avcom”).
Pursuant to the Agreement, the Company acquired 100% of the capital stock of Avcom. In consideration, the Preferred Stockholders of
Avcom received $550 in value of the Company’s Common Stock and the Common Stockholders and option holders of Avcom will receive an
aggregate of $1,000 in value of the Company’s Common Stock. The value of the Company’s Common Stock is based on the volume
weighted average closing price for the 20 trading days prior to signing the Agreement. The Avcom acquisition closed on November 26, 2013.

One half of the issuance to the Avcom Common Stockholders and option holders was placed in escrow and will be released upon
the later of (i) the commercial release of an agreed upon game or (ii) six (6) months after closing. In addition, the Common Stockholders may
be awarded contingent consideration of $1.0 million through the issuance of up to 333,000 of the Company’s Common Stock in the event that
the game reaches $3.0 million in gross revenues within 18 months of signing the Agreement.

Avcom is a game development studio producing free to play mobile and social casino–style games. Avcom’s assets include physical
and intellectual property associated with Mobileveg.as and freeawesome.com, as well as a game under development titled “SlotChamp”. Prior
to entering into the Agreement, Avcom had performed certain game development consulting services for the Company for which Avcom
received an aggregate of $146 as consideration for such services.

On December 4, 2013, the Company entered into a Strategic Alliance Agreement with M2P Entertainment GmbH, a German
corporation (“M2P”), the newly formed Delaware corporation, M2P Americas, Inc. (“M2P Americas”) and the Company’s ’s existing
subsidiary MGT Studios, Inc. The purpose of the transaction is to allow M2P Americas to market and exploit MP2’s gaming technology in
North and South America through M2P Americas. As part of the transaction, the Company acquired 50.1% of M2P Americas and M2P
Entertainment acquired 49.9%. The Strategic Alliance Agreement provides that the Company and M2P will jointly cooperate to launch M2P’s
gaming technology in North and South America. It further provides M2P Americas with an exclusive royalty free license to M2P’s gaming
technology for North and South America.

Pursuant to the terms of the Strategic Alliance Agreement, the Company will advance certain expenses to M2P Americas and the
Company and M2P will provide network and human resources support to M2P Americas. The parties also entered into a Stockholders
Agreement dated the same date which, among other things, grants M2P an option to purchase 10% of the Company’s ownership in M2P
America at book value if the Company does not purchase equity in M2P prior to April 2, 2014.

Any advances by the Company or its subsidiaries to M2P Americas will be considered a loan bearing interest at 4% per annum or

the applicable federal rate if greater. The Strategic Alliance Agreement has a term of 20 years.

On December 10, 2013, the Company entered into a Warrant Modification Agreement (the “Agreement”) with Iroquois Master Fund
Ltd. (“Iroquois”). Pursuant to the Agreement, Iroquois agreed to immediately exercise its warrant to purchase 613,496 shares of Common
Stock, par value $0.001 of the Company, at an exercise price of $1.50 per share, for aggregate gross proceeds to the Company of
approximately $920 and (ii) agreed to terminate its right of participation in future equity offerings of the Company. In exchange, the Company
agreed to reduce the warrant exercise price from $3.85 per share to $1.50 per share, and agreed not to issue any securities at a price below
$2.50 per share for a period of 90 days after the date of the Agreement (other than securities granted pursuant to a stock plan or issued in
connection with an acquisition or issued pursuant to an agency agreement with a registered broker–dealer provided that we agree with the
broker–dealer and publicly announce that we will not sell shares for a price below $2.50 per share); this 90 day period has expired. Iroquois
acquired the warrant in connection with the Company's November 2012 financing. In connection with the Agreement, the Company paid to
Chardan Capital Markets, LLC (“Chardan”) a placement fee for the solicitation of the exercise of the warrants equal to 8% of the gross
proceeds raised, or approximately $73 and reimbursed Chardan for $8 of its legal fees incurred.

MGT filed an application for a New Jersey Casino Service Industry Enterprise License (“CSIE”). According to regulations
promulgated by the New Jersey Division of Gaming Enforcement (NJDGE), companies providing Internet gaming software or systems, and
vendors who manage, control, or administer games and associated wagers conducted through the Internet, must obtain a CSIE.

Patent enforcement

MGT Gaming owns U.S. Patents 7,892,088 and 8,550,554 (the “’088 and ‘554 patents,” respectively), both entitled "Gaming
Device Having a Second Separate Bonusing Event and both relating to casino gaming systems in which a second game played on an
interactive sign is triggered once specific events occur in a first game. On November 2, 2012, MGT Gaming filed a lawsuit (No. 3:12–cv–
741) in the United States District Court for the Southern District of Mississippi alleging patent infringement. The lawsuit alleges the
defendants Caesars Entertainment Corporation (NASDAQ GS: CZR), MGM Resorts International, Inc. (NYSE: MGM), WMS Gaming, Inc.
– a subsidiary of WMS Industries, Inc. (NYSE: WMS), Penn National Gaming, Inc. (NASDAQ GS: PENN), and Aruze Gaming America,
Inc. either manufacture, sell or lease gaming systems in violation of MGT Gaming's patent rights, or operate casinos that offer gaming systems
in violation of MGT Gaming's ‘088 patent. An amended version of the complaint added the ‘554 patent, which is a continuation of the ‘088
patent. The allegedly infringing products manufactured, distributed, used, sold and/or offered for sale by defendants include at least those
identified under the trade names: "Pirate Battle," "Battleship," "Clue, "Amazon Fishing," “Star Trek Battle Stations," "Castle King,"
"Monopoly Bigger Event," and "Paradise Fishing."

On October 23, 2013, the U.S. District Court severed the originally filed action into three separate actions: MGT Gaming, Inc. v.
WMS Gaming, Inc. and Caesars Entertainment Corporation (No. 3:13–cv–691, MGT Gaming, Inc. v WMS Gaming Inc. and MGM Resorts
International, Inc. (No. 3:13–cv–692), and MGT Gaming, Inc. v Aruze Gaming America, Inc. and Penn National Gaming Inc. (No. 3:13–cv–
693). On November 4, 2013, the District Court consolidated the three severed cases for discovery purposes. The Defendants in all three
actions filed counterclaims denying infringement and asserting invalidity of both patents–in–suit. MGT Gaming filed appropriate responses to
those counterclaims, reasserting the validity and infringement of the ‘088 and ‘554 patents

On November 4, 2013, Aruze also voluntarily dismissed its separate action in Nevada which had sought a declaratory judgment that

Aruze does not infringe the '088 Patent and/or that the '088 Patent is invalid or unenforceable.

On January 27, 2014, the District Court issued a Docket Order setting a Markman Hearing (also known as a claims construction

hearing) for September 25, 2014, in Jackson, Mississippi before the Honorable District Judge Carlton W. Reeves for all three severed cases.

Results of operations

The Company achieved the following results for the years ended December 31, 2013, and 2012, respectively:

· Revenues totaled $396 (2012: $409).

· Operating expenses were $9,349 (2012: $4,634).

· Net loss attributable to Common shareholders $10,272 (2012: $5,882) resulting in a basic and diluted loss per share of $1.84

(2012: $2.62).

The decline in revenues is attributed to the Medicsight segment which was offset by additional revenues from the new Gaming

segment.

Our operating expenses have increased substantially during the year ended December 31, 2013, predominantly due to non–cash
expenses such as Preferred Series A warrant modification expense of $598 (2012: $nil), stock–based expense of $2,965 (2012: $753) and
depreciation and amortization expense of $399 (2012: $146). Additionally in 2013 the Company made several acquisitions (Note 3) within the
new Gaming segment and incurred $1,092 in associated operating costs.

Fiscal year ended December 31, 2013 vs. Fiscal year ended December 31, 2012

Medicsight software/devices

During the year ended December 31, 2013, ColonCAD sales decreased to $45 from $152 for the same period last year. Insufflator
sales decreased to $33 compared to $70 for the same period last year. The decline is due to the delay in launching the next generation of the
insufflator via our distributor Ultrasound.

Cost of revenue was $nil (2012: $92, attributable to the Insufflator devices).

Gross margin decreased to $78 from $130 for the same period last year due to lower revenues for this segment in 2013.

Selling, general and administrative expenses decreased to $15 in 2013, compared to $1,802 for the same period last year.
Management substantially reduced headcount and streamlined operations in the first half of 2012, all non–US operations we closed. In
addition in 2013 the Company did not allocate executive compensation to Medicsight from MGT Corporate, a decrease of $757 compared to
2012.

There was no research and development expense for this segment in Fiscal 2013 compared to $83 in 2012, due to the streamlining of

operations in the first half of 2012.

Medicsight services

During the year ended December 31, 2013, revenue of $97 was recognized from consulting services (2012: $187). Cost of revenue
was $63 (2012: $173). The decline is attributed to an employee departure during the quarter ended June 30, 2013 in this segment.
Management is currently evaluating and assessing options for this segment.

Selling, general and administrative expenses were $7 (2012: $25).

Intellectual property (f/k/a MGT Gaming)

No revenues were generated in Fiscal 2013 as the Company continues to pursue its patent enforcement strategy.

Selling, general and administrative expenses were $595 (2012: $208), attributed to intellectual property amortization and consulting

and legal fees.

Gaming

During the year ended December 31, 2013, revenue of $221 was recognized through our Gaming segment.

Our cost of revenue was $496, which primarily consisted of overlay incurred on the Fanthrowdown website. The website offers
daily Fantasy Sports contests and charges entry fees to play. Occasionally, as an incentive for user activity some contests may pay out higher
prize money than the charged entry fees, the expense is recognized as overlay and included in cost of revenues. Management expects these
costs to decrease substantially as the site builds its user base and increases liquidity.

There is no comparable revenue or cost of revenue for the same period last year as this is a new segment for 2013.

Our selling, general and administrative expenses were $1,092, which primarily related to information technology and marketing costs
associated with the Fanthrowdown website. There is no comparable selling, general and administrative expense for last year as this is a new
segment beginning May 20, 2013.

In the year ended December 31, 2013 the Company recognized $73 of research and development expense (2012: $nil), attributed to

product development costs in MGT Interactive and MGT Studios.

Unallocated corporate/other

Selling, general and administrative expenses during the year ended December 31, 2013 increased to $7,567 from $2,516 in 2012. A
substantial portion of this increase relates non–cash expenses such as stock–based expense of $2,965 (2012: $753), Preferred Series A
warrant modification expense of $598 (2012: $nil) and depreciation and amortization expense of $399 (2012: $146). In addition the Company
did not allocate executive compensation expense to Medicsight from MGT Corporate this year, resulting in an increase of $757 from 2012.

The Company recorded $30 in interest and other income for Fiscal 2013 (2012: an expense of $99, primarily attributed to interest

payments on the Convertible Note).

Liquidity and capital resources

Working capital summary:
Cash and cash equivalents (excluding $140 and $2,039 restricted cash in December 31,
2013, and 2012, respectively)
Other current assets
Current liabilities
Working capital surplus

Cash flow summary:
Cash (used in) / provided by:
Operating activities
Investing activities
Financing activities
Effects of exchange rates on cash and cash equivalents

Year ended December 31,

2013

2012

4,642 $
175
(985)
3,832 $

3,443
349
(581)
3,211

Year ended December 31,

2013

2012

(5,058) $
2,222
4,035
–
1,199 $

(3,467)
(250)
3,439
17
(261)

On December 31, 2013, MGT’s cash and cash equivalents were $4,642 excluding $140 of restricted cash. The Company continues
to exercise discipline with respect to current expense levels, as revenues remain limited. Our cash and cash equivalents have increased during
2013, primarily from $2,222 and $4,035 provided by investing and financing activities respectively.

Operating activities

Our net cash used in operating activities differs from the net loss predominantly because of various non–cash adjustments such as
depreciation, amortization of intangibles, modification of Preferred Series A warrants, accretion of convertible note discount, amortization of
deferred financing cost, loss on extinguishment of convertible note, stock–based compensation and movements in working capital.

Investing activities

Restricted cash

With fewer than 345,012 shares of Preferred Stock outstanding, $2,000 was released out of restricted cash as the Company is no
longer subject to the Cash Maintenance provision of the Purchase Agreement under which the Preferred Stock was originally sold in October
2012 (Note 9).

Avcom

One half of the issuance to the Avcom Common Stockholders and option holders was placed in escrow and will be released upon
the later of (i) the commercial release of an agreed upon game or (ii) six (6) months after closing. In addition, the Common Stockholders may
be awarded contingent consideration of $1,000 through the issuance of up to 333,000 of the Company’s Common Stock in the event that the
game reaches $3,000 in gross revenues within 18 months of signing the Agreement. Although the Company is currently evaluating the
accounting treatment of the Agreement, the Company believes that the acquisition will constitute a “Significant Acquisition” for accounting
purposes.

Real Deal Poker

On September 3, 2013, the Company entered into a Contribution and Sale Agreement (the “Contribution Agreement”) with Gioia
Systems, LLC. (“Gioia”) and MGT Interactive) whereby MGT Interactive acquired certain assets from Gioia, the inventor and owner of a
proprietary method of card shuffling for the online poker market. Trademarked under the name Real Deal Poker, the technology uses patented
shuffling machines, along with permutation re–sequencing, allowing for the creation of up to 16,000 decks per minute in real time. The
acquisition includes seven (7) U.S. Patents and several Internet URL addresses, including www.RealDealPoker.com. Pursuant to the
Contribution Agreement, Gioia contributed the assets to MGT Interactive in exchange for a 49% interest in MGT Interactive and MGT
contributed $200 to MGT Interactive in exchange for a 51% interest in MGT Interactive. The $200 contributed by the Company will be
utilized as working capital to cover the direct and associated costs relating to the achievement of a certification from Gaming Laboratories
International (“GLI”). The Company has the right to acquire an additional 14% ownership interest in MGT Interactive from Gioia in exchange
for a purchase price of $300 after GLI certification is obtained. Gioia, in turn, will have the right to re–acquire the 14% interest for a period of
three years at a purchase price of $500. Gioia has the right to certain royalty payments from the Gross Rake payments, and any licensing or
royalty income received by MGT Interactive.

Simultaneously with the entry into the Contribution Agreement, the Company and Gioia entered into a Limited Liability Company
Agreement which serves as the operating agreement for MGT Interactive, and a consulting agreement (the “Consulting Agreement”) with
Gioia to provide services to the Company primarily related to obtaining GLI Certification. The Consulting Agreement terminates on the earlier
of January 31, 2014 or the date on which GLI Certification is obtained. In the event that GLI Certification is obtained prior to January 31,
2013, the Consulting Agreement shall be extended for an additional year. Pursuant to the Consulting Agreement, Gioia will receive a monthly
consulting fee of $10 of which $5 is paid in cash per month and $5 is deferred until GLI certification is obtained. The Company expensed
$179 for Fiscal 2013. Testing concluded on January 29, 2014, and GLI reported random behavior suitable for the applications that were
analyzed. The Company is discussing with GLI the final steps to certification.

FanTD

On May 20, 2013, the Company completed the acquisition of 63% of FanTD in exchange for an aggregate purchase of $3,220
consisting of 600,000 shares of MGT Common Stock at a fair value of $5.03 per share for a total of $3,018 and a cash payment of $202. The
fair value of the 37% non–controlling interest retained by the sellers in this transaction amounted to $1,882. The Company’s acquisition of
FanTD is the Company’s initial venture in the online and mobile gaming and wagering space.

On July 23, 2013, MGT Sports acquired certain assets from Daily Joust, Inc. The purchase price consisted of a cash payment of $50

for $136 in customer deposits and assumption of a $136 customer liability.

On June 25, 2013, MGT Sports acquired Fantasy Sports Live, which was effectively a customer list associated with a specific

gaming application for $30 in cash and the assumption of a $46 customer deposit liability.

Digital Angel

On May 2, 2013, the Company purchased certain mobile game application assets from Digital Angel Corporation. The purchase
price consisted of a cash payment in the amount of $136 and 50,000 restricted shares of the Company’s Common Stock with an aggregate fair
value of $202 as of the date this transaction was completed. The Company determined the acquisition constitutes a purchase of assets in
accordance with guidance of ASC 805 “Business Combinations”.

Sale of medical imaging patents

On June 30, 2013, MGT closed the sale of Medicsight’s portfolio of medical imaging patents to Samsung Electronics Co, Ltd.
(“Samsung”). The Company had no prior relationship with Samsung. Gross proceeds of $1,500 was reduced by a broker commission of
$501 paid to Munich Innovation Group GmbH, foreign withholding tax of $248 and an escrow agent fee of $1. The seller deposited $750 of
proceeds into a restricted cash account upon the completion of the sale of which $651 was released to the Company on July 3, 2013. The
remaining $99 is currently in escrow pending reclaim of foreign withholding tax.

MGT Gaming

On May 11, 2012, the Company entered into a Contribution and Sale Agreement (the “Sale Agreement”) with J&S Gaming, Inc.
(“J&S”), and MGT Gaming, Inc. (“MGT Gaming”) for the acquisition of U.S. Patent #7,892,088, entitled “Gaming Device Having a Second
Separate Bonusing Event.” Pursuant to the Sale Agreement and certain ancillary agreements executed simultaneous thereto, (i) J&S sold a
patent to MGT Gaming in exchange for 1,000 shares (constituting 100% ownership) of MGT Gaming Common Stock, par value $0.001 (the
“MGT Gaming Shares”); and (ii) the Company purchased from J&S 550 MGT Gaming Shares constituting 55% ownership in exchange for
$200 cash and a four (4) year warrant to purchase 350,000 shares of the Company’s Common Stock at an exercise price of $4.00 per share
(the “J&S Warrant”).

Medicsight

During the year ending December 2012, the Company purchased 67 shares of Medicsight Ltd’s ordinary shares for cash

consideration of $51.

Financing activities

Warrant exercises

On April 26, 2013, the Company made an offer to the holders of the Company’s $3.85 Common Stock Purchase Warrants (the
“Warrants”), providing if such investors exercised one Warrant, they would have the right to exchange up to two additional Warrants for
5/8ths per share of Common Stock per Warrant exchanged. The results of the offer were that holders of 715,742 Warrants elected to exercise
their Warrants. Total proceeds received from the exercise of 715,742 Warrants were $2,757.

During the year ending December 31, 2013, 357,204 of the Company’s $3.00 Common Stock Purchase Warrants were exercised.

Of the warrant conversions, 210,529 were cashless and 146,675 were exercised for total proceeds of $440.

In addition, the allowed maximum of 1,431,486 Warrants were exchanged for 894,683 shares of the Company’s Common Stock,
issuable upon shareholder and Exchange approval. On September 27, 2013, at MGT’s annual meeting of stockholders, stockholders approved
the issuance of up to 894,683 shares of Common Stock in exchange for the cancellation of 1,431,486 warrants to purchase shares of Common
Stock at $3.85 per share. The shares were subsequently issued on October 8, 2013. The stock was valued at $3,230, using the closing market
price on September 27, 2013.

On December 10, 2013, the Company entered into a Warrant Modification Agreement (the “Agreement”) with Iroquois Master Fund
Ltd. (“Iroquois”). Pursuant to the Agreement, Iroquois agreed to immediately exercise its warrant to purchase 613,496 shares of Common
Stock, par value $0.001 of the Company, at an exercise price of $1.50 per share, for aggregate gross proceeds to the Company of $920 and (ii)
agreed to terminate its right of participation in future equity offerings of the Company. In exchange, the Company agreed to reduce the warrant
exercise price from $3.85 per share to $1.50 per share, and agreed not to issue any securities at a price below $2.50 per share for a period of
90 days after the date of the Agreement (other than securities granted pursuant to a stock plan or issued in connection with an acquisition or
issued pursuant to an agency agreement with a registered broker–dealer provided that we agree with the broker–dealer and publicly announce
that we will not sell shares for a price below $2.50 per share); this 90 day period has expired. Iroquois acquired the warrant in connection with
the Company's November 2012 financing. In connection with the Agreement, the Company paid to Chardan Capital Markets, LLC a
placement fee for the solicitation of the exercise of the warrants equal to 8% of the gross proceeds raised, or approximately $73 and
reimbursed Chardan for $9 of its legal fees, resulting in net proceeds of $838.

Century

On December 2, 2013, the Company entered into a Settlement Agreement (the “Settlement Agreement”) with Century. Pursuant to
the Settlement Agreement, both parties agreed to the following: (i) the Company’s obligation to grant the Warrant and to issue the underlying
Common Stock, and Century’s right to receive the Warrant and the underlying Common Stock is cancelled, (ii) Century will make a cash
payment to the Company of $100 and (iii) the Company will issue to Century 100,000 shares of Common Stock subject to NYSE MKT
exchange approval. These shares were subsequently issued on December 26, 2013. The stock was valued at $301, using the closing market
price on December 2, 2013. Proceeds under the Settlement Agreement were received December 10, 2013 (Note 11).

Convertible note

On May 29, 2012, MGT entered into an agreement with an investor providing $3.5 million of capital in support of the Company’s
strategy to monetize intellectual property. The capital raise comprised the sale of $3.5 million of Notes plus HB Warrants to purchase MGT
Common Stock. The Company paid $372 of financings costs associated to this note issuance.

On October 9, 2012, the Company executed two identical exchange agreements (collectively, the “Agreements”) settling the
outstanding Note for a cash payment of $3.5 million and 100,000 shares of the Company’s Common Stock valued at $415, using the opening
price of the Company’s Common Stock on October 9, 2012. The net carrying amount of the Note on the date of extinguishment was $2,698
which was comprised of the amount due at maturity of $3,500 less unamortized debt discount of $802 related to the amount allocated to the
warrants and the beneficial conversion feature at issuance. The total reacquisition price of $3,915 was allocated first to the repurchased
beneficial conversion feature by recording a reduction of additional paid–in capital of $1,341 measured as the intrinsic value of that conversion
feature at the extinguishment date with the residual amount of the reacquisition price of $2,574 allocated to the Note. The difference between
the reacquisition price allocated to the Note and the net carrying amount of the Note resulted in a gain of $124 which when netted with the
write–off of unamortized deferred financing costs of $462 and legal cost of $17, at extinguishment resulted in a total loss on extinguishment of
$355. Extinguishment of debt, gains and losses, including fees, incurred in connection with the early extinguishment of debt are charged to
current earnings as reductions in non–operating expenses.

Convertible Preferred Series A

On November 2, 2012, the Company closed two separate financing agreements with various institutional investors providing an
aggregate of $5.9 million of capital. The capital raise was comprised of the sale of 1,380,362 shares of Preferred Stock (including 2,760,724
warrants to purchase MGT Common Stock), resulting in gross proceeds of $4.5 million, plus a separate sale of 453,000 shares of MGT
Common Stock at $3.01 per share for gross proceeds of $1.4 million. On October 26, 2012, this transaction was approved by the Exchange.
The Preferred Stock is convertible into the Company's Common Stock at a fixed price of $3.26 per share and carries a 6% dividend. During
February and March 2013, 241,748 and 30,000 shares of the Company’s Preferred Convertible Series A Stock were converted into 241,748
and 30,000 shares, of the Company’s Common Stock, respectively. The Warrants have a five–year life and are exercisable at $3.85 per MGT
share; the Company issued a total of 2,760,724 warrants. The Common Stock was sold at $3.01 per share with a total of 453,000 shares sold,
under its S–3 Registration Statement (Registrant No. 333–182298), which was declared effective on September 25, 2012.

Risks and uncertainties related to our future capital requirements

The Company has incurred significant operating losses since inception and continues to generate losses from operations. As a result,
the Company has generated negative cash flows from operations and has an accumulated deficit of $293,833 at December 31, 2013. The
Company is operating in a developing industry based on new technology and its primary source of funds to date has been through the
issuance of securities. While the Company is optimistic and believes appropriate actions are being taken, there can be no assurance that the
products or patent monetization strategy will be successful. Furthermore, it is contemplated that any acquisitions may require the Company to
raise capital; such capital may not be available on terms acceptable to the Company, if at all.

On December 30, 2013, and as amended on March 27, 2014, the Company entered into an At the Market Offering Agreement (the

“Agreement”) with Ascendiant Capital Markets, LLC (the “Manager”).

Pursuant to the Agreement, the Company may offer and sell shares of its Common Stock (the “Shares”) having an aggregate
offering price of up to $8.5 million from time to time through the Manager. The Shares sold in the offering will be issued pursuant to the
Company’s effective shelf registration statement on Form S–3 (File No. 333–182298) previously filed with the Securities and Exchange
Commission (the “SEC”) in accordance with the provisions of the Securities Act of 1933, as amended (the “Securities Act”), as supplemented
by a prospectus supplement dated December 30, 2013 for the sale of up to $8.5 million of Shares, which the Company filed with the SEC
pursuant to Rule 424(b)(5) under the Securities Act.

The Manager is not required to sell any specific number or dollar amount of Shares but will use its commercially reasonable efforts,
as the Company's agent and subject to the terms of the Agreement, to sell the Shares offered, as instructed by the Company. Such instructions
will include notice as to the maximum amount of shares of the Company’s Common Stock to be sold by the Manager on a daily basis and the
minimum price per share at which such shares may be sold.

The Agreement provides that the Company will pay the Manager a fee of 3.0% of the gross sales price of any Shares sold through
the Manager. The Agreement contains customary representations, warranties and agreements of the Company and the Manager and customary
conditions to completing future sale transactions, indemnification rights and obligations of the parties and termination provisions.

The Company intends to use the net proceeds from any sales of Shares in the offering for working capital, capital expenditures, and

general business purposes. The Company's management will have significant flexibility in applying the net proceeds of this offering.

At December 31, 2013, MGT’s cash, cash equivalents and restricted cash were $4,782, including $271 held in FanTD and $6 held

in MGT Gaming.

Management believes that the current level of working capital along with the At the Market Offering Agreement, will be sufficient to

allow the Company to maintain its operations into April 2015.

To date we have primarily financed our operations through private placements of equity and debt securities. To the extent that
additional capital is raised through the sale of equity or equity–related securities of the Company or its subsidiaries, the issuance of such
securities could result in dilution to our stockholders.

No assurance can be given, however, that we will have access to the capital markets in the future, or that financing will be available

on acceptable terms, if at all, to satisfy our cash requirements to implement our business strategies.

If we are unable to access the capital markets or obtain acceptable financing, our results of operations and financial conditions could

be materially and adversely affected. We may be required to raise substantial additional funds through other means.

Commercial results have been limited and we have not generated significant revenues. We cannot assure our stockholders that our
revenues will be sufficient to fund our operations. If adequate funds are not available to us, we may be required to curtail operations
significantly or to obtain funds through entering into arrangements with collaborative partners or others that may require us to relinquish rights
to certain of our technologies or products that we would not otherwise relinquish.

Currently the Company anticipates it has sufficient cash on hand, along with the At the Market Offering Agreement to continue
operations at least through April 2015, at which point the Company may need to seek additional sources of financing. There is no guarantee
that additional sources of financing will be available or on terms acceptable to the Company, if at all.

There can be no assurance that any additional acquisitions will occur at all, or that any such acquisitions will be accretive to earnings,
book value and other financial metrics, or that any such acquisitions will generate positive returns for Company shareholders. Furthermore, it
is contemplated that any acquisitions may require the Company to raise additional capital; such capital may not be available on terms acceptable
to the Company, if at all.

The Company intends to use the net proceeds from any future offerings for general corporate purposes, including, but not limited to,

obtaining regulatory approvals, commercialization of its products, capital expenditures and working capital.

Commitments

Consulting agreements

On October 26, 2012, the Company entered into a one–year financial advisory and consulting agreement with a national investment–
banking firm. Compensation under the agreement includes cash consideration of $250 and 120,000 shares of restricted Common Stock. Under
the terms of the agreement, there are no penalties or liabilities to the Company if approval is not received. Issuances of restricted Common
Stock to service providers as compensation for services are subject to shareholder approval. These shares were subsequently issued on
September 4, 2013 (2012: None). The stock was valued at $504, the closing market price on that date. For the year ended December 31, 2013,
the Company expensed $188 in cash and $504 in stock consideration (2012: $42 and $nil respectively).

In November 2012, in connection with the sale of the Preferred Stock, the Company was required to enter into investor/public
relations service agreements, with terms of seven, ten and twelve months. Compensation under the agreements included cash consideration of
$444, the issuance of 100,000 shares of Preferred Stock and 400,000 warrants to purchase MGT Common Stock. Issuance of Preferred Stock
and warrants to service providers as compensation for services are subject to shareholder and NYSE MKT approval. No shares were
approved or issued as of December 31, 2013 (2012: None). Under the terms of the agreements, there are no penalties or liabilities to the
Company if approval is not received.

The twelve–month agreement was mutually terminated in January 2013, reducing the remaining cash consideration due by $108 and
the stock consideration still owed under the agreement was further renegotiated on May 3, 2013, to replace the issuance of 100,000 shares of
Preferred Stock and 200,000 warrants to purchase MGT Common Stock with the issuance of 50,000 shares of Restricted Common Stock,
subject to NYSE MKT exchange approval. These shares were subsequently issued on September 4, 2013. The stock was valued at $206,
using the closing market price on that date. For the year ended December 31, 2013, the Company expensed $228 in cash and $407 in stock
consideration (2012: $79 and $nil respectively).

On May 3, 2013, the seven–month agreement was mutually terminated, reducing the future cash consideration due by $20 in

consideration of having a month–to–month service agreement for $15 per month. This agreement was cancelled in August 2013.

The ten–month agreement terminated in accordance with its terms on September 19, 2013, however, because the obligation to meet
the timeframe contemplated and the issuance of the Warrant was never made, management determined it was in the best interest of the
Company to enter into a settlement regarding the Warrant issuance. On December 2, 2013, the Company entered into a Settlement Agreement
(the “Settlement Agreement”). Pursuant to the Settlement Agreement, both parties agreed to the following: (i) the Company’s obligation to
grant the Warrant and to issue the underlying Common Stock, and Century’s right to receive the Warrant and the underlying Common Stock is
cancelled, (ii) Century will make a cash payment to the Company of $100 and (iii) the Company will issue to Century 100,000 shares of
Common Stock subject to NYSE MKT exchange approval. Proceeds under the Settlement Agreement were received December 10, 2013. The
shares were issued on December 26, 2013. The stock was valued at $301, using the closing market price on that date.

For the years ended December 31, 2013, the Company paid $415 in cash consideration (2012: $121), and recognized $911 (2012:

$nil) of stock–based expense relating to the agreements.

Haller agreements

On September 30, 2013, the Company and Michael Haller (“Haller”) agreed to terminate the June 1, 2013, Employment Agreement
between the Company and Haller. In addition, the Company agreed to license certain intellectual property obtained from Digital Angel
Corporation to Gammaker Pty. Ltd (“Gammaker”), a Singapore entity controlled by Haller in exchange for a 10% share of the gross revenues
generated by Gammaker on such licensed assets. The Company also sold to Haller certain trademarks owned by the Company for
consideration of $6, which was received on October 17, 2013.

Lease agreements

In September 2011, the Company entered into a 39–month lease agreement for office space located in Harrison, New York,
terminating on November 30, 2014. Under the agreement our total rental payments over the 39–month lease period are $240, inclusive of three
months of free rent and a refundable rental deposit of $39, held as restricted cash.

A satellite office in Tokyo, Japan was closed in January 2012, and the rental deposit of $128 was returned.

Beginning August 1, 2011, the Company’s UK office lease was on a month–to–month basis, with total monthly rental payments of
$13 along with a rental deposit of $25. In February 2012, the Company moved to a smaller office in the same location with month–to–month
rental payments of $4 and a rental deposit of $6. We terminated this lease effective June 30, 2012, to streamline operations. The Company no
longer maintains a UK office.

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 (“GAAP”). The notes
to the consolidated financial statements contained in this Annual Report describe our significant accounting policies used in the preparation of
the 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.

We believe the critical accounting policies listed below reflect significant judgments, estimates and assumptions used in the

preparation of our consolidated financial statements.

Software developed for internal use

The Company follows Accounting Standards Codification (“ASC”) 350–40 “Intangibles–Internal Use Software” on accounting for
the costs of computer software developed or obtained for internal use. Costs incurred during the preliminary stage are expensed as incurred by
the Company. Certain qualifying costs incurred during the application development stage are capitalized as property, equipment and software
by the Company. The Company begins capitalization when the preliminary project stage is complete and it is probable that the project will be
completed and the software will be used to perform the function intended.

Intangible assets

Estimates of future cash flows and timing of events for evaluating long–lived assets for impairment are based upon management’s
judgment. If any of our intangible or long–lived assets are considered to be impaired, the amount of impairment to be recognized is the excess
of the carrying amount of the assets over its fair value. Applicable long–lived assets are amortized or depreciated over the shorter of their
estimated useful lives, the estimated period that the assets will generate revenue, or the statutory or contractual term in the case of patents.
Estimates of useful lives and periods of expected revenue generation are reviewed periodically for appropriateness and are based upon
management’s judgment.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the assets acquired and liabilities assumed. The Company

is required to perform impairment reviews at each of its reporting units annually and more frequently in certain circumstances.

In accordance with ASC 350–20 “Goodwill”, the Company is able to make a qualitative assessment of whether it is more likely than
not that a reporting unit’s fair value is less than its carrying amount before applying the two–step goodwill impairment test. If the Company
concludes that it is more likely than not that the fair value of a reporting unit is not less than its carrying amount it is not required to perform
the two–step impairment test for that reporting unit.

Virtual currency liability related to Avcom

Users of the Company’s website maintain virtual currency balances which are accumulated as users participate in the Company’s
online games. The amounts may become payable in cash by the Company once the user’s virtual currency balance exceeds a certain minimum
threshold; a virtual currency balance of $10.00 or $20.00 based upon initial date of enrollment on the site. User accounts expire after six
months of inactivity. The Company records an accrual for potential virtual currency payouts at the end of each reporting period based on
historical payout experience and current virtual currency balances. At December 31, 2013 the Company recorded a liability of $10 relating to
potential future virtual currency payouts.

Deferred financing costs

In conjunction with the issuance of Senior Secured Convertible Notes on June 1, 2012, the Company incurred certain financing
costs, including the issuance of Common Stock. The Company accounts for deferred financing costs in accordance with ASC 470–10 “Debt”.
Deferred financing costs are amortized through periodic charges to other non–operating expenses over the term of the related financial
instrument using the effective interest method.

Convertible instruments

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815
“Derivatives and Hedging Activities” and ASC 470 “Debt”. Applicable GAAP requires companies to bifurcate conversion options from their
host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria includes
circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to
the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument
and the host contract is not re–measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair
value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be
considered a derivative instrument. An exception to this rule, when the host instrument is deemed to be conventional as that term is described
under applicable GAAP.

Beneficial conversion features

From time to time, the Company may issue convertible instruments that may have conversion prices that create an embedded
beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the
underlying Common Stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first
considering the allocation of a portion of the note proceeds to the fair value of any detachable equity instruments, if any related equity
instruments were granted with the debt. The intrinsic value of the beneficial conversion feature is recorded as a discount with a corresponding
amount to additional paid–in–capital. A discount to the convertible instrument is accreted to expense over the life of the instrument using the
effective interest method.

Revenue recognition

The Company recognizes revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned
when there is persuasive evidence of an arrangement and that the product has been shipped or the services have been provided to the customer,
the sales price is fixed or determinable and collectability is probable. Our material revenue streams are related to the delivery of software
license fees, maintenance services, hardware, consulting services and gaming fees. We enter into revenue arrangements that may consist of
multiple deliverables of software and services due to the needs of our customers. In addition to these general revenue recognition criteria, the
following specific revenue recognition policies are followed:

Multiple–element arrangements — the Company enters into arrangements with visualization solution partners and original equipment
manufacturers. For such arrangements, the Company recognizes revenue using the Multiple–Deliverable Revenue Arrangements. For our
multiple–element arrangements, deliverables are separated into more than one unit of accounting when (i) the delivered element(s) have value
to the customer on a stand–alone basis, and (ii) delivery of the undelivered element(s) is probable and substantially in our control.

The revenue allocated to each deliverable will then be recorded in accordance with existing revenue recognition guidance for stand–

alone component sales and services.

Software – License fee revenue is derived from the licensing of computer software. Maintenance revenue is derived from
software maintenance. Our software licenses are generally sold as part of an arrangement that includes maintenance and support.

The Company generally offers terms that require payment 30 – 45 days from invoicing. Provided that the Reseller: (i) assumes all
risk of the purchase, (ii) has the ability and obligation to pay regardless of receiving payment from the end user, and (iii) all other
revenue recognition criteria are met, license revenue from Resellers is recognized upon shipment of its product to vendors (“sell–
in basis”).
Revenue from license fees is recognized when notification of shipment to the end user has occurred, there are no significant
Company obligations with regard to implementation and the Company’s services are not considered essential to the functionality
of other elements of the arrangement.

· Maintenance – Revenue from maintenance and support arrangements is deferred and recognized ratably over the term of the

maintenance and support arrangements.

· Hardware – Revenue is derived from sales of our automated carbon dioxide insufflation device. The device is sold and warrantied
exclusively through our distribution partner Ultrasound Technologies, Ltd. with the Company receiving a royalty on each unit
sold. Revenue is recognized as orders are satisfied and delivered by our supplier.

Services–consulting – Consulting revenue is earned over the period in which the Company provides the related services. The
Company recognizes consulting revenue as it meets the terms of the underlying contract on the terms of the agreement.

· Gaming fees – Revenue represents income earned as entry fees for a daily fantasy sports contest and is presented net of any

bonus points applied by customers. Once a contest concludes, the Company recognizes the income earned as revenue.

· Advertising – Revenue is earned with certain advertising service providers for advertisements within our games and revenue from
these advertisers is generated through impressions, click–throughs, banner ads and offers. Revenue is recognized as
advertisements are delivered, an executed contract exists, the price is fixed or determinable and collectability has been reasonably
assured. Delivery generally occurs when the advertisement has been displayed or the offer has been completed by the user.

Research and development

The Company incurs costs in connection with the development of software products that are intended for sale. Costs incurred prior
to technological feasibility being established for the product are expensed as incurred. Technological feasibility is established upon completion
of a detail program design or, in its absence, completion of a working model. Thereafter, all software production costs are capitalized and
subsequently reported at the lower of unamortized cost or net realizable value. Capitalized costs are amortized based on current and future
revenue for each product with an annual minimum equal to the straight–line amortization over the remaining estimated economic life of the
product. Amortization commences when the product is available for general release to customers.

The Company concluded that capitalizing such expenditures on completion of a working model was inappropriate because the
Company did not incur any material software production costs and therefore expenses were all research and development costs. Our research
and development costs are comprised of staff, consultancy and other costs expensed on our products.

Equity–based compensation

The Company recognizes compensation expense for all equity–based payments in accordance with ASC 718 “Share-based
payments". 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 Company. These awards are restricted as to the transfer of ownership and
generally vest over the requisite service periods, typically over an eighteen 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 Company stock on the grant date

The fair value of 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 input into the model. These assumptions are the expected stock
volatility, the risk–free interest rate, the option’s expected life and the dividend yield on the underlying stock. Expected volatility is calculated
based on the historical volatility of our Common Stock over the expected option life and other appropriate factors. Risk–free interest rates are
calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the
Company has never paid or declared any cash dividends on our Common Stock and does not intend to pay dividends on our Common Stock
in the foreseeable future. The expected forfeiture rate is estimated based on historical experience.

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. As a result, if factors
change and the Company uses different assumptions, our equity–based compensation expense could be materially different in the future. In
addition, the Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If our
actual forfeiture rate is materially different from our estimate, the equity–based compensation expense could be significantly different from
what the Company has recorded in the current period.

The Company accounts for share–based payments granted to non–employees in accordance with ASC 505, “Equity Based Payments
to Non–Employees”. The Company determines the fair value of the stock–based payment as either the fair value of the consideration received
or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is
used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for
performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

Segment reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or decision–making group in deciding how to allocate resources and in assessing
performance. Our chief operating decision–making group is composed of the chief executive officer and chief financial officer. We operate in
four operational segments, Medicsight Software/Devices, Medicsight Services, Gaming and Intellectual Property. MGT Gaming is now
referred to as Intellectual Property. Gaming is a new segment for the current year. Certain corporate expenses are not allocated to segments.

Recent accounting pronouncements

There are no recent accounting pronouncements that are expected to have an effect on the Company’s financial statements.

Item 7A. Quantitative and qualitative disclosure about market risk

We are a smaller reporting company and therefore, we are not required to provide information required by this Item on Form 10–K.

Item 8. Financial statements and supplementary data

See Financial Statements and Schedules attached hereto.

Item 9. Changes in and disagreements with accountants on accounting and financial disclosure

None.

Item 9A. Controls and procedures

(a) Evaluation of disclosure controls and procedures.

The Company has established controls and procedures designed to ensure that information required to be disclosed in the reports that
the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in
the Commission’s rules and forms and is accumulated and communicated to management, including the principal executive officer and
principal financial officer, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of the
Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company conducted an
evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a–
15(e) and 15d–15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this
report (the “Evaluation Date”). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures,
including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on such evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, the Company’s disclosure controls and
procedures were effective to provide reasonable assurance that information required to be disclosed by the Company (including its combined
subsidiaries) in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the communication to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Management’s annual report on internal control over financial reporting.

SEC rules implementing Section 404 of the Sarbanes–Oxley Act of 2002 require our 2013 Annual Report on Form 10–K to contain
management’s report regarding the effectiveness of internal control over financial reporting. As a basis for our report, we tested and evaluated
the design, documentation, and operating effectiveness of our internal control.

Management is responsible for establishing and maintaining effective internal control over financial reporting, as defined in
Rule 13a–15(f) under the Exchange Act, of MGT Capital Investments, Inc. and its subsidiaries. The Company’s internal control over financial
reporting consists of policies and procedures that are designed and operated to provide reasonable assurance about the reliability of the
Company’s financial reporting and its process for preparing financial statements in accordance with generally accepted accounting principles
(“GAAP”). There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and
the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurance with respect
to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial
Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's
assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process
documentation, accounting policies, and our overall control environment. Based on this evaluation, our management concluded that our
internal control over financial reporting was effective as of December 31, 2013.

This annual report does not include an attestation report of the Company’s independent public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation by the Company’s independent public accounting firm
pursuant to permanent rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this
annual report.

There have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to

materially affect, our internal control over financial reporting.

Item 9B. Other information.

None.

Item 10. Directors, Executive Officers and Corporate Governance

PART III

Name
H. Robert Holmes 70 Chairman of the Board, Chairman of the Nomination and Compensation Committee, Audit

Position

Age

Michael Onghai

44 Chairman of the Audit Committee, Nomination and Compensation Committee Member, Independent

Committee Member, Independent Director

Robert B. Ladd
55 President, Chief Executive Officer and Director
Robert P. Traversa 49 Treasurer, Chief Financial Officer and Director

Director

Directors are elected based on experience, qualifications and in accordance with the Company’s by–laws to serve until the next
annual stockholders meeting and until their successors are elected in their stead. Officers are appointed by the Board of Directors and hold
office until their successors are chosen and qualified, until their death or until they resign or have been removed from office. All corporate
officers serve at the discretion of the Board of Directors. There are no family relationships between any director or executive officer and any
other director or executive officer of the Company.

H. Robert Holmes was elected as a director in May 2012. From 2008 to 2012, Mr. Holmes has served on the board of Dejour
Energies Inc. (NYSE–MKT: DEJ, 2008–2013). Mr. Holmes was the founder and general partner of Gilford Partners Hedge Fund. From
1980–1992, Mr. Holmes was the Co–Founder, President of Gilford Securities, Inc. Previously, Mr. Holmes served in various positions with
Paine Webber and Merrill Lynch. Mr. Holmes has served on the Board of Trustees North Central College in Naperville, II; Board of Trustees
of Sacred Heart Schools, Chairman of Development Committee, in Chicago, IL; Board of Trustees of Crested Butte Academy where he was
Chairman of Development Committee; and the Board of Trustees Mary Wood Country Day School, Rancho Mirage, CA. The board believes
that Mr. Holmes has the experience, qualifications, attributes and skills necessary to serve as a director because of his years of business
experience and service as a director for many companies over his career.

Michael Onghai was appointed a director in May 2012. Mr. Onghai has been the CEO of LookSmart (NASDAQ CM: LOOK),
since February 2013. He has been the founder and Chairman of AppAddictive, an advertising and social commerce platform since July 2011.
Mr. Onghai is the President of Snowy August Management LLC, a special situations fund concentrating on the Asian market, spin–offs and
event–driven situations. Mr. Onghai is the founder of Stock Sheet, Inc., and Daily Stocks, Inc. – the web's early providers of financial
information and search engine related content for financial information. Mr. Onghai has founded several other internet technology companies
for the last two decades. Mr. Onghai is an advisor to several internet incubators and is a panelist who advises FundersClub on which
companies to accept for its pioneering venture capital platform. Mr. Onghai has earned his designation as a Chartered Financial Analyst (2006)
and holds a B.S. in Electrical Engineering and Computer Science from the University of California, Los Angeles and graduated from the
Executive Management Certificate Program in Value Investing (The Heilbrunn Center for Graham & Dodd Investing) Graduate School of
Business at Columbia Business School. The board believes that Mr. Onghai has the experience, qualifications, attributes and skills necessary
to serve as a director and chairman of the Audit Committee because of his years of business experience and financial expertise.

Robert B. Ladd joined the Company in December 2010 as a Director. He was named Interim President and CEO in February 2011,
and appointed President and CEO in January 2012. Mr. Ladd is the Managing Member of Laddcap Value Advisors, LLC, which serves as the
investment manager for various private partnerships, including Laddcap Value Partners LP. Prior to forming his investment partnership in
2003, Mr. Ladd was a Managing Director at Neuberger Berman, a large international money management firm catering to individuals and
institutions. From 1992 through November 2002, Mr. Ladd was a portfolio manager for various high net worth clients of Neuberger Berman.
Prior to this experience, Mr. Ladd was a securities analyst at Neuberger from 1988 through 1992. Mr. Ladd is a former Director of InFocus
Systems, Inc. (NASDAQ – INFS, 2007 to 2009), and served on the board of Delcath Systems, Inc. (NASDAQ – DCTH, 2006–2012). Mr.
Ladd has earned his designation as a Chartered Financial Analyst (1986). Based on Mr. Ladd’s familiarity with the Company in serving as our
Chief Executive Officer since 2011 and his overall background and experience as an executive in the financial industry, the Nominating
Committee of the Board of Directors concluded that Mr. Ladd has the requisite experience, qualifications, attributes and skill necessary to
serve as a member of the Board of Directors.

Robert P. Traversa joined the Company on March 1, 2011 as a senior advisor to executive management and was appointed the
Company’s Chief Financial Officer in May 2011. Prior to joining the company, he was a senior vice president at Neuberger Berman LLC, a
large international money management firm catering to individuals and institutions. He joined Neuberger Berman in 1994 and was most
recently a senior member of an investment team within the Private Asset Management Division. His earlier career at Neuberger encompassed
positions supporting management, operations and technology. Mr. Traversa was a financial analyst at Bankers Trust in the Investment
Management Division from 1990 until 1994. He began his career on the audit staff at Price Waterhouse in 1987. Mr. Traversa is a NY State
Certified Public Accountant. Based on Mr. Traversa’s familiarity with the Company in serving as our Chief Financial Officer since 2011 and
his overall background and experience as an executive in the financial industry, the Nominating Committee of the Board of Directors
concluded that Mr. Traversa has the requisite experience, qualifications, attributes and skill necessary to serve as a member of the Board of
Directors.

Arrangements relative to appointment as Director

Under an Amended and Restated Securities Purchase Agreement dated December 9, 2010 (the “Purchase Agreement”) between the
Company and Laddcap Value Partners, LP (the “Purchaser”), the Purchaser agreed to purchase 195,000 shares of the Company’s Common
Stock for $1,000. The Company appointed Robert B. Ladd, as director to fill the vacancy caused by the resignation of Tim Paterson–Brown.
The Purchase Agreement closed on December 13, 2010. On February 9, 2011, all 239,520 shares of the Company's Common Stock held by
the Purchaser were transferred from the Purchaser to Laddcap Value Partners III LLC (“Laddcap”). Mr. Ladd is the managing member of
Laddcap.

Involvement in certain legal proceedings

To the best of our knowledge, during the past ten years, none of the following occurred with respect to any director, director

nominee or executive officer:

(1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at

the time of the bankruptcy or within two years prior to that time;

(2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other

minor offenses);

(3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of
business, securities or banking activities;

(4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to
have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated;

(5) being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not

subsequently reversed, suspended or vacated, relating to an alleged violation of:

(i)

(ii)

any federal or state securities or commodities law or regulation;

any law or regulation respecting financial institutions or insurance companies including, but not limited to, a
temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or
permanent cease–and–desist order, or removal or prohibition order; or

(iii)

any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

(6) being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self–regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or persons associated with a member (covering stock, commodities
or derivatives exchanges, or other SROs).

Corporate code of ethics

On June 25, 2012, the Board of Directors revised the Code of Conduct and Ethics which applies to all directors and employees
including the company’s principal executive officer, principal financial officer and principal accounting officer or persons performing similar
functions. Prior to June 25, 2012, the Company’s employees and directors were subject to the previous Code of Ethics adopted by the Board
of Directors on December 28, 2007.

Copies of the Code of Business Conduct and Ethics, the Anti–Fraud Policy, the Whistleblower Policy and the MGT Share Dealing
Code can be obtained, without charge by writing to the Corporate Secretary at MGT Capital Investments, Inc., 500 Mamaroneck Avenue,
Suite 204, Harrison, NY 10528, or through our corporate website at www.mgtci.com.

Section 16(a) Beneficial ownership reporting compliance

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who own more than 10% of the
Company’s stock (collectively, “Reporting Persons”) to file with the SEC initial reports of ownership and changes in ownership of the
Company’s Common Stock. Reporting Persons are required by SEC regulations to furnish the Company with copies of all Section 16(a)
reports they file. Other than as disclosed below and based solely on a review of the reports furnished to us, or written representations from
reporting persons that all reportable transaction were reported, we believe that during the fiscal year ended December 31, 2013, our officers,
directors and greater than ten percent stockholders timely filed all reports and did not miss any filings as required to file under Section 16(a).

Audit Committee and Audit Committee financial expert

On November 25, 2004, the Company’s Board of Directors established an Audit Committee to carry out its audit functions. At

December 31, 2013, the membership of the Audit Committee was Michael Onghai and H. Robert Holmes.

The Company’s Board of Directors has determined that Michael Onghai, an independent director, is the Audit Committee financial

expert, as defined in Regulation S–K promulgated under the Securities and Exchange Act of 194, serving on its Audit Committee.

Item 11. Executive compensation

Summary compensation table

The following table summarizes Fiscal Years 2013 and 2012 compensation for services in all capacities of the Company’s named

executive officers and other individuals:

Name
Robert B. Ladd

Principal Position
Chief Executive Officer

Robert P. Traversa

Chief Financial Officer

Year
2013
2012
2013
2012

$
$
$
$

285 $
263 $
275 $
263 $

143 $
185 $
138 $
175 $

– $
711 $
– $
655 $

Salary

Bonus

Stock
awards
(1)

All other

compensation

Total
compensation
428
1,159
413
1,093

– $
– $
– $
– $

(1) This column discloses the dollar amount of the aggregate grant date fair value of restricted stock granted in the year.

Grants of Plan–Based Awards

All other
stock
awards:
Number of
shares of
stock (#)
85,000
50,000
75,000
50,000

Grant date
06/25/2012
11/19/2012
06/25/2012
11/19/2012

All other
option
awards:
Number of
securities
underlying
options (#)

Exercise or
base price
of option
awards
($/Share)

Grant date
fair value of
stock and
stock
options

– $
– $
– $
– $

5.62
4.67
5.62
4.67

Name

Robert B. Ladd

Robert P. Traversa

Outstanding equity awards at December 31, 2013

The table below sets forth information regarding outstanding equity awards held by our named executive officers as of December 31,

2013, granted under our 2012 Stock Incentive Plan.

Number of shares or
units of stock not
vested

Market value of
shares or units of
stock not vested
47
47

16,668 $
16,668 $

Equity incentive plan
awards: Number of
unearned shares,
units or other rights
that have not vested

Equity incentive plan
awards: market
value or payout value
of unearned shares,
units or other rights
not vested

16,668 $
16,668 $

–
–

Name

Robert B. Ladd
Robert P. Traversa

Employment agreements

On November 19, 2012, the Company entered into an employment agreement with Robert B. Ladd, to act as its President and Chief
Executive Officer. Upon execution of the agreement, Mr. Ladd was granted a $100 cash payment and 50,000 shares of restricted Common
Stock. The agreement provides for a two year term, subject to automatic renewals. The agreement provides for a base salary of $285 per year.
Pursuant to the employment agreement, Mr. Ladd is eligible for a cash and/or equity bonus as determined by the Compensation Committee.
Pursuant to the agreement, in the event that Mr. Ladd dies or is permanently disabled or he is terminated without good cause or he resigns for
Good Reason. Mr. Ladd is entitled to (i) a severance payment equal to the higher of his base salary for the remaining term of this agreement or
twelve times the average monthly Base Salary paid or accrued during the three full calendar months immediately preceding such determination;
(ii) expense compensation in an amount equal to twelve times the sum of the average Base Salary during the full calendar months preceding
such termination; (iii) immediate vesting of all stock options; (iv) vacation pay for any vacations days earned but not taken; (v) medical
insurance for 12 months; and (vi) the cost of office space, not to exceed $3 per month. Good Reason includes a change of control. If payments
are subject to the excise tax imposed by Section 4999 of the Code, the Company will pay Mr. Ladd an additional amount so that the net
amount retained by Mr. Ladd shall be equal to what his Total Payments would have been without the Excise Tax and any state and local

amount retained by Mr. Ladd shall be equal to what his Total Payments would have been without the Excise Tax and any state and local
income taxes. If the Company terminates Mr. Ladd for Cause or Mr. Ladd resigns without Good Reason, he shall only be entitled to any
compensation earned but not paid at such time. Mr. Ladd’s employment agreement was filed in an 8–K dated November 23, 2012, all defined
terms not otherwise defined herein are defined in such employment agreement. On January 28, 2014, the Company entered into an amendment
to the employment agreement which extended the term for an additional year, through November 30, 2015.

On November 19, 2012, the Company entered into an employment agreement with Robert P. Traversa to act as its Treasurer and
Chief Financial Officer. The agreement provides for a two year term, subject to automatic renewals. Upon execution of the agreement, Mr.
Traversa was granted a $100 cash payment and 50,000 shares of restricted Common Stock. The agreement provides for a base salary of $275
per year. Pursuant to the employment agreement, Mr. Traversa is eligible for a cash and/or equity bonus as determined by the Compensation
Committee. Pursuant to the agreement, in the event that Mr. Traversa dies or is permanently disabled or he is terminated without good cause or
he resigns for Good Reason. Mr. Traversa is entitled to (i) a severance payment equal to the higher of his base salary for the remaining term of
this agreement or twelve times the average monthly Base Salary paid or accrued during the three full calendar months immediately preceding
such determination; (ii) expense compensation in an amount equal to twelve times the sum of the average Base Salary during the full calendar
months preceding such termination; (iii) immediate vesting of all stock options; (iv) vacation pay for any vacations days earned but not taken;
(v) medical insurance for 12 months; and (vi) the cost of office space, not to exceed $3.00 per month. Good Reason includes a change of
control. If payments are subject to the excise tax imposed by Section 4999 of the Code, the Company will pay Mr. Traversa an additional
amount so that the net amount retained by Mr. Traversa shall be equal to what his Total Payments would have been without the Excise Tax
and any state and local income taxes. If the Company terminates Mr. Traversa for Cause or Mr. Traversa resigns without Good Reason, he
shall only be entitled to any compensation earned but not paid at such time. Mr. Traversa’s employment agreement was filed in an 8–K dated
November 23, 2012 all defined terms not otherwise defined herein are defined in such employment agreement. On January 28, 2014, the
Company entered into an amendment to the employment agreement which extended the term for an additional year, through November 30,
2015.

Director compensation for 2013

The following table sets forth the compensation of persons who served as a member of our Board of Directors during all or part of
2013, other than Robert B. Ladd and Robert P. Traversa whose compensations is discussed under "Executive Compensation" below and
neither of whom is separately compensated for Board service.

Name

H. Robert Holmes (1)
Michael Onghai (2)

Fees earned or
paid in cash

Stock
awards

All other
compensation

$
$

50 $
45 $

– $
– $

Total

– $
– $

50
45

All directors are reimbursed for their out–of–pocket expenses incurred in connection with the performance of Board duties.

(1) Includes bonus of $20 paid to Mr. Holmes on August 20, 2013.

(2) Includes bonus of $20 paid to Mr. Onghai on August 20, 2013.

Independent director compensation

Our policy is each independent director receives annual compensation of $20. In addition, independent directors, receive $5 as total
compensation for committee service. The Chairman of the Board receives an additional $5. For fiscal year 2014, the Company does not
propose any change in fees for the independent directors.

Item 12. Security ownership of certain beneficial owners and management and related stockholder matters

The following table sets forth certain information regarding beneficial ownership of Common Stock as of March 28, 2014:

Each person known by the Company to be the beneficial owner of more than 5% of the outstanding Common Stock;

Each person serving as a director, a nominee for director, or executive officer of the Company; and

· All executive officers and directors of the Company as a group.

Percentage beneficially owned is based upon 8,866,686 shares of Common Stock issued and outstanding as of March 28, 2014.

Name of beneficial owner:
5% beneficial owners:
Iroquois Capital Management, LLC
Directors and officers:
Robert B. Ladd (1)
Robert P. Traversa (2)
H. Robert Holmes
Michael Onghai
Total current officers and directors as a group (4 persons)

* Less than 1%

Numbers of shares
beneficially owned

Percentage of
common equity
beneficially owned

765,873

785,471
281,616
88,819
42,545
1,198,451

9%
3%
1%
*
14%

Addresses for the above directors and officers are care of the Company at 500 Mamaroneck Avenue, Suite 204, Harrison, NY

10528.

(1) Mr. Ladd owns 163,000 shares of Common Stock directly. Mr. Ladd may also be deemed to be the beneficial owner of an
additional 622,471 shares of Common Stock held by Laddcap Value Partners III LLC, a Delaware limited liability company
(“Laddcap”), by virtue of his ability to vote or control the vote or dispose or control the disposition of the shares of Common
Stock held by Laddcap through his position as Managing Member of Laddcap.

(2) Mr. Traversa owns 281,616 shares of Common Stock directly.

In addition, the Company has an aggregate of 9,413 shares of Series A Preferred Stock outstanding as of March 28, 2014 which

each entitle the respective holders to one vote per share of Series A Preferred Stock.

Item 13. Certain relationships and related transactions and director independence

Laddcap Value Partners III LLC (“Laddcap”)

On April 12, 2011, the Company entered into a Revolving Line of Credit and Security Agreement with Laddcap for up to $500 for a
fifteen–month term. The Agreement encompasses a standby commitment fee of two (2%) percent of the maximum loan amount along with an
eight (8%) percent interest charge on any funds drawn. Laddcap is a related party as the Managing Partner and beneficial owner of Laddcap is
a 10% plus shareholder and CEO of MGT. The Agreement expired in July 2012 and was not renewed by the Company.

Director independence

Each of the Company’s current independent directors: H. Robert Holmes and Michael Onghai are considered independent under

Section 803A of NYSE MKT rules, accordingly to which the Company must comply.

Item 14. Principal accountant fees and services

EisnerAmper LLP (“Eisner”) served as our independent auditors for the fiscal year ended December 31, 2012. On April 18, 2013,
we dismissed Eisner, and Marcum LLP (“Marcum”) became our independent auditor. The following is a summary of the fees billed to the
Company for professional services rendered for the fiscal years ended December 31, 2013 and 2012. The fees for the year ended December
31, 2011 were billed by Eisner, and the fees for the year ended December 31, 2013 were billed by both Eisner and Marcum.

Audit fees – Eisner
Audit related fees – Eisner
Tax fees – Eisner
Total

Audit fees – Marcum
Audit related fees – Marcum
Tax fees – Marcum
Total

Fiscal Year
2013

Fiscal Year
2012

– $
–
–
– $

Fiscal Year
2013

Fiscal Year
2012

142 $
–
20
162 $

283
–
22
305

–
–
–
–

Audit fees consist of fees billed for services rendered for the audit of our financial statements and review of our financial statements

included in our quarterly reports on Form 10–Q.

Tax fees consist of fees billed for professional services related to the preparation of our U.S. federal and state income tax returns and

tax advice.

The Audit Committee pre–approved all audit–related fees. After considering the provision of services encompassed within the above
disclosures about fees, the Audit Committee has determined that the provision of such services is compatible with maintaining Marcum’s
independence.

Pre–approval policy of services performed by independent registered public accounting firm

The Audit Committee’s policy is to pre–approve all audit and non–audit related services, tax services and other services. Pre–
approval is generally provided for up to one year, and any pre–approval is detailed as to the particular service or category of services and is
generally subject to a specific budget. The Audit Committee has delegated the pre–approval authority to its chairperson when expedition of
services is necessary. The independent registered public accounting firm and management are required to periodically report to the full Audit
Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre–approval
and the fees for the services performed to date.

Item 15. Exhibits and Financial Statement Schedules.

Financial Statements

PART IV

The consolidated financial statements of the Company for the fiscal years covered by this Annual Report are located on pages F–1 to

F–23 of this Annual Report.

Exhibit No.

Description

2.1
2.2
3.1
3.2
10.1
10.2
10.3
10.4

10.5

10.6

10.7

10.8
10.9

10.10
10.11
10.12

10.13
10.14

10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
21.1
23.1
23.2
31.1
31.2
32.1
32.2

Articles of Merger of Medicsight, Inc., a Utah corporation (1)
Certificate of Merger of Medicsight, Inc., a Delaware corporation (1)
Restated Certificate of Incorporation of MGT Capital Investments, Inc. (2)
Amended and Restated Bylaws of MGT Capital Investments, Inc. (3)
Subscription agreement between Moneygate Group Limited and MGT Capital Investments Limited (4)
Working capital facility agreement between MGT Capital Investments Limited and Moneygate Group Limited (4)
Facility agreement between MGT Capital Investments Limited and Moneygate Group Limited (4)
Agreement for the Purchase of Assets dated March 31, 2010 between MGT Capital Investments, Inc. and MGT Investments

Limited and Rivera Capital Management Limited (5)

Amended and Restated Securities Purchase Agreement dated December 9, 2010 between MGT Capital Investments, Inc. and

Laddcap Value Partners, LP (5)

Registration Rights Agreement dated December 9, 2010 between MGT Capital Investments, Inc. and Laddcap Value Partners,

LP (5)

Form of Revolving Line of Credit and Security Agreement dated April 12, 2011, between MGT Capital Investments, Inc. and

Laddcap Value Partners, LP (5)

Form of Revolving Credit Note dated April 12, 2011, for the benefit of Laddcap Value Partners, LP (5)
Contribution and Sale Agreement, dated as of May 9, 2012, by and among J&S Gaming, Inc., MGT Capital Investments, Inc.

and MGT Gaming, Inc. (6)

Common Stock Warrant dated May 9, 2012 (6)
Form of Common Stock Warrant
Stockholder Agreement dated May 9, 2012, by and among J&S Gaming, Inc., MGT Gaming, Inc. and MGT Capital

Investment, Inc. (6)

Patent Assignment, dated as of May 9, 2012, by and between J&S Gaming, Inc. and MGT Holdings, Inc. (6)
Securities Purchase Agreement, dated May 24, 2012, by and between MGT Capital Investments, Inc. and the investor listed

on the Schedule of Buyers attached thereto. (7)
Form of Senior Secured Convertible Note (7)
Form of Warrant (7)
Form of Exchange Agreement (8)
Form of Subscription Agreement (9)
Form of Certificate of Designations (9)
Form of Warrant (9)
Form of Registration Rights Agreement (9)
Employment Agreement dated November 19, 2012, by and between the Company and Robert Ladd (10)
Employment Agreement dated November 19, 2012, by and between the Company and Robert P. Traversa (10)
Subsidiaries*
Consent of Marcum LLP, independent registered public accounting firm, dated March 28, 2014*
Consent of EisnerAmper LLP, independent registered public accounting firm, dated March 28, 2014*
Certification pursuant to Section 302 of the Sarbanes–Oxley Act of 2002 of Principal Executive Officer*
Certification pursuant to Section 302 of the Sarbanes–Oxley Act of 2002 of Principal Financial Officer*
Certification pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 of Principal Executive Officer*
Certification pursuant to Section 906 of the Sarbanes–Oxley Act of 2002 of Principal Financial Officer*

Filed herewith

Incorporated herein by reference to the Company’s Current Report on Form 8–K filed on January 19, 2007.

Incorporated herein by reference to the Company’s Quarterly Report on Form 10–Q, filed November 13, 2013.

Incorporated herein by reference to the Company’s Current Report filed on Form 8–K, filed January 30, 2014.

Incorporated herein by reference to the Company’s Quarterly Report on Form 10–Q, filed November 12, 2009.

Incorporated herein by reference to the Company’s Annual Report on Form 10–K filed April 15, 2011.

Incorporated herein by reference to the Company’s Current Report on Form 8–K filed May 16, 2012.

Incorporated herein by reference to the Company’s Current Report on Form 8–K filed May 30, 2012.

Incorporated herein by reference to the Company’s Current Report on Form 8–K filed October 9, 2012.

Incorporated herein by reference to the Company’s Current Report on Form 8–K filed October 26, 2012.

10)

Incorporated herein by reference to the Company’s Current Report on Form 8–K filed October 26, 2012.

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the

undersigned, thereunto duly authorized.

SIGNATURES

March 28, 2014

MGT CAPITAL INVESTMENTS, INC

By: /s/ ROBERT B. LADD

Robert B. Ladd
Chief Executive Officer (Principal Executive Officer)

By: /s/ ROBERT P. TRAVERSA

Robert P. Traversa
Chief Financial Officer (Principal Financial Officer)

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in

the capacities and on the dates indicated.

Signature

Title

/s/ Robert B. Ladd
Robert B. Ladd

/s/ Robert P. Traversa
Robert P. Traversa

/s/ H. Robert Holmes
H. Robert Holmes

/s/ Michael Onghai
Michael Onghai

President, CEO and Director
(Principal Executive Officer)

Treasurer, Chief Financial Officer and Director
(Principal Financial Officer)

Director

Date

March 28, 2014

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee of the
Board of Directors and Shareholders
of MGT Capital Investments, Inc.

We have audited the accompanying consolidated balance sheet of MGT Capital Investments, Inc. and Subsidiaries (the “Company”) as of
December 31, 2013, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash
flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MGT
Capital Investments, Inc. and Subsidiaries as of December 31, 2013, and the consolidated results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Marcum LLP

New York, NY
March 28, 2014

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
MGT Capital Investments, Inc.

We have audited the accompanying consolidated balance sheet of MGT Capital Investments, Inc. and Subsidiaries (the “Company”) as of
December 31, 2012, and the related consolidated statement of operation and comprehensive loss, stockholders’ equity/(deficit), and cash flows
for the year then ended. The financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MGT
Capital Investments, Inc. and Subsidiaries as of December 31, 2012, and the consolidated results of their operations and their cash flows for
the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ EisnerAmper LLP

Iselin, New Jersey
March 28, 2014

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per–share amounts)

Assets:
Current assets:

Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets

Total current assets

Non–current assets:
Restricted cash
Property and equipment, at cost, net
Intangible assets, net
Goodwill
Other non–current assets

Total assets

Liabilities:
Current liabilities:

Accounts payable
Accrued expenses
Player deposit liability
Other payables

Total current liabilities

Non–current liabilities:

Derivative liability – Warrants

Total liabilities

December 31,

2013

2012

4,642 $
43
132
4,817

140
45
2,423
6,444
4
13,873 $

228 $
94
647
16
985

–
985

3,443
9
340
3,792

2,039
25
1,795
–
–
7,651

242
272
–
67
581

7,166
7,747

Commitments and contingencies:
Redeemable convertible preferred stock – Temporary equity:

Liquidation preference - $nil (2012: $4,547).
Preferred Stock, Series A Convertible Preferred, $0.001 par value; 1,416,160 and 1,394,766 shares
authorized at December 31, 2013 and 2012, respectively; 9,413 and 1,394,766 shares issued and
outstanding at December 31, 2013 and 2012, respectively.

Stockholders' equity/(deficit):

Undesignated Preferred Stock, $0.001 par value; 8,583,840 and 8,605,234 shares authorized at
December 31, 2013 and 2012, respectively. No shares authorized, issued and outstanding at December
31, 2013 and 2012 respectively.
Common Stock, $0.001 par value; 75,000,000 shares authorized; 8,848,686 and 3,251,187 shares
issued and outstanding at December 31, 2013 and 2012, respectively.
Additional paid–in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders' equity / (deficit)
Non–controlling interests
Total equity /(deficit)

–

9
304,886
(281)
(293,833)
10,781
2,107
12,888

3
282,998
(281)
(283,631)
(911)
768
(143)

Total stockholders' equity/(deficit), liabilities and non–controlling interest

13,873 $

7,651

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

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per–share amounts)

Revenues

Software and devices
Services – Consulting
Gaming

Cost of revenues

Software and devices
Services – Consulting
Gaming

Gross margin

Operating expenses:

General and administrative
Sales and marketing
Research and development

Operating loss

Other non–operating income / (expense):
Interest and other income / (expense)
Gain on sale of patent, net
Change in fair value of warrants
Accretion of debt discount and amortization deferred financing costs
Loss on extinguishment of convertible note

Net loss before income taxes and non–controlling interest

Income tax expense

Net loss before non–controlling interest

Net loss attributable to non–controlling interest

Net loss attributable to MGT

Less:

Warrant – Deemed Dividend (in excess of proceeds received)
Quarterly dividend on Series A Preferred Stock
Net loss applicable to Common shareholders

Per–share data:
Basic and diluted loss per share

Weighted average number of common shares outstanding

Net loss as reported
Other comprehensive loss:

Unrealized foreign exchange gains
Comprehensive loss
Comprehensive loss attributable to non–controlling interest

Comprehensive loss attributable to MGT

Year ended December 31,

2013

2012

78 $
97
221
396

–
63
496
559

(163)

9,115
161
73
9,349

222
187
–
409

92
173
–
265

144

4,551
–
83
4,634

(9,512)

(4,490)

30
750
(2,204)
–
–
(1,424)

(99)
–
557
(324)
(355)
(221)

(10,936)

(4,711)

–

(14)

(10,936)

(4,725)

734

1,121

(10,202) $

(3,604)

–
(70)
(10,272) $

(2,231)
(47)
(5,882)

(1.84) $

(2.62)

5,590,620

2,245,465

(10,936) $

(4,725)

–
(10,936)
–
(10,936) $

49
(4,676)
1,095
(3,581)

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

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARIES
REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT)/EQUITY
(In thousands)

At December 31, 2011
Cash in lieu of fractional shares for MGT reverse / forward split
Warrants issued in connection with issuance of convertible note, net
of issuance costs $100
Beneficial conversion on issuance of convertible note
Beneficial conversion at extinguishment of convertible note
Stock issued for services in connection with issuance of convertible
note
Stock issued on extinguishment of convertible note
Non–controlling share of MGT Gaming, Inc.
Warrant – Deemed Dividend (in excess of proceeds received)
Issuance of Series A Convertible Preferred Stock
Preferred Stock Dividend
Issuance of Common Stock, net of issuance costs of $48
Acquisition of subsidiary shares from non–controlling interest
Medicsight Ltd Liquidation
Stock–based compensation (Stock awards)
Stock–based compensation (Stock options)
Net loss for the year
Translation adjustment
At December 31, 2012
Reclassification of derivative liability – Series A Preferred Warrants
into equity
Reclassification of derivative liability – J&S Warrants into equity
Quarterly dividend on Series A Preferred Stock
Conversion of Series A Preferred Stock to Common Stock
Proceeds from the exercise of $3.85 warrants
Proceeds from the exercise of $3.00 warrants
Stock issued for acquisition – Digital Angel
Stock issued for acquisition – FanTD
Exchange of warrants
Stock issued in relation to modification of Series A Preferred
Warrants
Proceeds from the exercise of Series A Preferred Warrants
Investment in MGT Interactive
Stock issued for acquisition – Avcom
Stock issued for services, including $100 of cash received upon
discounted transfer of shares
Stock–based compensation
Net loss for the period
At December 31, 2013

Redeemable
Convertible
Preferred stock

Common Stock

Amounts
–
$

–

2,109

Amounts
$

Additional
paid–in

capital

Accumulated
comprehensive
income /

Accumulated

Total
shareholders'

Non–
controlling

(loss)

deficit

equity

interests

283,240

(4,861) $

(280,027) $

(1,646) $
(5)

5,293

Total equity
3,647
$
(5)

(4)

75
100

453
93

425

(5)

400
500
(1,341)

315
415

(2,231)

(47)

1,316
8,018
(8,319)
720
17

1,380
15

400
500
(1,341)

315
415
–
(2,231)
–
(47)

1,316
4,256
–
721
17
(3,604)
23

(3,762)
8,319

(3,604)

1,395

3,251

282,998

(281) $

(283,631) $

(911) $

862

(4,307)

15
(1,121)
26
768

1,882

191

8,206
1,164

(67)
120
440
2,757
202
3,018
–

598
838
–
1,552

400
500
(1,341)

315
415
862
(2,231)
–
(47)
1,316
(51)
–
721
32
(4,725)
49
(143)

8,206
1,164
(67)
120
440
2,757
202
4,900
–

598
838
191
1,552

1,709
1,357
(10,936)
12,888

(10,202)
(293,833) $

1,709
1,357
(10,202)
10,781

(734)
2,107

21
(1,407)

69
(116)

1,407
237
716
50
600
895

162
613

491

427

8,206
1,164

(67)
116
440
2,757
202
3,018

(1)

598
838

1,551

1,709
1,357

–

8,849

304,886

(281) $

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

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Cash flows from operating activities:

Net loss

Adjustments to reconcile net loss to net cash used in operating activities:

Year ended December 31,

2013

2012

(10,936) $

(4,725)

Depreciation
Amortization of intangible assets
Stock–based expense
Modification of Preferred Series A warrants
Change in fair value of warrants
Gain on sale of patents
Warrant expense
Accretion of convertible note discount
Amortization of deferred financing costs
Loss on extinguishment of convertible note
Write–off of obsolete inventory
Loss on disposal of property and equipment

Change in operating assets and liabilities:

Accounts receivable
Prepaid expenses and other current assets
Inventory
Restricted cash
Proceeds from release of security deposits
Accounts payable
Accrued expenses
Other payables

Net cash used in operating activities

Cash flows from investing activities:
Purchase of property and equipment
Release of restricted cash
Receipts from sale of patents
Receipts from sale of intangible assets
Cash paid for purchase of FanTD, net of cash acquired
Cash received from purchase of Avcom, net of cash paid
Purchase of intangible assets
Purchase of intangible assets – Fantasy Sports Live
Purchase of intangible assets – Daily Joust
Purchase of intangible assets – Digital Angel
Purchase of intangible assets – MGT Gaming
Repurchase of Medicsight's shares

Net cash provided by / (used in) investing activities

Cash flows from financing activities:
Proceeds from exercise of warrants
Proceeds from modification of Preferred Series A warrants
Proceeds from issuance of common stock – Century
Repayment of loan – related party
Cash paid in lieu of fractional shares in reverse/forward split
Proceeds from issuance of convertible note
Payments for convertible note issuance costs
Repayment of convertible note
Proceeds from issuance of preferred stock
Proceeds from issuance of common stock, net
Restricted cash

Net cash provided by financing activities

Effects of exchange rates on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period

31
368
2,965
598
2,204
(750)
–
–
–
–
–
–

(34)
268
–
–
–
(14)
(222)
464
(5,058)

(12)
1,899
750
6
(124)
9
(90)
(30)
(50)
(136)
–
–
2,222

3,197
838
100
(100)
–
–
–
–
–
–
–
4,035

–
1,199
3,443
4,642 $

28
118
753
–
(557)
–
141
199
125
338
56
2

75
(13)
36
(39)
201
29
(230)
(4)
(3,467)

(17)
–
–
–
–
–
–
–
–
–
(200)
(33)
(250)

–
–
–
–
(5)
3,500
(372)
(3,500)
4,500
1,316
(2,000)
3,439

17
(261)
3,704
3,443

Year ended December 31,

Supplemental cash disclosures:

Cash paid for interest

Supplemental disclosures of non–cash investing and financing activities:
Stock issued for services in connection with issuance of convertible note
Stock issued for services in connection with extinguishment of convertible note
Warrants issued in connection with acquisition of intangible assets
Warrants issued in connection with issuance of convertible note
Beneficial conversion on convertible note
Beneficial conversion on extinguishment of convertible note
Intangible asset contributed by non–controlling interest
Stock issued for purchase of Medicsight Ltd ordinary shares
Dividends issued on Convertible Preferred Series A Stock
Warrant – Deemed Dividend (in excess of proceeds received)
Conversion of Series A Preferred to Common Stock
Series A Convertible Preferred Stock, dividends paid in kind
Reclassification of derivative liability– Preferred Series A warrants into equity
Reclassification of derivative liability– J&S warrants into equity
Stock issued for acquisition – Avcom
Stock issued for acquisition – FanTD
Stock issued for acquisition – Digital Angel
Stock issued for exercise of Series A warrants
Stock issued for exercise of warrants
Assets acquired and liabilities assumed through purchase of Avcom:

Prepaid expenses and other current assets
Property and equipment
Intangible assets
Goodwill
Accrued expenses
Other payables

Assets acquired and liabilities assumed through purchase of assets:

Prepaid expenses and other current assets
Security deposit
Property and equipment
Intangible assets
Goodwill
Other payables
Loan payable – related party

Year ended December 31,

2013

2012

– $

–
–
–

191
–
70

(116)
69
8,206
1,164
1,552
3,018
202
2,757
440

29
7
65
1,496
(44)
(10)

31
2
32
631
4,948
(126)
(100)

315
415
851
500
500
1,341
862
418
47
2,231
–
–
–
–
–
–
–
–
–

–
–
–
–
–
–

–
–
–
–
–
–
–

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

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per–share amounts)

Note 1. Organization, basis of presentation and liquidity

Organization

MGT and its subsidiaries are primarily engaged in the business of acquiring, developing and monetizing assets in the casino, online

and mobile gaming space, as well as the casino industry.

MGT Gaming owns U.S. Patents 7,892,088 and 8,500,54 (the “’088 and ‘554 patents,” respectively), both entitled "Gaming Device
Having a Second Separate Bonusing Event and both relating to casino gaming systems in which a second game played on an interactive sign
is triggered once specific events occur in a first game. On November 2, 2012, MGT Gaming filed a lawsuit (No. 3:12–cv–741) in the United
States District Court for the Southern District of Mississippi alleging patent infringement. The lawsuit alleges the defendants Caesars
Entertainment Corporation (NASDAQ GS: CZR), MGM Resorts International, Inc. (NYSE: MGM), WMS Gaming, Inc. – a subsidiary of
WMS Industries, Inc. (NYSE: WMS), Penn National Gaming, Inc. (NASDAQ GS: PENN), and Aruze Gaming America, Inc. either
manufacture, sell or lease gaming systems in violation of MGT Gaming's patent rights, or operate casinos that offer gaming systems in
violation of MGT Gaming's ‘088 patent.

As of March 31, 2014 the Company is still pursuing its patent-infringement case and awaiting a Markman Hearing (also known as a
claims construction hearing) which is set for September 25, 2014 in Jackson, Mississippi before the Honorable District Judge Carlton W.
Reeves for all three severed cases.

Liquidity

The Company has incurred significant operating losses since inception and continues to generate losses from operations. As a result,
the Company has generated negative cash flows from operations and has an accumulated deficit of $293,833 at December 31, 2013. The
Company is operating in a developing industry based on new technology and its primary source of funds to date has been through issuances
of securities. While the Company is optimistic and believes appropriate actions are being taken, there can be no assurance that the products or
patent monetization strategy will be successful. Furthermore, it is contemplated that any acquisitions may require the Company to raise capital;
such capital may not be available on terms acceptable to the Company, if at all.

On December 30, 2013, and as amended on March 27, 2014, the Company entered into an At the Market Offering Agreement (the

“Agreement”) with Ascendiant Capital Markets, LLC (the “Manager”).

The Company intends to use the net proceeds from any sales of Shares in the offering for working capital, capital expenditures, and

general business purposes. The Company's management will have significant flexibility in applying the net proceeds of this offering.

At December 31, 2013, MGT’s cash, cash equivalents and restricted cash were $4,782, including $6 held in MGT Gaming, $271

held in FanTD Company’s portfolio of medical imaging patents.

Management believes that the current level of working capital along with the At the Market Offering Agreement, will be sufficient to

allow the Company to maintain its operations until at least January 2015.

The Fanthrowdown website offers daily Fantasy Sports contests and charges entry fees to play. Occasionally, as an incentive for
user activity some contests may pay out higher prize money than the charged entry fees, the expense is recognized as overlay and included in
cost of revenues. Management expects these costs to decrease substantially as the site builds its user base and increases liquidity.

Note 2. Summary of significant accounting policies

Basis of presentation

Prior to the change in functional currency effective June 30, 2012, all foreign currency translation gains and losses arising on
consolidation were recorded in stockholders’ equity as a component of accumulated other comprehensive income / (loss). Non–controlling
interest represents the minority equity investment in any of the MGT subsidiaries, plus the minorities’ share of the net operating result and
other components of equity relating to the non–controlling interest.

Use of estimates and assumptions and critical accounting estimates and assumptions

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date(s) of the financial statements
and the reported amounts of revenues and expenses during the reporting period(s).

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and
judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on
financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial
statements were:

(1) Allowance for doubtful accounts: Management’s estimate of the allowance for doubtful accounts is based on historical sales,
historical loss levels, and an analysis of the collectability of individual accounts; and general economic conditions that may affect a
client’s ability to pay. The Company evaluated the key factors and assumptions used to develop the allowance in determining that it
is reasonable in relation to the financial statements taken as a whole.

(2) Fair value of long–lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or
market value, if readily determinable. If long–lived assets are determined to be recoverable, but the newly determined remaining
estimated useful lives are shorter than originally estimated, the net book values of the long–lived assets are depreciated over the
newly determined remaining estimated useful lives. The Company considers the following to be some examples of important
indicators that may trigger an impairment review: (i) significant under–performance or losses of assets relative to expected historical
or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy
with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant
negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price
for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment
indicators at least annually and more frequently upon the occurrence of such events.

(3) Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets
resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future
taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry–forwards are
offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses,
(b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or
private offering, among other factors.

(4) Estimates and assumptions used in valuation of equity instruments: Management estimates expected term of share options and
similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate
of quarterly dividends, and risk free rate(s) to value share options and similar instruments.

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to

these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to
the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available
information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed
appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

Principles of consolidation

All intercompany transactions and balances have been eliminated. Non–controlling interest represents the minority equity investment
in MGT subsidiaries, plus the minority investors’ share of the net operating results and other components of equity relating to the non–
controlling interest.

Software developed for internal use

The Company follows ASC 350–40 “Intangibles–Internal Use Software” on accounting for the costs of computer software
developed or obtained for internal use. Costs incurred during the preliminary stage are expensed as incurred by the Company. Certain
qualifying costs incurred during the application development stage are capitalized as property, equipment and software by the Company. The
Company begins capitalization when the preliminary project stage is complete and it is probable that the project will be completed and the
software will be used to perform the function intended.

Cash, cash equivalents and restricted cash

The Company considers investments with original maturities of three months or less to be cash equivalents. Restricted cash primarily

represents cash not available for immediate and general use by the Company.

We invest our cash in short–term deposits with major banks. As of December 31, 2012, we held $3,443 of cash and cash
equivalents. Cash and cash equivalents consist of cash and temporary investments with original maturities of 90 days or less when purchased.

As of December 31, 2013, our cash balance was $4,642. Of the total cash balance, $3,590 is covered under the US Federal

Depository Insurance Corporation.

A of December 31, 2012 our restricted cash was $2,039, consisting of $2,000 restricted under Convertible Preferred Series A Stock
Agreement (Note 9) and $39 relating to a rental deposit for our Harrison Office. As of December 31, 2013 restricted cash was $140, which
included $99 held in escrow relating to the sale of the Company’s portfolio of medical imaging patents pending reclaim of foreign withholding
tax. Proceeds from the patent sale were placed into escrow prior to receipt by the Company pursuant to an escrow agreement between the
Company and Munich Innovations GmbH (Note 4). The escrow agent distributed the escrow deposit in accordance with and subject to any
deductions specified in the patent sale agreement. The remaining $39 of restricted cash supports a letter of credit, in lieu of a rental deposit, for
our Harrison, NY office lease and $2 relates to security deposit for our Saratoga, NY office lease.

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 two to five years.

Intangible assets

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the assets acquired and liabilities assumed. The Company

is required to perform impairment reviews at each of its reporting units annually and more frequently in certain circumstances.

In accordance with ASC 350–20 “Goodwill” , the Company is able to make a qualitative assessment of whether it is more likely than
not that a reporting unit’s fair value is less than its carrying amount before applying the two–step goodwill impairment test. If the Company
concludes that it is more likely than not that the fair value of a reporting unit is not less than its carrying amount it is not required to perform
the two–step impairment test for that reporting unit.

Virtual currency liability related to Avcom

Convertible instruments

Beneficial conversion features

Revenue recognition

The revenue allocated to each deliverable will then be recorded in accordance with existing revenue recognition guidance for stand–

alone component sales and services.

· Maintenance – Revenue from maintenance and support arrangements is deferred and recognized ratably over the term of the

maintenance and support arrangements.

· Gaming fees – Revenue represents income earned as entry fees for a daily fantasy sports contest and is presented net of any

bonus points applied by customers. Once a contest concludes, the Company recognizes the income earned as revenue.

Advertising costs

The Company expenses advertising costs as incurred. During the years ended December 31, 2013 and 2012 respectively, the Company
recognized $70 and $nil in advertising costs.

Equity–based compensation

Foreign currency translation

Prior to June 30, 2012, the accounts of the Company were maintained using GBP as the functional currency. Assets and liabilities
were translated into U.S. dollars at period–end exchange rates, and income and expense accounts were translated at average monthly exchange
rates. Net gains and losses from foreign currency translations were excluded from operating results and were accumulated as a separate
component of stockholders’ equity. Gains and losses on foreign currency transactions are reflected in selling, general and administrative
expenses in the income statement.

Effective June 30, 2012, in connection with the closing of the Medicsight UK office at quarter end June 2012, and the final transfer
of all operations to the U.S., along with MGT’s proceeds from the sale of $3.5 million of convertible notes on June 1, 2012, the Company
reassessed the functional currency designation and as a result of the aforementioned activities, determined to prospectively change the
functional currency from the previous local currency, GBP to the U.S. dollar. Under ASC 830–10 “Foreign Currency Matters” when the
functional currency changes from a foreign currency to the reporting currency, translation adjustments for prior periods shall remain in
accumulated other comprehensive income/(loss) and the translated amounts for non–monetary assets at the end of the prior period become the
accounting basis for those assets in the period of the change and the subsequent periods.

Income taxes

The Company applies the elements of ASC 740–10 “Income Taxes — Overall” regarding accounting for uncertainty in income
taxes. This clarifies the accounting for uncertainty in income taxes recognized in financial statements and requires the impact of a tax position
to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority. As of December
31, 2013, the Company did not have any unrecognized tax benefits. The Company does not expect that the amount of unrecognized tax
benefits will significantly increase or decrease within the next twelve months. The Company’s policy is to recognize interest and penalties
related to tax matters in the income tax provision in the Consolidated Statements of Operations. There was no interest and penalties for the
years ended December 31, 2013, and 2012. Tax years beginning in 2010 are generally subject to examination by taxing authorities, although
net operating losses from all years are subject to examinations and adjustments for at least three years following the year in which the attributes
are used.

Deferred taxes are computed based on the tax liability or benefit in future years of the reversal of temporary differences in the
recognition of income or deduction of expenses between financial and tax reporting purposes. The net difference, if any, between the provision
for taxes and taxes currently payable is reflected in the balance sheet as deferred taxes. Deferred tax assets and/or liabilities, if any, are
classified as current and non–current based on the classification of the related asset or liability for financial reporting purposes, or based on the
expected reversal date for deferred taxes that are not related to an asset or liability. Valuation allowances are recorded to reduce deferred tax
assets to that amount which is more likely than not to be realized.

Our effective tax rate for fiscal year 2013, and 2012, was (0)% and (0)%, respectively. The difference in the Company’s effective tax

rate from the Federal statutory rate is primarily due to a 100% valuation allowance provided for all deferred tax assets.

Comprehensive income / (loss)

Comprehensive income/(loss) includes net income/(loss) and items defined as other comprehensive income / (loss). Items defined as
other comprehensive income/(loss), include foreign currency translation adjustments and are separately classified in the consolidated financial
statements. Such items are reported in the Consolidated Statement of Operations and Comprehensive Loss

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 the convertible Preferred Stock, unvested restricted shares and stock options, are not
reflected in diluted net loss per share because such shares are anti–dilutive.

The computation of diluted loss per share for the year ending December 31, 2013, excludes 9,413 shares in connection to the
convertible Preferred Stock, 920,825 warrants and 52,677 unvested restricted shares, as they are anti–dilutive due to the Company’s net loss.
For the year ending December 31, 2012, 1,394,766 common shares in connection to convertible Preferred Stock, 4,038,753 warrants and
314,669 unvested restricted shares, are excluded because they are anti–dilutive due to the Company’s loss.

Segment reporting

Recent accounting pronouncements

There are no recent accounting pronouncements that are expected to have an effect on the Company’s financial statements.

Note 3. Asset purchases and acquisitions of businesses

Digital Angel

The following table summarizes the Company’s allocation of the purchase price to the separable components of the mobile

applications based on their relative fair values at the date the purchase was completed.

Purchase price allocation:
Software and hardware
Trademark
Intangible assets – mobile gaming application
Net assets acquired

FanTD

28
6
305
339

On May 20, 2013, the Company acquired 63% of the outstanding membership interests of FanTD in exchange for an aggregate
purchase of $3,220 consisting of 600,000 shares of MGT Common Stock at a fair value of $5.03 per share for a total of $3,018 and a cash
payment of $202. The fair value of the 37% non–controlling interest retained by the sellers in this transaction amounted to $1,882.

The Company recorded the purchase of FanTD using the acquisition method of accounting as specified in ASC 805 “Business
Combinations.” This method of accounting requires the acquirer to (i) record purchase consideration issued to sellers in a business
combination at fair value on the date control is obtained, (ii) determine the fair value of any non–controlling interest, and (iii) allocate the
purchase consideration to all tangible and intangible assets acquired and liabilities assumed based on their acquisition date fair values. Further,
the Company commenced reporting the results of FanTD on a consolidated basis with those of the Company effective upon the date of the
acquisition.

The following tables summarizes the preliminary fair values of the net liabilities assumed and the allocation of the aggregate fair

value of the purchase consideration, non–controlling interest and net liabilities to assumed identifiable and unidentifiable intangible assets:

Purchase consideration:
Common Stock (600,000 shares at the transaction date fair value of $5.03 per share)
Cash
Aggregate purchase consideration
Fair value of non–controlling interest
Aggregate fair value of enterprise

Purchase price allocation:
Net liabilities assumed
Property and equipment

Aggregate fair value of purchase consideration, non–controlling interest and net liabilities assumed
allocated to intangible assets as follows:
Developed software
Customer list
Goodwill
Total purchase price allocation

3,018
202
3,220
1,882
5,102

(69)
4
(65)

186
33
4,948
5,102

Fantasy Sports Live

On June 25, 2013, MGT Sports acquired Fantasy Sports Live, which was effectively a customer list associated with a specific

gaming application for $30 in cash and the assumption of a $46 customer deposit liability.

Daily Joust

On July 23, 2013, MGT Sports acquired certain assets from Daily Joust, Inc. The purchase price consisted of a cash payment of $50

for $136 in customer deposits and assumption of a $136 customer liability.

Real Deal Poker

the Company, Gioia Systems, LLC (“Gioia”) and MGT Interactive whereby MGT Interactive acquired certain assets from Gioia, the inventor
and owner of a proprietary method of card shuffling for the online poker market. Pursuant to the Contribution Agreement, Gioia contributed
the assets to MGT Interactive in exchange for a 49% interest in MGT Interactive and MGT contributed $200 to MGT Interactive in exchange
for a 51% interest in MGT Interactive. The $200 contributed by the Company will be utilized as working capital to cover the direct and
associated costs relating to the achievement of a certification from Gaming Laboratories International (“GLI”). The Company has the right to
acquire an additional 14% ownership interest in MGT Interactive from Gioia in exchange for a purchase price of $300 after GLI certification is
obtained. Gioia, in turn, will have the right to re–acquire the 14% interest for a period of three years at a purchase price of $500. Gioia has the
right to certain royalty payments from the gross rake payments, and any licensing or royalty income received by MGT Interactive.

Avcom

On November 26, 2013, the Company closed on an Agreement and Plan of Reorganization (the “Agreement”) with MGT Capital
Solutions, Inc., a wholly owned subsidiary of the Company, Avcom, Inc. and the shareholders and option holders of Avcom, Inc. (“Avcom”).
Pursuant to the Agreement, the Company acquired 100% of the capital stock of Avcom. In consideration, the Preferred Stockholders of
Avcom received $550 in value of the Company’s Common Stock and the Common Stockholders and option holders of Avcom will receive an
aggregate of $1,000 in value of the Company’s Common Stock. The value of the Company’s Common Stock is based on the closing price on
signing the Agreement.

Prior to entering into the Agreement, Avcom had performed certain game development consulting services for the Company for

which Avcom received an aggregate of $146 as consideration for such services.

The Company recorded the purchase of Avcom using the acquisition method of accounting as specified in ASC 805 “Business
Combinations.” This method of accounting requires the acquirer to (i) record purchase consideration issued to sellers in a business
combination at fair value on the date control is obtained, (ii) determine the fair value of any non–controlling interest, and (iii) allocate the
purchase consideration to all tangible and intangible assets acquired and liabilities assumed based on their acquisition date fair values. Further,
the Company commenced reporting the results of Avcom on a consolidated basis with those of the Company effective upon the date of the
acquisition.

The following tables summarizes the preliminary fair values of the net liabilities assumed and the allocation of the aggregate fair

value of the purchase consideration to assumed identifiable and unidentifiable intangible assets:

Purchase consideration:
Cash consideration
Stock consideration (491,035 shares at $3.16 closing price)
Total purchase consideration

Purchase price allocation:
Current assets and liabilities
Equipment
Intangible assets – Patent applications
Intangible assets – Website
Goodwill
Total purchase price allocation

10
1,552
1,562

(6)
7
15
50
1,496
1,562

In connection with the Agreement, the Company entered into two executive employments agreements. Each executive agreement has
a term of two years. Each executive will receive a deferred signing bonus equal to $75 and a base salary of $190 per year. The deferred
signing bonus is payable once the Company generates cash revenues in excess of $200 from its product, SlotChamp, net of app store fees.

Pro–forma results

The following tables summarize, on an unaudited pro–forma basis, the results of operations of the Company as though the
acquisitions of Avcom and FanTD had occurred as of January 1, 2013, and 2012. The pro–forma amounts give effect to appropriate
adjustments of amortization of intangible assets and interest expense associated with the financing of the acquisition. The pro–forma amounts
presented are not necessarily indicative of the actual results of operations had the acquisition transaction occurred as of January 1, 2013, and
2012.

Year ended December 31, 2013
Revenues
Net loss
Loss per share of Common Stock
Basic and diluted

Year ended December 31, 2012
Revenues
Net loss
Loss per share of Common Stock
Basic and diluted

Note 4. Goodwill and intangible assets

MGT
$

396 $
(10,202)
(1.84)
5,590,618

409 $
(3,604)
(2.62)
2,245,465

FanTD

Avcom

Pro–forma
total

62 $
(336)
–
–

3 $
(167)
–
–

110 $
125
–
–

568
(10,538)
(1.82)
5,801,068

214 $
(289)
–
–

626
(4,060)
(1.45)
2,806,974

Goodwill represents the difference between purchase cost and the fair value of net assets acquired in business acquisitions. Indefinite
lived intangible assets, representing trademarks and trade names, are not amortized unless their useful life is determined to be finite. Long–
lived intangible assets are subject to amortization using the straight–line method. Goodwill and indefinite lived intangible assets are tested for
impairment annually as of December 31, 2013, and more often if a triggering event occurs, by comparing the fair value of each reporting unit
to its carrying value. The Company performed this impairment test and concluded that impairment did not exist as of December 31, 2013.

Balance, December 31, 2012
Acquisitions (Note 3)
Balance, December 31, 2013

Intellectual property
Software and website development
Customer lists
Trademarks
Less: Accumulated amortization
Intangible assets, net

Goodwill

–
6,444
6,444

Estimated
remaining
useful
life
6 years
2 years
4 years
3 years

As of

December 31,

2013

2012

2,468 $
275
159
7
(486)
2,423

1,913
–
–
–
(118)
1,795

The Company recorded an amortization expense of $368 (2012: $118).

Estimated future annual amortization expense as of:

Intellectual
property

Software and
website
development

Customer lists

Trademarks

Total

2014
2015
2016
2017
2018
Thereafter

363 $
363
363
363
363
246
2,061 $

83 $
83
52
–
–
–
218 $

40 $
40
40
17
–
–
137 $

3 $
3
1
–
–
–
7 $

489
489
456
380
363
246
2,423

MGT Gaming

On May 11, 2012, the Company entered into a Contribution and Sale Agreement (the “Sale Agreement”) with J&S Gaming, Inc.
(“J&S”), and MGT Gaming for the acquisition of U.S. Patent #7,892,088, entitled “Gaming Device Having a Second Separate Bonusing
Event” (“the Patent”). Pursuant to the Sale Agreement, (i) J&S sold certain patents to MGT Gaming in exchange for 1,000 shares (constituting
100% ownership) of MGT Gaming Common stock, par value $0.001; (ii) the Company purchased from J&S 550 MGT Gaming Shares
constituting 55% ownership in exchange for $200 cash and a four (4) year warrant to purchase 350,000 shares of the Company’s Common
stock at an exercise price of $4.00 per share, subject to certain anti-dilution provisions (the “Warrants”). The Patent was recorded at its
estimated fair value of $1,913 at the date of closing. Due to certain anti–dilution provisions, the J&S Warrants was recorded as a liability, and
consequently “marked–to–market” to the fair value at the end of each reporting period. On May 20, 2013, the Company modified the J&S
Warrant granted to eliminate the anti–dilution provision therein. The Company paid J&S Gaming $25 in cash as consideration for the
modification.

On May 20, 2013, the Company had 403,029 warrants outstanding with a fair value of $1,164 carried as a derivative liability. The
modification agreement allowed the Company to reclassify the $1,164 from a derivative liability into shareholders’ equity. In Fiscal 2013 the
Company recognized $363 of mark–to–market loss associated with this agreement.

Medicsight

On June 30, 2013, MGT closed the sale of its portfolio of medical imaging patents to Samsung Electronics Co, Ltd. (“Samsung”).
The Company had no prior relationship with Samsung. Gross proceeds of $1,500 was reduced by a broker commission of $501 paid to
Munich Innovation Group GmbH, foreign withholding tax of $248 and an escrow agent fee of $ 1 . The seller deposited $750 of proceeds
into a restricted cash account upon the completion of the sale of which $651 was released to the Company on July 3, 2013. The remaining $99
is retained escrow pending reclaim of the foreign withholding tax.

Note 5. Property and equipment

Property and equipment consisted of the following:

Computer hardware and software
Furniture and fixtures

Less: Accumulated depreciation
Total

December 31,

2013

2012

152 $
12
164
(119)
45 $

101
12
113
(88)
25

The company recorded depreciation expense of $31 and $28 for the years ended December 31, 2013 and 2012, respectively.

Note 6. Series A Convertible Preferred Stock

On November 2, 2012, the Company closed a private placement sale of 1,380,362 shares of Series A Convertible Preferred Stock
(“Preferred Stock”), (including 2,760,724 warrants to purchase MGT Common Stock) for an aggregate of $4.5 million. This transaction was
approved by the Exchange on October 26, 2012. The Preferred Stock is convertible into the Company's Common Stock at a fixed price
of $3.26 per share and carries a 6% dividend. The warrants have a five–year life and are exercisable at $3.85 per share. Total issuance cost for
this private placement for the year ended December 31, 2012, was $88.

Significant terms of the Preferred Stock, as specified in the Certificate of Designation are as follows:

Cash maintenance

The Company shall maintain a cash balance of at least $2,000 as long as at least 345,092 shares of Preferred Stock remains
outstanding. In February and March 2013, 241,748 and 30,000 shares of the Company’s Series A Convertible Preferred Stock were
converted into 241,748 and 30,000 shares, of the Company’s Common Stock, respectively. In April 2013, 1,123,809 shares of the Preferred
Stock were converted into 1,125,763 shares of the Company’s Common Stock, which included 1,954 shares of accrued interest on the
Preferred Stock. As of December 31, 2013 and 2012, respectively, 9,413 and 1,380,362 shares of the Preferred Stock remained outstanding.

With fewer than 345,012 shares of Preferred Stock outstanding, the Company is no longer subject to the Cash Maintenance

provision of the Purchase Agreement under which the Preferred Stock was originally sold in October 2012.

Conversion option

At any time and from time to time on or after the Effective Date, the Preferred Stock shall be convertible (in whole or in part), at the
option of the Holder, into such number of fully paid and non–assessable shares of Common Stock as is determined by dividing (x) the
aggregate Stated Value of $3.26 per shares (“Stated Value”) of Preferred Stock that are being converted plus any accrued but unpaid dividends
thereon as of such date that the Holder elects to convert by (y) the Conversion Price ($3.26) then in effect on the date (the “Conversion Date”).

For the year ending December 31, 2013 1,406,747 of Preferred were converted into 1,406,747 shares of MGT Common Stock. For

the year ending December 31, 2012, no share of Preferred were converted to MGT Common Stock.

Dividends

The Preferred Stock shall pay a six percent (6%) annual dividend on the outstanding Preferred Stock, payable quarterly on March
31, June 30, September 30 and December 31 of each year (the “Dividend Date”), with the first dividend payable for the period commencing
on the Issuance Date. The Company has the option to pay each quarterly dividend in cash or additional shares of Preferred Stock (the
"Dividend Shares").

For the years ended December 31, 2013 and 2012, respectively, the Company issued 21,394 and 14,404 Dividend Shares, in

connection with this Preferred Stock dividend.

Liquidation preference

Upon the liquidation, dissolution or winding up of the business of the Corporation, whether voluntary or involuntary, each holder of
Preferred Stock shall be entitled to receive, for each share thereof, a preferential amount in cash equal to (and not more than) the Stated Value
(the “Liquidation Amount”) plus all accrued and unpaid dividends.

The Preferred Stock Certificate of Designation and Warrant agreement (“Warrants”) each contain a fundamental transactions clause
that provides for the conditional redemption of these instruments under certain circumstances that are not within the Company’s sole control.
Management has therefore concluded that the Preferred Stock requires temporary equity classification in accordance with ASC 480–10–S99
“Accounting for Redeemable Equity Instruments” at its allocated value and the warrants require classification at fair value. When the Preferred
Stock and Warrants were issued, the fair value of the Warrants exceeded the proceeds received from the sale and issuance of the Preferred
Stock and Warrants. The Warrants were recorded at their fair value and the excess over the proceeds received was recorded as a deemed
dividend. Changes in the fair value of the Warrants at each reporting date are included in the statement of operations. The carrying amount of
the Preferred Shares requires no further adjustment unless and until the conditional redemption events are probable. The Company does not
consider the conditional redemption events to be probable, as these events refer to fundamental change of control situations that do not
currently exist, in the opinion of management. Accordingly, management concluded that the conversion option embedded in the preferred
shares does not require bifurcation from the host contract, as the Preferred Stocks have the characteristics of a residual interest and therefore
are clearly and closely related to the Common Stocks issuable upon the exercise of the conversion option. Further, since the issuance date fair
value of the warrants exceeded the proceeds received from the sale and issuance of the Preferred Stock, accounting recognition of the
beneficial conversion feature was not required.

The warrants were recorded at fair value as of October 29, 2012 of $6,731 based upon the following Black Scholes Model (“BSM”)
to value warrants containing circumstances that are not within the Company’s sole control: risk free rate 0.760%; expected term five (5) years;
annual volatility 75.0%; exercise price $3.85, adjusted market value of $3.98 per share. The adjusted market value was determined based on
market conditions for our common shares, characterized by significant price volatility when compared to seasoned issuers. The Company
expects that our share price will continue to be more volatile for the indefinite future. The volatility is attributable to a several factors, most
notably the fact that our common shares are thinly traded. Share Price is one of the inputs needed to determine the fair value of derivative
instruments, as used in the BSM. The Company feels that the share price volatility would distort a BSM calculation is based on a single day’s
closing price, thereby dissuading us from utilizing the closing price on October 26, 2012. The Company has determined that a more
representative measurement would be to utilize an average of the daily weighted average stock price of the Company’s Common Stock for the
30 days prior to the deal close. This calculation minimizes the impact of specific daily news or market trading distortions caused by an
imbalance of orders on a single day.

On December 31, 2012, the warrants were re–measured at fair value of $6,364, based upon the following BSM inputs: risk free rate
0.760%; expected term five (5) years; annual volatility 75.0%; exercise price $3.85, closing stock price of $3.86. The Company recorded a
gain of $365, caused by the change in fair value of its derivative liability from inception through December 31, 2012.

In connection with the sale of the Preferred Stock, the Company entered into a registration rights agreement with the investors
agreeing to file a registration statement within 60 days of the closing and to have the registration statement declared effective within 150 days
of the closing if the registration statement is not subject to a full review and within 180 days of the closing if the registration statement is
subject to a full review. The Company filed a Registration Statement (Registrant No. 333–185284) with the SEC on November 30, 2012,
which was declared effective on January 11, 2013.

On April 26, 2013, the Company made an offer to the holders of the Company’s $3.85 Common Stock Purchase Warrants issued on
October 29, 2012 (the “Warrants”), providing if such holders exercised one Warrant, they would have the right to exchange up to two
additional Warrants for 5/8ths per share of Common Stock per Warrant exchanged. The results of the offer were that holders of 715,742
Warrants elected to exercise their Warrants. The Warrants had a fair value of $1,680 carried as a derivative liability on the exercise date. The
Warrants were fair valued based upon the following Black Scholes Model (“BSM”): risk free rate 0.68 % – 0.85 %; expected term five (4.44)
years; annual volatility 75%; exercise price $3.85, market value of $3.90 – $4.27 per share. The exercise of the Warrants allowed the Company
to reclassify $1,680 from derivative liability into shareholders’ equity. During the years ended December 31, 2013 and 2012, the Company
recognized $30 and $557 mark–to–market loss associated to this agreement.

On May 20, 2013, the Company entered into Warrant Waiver Agreements with four holders of Warrants who collectively held more
than 60 % of the Warrants, which per the original Warrants, triggers the modification of all Warrants in the series. The modification addresses
the ability of warrant holders to redeem the Warrants for cash in a “Fundamental Transaction” as defined in the Warrant to provide that the
Warrant holders do not have the right to redeem the Warrants for cash in any Fundamental Transaction that is not approved by the Company’s
Board of Directors or that occurs in a transaction or as a result of an event that was not in the Company’s sole control. The modification
changes the accounting treatment of the Warrants. The Company committed to issue an aggregate of 162,460 shares of its Common Stock in
consideration for the modification. On September 27, 2013, at MGT’s Annual Meeting of Stockholders, stockholders approved a resolution
for the issuance of up to 162,460 shares of Common Stock (the “Modification Shares”) in consideration for the modification of certain
provisions contained in an aggregate of 2,044,982 warrants which modifications allowed the Company to treat such warrants as equity rather
than as a derivative liability. The shares were subsequently issued on October 8, 2013. The stock was valued at $598 using the closing market
price on September 27, 2013. On May 20, 2013, the Company had 2,044,982 warrants outstanding with a fair value of $6,525 carried as a
derivative liability. The warrants were fair valued based upon the following Black Scholes Model (“BSM”): risk free rate 0.850 %; expected
term five (4.44) years; annual volatility 75 %; exercise price $3.85, market value of $5.03 per share. The modification agreement allowed the
Company to reclassify the $6,525 from derivative liability into shareholders’ equity. For the year ended December 31, 2013, the Company
recognized $1,811 mark–to–market loss, respectively, associated with this agreement.

Note 7. Common Stock

On November 2, 2012, the Company closed a registered offering sale of 453,000 shares of MGT Common Stock for gross proceeds
of $1,364. The Common Stock was sold at $3.01 per share with a total of 453,000 shares sold, under its S–3 Registration Statement
(Registrant No. 333–182298), which was declared effective on September 25, 2012. Total issuance cost for this registered offering was $48.

All of the Investors represented that they were “accredited investors,” as that term is defined in Rule 501(a) of Regulation D under
the Securities Act, and the sale of the securities was made in reliance on exemptions provided by Regulation D and Section 4(2) of the
Securities Act of 1933, as amended.

Note 8. Stock incentive plan and stock–based compensation

Stock incentive plan

The Company’s board of directors established the 2012 Stock Incentive Plan (the “Plan”) on April 15, 2012, and the Company’s
shareholders ratified the Plan at the annual meeting of the Company’s stockholders on May 30, 2012. The Company has 415,000 shares of
Common Stock that are reserved to grant Options, Stock Awards and Performance Shares (collectively the “Awards”) to “Participants” under
the Plan. The Plan is administered by the board of directors or the Compensation Committee of the board of directors, which determines the
individuals to whom awards shall be granted as well as the type, terms and conditions of each award, the option price and the duration of each
award.

At the annual meeting of the stockholders of MGT held on September 27, 2013, stockholders approved an amendment to the Plan
(the “Amended and Restated Plan”) to increase the amount of shares of Common Stock that may be issued under the Amended and Restated
Plan to 1,335,000 shares from 415,000 shares, an increase of 920,000 shares and to add a reload feature.

Options granted under the Plan vest as determined by the Company’s Compensation and Nominations Committee and expire over
varying terms, but not more than seven years from date of grant. In the case of an Incentive Stock Option that is granted to a 10% shareholder
on the date of grant, such Option shall not be exercisable after the expiration of five years from the date of grant. No option grants were issued
during the years ended December 31, 2013 and 2012.

Issuance of restricted shares – directors, officers and employees

The Company in periods preceding January 1, 2013 made grants of restricted shares which vest one–third each six months from the
date of issue, except for a specific grant made on December 26, 2012, which vests three and eight months from the date of grant subject to the
attainment of certain performance conditions which were achieved in March 2013. The restricted shares are valued using the closing market
price on the date of grant, of which the share–based compensation expense is recognized over their vesting period. The unvested shares are
subject to forfeiture if the applicable recipient is not a director, officer and/or employee of the Company at the time the restricted shares are to
vest.

On September 30, 2013, 6,000 restricted shares were granted and issued to a certain employee. The restricted shares vest one–third

each six months from the date of issue.

A summary of the Company’s employee’s restricted stock as of December 31, 2013, is presented below:

Non–vested at December 31, 2012
Granted
Vested
Forfeited

Weighted
average grant

Number of

date fair
value

314,667 $
6,000
(264,000)
(4,000)

5.20
3.68
4.56
4.62

Non–vested at December 31, 2013

(4,000
52,667 $

4.62
4.56

On January 8, 2014, January 16, 2014, and March 26, 2014, respectively, a total of 46,000 restricted shares were granted and issued

to certain employees with an aggregate fair value of $91. The restricted shares vest one–third each six months from the date of issue.

The Company has recorded the following amounts related to its share–based compensation expense in the accompanying

Consolidated Statements of Operations and Comprehensive Loss:

Selling, general and administrative
Research and development

Year ended December 31,

2013

2012

1,357 $
–
1,357 $

746
7
753

Of the stock based–expense for the year ended December 31, 2013 and 2012, $nil and $15, respectively, was allocated to non–

controlling interest.

Unrecognized compensation cost

As of December 31, 2013 and 2012, unrecognized compensation costs related to non–vested share–based compensation

arrangements was $187 and $1,534, respectively. That cost is expected to be recognized over a weighted average period of 0.48 years.

Share–based compensation – non–employees

As a result of MGT’s acquisition of 63.12 % of FanTD LLC on May 20, 2013, the Company incurred $503 associated to the
issuance of 100,000 shares of the Company’s Common Stock for a consulting and marketing agreement. These shares were issued on June
29, 2013. The stock was valued using the closing market price on the closing date of the acquisition.

On September 4, 2013, the Company issued 16,611 shares of the Company’s Common Stock for legal services rendered. The stock

was valued at $72 using the closing market price on the date of issuance.

On August 16, 2013, the Company entered into a consulting agreement for investor relation services for a period of six months. In
consideration for the services, the Company was paying $6 per month and 30,000 shares of the Company’s Common Stock. The Common
Stock vested over a six month period. In accordance with ASC 505–50–S99 “Equity – Based Payments to Non–Employees”, the Company
recognized the issuance over the vesting period. On November 27, 2013, the Company cancelled the agreement. For the year ended December
31, 2013, the Company issued 20,000 shares with a fair market value of $66 based on the closing market price for each of the vesting dates.

On November 12, 2013, the Company entered into a consulting agreement for investor relations media services for a period of three
months. In consideration for the services, the Company was scheduled to pay $20 upon execution of the agreement and $25, 30 and 60 days
subsequent to the date of the agreement; and 10,000 shares of the Company’s Common Stock upon execution of the agreement and 10,000
shares of the Company’s Common Stock 30 and 60 days from the date of the agreement, respectively. The Company expensed $57 associated
to the issuance of 20,000 shares based on the closing market price on November 12, 2013 and December 12, 2013. The agreement was
cancelled January 3, 2014.

In addition to the above, the Company also issued 270,000 shares of the Company’s Common Stock to non–employees (Note 11).

The shares were valued at $1,011, the Company recorded $911 of expense and $100 of cash proceeds related to the issuance.

Medicsight Ltd equity plan

On March 26, 2012, at Medicsight Ltd’s General Meeting, stockholders approved a resolution to effect a Reverse Split of the
Company’s existing ordinary shares of £0.05 par value per share into 1 new ordinary share of £16,250 par value per share and for MGT to
acquire all New Ordinary Shares representing the fractions of shares left over following the Reverse Split. The exchange ratio for the Reverse
Split was 1 for 325,000. As a result of the Reverse Split, stockholders holding fewer than 325,000 shares were cancelled and not entitled to a
cash payment for fractional shares.

Following Medicsight’s general meeting on March 26, 2012, a shareholder resolution approving the Reverse Split of 1–for–325,000
of the Company’s existing ordinary shares of £0.05 par value into one new ordinary share was duly passed. As a result of the reverse split,
option holders under certain existing share option plans are no longer entitled to options under those plans as option holders’ share entitlement
is now less than one as a result of the Reverse Split. Following the share reversal, the Company cancelled with immediate effect all redundant
option plans with the exception of Plan J. All previously unrecognized stock based compensation expense of $32 was accelerated during the
year ended December 31, 2012.

On December 6, 2012, the Company initiated the process of dissolving the non–essential subsidiary of Medicsight Ltd. resulting in
the cancellation of stock option Plan J. For the year ended December 31, 2013, there were no grants issued and all options were fully vested
and expensed prior to the cancellation of stock option Plan J.

Warrants

The following table summarizes information about warrants outstanding at December 31, 2013:

Warrants outstanding at December 31, 2012
Issued
Exercised
Expired
Warrants outstanding at December 31, 2013

Number
of warrants

Weighted average
exercise price

4,038,753 $
–
(3,117,928)
–
920,825 $

3.68
–
3.75
–
3.44

For the years ended December 31, 2013 and 2012, all issued warrants are exercisable and expire through 2017. There were no

warrants issued for the year ended December 31, 2013.

During the year ended December 31, 2013, 357,204 of the Company’s $3.00 Common Stock Purchase Warrants were exercised. Of
the warrant conversions, 210,529 were cashless and 146,675 were exercised for total proceeds of $440. As a result the Company issued an
aggregate of 236,730 shares.

On April 26, 2013, the Company made an offer to the holders of the Company’s $3.85 Common Stock Purchase Warrants (the
“Warrants”), providing if such holders exercised one Warrant, they would have the right to exchange up to two additional Warrants for 5/8ths
per share of Common Stock per Warrant exchanged. The results of the offer were that holders of 715,742 Warrants elected to exercise their
Warrants. Total proceeds received from the exercise of 715,742 Warrants were $2,757.

In addition, the allowed maximum of 1,431,486 Warrants were exchanged for 894,683 shares of the Company’s Common Stock,
issuable upon shareholder and NYSE MKT exchange approval. On September 27, 2013, at MGT’s annual meeting of stockholders,
stockholders approved the issuance of up to 894,683 shares of Common Stock in exchange for the cancellation of 1,431,486 warrants to
purchase shares of Common Stock at $3.85 per share. The shares were subsequently issued on October 8, 2013.

On December 10, 2013, the Company entered into a Warrant Modification Agreement (the “Agreement”) with Iroquois Master Fund
Ltd. (“Iroquois”). Pursuant to the Agreement, Iroquois agreed to immediately exercise its warrant to purchase 613,496 shares of Common
Stock, par value $0.001 of the Company, at an exercise price of $1.50 per share, for aggregate gross proceeds to the Company of $920 and (ii)
agreed to terminate its right of participation in future equity offerings of the Company. In exchange, the Company agreed to reduce the warrant
exercise price from $3.85 per share to $1.50 per share, and agreed not to issue any securities at a price below $2.50 per share for a period of
90 days after the date of the Agreement (other than securities granted pursuant to a stock plan or issued in connection with an acquisition or
issued pursuant to an agency agreement with a registered broker–dealer provided that we agree with the broker–dealer and publicly announce
that we will not sell shares for a price below $2.50 per share). Iroquois acquired the warrant in connection with the Company's November
2012 financing. In connection with the Agreement, the Company paid to Chardan Capital Markets, LLC a placement fee for the solicitation of
the exercise of the warrants equal to 8% of the gross proceeds raised, or approximately $73 and reimbursed Chardan for $9 of its legal fees,
resulting in net proceeds of $838.

Note 9. Non–controlling interest

The Company has the following non–controlling interest:

MGT
Gaming

MGT

FanTD

Interactive

M2P
Americas

Total

Non–controlling interest at January 1,
2013
Purchase of FanTD
Investment in MGT Interactive
Non–controlling share of net losses
Non–controlling interest at December
31, 2013

768 $
–
–
(183)

– $
1,882
–
(451)

585 $

1,431 $

– $
–
191
(95)

96 $

– $
–
–
(5)

768
1,882
191
(734)

(5) $

2,107

On January 2012, the Company had $5,293 of non-controlling interest relating to Medicsight Ltd. During the year ended December
31, 2012, the Company assigned $1,027 of net loss to the non-controlling interest of Medicsight and $41 of stock-based compensation and
other other accumulated comprehensive income. The remaining $4,307 was reversed as a result of the acquisition of the remaining interest in
Medicsight Ltd by the Company.

FanTD

MGT Interactive

On September 3, 2013, the Company entered into a Contribution and Sale Agreement (the “Contribution Agreement”) by and among
the Company, Gioia Systems, LLC (“Gioia”) and MGT Interactive whereby MGT Interactive acquired certain assets from Gioia, the inventor
and owner of a proprietary method of card shuffling for the online poker market. Pursuant to the Contribution Agreement, Gioia contributed
the assets to MGT Interactive in exchange for a 49% interest in MGT Interactive and MGT contributed $200 to MGT Interactive in exchange
for a 51% interest in MGT Interactive.

M2P Americas

Pursuant to the terms of the Strategic Alliance Agreement, the Company will advance certain expenses to M2P Americas and the
Company and M2P will provide network and human resources support to M2P Americas. The parties also entered into a Stockholders
Agreement dated the same date which, among other things, grants M2P an option to purchase 10% of the Company’s ownership in M2P
Americas at book value if the Company does not purchase equity in M2P prior to April 2, 2014.

Any advances by the Company or its subsidiaries to M2P Americas will be considered a loan bearing interest at 4% per annum or

the applicable federal rate if greater. The Strategic Alliance Agreement has a term of 20 years.

Medicsight Ltd

Subsequent to March 26, 2012, and through December 31, 2012, MGT acquired an additional 160 shares of Medicsight Ltd’s
ordinary shares, 67 ordinary shares were acquired for cash consideration of $51 and 93 ordinary shares were acquired in exchange for 93,000
shares of the Company’s Common Stock with a fair value of $418. On December 6, 2012 at Medicsight Ltd’s General Meeting, the
stockholders approved a resolution to effect a Reverse Split of Medicsight Ltd’s remaining shares at an exchange rate of 1 for 25. As a result,
stockholders holding fewer than 25 shares at the time of the reversal received a cash payment of $16, in lieu of fractional shares and no longer
had an interest in Medicsight Ltd. As a result of the purchase of additional shares and the reverse split, as of December 6, 2012, MGT held
100% of the issued share capital of Medicsight Ltd.

The Company filed an application to the Registrar of Companies under s1003 of the Companies Act 2006 for Medicsight Ltd’s
dissolution. As a part of the dissolution of this non–essential subsidiary, Medicsight Ltd assigned its intellectual property to Medicsight, Inc.
and its ownership in Medicsight, Inc. to MGT.

Note 10. Segment reporting

The accounting policies of the segments are the same as those described in the summary of significant accounting policies (Note 2).
We evaluate performance of our operating segments based on revenue and operating (loss). Segment information as of December 31, 2013,
and December 31, 2012, are as follows:

Medicsight

Software/
Devices Services

Intellectual
property Gaming

Unallocated
corporate/
other

Total

Year ended December 31, 2013
Revenues
Cost of revenue
Gross margin
Operating profit/(loss )

Year ended December 31, 2012
Revenues
Cost of revenue
Gross margin
Operating loss

December 31, 2013
Cash and cash equivalents (excludes $140 of
restricted cash)
Property and equipment
Intangible assets
Goodwill
Additions:
Property and equipment
Intangible assets
Goodwill

December 31, 2012
Cash and cash equivalents (excludes $2,039 of
restricted cash)
Property and equipment
Intangible assets
Goodwill
Additions:
Property and equipment
Intangible assets
Goodwill

78 $
–
78
63

97 $
(63)
34
27

– $
–
–
(1,195)

221 $
(496)
(275)
(1,440)

– $
–
–
(6,967)

396
(559)
(163)
(9,512)

222 $
(92)
130
(1,755)

187 $
(173)
14
(11)

– $
–
–
(208)

– $
–
–
–

– $
–
–
(2,516)

409
(265)
144
(4,490)

– $
–
–
–

–
–
–

– $
–
–
–

–
–
–

6 $
–
2,007
–

338 $
28
416
6,444

4,298 $
17
–
–

–
–
–

42
1,002
6,444

9
–
–

49 $
–
1,795
–

–
1,795
–

– $
–
–
–

–
–
–

3,064 $
25
–
–

17
–
–

4,642
45
2,423
6,444

51
1,002
6,444

3,443
25
1,795
–

17
1,795
–

– $
–
–
–

–
–
–

330 $
–
–
–

–
–
–

Note 11. Operating leases, commitments and security deposits

Operating leases

In January 2012, the Company had a $13 monthly office lease payment. In February 2012, the Company moved to a smaller office in
the same location with month–to–month rental payments of $4 and a rental deposit of $6. On April 30, 2012, we terminated our UK lease
effective June 30, 2012.

In May 2013, the Company assumed a 24–month lease agreement for office space located in Saratoga Springs, New York

terminating on October 31, 2014. Under the agreement our total rental payments over the lease period are $2, and a security deposit of $2.

In January 2014, the Company entered into a six–month lease agreement for temporary office space due to the Avcom acquisition
located in New York, NY, terminating on June 30, 2014. Under the agreement our total rental payments over the lease period are $3, and a
security deposit of $3.

A satellite office in Tokyo, Japan, was closed in January 2012, and the rental deposit of $128 was refunded to us.

The following is a schedule of the future minimum payments required under operating leases in the aggregate and for each

subsequent year through lease maturity:

Year ending
2014
2015
Total

104
–
104

The total lease rental expense was $145 for the year ended December 31, 2013.

Commitments

Consulting agreements

On October 26, 2012, the Company entered into a one–year financial advisory and consulting agreement with a national investment–
banking firm. Compensation under the agreement includes cash consideration of $250 and 120,000 shares of restricted Common Stock. Under
the terms of the agreement, there are no penalties or liabilities to the Company if approval is not received. Issuances of restricted Common
Stock to service providers as compensation for services are subject to shareholder approval. These shares were subsequently issued on
September 4, 2013, (2012: None.). The stock was valued at $504, the closing market price on that date. For the year ended December 31,
2013, the Company expensed $188 in cash and $504 in stock consideration (2012: $42 and $nil respectively).

In November 2012, in connection with the sale of the Preferred Stock, the Company was required to enter into investor/public
relations service agreements, with terms of seven, ten and twelve months. Compensation under the agreements included cash consideration of
$444, the issuance of 100,000 shares of Preferred Stock and 400,000 warrants to purchase MGT Common Stock. Issuance of Preferred Stock
and warrants to service providers as compensation for services are subject to shareholder and NYSE MKT approval. No shares were
approved or issued as of December 31, 2013 and 2012. Under the terms of the agreements, there are no penalties or liabilities to the Company
if approval is not received.

The twelve–month agreement was mutually terminated in January 2013, and the stock consideration still owed under the agreement
was further renegotiated on May 3, 2013, to replace the issuance of 100,000 shares of Preferred Stock and 200,000 warrants to purchase
MGT Common Stock with the issuance of 50,000 shares of Restricted Common Stock, subject to NYSE MKT exchange approval. These
shares were subsequently issued on September 4, 2013. The stock was valued at $206, using the closing market price on that date.

On May 3, 2013, the seven–month agreement was mutually terminated, reducing the future cash consideration due by $20 in

consideration of having a month–to–month service agreement for $15 per month. This agreement was cancelled in August 2013.

The ten–month agreement terminated in accordance with its terms on September 19, 2013, however, because the obligation to meet
the timeframe contemplated and the issuance of the Warrant was never made, management determined it was in the best interest of the
Company to enter into a settlement regarding the Warrant issuance. On December 2, 2013, the Company entered into a Settlement Agreement
(the “Settlement Agreement”). Pursuant to the Settlement Agreement, both parties agreed to the following: (i) the Company’s obligation to
grant the Warrant and to issue the underlying Common Stock, and Century’s right to receive the Warrant and the underlying Common Stock is
cancelled, (ii) Century will make a cash payment to the Company of $100 and (iii) the Company will issue to Century 100,000 shares of
Common Stock subject to NYSE MKT exchange approval. Proceeds under the Settlement Agreement were received December 10, 2013. The
shares were issued on December 26, 2013 and valued at $301, using the closing market price on that date. The Company recorded $201 of
expense and $100 of cash proceeds related to the issuance.

For the years ended December 31, 2013, the Company paid $415 in cash consideration (2012: $113), and recognized $911 (2012:

$nil) of stock–based expense relating to the agreements.

Haller agreements

Note 12. Income taxes

Significant components of deferred tax assets were as follows as of December 31:

U.S. federal tax loss carry–forward
U.S. State tax loss carry–forward
Foreign tax loss carry–forward
U.S. federal capital loss carry–forward
U.S. foreign tax credit carry–forward
Equity–based compensation, fixed assets and other
Total deferred tax assets
Less: valuation allowance
Deferred tax liability – warrants
Net deferred tax asset

As of December 31, 2013, the Company had the following tax attributes:

U.S. federal net operating loss carry–forwards
U.S. State net operating loss carry–forwards
U.S. federal foreign tax credit carry–forwards
U.S. federal capital loss carry–forwards

Year ended December 31,

2013

2012

8,511 $
653
–
706
248
1,446
11,564
(11,564)
–
– $

6,400
224
15,552
706
–
255
23,137
(22,917)
(220)
–

Amount

Begins to expire

25,064
11,703
248
2,076

Fiscal 2023
Fiscal 2031
Fiscal 2025
Fiscal 2015

As it is not more likely than not that the resulting deferred tax benefits will be realized, a full valuation allowance has been recognized
for such deferred tax assets. Federal and state laws impose substantial restrictions on the utilization of tax attributes in the event of an
“ownership change,” as defined in Section 382 of the Internal Revenue Code. Currently, the Company does not expect the utilization of tax
attributes in the near term to be materially affected as no significant limitations are expected to be placed on these tax attributes as a result of
previous ownership changes. If an ownership change is deemed to have occurred as a result of equity ownership changes or offerings,
potential near term utilization of these assets could be reduced.

The provision for/(benefit from) income tax differs from the amount computed by applying the statutory federal income tax rate to
income before the provision for/(benefit from) income taxes. The sources and tax effects of the differences are as follows for the year ended
December 31:

Expected Federal Tax
State Tax (Net of Federal Benefit)
Permanent differences
Loss of NOL benefit of closed foreign entity
Foreign tax credit
Other
Foreign rate differential
Change in valuation allowance
Effective rate of income tax

2013

2012

34%

6.63
(1.98)
(142.44)
1.60
(1.78)
–
(103.98)

(0.00)%

35%
–
–
–
–
–
42
(7)
(0.00)%

There was an income tax expense of $nil and $14 recorded in the years ended December 31, 2013, and 2012, respectively.

The Company files income tax returns in the U.S. federal jurisdiction, New York State, New York City, New Jersey and California
jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non–U.S. income tax examinations by
tax authorities for years before 2010.

Note 13. Related party transactions

FanTD – loan payable to FanTD members

The Company had a loan payable to certain founding members of FanTD. The loan served to temporarily assist with FanTD’s
operating expenditures. The loan was interest–free and payable on demand no later than December 31, 2013. On October 29, 2013 and
November 18, 2013, the Company paid $50 and $50, respectively towards the outstanding balance. The outstanding balance as of December
31, 2013 was $nil.

Note 14. Fair value of financial instruments

The Company follows paragraph 825–10–50–10 of the FASB Accounting Standards Codification for disclosures about fair value of
its financial instruments and paragraph 820–10–35–37 of the FASB Accounting Standards Codification (“Paragraph 820–10–35–37”) to
measure the fair value of its financial instruments. Paragraph 820–10–35–37 establishes a framework for measuring fair value in accounting
principles generally accepted in the United States of America (“GAAP”), and expands disclosures about fair value measurements. To increase
consistency and comparability in fair value measurements and related disclosures, Paragraph 820–10–35–37 establishes a fair value hierarchy
which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the
highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820–10–35–37 are described below:

Level 1

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly
observable as of the reporting date.

Level 3

Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow

methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and
the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level
described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses, accounts
payable and accrued expenses, accrued dividends and unearned convention revenue approximate their fair value because of the short maturity
of those instruments. The Company’s convertible Preferred Stock and warrants approximate the fair value of such instruments based upon
management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2013,
and 2012.

The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative
warrant liability at every reporting period and recognizes gains or losses in the consolidated statements of operations and comprehensive
income (loss) that are attributable to the change in the fair value of the derivative warrant liability.

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

Level 3 Financial Liabilities – Derivative conversion features and warrant liabilities

Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the consolidated

balance sheets as of December 31, 2013:

Derivative warrant – liability

Carrying value
$

– $

Level 1

Level 2

Level 3

Total

– $

–

Fair value measurement using

Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the consolidated

balance sheets as of December 31, 2012:

Derivative warrant – liability

Carrying value
$

7,166 $

Level 1

Level 2

Level 3

Total

– $

7,166 $

7,166

Fair value measurement using

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and
liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the year ending December 31,
2013:

Fair value measurement
using level 3 inputs

Balance January 1, 2012
Issuance of warrants to purchase intangible assets
Revaluation of warrant liability
Issuance of warrants with the issuance of Preferred Series A Convertible stock
Issuance of additional warrants due to anti-dilution provision
Transfers in and/or out of Level III
Balance December 31, 2012
Total (gains) or losses (realized/unrealized) included in consolidated statements of operations
Purchases, issuances and settlements
Reclassification of derivative liabilities to equity upon modification of terms (Note 6)
Balance, December 31, 2013

Derivatives
$

- $
851
557
6,731
141
-
7,166 $
2,204
-
(9,370)
- $

Total

-
851
557
6,731
141
-
7,166
2,204
-
(9,370)
–

Note 15. Convertible note and warrant

On May 24, 2012, the Company entered into a securities purchase agreement (the “SPA”) with Hudson Bay Fund Ltd. (the
“Investor”). The SPA provided for the purchase of an 18 month promissory note (the “Senior Secured Convertible Note” or the “Note”)
convertible into up to 1,166,667 shares of Company Common Stock at a conversion price of $3.00 per share and a warrant (the “Hudson Bay
Warrant” or the “HB Warrant”) to purchase up to 875,000 shares of Common Stock at an exercise price of $3.00 per share for proceeds of
$3,500 (the “Hudson Bay Transaction”). The HB Warrant is exercisable at the option of the holder at a $3.00 per share exercise price and the
Company can require exercise if the Weighted Average Price of the Company’s Common Stock equals or exceeds 250% of the exercise price
for no less than twenty (20) Trading Days during any thirty (30) consecutive Trading Day period occurring following the issuance date, as
such terms are defined in the HB Warrant. The HB Warrant exercise price is subject to adjustment in the case of combination or subdivision of
stock or in the event of the granting of any stock appreciation rights, phantom stock rights or other rights with equity features. The Note
allows for payment of Common Stock in lieu of cash interest payments due pursuant to the Note.

In connection with the Hudson Bay Transaction, MGT issued 75,000 shares of Restricted Common Stock to Chardan Capital
Markets, LLC (“Chardan”) and certain affiliates of Chardan in consideration of investment banking services rendered. Stockholder approval
was obtained for the issuance of 75,000 shares of Restricted Common Stock to Chardan. The restricted Common Stock was recorded at fair
market value of $315 at the date of closing and was issued on August 9, 2012.

Financing and issuance costs totaling $688 were incurred in connection with the issuance of the Note and HB Warrants. These costs
include legal and placement fees, including the issuance of the 75,000 shares of restricted Common Stock. The total costs were allocated based
on relative fair values to deferred financing costs in the amount of $588 and HB Warrant issuance costs of $100. Deferred financing costs are
amortized through periodic charges to non–operating expense over the 18 month period from the date of issuance to the date the Note is due
using the effective interest method. Amortization expense for the year ended December 31, 2013, and 2012, was $nil and $125, respectively.

The debt to equity conversion feature embedded in the Note was evaluated to determine if such conversion feature should be
bifurcated from its host instrument and accounted for as a free standing derivative. The Company determined that the conversion feature did
not need to be bifurcated. The fair value of the beneficial conversion feature was calculated to be $500 after adjusting the effective conversion
price for the fair value of the HB Warrants issued, recognized as an increase of additional paid–in capital and a discount to the convertible note.
The discount to the convertible note payable is accreted through periodic charges to other non–operating expense over the 18 month period
from the date of issuance to the date the Note is due using the effective interest method.

The fair value of the HB Warrant was estimated on the date of issuance, June 1, 2012, using a closed–formula option pricing method
for barrier–type options that took into account the terms of the option rights of the holder and also the Company’s mandatory exercise option,
which is consistent with using a Monte Carlo option pricing method. The options pricing methods used the following input assumptions:
expected stock price volatility 75.0%; warrant term five (5) years; risk–free rate of 0.80%; dividend yield 0.0%. As the trading volume of the
Company’s publicly traded shares was approximately 30,000 per day and the issuable shares under the Note and HB warrant were over 2.0
million, and further because these issuable shares had not yet been registered for public sale at the issuance date, the price of the underlying
shares was discounted approximately 30% for options pricing purposes. The fair value of the total HB warrants issued, given the terms of the
HB Warrant agreement, was determined to be $500. The HB warrant fair value was recognized as an increase of additional paid–in capital and
a discount to the convertible note. The discount to the convertible note payable is accreted through periodic charges to other non–operating
expense over the 18 month period from the date of issuance to the date the Note is due using the effective interest method.

The beneficial conversion feature and the HB warrant discount accretion expense for the years ending December 31, 2013, and 2012,

was $nil and $199, respectively.

The estimates discussed above require us to make assumptions based on historical results, observance of trends in our stock price,
future expectations and other relevant risk factors. If other assumptions had been used, the HB Warrant valuation as calculated and recorded
under the accounting guidance could have been affected.

Volatility is a key factor in option pricing models. For purposes of determining expected volatility, the Company used significant
judgment to identify a peer group. The historical volatility of the Company’s own Common Stock was not deemed pertinent to the estimate,
because of the recent change in the Company’s operations and business plan. The risk–free rate for the period coincides with the expected life
of the HB Warrants and is based on the U.S. Treasury Department yield curve in effect at time of closing.

On October 9, 2012, the Company executed two identical exchange agreements (collectively, the “Agreements”) settling the
outstanding Note for a cash payment of $3.5 million and 100,000 shares of the Company’s Common Stock valued at $415, using the opening
price of the Company’s Common Stock on October 9, 2012. The net carrying amount of the Note on the date of extinguishment was $2,698
which was comprised of the amount due at maturity of $3,500 less unamortized debt discount of $802 related to the amount allocated to the
warrants and the beneficial conversion feature at issuance. The total reacquisition price of $3,915 was allocated first to the repurchased
beneficial conversion feature by recording a reduction of additional paid–in capital of $1,341 measured as the intrinsic value of that conversion
feature at the extinguishment date with the residual amount of the reacquisition price of $2,574 allocated to the Note. The difference between
the reacquisition price allocated to the Note and the net carrying amount of the Note resulted in a gain of $124 which when netted with the
write off of unamortized deferred financing costs of $462 and legal cost of $17, at extinguishment resulted in a total loss on extinguishment of
$355. Extinguishment of debt, gains and losses, including fees, incurred in connection with the early extinguishment of debt are charged to
current earnings as reductions in non–operating expenses.

For the years ending December 31, 2013 and 2012, interest expense on the convertible note was $nil and $93, respectively.

Note 16. Accrued expenses

Professional fees
Vendors
Non-executive directors’ fees
Other
Total

2013

2012

66 $
–
23
5
94 $

200
–
54
18
272

As of December 31, 2013, the Company accrued $nil (2012: $18) related to the acquisition of Medicsight Ltd ordinary shares (Note

9).

SUBSIDIARIES OF MGT CAPITAL INVESTMENTS, INC.

Jurisdiction of Organization

Exhibit 21.1

Delaware, USA

Name of Subsidiary

MGT Gaming, Inc.

Medicsight, Inc.

MGT Studios, Inc. (f/k/a MGT Capital Solutions, Inc.) and

Delaware, USA

subsidiaries:
– MGT Interactive LLC
– M2P Americas, Inc.

MGT Sports, Inc. and subsidiary:

– FanTD LLC

Delaware, USA
Delaware, USA

Delaware, USA
New York, USA

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT

We consent to the incorporation by reference in the Registration Statements of MGT Capital Investments, Inc. on Form S-3 (No. 33-185214
and No. 33-182298) of our report dated March 28, 2014, with respect to our audit of the consolidated financial statements of MGT Capital
Investments, Inc. as of December 31, 2013 and for the year ended December 31, 2013, which report is included in this Annual Report on
Form 10-K of MGT Capital Investments, Inc. for the year ended December 31, 2013.

Exhibit 23.1

/s/ Marcum LLP

New York, NY
March 28, 2014

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements of MGT Capital Investments, Inc. and Subsidiaries on Form S-3
(No. 33-185214 and No. 33-182298) of our report dated March 28, 2014, on our audit of the consolidated financial statements as of
December 31, 2012 and for the year then ended, which report is included in this Annual Report on Form 10-K to be filed on or about March
28, 2014.

Exhibit 23.2

/s/ EisnerAmper LLP

Iselin, New Jersey
March 28, 2014

CERTIFICATION PURSUANT TO SARBANES–OXLEY ACT OF 2002

I, Robert B. Ladd, certify that:

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

Exhibit 31.1

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. The registrant’s other certifying officer and I are 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. The registrant’s other certifying officer and 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.

March 28, 2014

/s/ ROBERT B. LADD

By:
Robert B. Ladd
President and Chief Executive Officer
(Principal Executive Officer)

CERTIFICATION PURSUANT TO SARBANES–OXLEY ACT OF 2002

I, Robert P. Traversa, certify that:

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

Exhibit 31.2

(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.

March 28, 2014

/s/ ROBERT P. TRAVERSA

By:
Robert P. Traversa
Chief Financial Officer
(Principal Financial Officer)

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

Exhibit 32.1

I, Robert B. Ladd, President and Chief Executive Officer of MGT Capital Investments, Inc. (the “Company”), certify, pursuant to Section 906
of the Sarbanes–Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

(1) the Annual Report on Form 10–K of the Company for the year ended December 31, 2013, (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.

March 28, 2014

/s/ ROBERT B. LADD

By:
Robert B. Ladd
President and Chief Executive Officer
(Principal Executive Officer)

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

Exhibit 32.2

I, Robert P. Traversa, Chief Financial Officer of MGT Capital Investments, Inc. (the “Company”), certify, pursuant to Section 906 of the
Sarbanes–Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.

March 28, 2014

/s/ ROBERT P. TRAVERSA

By:
Robert P. Traversa
Treasurer and Chief Financial Officer
(Principal Financial Officer)