MGT Capital Investments, Inc. Annual Report 2014

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FY2014 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, 2014

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 x

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 ¨

Accelerated filer ¨

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

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, 2014, 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 $8,565,902

As of April 14, 2015, the registrant had outstanding 13,529,969 shares of Common stock, $0.001 par value. (the “Common

stock”)

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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4
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16

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32
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41

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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”) and its minority–owned subsidiary M2P Americas, Inc., and MGT Sports, Inc. (“MGT Sports”) including
its wholly–owned subsidiary FanTD LLC, (“FanTD”). Our corporate office is located in Harrison, New York.

MGT and its subsidiaries are principally engaged in the business of acquiring, developing and monetizing assets in the online and
mobile gaming space and social casino. MGT’s portfolio of assets in the online, mobile gaming and social casino gaming space includes
DraftDay.com, FantasySportsLive.com and Slot Champ. On December 30, 2014, the Company announced an exclusive partnership with
Vivid Entertainment, LLC to develop a fantasy sports gaming site which is available online at VividBetSports.com.

In addition, 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.

Outside of the business of acquiring, developing and monetizing assets in the online, mobile gaming and casino gaming space,
MGT’s wholly subsidiary Medicsight owns the U.S. Food and Drug Administration (“FDA”) approved medical imaging software and has
developed an automated carbon dioxide insufflation device which 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 principally 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 stockholders. 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.

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
such as the daily fantasy sports operators FanDuel, Inc. and DraftKings, Inc. or Zynga, Inc. (NASDAQ: ZNGA) and Caesars Acquisition
Company (NASDAQ: CACQ) which 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 as Aruze Gaming America, Inc.

Employees

Currently, the Company and its subsidiaries have 11 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 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 Annual 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 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 financial results are highly concentrated in the online mobile and gaming business; if we are unable to grow online mobile and

gaming revenues and find alternative sources of revenue, our financial results will suffer.

Software, devices and gaming accounted for substantially all of our revenues for the year ended December 31, 2014. Our success
depends upon customers choosing to use, and search advertising partners choosing to advertise, on, our online, mobile and casino gaming
products. Decisions by customers and our search advertising partners not to adopt our products at projected rates, or changes in market
conditions, may adversely affect the use or distribution of our products. Because of our revenue concentration in the online, mobile and
casino gaming business, such shortfalls or changes could have a negative impact on our financial results, or with regard to some of our
larger advertising partners specifically, our results of operations, financial condition and/or liquidity will suffer.

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 “thin–
client games,” which often utilize a significant amount of the available memory on a user’s device. Due to the inherent
limitations of the most commonly–used 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–load the thick–client
game 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;

stronger strategy which may reach our target audience better than our current strategy;

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.

Inflation and future expectations of inflation influence consumer spending on entertainment such as online gaming and gambling.

As a result, our profitability and capital levels may be impacted by inflation and inflationary expectations. Additionally, inflation’s
impact on our operating expenses may affect profitability to the extent that additional costs are not recoverable through increased cost of
consumer acquisition for our portfolio of online, mobile gaming and casino gaming offerings.

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.draftday.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. Our competitors may have more resources to drive traffic to
their websites in order to optimize their internet search ranking position, including the ability to conduct national television and radio
advertising campaigns advertising our competitors’ websites. This risk particularly effects DraftDay.com, as we may not have the resources
to promote its sports-related content during televised sporting events such as the NFL Superbowl. 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 U.S. Patent and Trademark Office (the “USPTO”) or 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 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.

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 in a developing industry 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 $299,163 as of December 31, 2014. 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 growth or 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.

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.

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 of the Sarbanes–Oxley Act of 2002. 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 the growth of our operations, and cannot obtain sufficient capital, we 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 or lack thereof, (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 do not anticipate paying any cash dividends on our Common stock in the foreseeable future and our stock may not appreciate in

value.

We have not declared or paid cash dividends on our Common stock to date. We currently intend to retain our future earnings, if
any, to fund the development and growth of our business. In addition, the terms of any existing or future debt agreements may preclude us
from paying dividends. There is no guarantee that shares of our Common stock will appreciate in value or that the price at which our
stockholders have purchased their shares will be able to be maintained.

If securities or industry analysts do not publish research or reports about our business, or publish inaccurate or unfavorable

research reports about our business, our share price and trading volume could decline.

The trading market for our Common stock will, to some extent, depend on the research and reports that securities or industry
analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us
should downgrade our shares or change their opinion of our business prospects, our share price would likely decline. If one or more of
these analysts ceases coverage of our company or fails to regularly publish reports on us, we could lose visibility in the financial markets,
which could cause our share price and volume to decline.

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 10528, under a lease that expires on November 30, 2015. The Company leases additional space in New York City,
NY (occupied by MGT Studios) under a month–to–month arrangement. 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 8,550,554 (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 against certain companies
which 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, including WMS Gaming, Inc. – a subsidiary of Scientific Games, Inc. (“WMS”)
(NASDAQ: SGMS), Penn National Gaming, Inc. (“Penn”) (NASDAQ GS: PENN), and Aruze Gaming America, Inc. (“Aruze America”).
An amended complaint added the '554 patent, a continuation of the ‘088 patent. The allegedly infringing products include at least those
identified under the trade names: "Amazon Fishing" and "Paradise Fishing."

On October 23, 2013 the U.S. District Court severed the originally filed action into three separate actions: The Defendants in all
three actions filed counterclaims denying infringement and asserting invalidity of both patents–in–suit. MGT Gaming filed appropriate
responses, reasserting the validity and infringement of the ‘088 and ‘554 patents.

On November 4, 2013, WMS filed a Petition for Inter Parties Review ("IPR") with the United States Patent and Trademark Office
("PTO"), challenging the’088 patent–in–suit. On April 30, 2014 the Patent Trial and Appeal Board (“PTAB”) instituted the IPR, allowing
the IPR to proceed on all claims in suit. The IPR proceeding has subsequently been dismissed by agreement between WMS and MGT
Gaming as part of a settlement of all claims between WMS and MGT, including a dismissal of MGT’s court action against WMS.

Aruze Macau, a sister company of Aruze, Aruze America, subsequently filed its own IPR Petition seeking review of the ‘088
patent based on the same prior art cited by WMS in its IPR. Aruze America also filed a Request for Ex Parte Reexamination of that patent
and a Petition for IPR of the ‘554 patent, both based on different prior art. Aruze America’s Reexamination Request has been denied by the
PTO. Its Petition for IPR remains pending, with MGT’s Preliminary Response due on March 16, 2015.

MGT sought dismissal of Aruze Macau’s IPR Petition based on the grounds that Aruze America, not Aruze Macau, was the real
party in interest and/or was in privity with Aruze Macau, and that the Aruze entities delayed more than 12 months after the filing of MGT’s
infringement action against Aruze America based on the ‘088 patent and are therefore barred from filing an IPR against that patent. On
February 20, 2015, the PTAB denied MGT’s request for dismissal of the Aruze Macau IPR Petition, but granted MGT the right to conduct
further discovery on the real party in interest, privity and one year bar issues that it had raised in its dismissal request. MGT is pursuing
such discovery and will reassert the one–year bar as well as addressing Aruze Macau’s arguments on the merits. The PTAB held an initial
conference call in that proceeding on March 16, 2015, the same day that MGT’s Preliminary Response to Aruze America’s concurrent IPR
Petition directed to the ‘554 patent was filed. MGT is seeking denial of that latter Petition on the grounds that Aruze America has not made
out a prima facie case of either anticipation or obviousness based on the prior art asserted in that proceeding.

By motions filed on May 12, 2014, Aruze sought a transfer of the Mississippi infringement action to Nevada as well as a stay
pending resolution of IPR proceedings before the PTAB. Only the latter motion has been granted and the Mississippi action remains stayed
at present.

On September 29, 2014, Iroquois Capital Management, LLC, Iroquois Master Fund and Joshua Silverman (collectively,
“Iroquois”) entered into a settlement agreement with the Company (the “Iroquois Settlement Agreement”). Pursuant to the Iroquois
Settlement agreement, Iroquois dropped all claims against the Company, and the Company agreed to: (i) nominate Joshua Silverman,
together with H. Robert Holmes, Robert B. Ladd, and Michael Onghai (collectively, the “2014 Nominees”), for election to the Board at the
Company’s 2014 annual meeting of stockholders (the “2014 Annual Meeting”); (ii) recommend a vote for the 2014 Nominees and solicit
proxies from the Issuer’s stockholders for the election of the 2014 Nominees at the 2014 Annual Meeting; (iii) immediately appoint Mr.
Silverman as an observer to the Board until the 2014 Annual Meeting; (iv) hold the 2014 Annual Meeting no later than December 31,2014;
and (v) appoint Mr. Silverman to at least one committee of the Board promptly following the 2014 Annual Meeting, but in no event later
than fifteen (15) business days thereafter.

On December 18, 2014, the Company held the 2014 Annual Meeting, at which the 2014 Nominees, including Mr. Silverman,
were elected as members of the Board, to serve until the next annual meeting of the Company or until their successors are duly elected,
appointed and qualified. After his election to the Board, Mr. Silverman was appointed as a member of the Company’s Audit Committee,
Nomination and Compensation Committees.

In addition, the Iroquois Settlement Agreement also required Iroquois to agree to a number of standstill restrictions during the
period beginning on September 29, 2014 and ending upon the conclusion of the 2015 annual meeting of stockholders (the “2015 Annual
Meeting”); provided, however, that in the event the Company does not satisfy at least one of the Standstill Conditions (as hereinafter
defined) prior to, or as of the deadline for submissions of stockholder nominations for the 2015 Annual Meeting pursuant to the Company’s
Bylaws (the “2015 Stockholder Nomination Deadline Date”), then Iroquois shall no longer be bound by the standstill provisions of the
Iroquois Settlement Agreement and shall be permitted to nominate a slate of nominees for election at the 2015 Annual Meeting provided
that the Iroquois Director has resigned as a director as of the 2015 Stockholder Nomination Deadline Date. The “Standstill Conditions” are
that either: (1) the Company’s stock price doubles between the date of the Iroquois Settlement Agreement and the 2015 Stockholder
Nomination Deadline Date; (2) the Company enters into a merger, sale, business combination or disposition of substantially all of the
Company’s assets prior to the 2015 Stockholder Nomination Deadline Date; or (3) each of the Company’s existing business lines are
profitable as of the 2015 Stockholder Nomination Deadline Date. If the Company does not satisfy at least one of the Standstill Conditions
prior to, or as of, the 2015 Stockholder Nomination Deadline Date, and Mr. Silverman resigns from the Board prior to the date that is 10
days prior the 2015 Stockholder Nomination Deadline Date, then the standstill period shall end on the 2015 Stockholder Nomination
Deadline Date.

The standstill provisions that Iroquois agreed to pursuant to the Iroquois Settlement Agreement provide, among other things, that
Iroquois will not: (i) acquire beneficial ownership of any additional securities of the Company, without the Company’s prior written
consent; (ii) submit any stockholder proposals; (iii) engage in any solicitation of proxies (or written consents) or otherwise become a
participant in a solicitation in opposition to the recommendation or proposal of the Board; (iv) form or join any partnership, limited
partnership, syndicate or other group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended with
respect to the Common Stock or deposit any shares of Common Stock in a voting trust or similar arrangement; (v) call, or request the call
of, a special meeting of the Company’s stockholders, or make a request for a list of the Company’s stockholders; (vi) vote for any
nominee(s) for election to the Board, other than those nominated or supported by the Board; (vii) except as provided in the Iroquois
Settlement Agreement, seek to place a representative or other affiliate, associate or nominee on the Board or seek the removal of any
member of the Board or a change in the size or composition of the Board; (viii) effect or seek to effect, in any capacity other than as a
member of the Board, offer or propose to effect, or cause or participate in, or assist or facilitate any other person to do the same (whether
publicly or otherwise) (a) any acquisition of any material assets or businesses of the Company or its subsidiaries, or any sale, lease,
exchange, pledge, mortgage, or transfer thereof; (b) any tender offer or exchange offer, merger, acquisition or other business combination
involving the Company or its subsidiaries; or (c) any recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company or its subsidiaries; (ix) make, or assist or encourage any third party to make, any demands for
books and records and other materials pursuant to Section 220 of the Delaware General Corporate Law or pursue any litigation related
thereto against the Company; and (x) disclose publicly, or privately in a manner that could reasonably be expected to become public, any
intention, plan or arrangement inconsistent with the foregoing.

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 (“NYSE MKT”) under the symbol “MGT”.

The following table sets forth the high and low last reported sales prices of our Common stock for each quarterly period during

2014 and 2013.

2014:
Fourth quarter
Third quarter
Second quarter
First quarter

2013:
Fourth quarter
Third quarter
Second quarter
First quarter

High

Low

1.08 $
1.90
2.00
2.73

3.77 $
5.02
5.29
3.90

0.57
0.64
1.05
1.78

2.70
3.45
3.05
2.76

On April 13, 2015, the Company’s Common stock closed on NYSE MKT at $0.59 per share.

As of April 13, 2015, there were 377 stockholders of record of our Common stock.

Dividends

The Company has never declared or paid cash dividends on its Common stock and has no intention to do so in the foreseeable

future.

For the years ending December 31, 2014, and 2013, the Company issued an aggregate of 580 and 21,394 shares of Convertible
Preferred Series A stock respectively, as dividend shares to record stockholders. The issuances of Convertible Preferred Series A Stock as
dividend shares to record stockholders did not result in any proceeds to the Company.

Securities authorized for issuance under equity compensation plans

No option grants were issued during the year ended December 31, 2014. Further reference is made to the information contained in

the Equity Compensation Plan table contained in Item 12 of this Annual Report.

Recent sales of unregistered securities

In the three months ended December 31, 2014, the Company issued 148 shares of Series A Convertible Preferred stock as

dividend shares to holders, representing dividends due from October 1, 2014 to December 31, 2014.

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

1933, as amended. The issuances did not result in any proceeds to the Company.

Issuer purchases of equity securities

There were no repurchases of the Company’s Common stock during the year ended December 31, 2014.

Item 6. Selected financial data.

Not applicable.

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

Amounts in thousands, except shares and per share amount.

Executive summary

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 subsidiaries MGT
Gaming, Inc. (“MGT Gaming”), MGT Interactive LLC (“MGT Interactive”), and wholly–owned subsidiaries Medicsight, Inc.
(“Medicsight”), MGT Studios, Inc. (f/k/a MGT Capital Solutions, Inc.) (“MGT Studios”) including its minority–owned subsidiary M2P
Americas, Inc., and MGT Sports, Inc. (“MGT Sports”) including its wholly–owned subsidiary FanTD LLC, (“FanTD”). Our corporate
office is located in Harrison, New York.

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.

MGT Sports

MGT Sports operates DraftDay.com, the daily fantasy sports industry’s third largest daily fantasy sports wagering site, based
upon player activity, contest sizes and similar metrics. The website offers players the opportunity to participate in real money daily fantasy
gameplay for the NFL, MLB, NCAA (basketball & football), NHL, NBA and professional golf. Player funds associated to the
DraftDay.com website are maintained in a segregated account and are not used for operating activities. 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. DraftDay is a leader in the popular quick–pick
style of skill–based fantasy sports gaming. In addition, the Company has launched an online portal for fantasy sports news and
commentary, FantasySportsLive.com.

On May 20, 2013, MGT Sports completed the acquisition of 63% of the outstanding membership interests of FanTD LLC.

During the year ended December 31, 2014 the Company acquired the remaining 37% interest in FanTD.

On April 7, 2014, the Company closed on the Asset Purchase Agreement (the “CRG Agreement”) with CardRunners Gaming,
Inc. (“CRG”), and certain key stockholders of CRG. The CRG Agreement provided for the Company’s purchase of all of the business
assets and intellectual property related to DraftDay.com. (Note 4)

On December 30, 2014, the Company announced an exclusive partnership with Vivid Entertainment, LLC to develop a fantasy

sports gaming site which is available online at VividBetSports.com.

On September 30, 2006, the United States Congress passed the Unlawful Internet Gambling Enforcement Act of 2006
(“UIGEA”). The criminal provisions of UIGEA provide that no person engaged in the business of betting or wagering may knowingly
accept directly or indirectly virtually any type of payment from a player in unlawful internet gambling (i.e. bets that are unlawful under
other state or Federal laws). The Company has been advised by counsel that the fantasy sports are exempt from the definition of unlawful
internet gambling provided that:

They are not based on the current membership of an actual sports team or on the score, point spread or performance of teams;

· All prizes and awards are established and made known before the start of the contest;

· Winning outcomes are based on the skill of the participants and predominately by accumulated statistics of individual

performances of athletes, but not solely on a single performance of an athlete.

MGT Gaming

MGT Studios

MGT Studios is publisher of social games and real money games of skill.

On November 11, 2013, the Company entered into an Agreement and Plan of Reorganization (the “Avcom Agreement”) with
MGT Capital Solutions, Inc., a wholly owned subsidiary of the Company, Avcom, Inc. and the stockholders and option holders of Avcom,
Inc. (“Avcom”). Pursuant to the Avcom 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 Avcom Agreement. The acquisition
contemplated by the Avcom Agreement 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 shares 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 Avcom 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 Mobilevegas and freeawesome.com, as well as a game under development titled
“SlotChamp”. Prior to entering into the Avcom 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 in 2013.

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 existing
subsidiary MGT Studios. 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
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
Americas at book value if the Company does not purchase equity in M2P prior to April 2, 2014. This agreement was subsequently
amended to extend the purchase date to May 31, 2014.

On May 31, 2014, M2P exercised its option to purchase 10% of the outstanding equity interests of M2P Americas from the

Company. As a result, the Company’s ownership of M2P Americas is now 40.1%, and M2P’s ownership is 59.9%.

MGT filed a completed 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.
The Company expects a determination from NJDGE after it reviews the Personal History Disclosure forms to be provided by a significant
minority stockholder of the Company. Completion of this paperwork is beyond the control of MGT; therefore the Company is unable to
predict when or if a CSIE License will be granted.

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, and LLC (“Gioia”) and MGT Interactive, LLC 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. 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 has been 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 shall have the right to certain royalty
payments from the gross rake payments, and any licensing or royalty income received by MGT Interactive after certain revenue targets are
exceeded.

Medicsight

Medicsight owns medical imaging software that has received U.S. FDA approval and European CE Mark. The software is
designed to detect colorectal polyps during a virtual colonoscopy performed using CT Tomography. Software sales have been very limited
in the past two years. 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.

Results of operations

The Company currently has four operational segments, Medicsight Software/Devices, Medicsight Services, Gaming and
Intellectual Property. Intellectual Property was previously referred to as MGT Gaming. Gaming is a new segment for the year ended
December 31, 2014. Certain corporate expenses are not allocated to a particular segment.

Revenue totaled $1,056 (2013: $396).

· Operating expenses were $6,075 (2013: $9,349).

· Net loss attributable to Common stockholders was $5,330 (2013: $10,272) resulting in a basic and diluted loss per share of

$0.56 (2013: $1.84).

The increase in revenues is attributed to DraftDay, acquired in the second quarter of 2014.

Our operating expenses have decreased substantially during the year ended December 31, 2014, predominantly due to lower
corporate governance costs of $629 (2013: $2,430), professional fees of $944 (2013: $1,693), non–cash expenses such as stock–based
expense of $449 (2013: $2,965) and Preferred Series A warrant modification expense of $nil (2013: $598).

Fiscal years ended December 31, 2014 versus 2013

Gaming

During the year ended December 31, 2014, the Company recognized $971 in revenue for this segment (2013: $221), the increase

is attributed to DraftDay, acquired in the second quarter of 2014.

Our cost of revenue was $610 (2013: $496), which primarily consisted of overlay incurred on the DraftDay 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.

Our selling, general and administrative expenses were $3,160 (2013: $1,092), primarily consisting of marketing expenses,
employee compensation, IT and office related expenses in MGT Studios, FanTD and MGT Sports. The increase is primarily attributed to
operating costs in DraftDay, acquired in the second quarter of 2014.

In the year ended December 31, 2014 the Company recognized $188 of research and development expense (2013: $73), attributed

to product development costs in MGT Studios.

In the fourth quarter of 2014, MGT Studios wrote down $135 (2013: $nil) relating to Digital Angel intangible assets.

Medicsight software/devices

Revenues were $85 (2013: $78), primarily consisting of newly launched Insufflator sales via our distributor Ultrasound

Technologies, Ltd.

There were no expenses attributed to this segment (2013: $15).

Medicsight services

As a result of employee departure in the second quarter of 2013 the company did not recognize any revenue in 2014 (2013: $97)
or cost of revenue (2013: $63) for this segment during the year ended December 31, 2014. Selling, general and administrative expenses
were also $nil (2013: $7). Management is currently evaluating and assessing options for this segment.

Intellectual property (f/k/a MGT Gaming)

This segment currently does not generate revenue as the Company continues to pursue its patent enforcement strategy.

Selling, general and administrative expenses were $486 (2013: $595), attributed to intellectual property amortization and

consulting and legal fees.

Unallocated corporate/other

Selling, general and administrative expenses during the year ended December 31, 2014, decreased to $2,242 from $6,967 in 2013.
Stock–based compensation expense was lower by approximately $2.5 million compared to last year and corporate governance and
professional fees have decreased by approximately $1.5 million as there were no investor and public relations costs this year. Additionally,
in 2013, the Company recorded a non–recurring expense of $598 related to warrant modification.

The Company recorded $1 in interest and other expense for the year ended December 31, 2014 (2013: $43).

Liquidity and capital resources

Working capital summary:
Cash and cash equivalents (excluding $138 and $140 of restricted cash in December 2014 and
December 2013, respectively)
Other current assets
Current liabilities
Working capital surplus

Cash flow summary:
Cash (used in) / provided by:

Operating activities
Investing activities
Financing activities

Net (decrease) increase in cash and cash equivalents

December 31 December 31

2014

2013

1,455 $
177
(1,379)
253 $

4,642
175
(985)
3,832

Year ended December 31, 2014

2014

2013

(4,552) $
(101)
1,466
(3,187) $

(5,058)
2,222
4,035
1,199

On December 31, 2014, MGT’s cash and cash equivalents were $1,455 excluding $138 of restricted cash. Player funds associated
to the DraftDay.com website are maintained in a segregated account and are not used for operating activities. The Company continues to
exercise discipline with respect to current expense levels, as revenues remain limited. Our cash and cash equivalents have decreased during
2014 primarily from $4,552 used in operating activities.

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. The Company intends to raise additional capital through equity investors. The Company needs to raise
additional capital in order to be able to accomplish its business plan objectives. Management believes that it will be successful in obtaining
additional financing based on its history of raising funds; however, no assurance can be provided that the Company will be able to do so.
There is no assurance that any funds it raises will be sufficient to enable the Company to attain profitable operations or continue as a going
concern. 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. There can be no assurance that such a plan will be successful.

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, change in fair value of warrants, gain on sale of
patent, 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 8).

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 Avcom 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 Avcom 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.

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. MGT filed
for an application for a New Jersey Casino Services Industry Enterprise License with the New Jersey Department of Gaming, as required,
to offer internet gambling services. Although obtaining the license is beyond the Company’s control, the Company hopes to obtain the
license sometime in 2015.

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.

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 on December 10, 2013 (Note 10).

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 $299,163 at December 31, 2014.
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

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

Pursuant to the ATM 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 ATM 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 ATM 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 ATM 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, 2014, MGT’s cash, cash equivalents and restricted cash were $1,455, including $11 held in MGT Gaming.

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 ATM agreement and combined with the
anticipated gross margin from DrafDay and the gross margin from the expected launch of its social slot machine game, Slotchamp, to
continue operations at least through March 31, 2016.

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 stockholders.
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.

For the year ended December 31, 2014, and through April 14, 2015, the Company sold approximately 4,100,000 shares of our
Common stock under the ATM Agreement through an “at the market” equity offering program for gross proceeds of approximately $2,949,
before related expenses. The proceeds will be used for general corporate purposes, including, but not limited to, commercialization of our
products, capital expenditures and working capital. As of April 14, 2015, the Company has approximately $5.6 million remaining under the
program, assuming sufficient shares are available to be issued.

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.

At The Market Offering Agreement

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

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

For the year ended December 31, 2014, and through March 30, 2015, the Company sold approximately 3,400,000 shares of our
Common stock under the ATM Agreement through an “at the market” equity offering program for gross proceeds of approximately $2,573,
before related expenses. The proceeds will be used for general corporate purposes, including, but not limited to, commercialization of our
products, capital expenditures and working capital. As of March 30, 2015, the Company has approximately $6.0 million remaining under
the program, assuming sufficient shares are available to be issued.

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.

Commitments

STATS licensing agreement

On May 1, 2014, the Company entered into a licensing agreement with STATS LLC (“STATS”) effective February 1, 2014. In
exchange for the right and license to both use certain of STATS’ proprietary information for use with daily and seasonal games and to
power the scoring with the Company’s fantasy sports games on the Company’s websites, the Company has agreed to pay the following
monthly license fees of $11 per month for February–March 2014, $26 per month for April-June 2014 and $20 per month July-October 2014
and $18 per–month thereafter through expiration of the agreement on December 31, 2015. The Company expensed $186 for the year ended
December 31, 2014.

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 in a restricted cash account.

On August 20, 2014 the Company entered into a First Lease Modification and Extension Agreement, extending for a period of one

year the current lease on the Harrison office. Under the agreement the total rental payments over the next twelve months are $71.

Off–balance sheet arrangements

None.

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 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 accrual

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 $0.01or $0.02 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, 2014 and 2013, the Company recorded a liability of
$10 and $10, respectively, relating to potential future virtual currency payouts.

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 - 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.

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 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 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 after 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 “Compensation –
StockCompensation". 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, the dividend yield on the underlying stock and the expected forfeiture
rate. 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 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 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 505-40, “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. The fair value of the equity instruments is re-measured each reporting period over the requisite
service period.

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

In April 2014, the U.S. Financial Accounting Standards Board issued Accounting Standards Update 2014–08, Reporting
Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014–08). This new standard (i) raises the
threshold for disposals to qualify as discontinued operations (ii) allows companies to have significant continuing involvement and
continuing cash flows with the discontinued operation, and (iii) provides for new and additional disclosures of discontinued operations and
individually material disposal transactions. The Company anticipates adopting the new standard when it becomes effective in the first
quarter of 2015.

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014–09, Revenue from Contracts
with Customers. Amendments in this Update create Topic 606, Revenue from Contracts with Customers, and supersede the revenue
recognition requirements in Topic 605, Revenue Recognition, including most industry–specific revenue recognition guidance throughout
the Industry Topics of the Codification. In addition, the amendments supersede the cost guidance in Subtopic 605–35, Revenue
Recognition—Construction–Type and Production–Type Contracts, and create new Subtopic 340–40, Other Assets and Deferred Costs—
Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2011–230—
Revenue Recognition (Topic 605) and Proposed Accounting Standards Update 2011–250—Revenue Recognition (Topic 605): Codification
Amendments, both of which have been deleted. Accounting Standards Update 2014–09. The amendments in this Update are effective for
the Company for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The
Company is currently evaluating the effects of ASU 2014–09 on the consolidated financial statements.

In June 2014, FASB issued Accounting Standards Update 2014–12, Compensation – Stock Compensation (Topic 718), which
clarifies accounting for share–based payments for which the terms of an award provide that a performance target could be achieved after
the requisite service period. That is the case when an employee is eligible to retire or otherwise terminate employment before the end of the
period in which a performance target could be achieved and still be eligible to vest in the award if and when the performance target is
achieved. The updated guidance clarifies that such a term should be treated as a performance condition that affects vesting. As such, the
performance target should not be reflected in estimating the grant–date fair value of the award. Compensation cost should be recognized in
the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost
attributable to the periods for which the requisite service has already been rendered. The guidance will be effective for the annual periods
(and interim periods therein) ending after December 15, 2015. Early application is permitted. The Company is currently evaluating the
effects of ASU 2014–12 on the consolidated financial statements.

In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, Presentation of
Financial Statements- Going Concern. The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether
there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each
reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a
company’s ability to continue as a going concern within one year from the date the financial statements are issued. This Accounting
Standards Update is the final version of Proposed Accounting Standards Update 2013-300—Presentation of Financial Statements (Topic
205): Disclosure of Uncertainties about an Entity’s Going Concern Presumption, which has been deleted. The amendments in this Update
are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is
currently evaluating the effects of ASU 2014-15 on the consolidated financial statements.

In November 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014–16, Derivatives and
Hedging. For hybrid financial instruments issued in the form of a share, Topic 815 requires an entity to determine the nature of the host
contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and
feature on the basis of relevant facts and circumstances. Certain classes of shares include features that entitle the holders to preferences and
rights (such as conversion rights, redemption rights, voting powers, and liquidation and dividend payment preferences) over the other
stockholders. Shares that include embedded derivative features are referred to as hybrid financial instruments, which must be separated
from the host contract and accounted for as a derivative if certain criteria are met under Subtopic 815–10. One criterion requires evaluating
whether the nature of the host contract is more akin to debt or to equity and whether the economic characteristics and risks of the
embedded derivative feature are “clearly and closely related” to the host contract. In making that evaluation, an issuer or investor may
consider all terms and features in a hybrid financial instrument including the embedded derivative feature that is being evaluated for
separate accounting or may consider all terms and features in the hybrid financial instrument except for the embedded derivative feature
that is being evaluated for separate accounting. The use of different methods can result in different accounting outcomes for economically
similar hybrid financial instruments. Additionally, there is diversity in practice with respect to the consideration of redemption features in
relation to other features when determining whether the nature of a host contract is more akin to debt or to equity. The amendments apply
to all reporting entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share. This
Accounting Standards Update is the final version of Proposed Accounting Standards Update EITF–13G—Derivatives and Hedging—
Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity
(Topic 815), which has been deleted. This update is effective for public business entities for fiscal years, and interim periods within those

fiscal years, beginning after December 15, 2015. Early application is permitted. The Company is currently evaluating the effects of ASU
2014–16 on the consolidated financial statements.

In November 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014–Business Combinations
(Topic 805): Pushdown Accounting. The amendments in ASU 2014-17 provide an acquired entity with an option to apply pushdown
accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An
acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. An
acquired entity should determine whether to elect to apply pushdown accounting for each individual change-in-control event in which an
acquirer obtains control of the acquired entity. If pushdown accounting is not applied in the reporting period in which the change-in-control
event occurs, an acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period to the acquired
entity’s most recent change-in-control event. An election to apply pushdown accounting in a reporting period after the reporting period in
which the change-in-control event occurred should be considered a change in accounting principle in accordance with Topic 250,
Accounting Changes and Error Corrections. If pushdown accounting is applied to an individual change-in-control event, that election is
irrevocable. The amendments in ASU 2014-17 are effective on November 18, 2014. After the effective date, an acquired entity can make
an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial
statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be
issued, the application of this guidance would be a change in accounting principle. The Company is currently evaluating the effects of ASU
2014–17 on the consolidated 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–

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 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 2014 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, 2014.

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

Age
71

Chairman of the Board, Chairman of the Nomination and Compensation Committee, Audit Committee

Member, Independent Director

Position

Michael Onghai

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

Robert B. Ladd
Joshua Silverman
Robert P. Traversa

56
44
50

President, Chief Executive Officer and Director
Audit Committee, Nomination and Compensation Committee Member, Independent Director
Treasurer, Chief Financial Officer and Corporate Secretary

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 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. 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 concluded that Mr. Ladd has the requisite experience, qualifications, attributes
and skill necessary to serve as a member of the Board.

Joshua Silverman is the Co–founder, and is a Principal and Managing Partner of Iroquois Capital Management, LLC, the
Registered Investment Advisor to Iroquois Capital LP and Iroquois Capital (Offshore) Ltd. (collectively, “ Iroquois”). Mr. Silverman has
served as Co–Chief Investment Officer of Iroquois since inception in 2003. From 2000 to 2003, Mr. Silverman served as Co–Chief
Investment Officer of Vertical Ventures, LLC, a merchant bank. Prior to forming Iroquois, Mr. Silverman was a Director of Joele Frank, a
boutique consulting firm specializing in mergers and acquisitions. Previously, Mr. Silverman served as Assistant Press Secretary to The
President of The United States. Mr. Silverman received his B.A. from Lehigh University in 1992. Based on Mr. Silverman’s overall
background and experience as an executive in the financial industry, Board believes that Mr. Silverman has the requisite experience,
qualifications, attributes and skill necessary to serve as a member of the Board.

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. Mr. Traversa served as a director of the Company from May, 2012 until December, 2014.
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.

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 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 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 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, 2014, 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 Board established an Audit Committee to carry out its audit functions. At December 31, 2014, the

membership of the Audit Committee was Michael Onghai, H. Robert Holmes and Joshua Silverman.

The Board has determined that Michael Onghai, an independent director, is the Audit Committee financial expert, as defined in

Regulation S–K promulgated under the Exchange Act, serving on its Audit Committee.

Item 11. Executive compensation

Summary compensation table

The following table summarizes Fiscal Years 2014 and 2013 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
2014
2013
2014
2013

$
$
$
$

Salary

Bonus

285 $
285 $
275 $
275 $

– $
143 $
– $
138 $

– $
– $
– $
– $

Stock
awards
(1)

All other

compensation

Total
compensation
285
428
275
413

– $
– $
– $
– $

(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

There were no plan–based awards in Fiscal 2014.

Outstanding equity awards at December 31, 2014

There were no outstanding equity awards at December 31, 2014.

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 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 as an exhibit to the Current Report on Form 8–K we filed with the SEC on 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 Mr. Ladd’s employment agreement which extended the

agreement’s 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 as an exhibit to the Current Report on Form 8–K we filed with the SEC on 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 Mr. Traversa’s employment agreement which extended the

agreement’s term for an additional year, through November 30, 2015.

Director compensation

The following table sets forth the compensation of persons who served as a member of our Board of Directors during all or part of
2014, 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
Michael Onghai
Joshua Silverman

Fees earned or
paid in cash

Stock
awards

All other
compensation

Total

$
$
$

30 $
25 $
1 $

– $
– $
– $

30
25
1

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

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 2015, 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

Securities authorized for issuance under equity compensation plans

No option grants were issued during the year ended December 31, 2014. The table below provides information on our equity

compensation plans as of December 31, 2014:

Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)

Weighted–average
exercise price of
outstanding options,
warrants and rights

(b)

Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a))
(c)

– $
–
–

625,967(1)

–

625,967(1)

Plan category:
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total

(1) On September 27, 2013, the Company’s stockholders approved an increase of the number of shares of Common stock issuable
under the Company’s 2012 Stock Incentive Plan to 1,335,000 shares. As of December 31, 2014, the Company issued an
aggregate of 709,033 restricted shares under the Company’s 2012 Stock Incentive Plan, as amended.

Security owner of certain beneficial owners

The following tables set forth certain information regarding beneficial ownership and voting power of the Common stock as of

March 30, 2015, of:

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

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

· All persons who, to our knowledge, beneficially own more than five percent of the Common stock or Series A Preferred stock.

“Beneficial ownership” here means direct or indirect voting or investment power over outstanding stock and stock which a person
has the right to acquire now or within 60 days after March 30, 2015. See the accompanying footnotes to the tables below for more detailed
explanations of the holdings. Except as noted, to our knowledge, the persons named in the tables beneficially own and have sole voting and
investment power over all shares listed

Each share of Common stock has one vote per share of Common stock held and each share of Series A Preferred stock has one

vote per share of Series A Preferred stock held.

The following table sets forth certain information regarding beneficial ownership of Common stock as of March 30, 2015:

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 13,529,969 shares of Common stock issued and outstanding as of April 13, 2015.

Directors and officers: (1)
Robert B. Ladd (2)
Robert P. Traversa
Joshua Silverman (3)(4)(5)
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

785,471
281,616
1,039,096
88,819
44,545
2,239,547

6%
2%
8%
*
*
17%

(1) Unless otherwise noted, the addresses for the above persons are care of the Company at 500 Mamaroneck Avenue, Suite 204,

Harrison, NY 10528.

(2) 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.

(3) Common stock As reported on Amendment Number 4 to the Schedule 13D filed by, among others, Iroquois Capital
Management, LLC (“Iroquois”), Iroquois Master Fund Ltd. and Mr. Silverman with the SEC on October 2, 2014, Mr.
Silverman is a managing member of Iroquois and Iroquois Master Fund Ltd. Iroquois directly owns 48,378 shares of Common
stock and Iroquois Master Fund Ltd. directly owns 990,358 shares of Common stock. Iroquois is the investment advisor to
Iroquois Master Fund Ltd. As a managing member of Iroquois, Mr. Silverman may be deemed the beneficial owner of the
1,039,096 shares of Common stock owned by Iroquois and Iroquois Master Fund Ltd.

(4) Excluded from Iroquois Master Fund, Ltd.’s beneficial ownership is 9,221 shares of Common Stock issuable upon conversion
of shares of Series A Convertible Preferred Stock held by Iroqouis Master Fund, Ltd. and 437,500 shares of Common Stock
issuable upon the exercise of warrants, both of which are subject to a conversion cap that precludes Iroquois Master Fund, Ltd.
from converting or exercising the Series A Convertible Preferred Stock and warrants, respectively, to the extent that Iroquois
Master Fund, Ltd. would, after such conversion or exercise, beneficially own (as determined in accordance with Section 13(d)
of the Exchange Act) in excess of 9.99% of the shares of Common Stock outstanding (the “Conversion Cap”). Because
Iroquois Master Fund, Ltd. has exceeded the Conversion Cap, it cannot convert or exercise its rights under the Series A
Convertible Preferred Stock or warrants, respectively, within 60 days hereof and thus is not deemed to beneficially own those
shares of Common Stock underlying the Preferred Stock and warrants.

(5) Mr. Silverman’s address is 641 Lexington Avenue, 26th Floor, New York, New York 10022.

5% beneficial owners:
Iroquois Capital Management, LLC (1)(2)(3)
Total 5% beneficial owners:

Numbers of shares
beneficially owned

Percentage of Common
equity beneficially
owned

1,039,096
1,039,096

8%
8%

(1) As reported on Amendment Number 4 to the Schedule 13D filed by, among others, Iroquois, Iroquois Master Fund Ltd. and
Joshua Silverman with the SEC on October 2, 2014, Iroquois directly owns 48,378 shares of Common Stock and Iroquois
Master Fund Ltd. directly owns 990,358 shares of Common Stock. Iroquois is the investment advisor to Iroquois Master Fund
Ltd., such that Iroquois may be deemed the beneficial owner of the 990,358 shares of Common Stock owned by Iroquois
Master Fund Ltd.

(2) Excluded from Iroquois Master Fund, Ltd.’s beneficial ownership is 9,221 shares of Common Stock issuable upon conversion
of shares of Series A Convertible Preferred Stock held by Iroqouis Master Fund, Ltd. and 437,500 shares of Common Stock
issuable upon the exercise of warrants, both of which are subject to a conversion cap that precludes Iroquois Master Fund, Ltd.
from converting or exercising the Series A Convertible Preferred Stock and warrants, respectively, to the extent that Iroquois
Master Fund, Ltd. would, after such conversion or exercise, beneficially own (as determined in accordance with Section 13(d)
of the Exchange Act) in excess of the Conversion Cap. Because Iroquois Master Fund, Ltd. has exceeded the Conversion Cap,
it cannot convert or exercise its rights under the Series A Convertible Preferred Stock or warrants, respectively, within 60 days
hereof and thus is not deemed to beneficially own those shares of Common Stock underlying the Preferred Stock and warrants .

(3) Iroquois’ address is 641 Lexington Avenue, 26th Floor, New York, New York 10022.

Item 13. Certain relationships and related transactions and director independence

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, 2014 and 2013.

Audit
Tax
Total

Year ended December 31,

2014

2013

218 $
32
250 $

142
20
162

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 45

to 76 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
10.12

10.13
10.14

10.15
10.16
10.17
10.18
10.19
10.20

10.21
10.22
10.23
10.24
10.25
10.26
21.1
23.1
99.1

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)

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)
Amendment to Executive Employment Agreement of Robert B. Ladd as of January 28, 2014. (11)
Amendment to Executive Employment Agreement of Robert P. Traversa as of January 28, 2014. (11)
Asset Purchase Agreement by and between the Company and CardRunners Gaming, Inc. effective April 1, 2014. (12)
Subsidiaries*
Consent of Marcum LLP, independent registered public accounting firm, dated March 28, 2014*

Settlement Agreement, dated September 29, 2014, by and among MGT Capital Investments, Inc., Iroquois Capital
Management L.L.C., Iroquois Master Fund Ltd. and Joshua Silverman (13)

31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE

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*
XBRL Instance Document*
XBRL Taxonomy Extension Schema*
XBRL Taxonomy Extension Calculation Linkbase Document*
XBRL Taxonomy Extension Definition Linkbase Document*
XBRL Taxonomy Extension Labels Linkbase Document*
XBRL Taxonomy Extension Presentation Linkbase Document*

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.

10)

11)

12)

13)

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.

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 Current Report on Form 8–K filed April 7, 2014.

Incorporated herein by reference to the Company’s Current Report on Form 8–K filed September 29, 2014.

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

April 15, 2015

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

President, CEO and Director
(Principal Executive Officer)

Date

April 15, 2015

/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

/s/ Joshua Silverman
Joshua Silverman

Treasurer, Chief Financial Officer and Director

April 15, 2015

(Principal Financial Officer)

Director

April 15, 2015

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheets of MGT Capital Investments, Inc. and Subsidiaries (the
“Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, redeemable preferred stock and
changes in stockholders’ equity and cash flows for the years 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 audits.

We conducted our audits 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 audits provide 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, 2014 and 2013, and the consolidated results of its operations and its
cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Marcum LLP

New York, NY
April 15, 2015

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

Commitments and contingencies:

Redeemable convertible Preferred stock – Temporary equity:

Preferred stock, series A convertible preferred, $0.001 par value; 1,416,160 and 1,416,160 shares
authorized at December 31, 2014 and December 31, 2013, respectively; 9,993 and 9,413 shares
issued and outstanding at December 31, 2014 and December 31, 2013, respectively

Stockholders' equity:

Undesignated Preferred stock, $0.001 par value; 8,583,840 and 8,583,840 shares authorized at
December 31, 2014 and 2013, respectively. No shares authorized, issued and outstanding at
December 31, 2014 and December 31, 2013 respectively
Common stock, $0.001 par value; 75,000,000 shares authorized; 10,731,160 and 8,848,686 shares
issued and outstanding at December 31, 2014 and December 31, 2013, respectively
Additional paid–in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders' equity attributable to MGT Capital Investments, Inc.
Non–controlling interests

Total stockholders’ equity

December 31, December 31,

2014

2013

1,455 $
5
172
1,632

138
43
2,417
6,444
2
10,676 $

245 $
180
952
2
1,379

–

4,642
43
132
4,817

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

228
94
647
16
985

–

11
308,288
(281)
(299,163)
8,855
442
9,297

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

Total liabilities, redeemable convertible preferred stock and stockholders' equity

10,676 $

13,873

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

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per–share amounts)

Revenues:

Software and devices
Services – Consulting
Gaming

Cost of revenues:

Services – Consulting
Gaming

Gross margin

Operating expenses:

General and administrative
Sales and marketing
Research and development

Operating loss

Other non–operating (expense) / income:
Interest and other (expense) / income
Impairment of intangible assets
Gain on sale of patent, net
Change in fair value of warrants

Net loss before income taxes and non–controlling interest

Net loss attributable to non–controlling interest

Net loss attributable to MGT

Less:

Quarterly dividend on Series A Preferred stock
Net loss applicable to Common stockholders

Per–share data:
Basic and diluted loss per share

Weighted average number of common shares outstanding

Years ended December 31,

2014

2013

85 $
–
971
1,056

–
610
610

446

5,507
380
188
6,075

78
97
221
396

63
496
559

(163)

9,115
161
73
9,349

(5,629)

(9,512)

(1)
(135)
–
–
(136)

30
–
750
(2,204)
(1,424)

(5,765)

(10,936)

435

734

(5,330) $

(10,202)

–
(5,330) $

(70)
(10,272)

(0.56) $

(1.84)

9,493,057

5,590,620

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

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

At January 1, 2013 (restated)
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 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 (includes $100 of cash
proceeds upon discounted transfer of shares)
Stock–based compensation
Net loss for the period

At December 31, 2013
Issuance of common stock for cash
Acquisition of Draft Day
Acquisition of non–controlling interest in
FanTD
Warrants issued for services
Stock issued for services
Stock–based compensation
Net loss for the period
At December 31, 2014

Redeemable Convertible
Preferred stock

Common stock

Additional
paid–in

Accumulated
comprehensive
income /

Accumulated

Total
stockholders'

Non–controlling

Amounts

capital

(loss)

deficit

equity

Interest

1,395

3,251

282,998

(281) $

(283,631) $

(911) $

Total equity
(143)
$

768

(1,407)

(116)

8,206

1,164

(67)

116
440
2,757
202
3,018

(1)

598

838

1,551

1,709
1,357

1,407
237
716
50
600
895

162

613

491

427

–

8,849
1,403
95

9
2

304,886
1,464
190

(281) $

(10,202)
(293,833) $

185
147

1,219
80
159
290

–

10,732

308,288

(281) $

(5,330)
(299,163) $

8,206

1,164

(67)

120
440
2,757
202
3,018
–

598

838
–
1,552

1,709
1,357
(10,202)
10,781
1,466
190

1,219
80
159
290
(5,330)
8,855

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
1,466
190

(11)
80
159
290
(5,765)
9,297

1,882

191

(734)
2,107

(1,230)

(435)
442

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:

Depreciation
Amortization of intangible assets
Stock–based expense
Warrant expense
Impairment of intangible assets
Stock–based compensation – modification of Preferred Series A Warrants
Change in fair value of warrants
Gain on sale of patent

Change in operating assets and liabilities:

Accounts receivable
Prepaid expenses and other current assets
Accounts payable
Accrued expenses
Player deposit liability
Other payables

Net cash used in operating activities

Cash flows from investing activities:
Purchase of property and equipment
Cash acquired in purchase of DraftDay

Cash paid for purchase of DraftDay
Cash paid for purchase of FanTD
Release of restricted cash
Release of security deposit
Receipt from sale of patent
Cash acquired in purchase of Avcom, net of cash paid
Receipts from sale of intangible assets
Purchase of intangible assets
Purchase of intangible assets – Fantasy Sports Live
Purchase of intangible assets – Daily Joust
Purchase of intangible assets – Digital Angel

Net cash (used in) / provided by investing activities

Cash flows from financing activities:

Proceeds from ATM sales of Common stock, net of fees
Proceeds from exercise of warrants
Proceeds from modification of Preferred Series A warrants
Proceeds from issuance of Common stock
Repayment of loan – related party

Net cash provided by investing activities

Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year

Years ended December 31, 2014

2014

2013

(5,765) $

(10,936)

43
661
449
80
135
–
–
–

38
(40)
17
86
(242)
(14)
(4,552)

(41)

547
(600)
(11)
2
2
–
–
–
–
–
–
–
(101)

1,466
–
–
–
–
1,466

(3,187)
4,642
1,455 $

31
368
2,965
–
–
598
2,204
(750)

(34)
268
(14)
(222)
–
464
(5,058)

(12)

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

–
3,197
838
100
(100)
4,035

1,199
3,443
4,642

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

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

Supplemental non–cash disclosures (investing and financing activities):

Transfers from the non–controlling interest in FanTD
Stock issued for acquisition – DraftDay
Stock issued for acquisition – FanTD, LLC
Stock issued for acquisition – Avcom
Stock issued for acquisition – Digital Angel
Stock issued for exercise of warrants
Reclassification of derivative liability– Preferred Series A warrants into equity
Reclassification of derivative liability– J&S warrants into equity
Intangible asset contributed by non–controlling interest
Series A Convertible Preferred stock, dividends paid in kind
Conversion of Series A Preferred to Common stock
Series A Convertible Preferred stock, dividends paid in kind
Assets acquired and liabilities assumed through purchase of assets:

Prepaid expenses and other current assets

Security deposit
Property and equipment
Intangible assets
Goodwill
Player deposit liability
Other payables
Loan payable – related party

Assets acquired and liabilities assumed through purchase of Avcom:

Prepaid expenses and other current assets
Property and equipment
Intangible assets
Goodwill
Other payables
Long–term debt

Years ended December 31, 2014

2014

2013

1,116
190
103
–
–
–
–
–
–
–
–
–

–
–

–
790
–
(547)
–
–

–
–
–
–
–
–

–
–
3,018
1,552
202
3,197
8,206
1,164
191
70
(116)
69

31
2

32
631
4,948
–
(126)
(100)

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

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

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 subsidiaries MGT
Gaming, Inc. (“MGT Gaming”), MGT Interactive LLC (“MGT Interactive”), and wholly–owned subsidiaries Medicsight, Inc.
(“Medicsight”), MGT Studios, Inc. (f/k/a MGT Capital Solutions, Inc.) (“MGT Studios”) and its minority–owned subsidiary M2P
Americas, Inc., and MGT Sports, Inc. (“MGT Sports”) including its wholly–owned subsidiary FanTD LLC, (“FanTD”). Our Corporate
office is located in Harrison, New York.

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 Sports

MGT Sports operates DraftDay.com (Note 4), the daily fantasy sports industry’s third largest daily fantasy sports wagering site,
based upon player activity, contest sizes and similar metrics. The website 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. DraftDay is a leader in the popular quick–pick
style of skill–based fantasy sports gaming. In addition, the Company has launched an online portal for fantasy sports news and
commentary, FantasySportsLive.com (Note 4).

On December 30, 2014, the Company announced an exclusive partnership with Vivid Entertainment, LLC to develop a fantasy

sports gaming site which is available online at VividBetSports.com.

They are not based on the current membership of an actual sports team or on the score, point spread or performance of teams;

· All prizes and awards are established and made known before the start of the contest;

· Winning outcomes are based on the skill of the participants and predominately by accumulated statistics of individual

performances of athletes, but not solely on a single performance of an athlete.

MGT Gaming

MGT Studios

MGT Studios is publisher of social games and real money games of skill.

On May 31, 2014, M2P exercised its option to purchase 10% of the outstanding equity interests of M2P Americas from the

Company. As a result, the Company’s ownership of M2P Americas is now 40.1%, and M2P’s ownership is 59.9%.

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.

MGT Interactive

Medicsight

Note 2. Liquidity and financial condition

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 $299,163 at December 31, 2014.
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

“ATM 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.

At December 31, 2014, MGT’s cash, cash equivalents and restricted cash were $1,455, including $11 held in MGT Gaming.

For the year ended December 31, 2014, and through April 14, 2015, the Company sold approximately 4,100,000 shares of our
Common stock under the ATM Agreement through an “at the market” equity offering program for gross proceeds of approximately $2,949
before related expenses. The proceeds will be used for general corporate purposes, including, but not limited to, commercialization of our
products, capital expenditures and working capital. As of April 14, 2015, the Company has approximately $5.6 million remaining under the
program, assuming sufficient shares are available to be issued.

Note 3. Summary of significant accounting policies

Basis of presentation

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the

United States of America (“US GAAP”) and the rules and regulations of the SEC.

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.

A variable interest entity is defined in Accounting Standards Codification ("ASC") Topic 810 "Consolidation" ("ASC 810") as a
legal entity where either (a) the total equity at risk is not sufficient to permit the entity to finance its activities without additional
subordinated support; (b) equity interest holders as a group lack either i) the power to direct the activities of the entity that most
significantly impact on its economic success, ii) the obligation to absorb the expected losses of the entity, or iii) the right to receive the
expected residual returns of the entity; or (c) the voting rights of some investors in the entity are not proportional to their economic interests
and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest.

ASC 810 requires a variable interest entity to be consolidated by its primary beneficiary, being the interest holder, if any, which
has both (1) the power to direct the activities of the entity which most significantly impact on the entity's economic performance, and (2)
the right to receive benefits or the obligation to absorb losses from the entity which could potentially be significant to the entity.

The Company evaluates its subsidiaries, and any other entities in which it holds a variable interest, in order to determine whether
the Company is having the power to direct the activities of the entity and is the primary beneficiary of the entity. The Company
consolidated M2P America, a variable interest entity, in which the Company holds minority interest but the Company controls the board
and managment of M2P America and is the primary beneficiary of M2P America.

Business combinations

As specified in ASC 805 “Business Combinations.” the Company adheres to the following guidelines: (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. The Company commences reporting the results from operations on a consolidated basis effective
upon the date of acquisition.

Software developed for internal use and for sale

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 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.

As of December 31, 2014, our cash balance was $1,455 (2013: $4,642). Of the total cash balance, $652 is covered under the US
Federal Depository Insurance Corporation. We invest our cash in short–term deposits with major banks. Cash and cash equivalents consist
of cash and temporary investments with original maturities of 90 days or less when purchased.

As of December 31, 2014 restricted cash was $138 (2013: $140), which included $99 (2013: $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 (Note5). 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.

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

Intangible assets consist of patents, trademarks, domain names, software and customer lists. 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.
The Company performs the annual assessment on December 31.

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 accrual

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 $0.01 or $0.02 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, 2014, and 2013, the Company recorded a
liability of $10 and $10, respectively, relating to potential future virtual currency payouts.

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.

· Hardware –Revenue is recognized as orders are satisfied and delivered by our supplier.

· 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, 2014 and 2013, respectively, the

Company expensed $199 and $70 in advertising costs.

Equity–based compensation

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

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, 2014, 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, 2014 and 2013. Tax years beginning in 2011 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 years 2014, and 2013, 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.

Loss per share

Basic loss per share is calculated by dividing net loss applicable to Common stockholders by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is calculated by dividing the net earnings attributable to Common
stockholders 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 warrants, 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 ended December 31, 2014, excludes 9,993 (2013: 9,413) shares in
connection to the convertible Preferred stock, 1,020,825 (2013: 920,825) warrants and 110,000 (2013:52,677) unvested restricted shares, as
they are anti–dilutive due to the Company’s net loss.

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, created in fiscal 2013. Certain corporate expenses are not allocated to
segments.

Recent accounting pronouncements

Note 4. Asset purchases and acquisitions of businesses

DraftDay

On April 7, 2014, the Company closed on an Asset Purchase Agreement (“Agreement”) with CardRunners Gaming, Inc. to
acquire business assets and intellectual property related to DraftDay.com for cash consideration of $600 and stock consideration of $190,
consisting of 95,166 shares of Company’s Common stock at $2.00 per share (valued on the date of close). The Company determined the
acquisition constitutes a business in accordance with the guidance of ASC 805 “Business Combinations.”

The following table summarizes the fair values of the net assets/liabilities assumed and the allocation of the aggregate fair value

of the purchase consideration to assumed identifiable intangible assets:

Cash
Common stock – 95,166 shares at $2.00 per share
Total purchase price

Cash
Customer list
Domains
Website
Player deposit liability
Total purchase price allocation

600
190
790

547
51
64
675
(547)
790

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 $203 as of the date this transaction was completed. The Company determined the acquisition constitutes a purchase of assets
in accordance with the guidance of ASC 805 “Business Combinations.”

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 determined the acquisition constitutes a business acquisition in accordance with the guidance of ASC 805 “Business
Combinations.”

The following tables summarizes the fair values of the net assets/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; the excess consideration over the fair value of allocated assets is recorded as goodwill
Total purchase price allocation

Revenue and net loss from the acquisition date through December 31, 2013, was $217 and $1,224, respectively.

Fantasy Sports Live

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

(69)
4
(65)

186
33
4,948
5,102

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. The Company determined the acquisition
constitutes a purchase of assets in accordance with the guidance of ASC 805 “Business Combinations.”

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. The Company determined the acquisition constitutes a
purchase of assets in accordance with the guidance of ASC 805 “Business Combinations.”

Real Deal Poker

Simultaneously with the entry into the Contribution Agreement, the Company and Gioia entered into a Limited Liability
Company Agreement which served as the operating agreement for MGT Interactive, and a consulting agreement (the “Gioia Agreement”)
with Gioia to provide services to the Company primarily related to obtaining GLI Certification. The Gioia Agreement terminated on
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 MGT filed for an application for a New Jersey
Casino Services Industry Enterprise License with the New Jersey Department of Gaming, as required, to offer internet gambling services.
Although obtaining the license is beyond the Company’s control, the Company hopes to obtain the license sometime in 2015.

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 stockholders 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 Avcom Agreement. The acquisition
contemplated by the Avcom Agreement closed on November 26, 2013. The Company determined the acquisition constitutes a business
acquisition in accordance with the guidance of ASC 805 “Business Combinations.”

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.

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 following tables summarizes the 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; the excess consideration over the fair value of allocated assets is recorded as 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.
As of December 31, 2014, the Company has not recognized any expense related the deferred signing bonuses as the SlotChamp game has
not launched.

Revenue and net loss from the acquisition date through December 31, 2013, was $3 and $22, respectively.

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, FanTD and DraftDay had occurred as of January 1, 2013. 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.

Year ended December 31, 2014
Revenues
Net loss
Loss per share of Common stock
Basic and diluted

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

MGT

DraftDay

Pro–forma
total

1,056 $
(5,330)
(0.56)
9,493,057

192 $
(240)
–
–

1,248
5,570
(0.56)
9,493,057

MGT

FanTD

Avcom

DraftDay

Pro–forma
total

396 $

62 $

(10,202)
(1.84)
5,590,620

(336)
–
–

110 $
125
–
–

1,190 $
(1,007)
–
–

1,758
(11,420)
(1.84)
5,590,620

Note 5. Goodwill and intangible assets

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, 2014, 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, 2014 and 2013.

Balance, December 31, 2012
Additions (Note 4)
Balance, December 31, 2013
Additions
Balance, December 31, 2014

The Company’s intangibles assets consisted of the following:

Goodwill
$

–
6,444
6,444
–
6,444

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

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

As of December 31,
2013

2014

2,230 $
951
210
5
(979)
2,417 $

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

For the year ended December 31, 2014, the Company recorded amortization expense of $661 (2013: $368). In addition the

Company impaired $135 related to the Digital Angel intangible assets in 2014.

The following table outlines estimated future annual amortization expense for the next five years and thereafter:

Intellectual
property

Software and
website
development

Customer lists

Trademarks

Total

283 $
283
283
283
283
236
1,651 $

316 $
317
–
–
–
–
633 $

42 $
42
42
2
–
–
128 $

3 $
2
–
–
–
–
5 $

644
644
325
285
283
236
2,417

2015
2016
2017
2018
2019
Thereafter
Balance, December 31, 2014

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 stockholders’ 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 6. Property and equipment

Property and equipment consisted of the following:

Computer hardware and software
Furniture and fixtures

Less: Accumulated depreciation
Total

December 31,

2014

2013

193 $
12
205
(162)
43 $

152
12
164
(119)
45

The Company recorded depreciation expense of $43 and $31 for the years ended December 31, 2014 and 2013, respectively.

Note 7. Accrued expenses

Professional fees
Non–executive directors’ fees
Other
Total

Note 8. Series A Convertible Preferred stock

December 31,

2014

2013

100 $
56
24
180 $

66
23
5
94

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. 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.

Significant terms of the Preferred stock, as specified in the Certificate of Designation

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, 2014, no Preferred shares were converted into shares of the Company’s Common stock. During

the year ending December 31, 2013, 1,406,747 of Preferred stock were converted into 1,406,747 shares of 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, 2014, and 2013, respectively, the Company issued 580 and 21,394 Dividend Shares, in

connection with the Preferred stock dividend. The Dividend shares are valued at the $0.001 Preferred stock par value.

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. As of December 31, 2014 and 2013, the liquidation preference
value of the outstanding redeemable series A preferred stock is not material.

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.

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 stockholders’ equity. During the year ended December 31, 2013, the Company
recognized $30 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 stockholders’ equity. For the
year ended December 31, 2013, the Company recognized $1,811 mark–to–market loss, respectively, associated with this agreement.

Cash maintenance

Under the cash maintenance provision the Company had to maintain a cash balance of at least $2,000 as long as at least 345,092
shares of Preferred stock remains 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.

Note 9. 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
stockholders 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, 2014 and 2013.

Issuance of restricted shares – directors, officers and employees

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.

On January 8, 2014, January 16, 2014, and March 26, 2014, 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.

On April 15, 2014, 39,000 restricted shares were granted and issued to certain employees, with an aggregate fair value of $77. The

restricted shares vest one–third each six months from the date of issue.

On July 1, 2014, and August 15, 2014, a total of 62,000 restricted shares were granted and issued to certain employees, with an

aggregate fair value of $57. The restricted shares vest one–half each six months from the date of issue.

For the year ended December 31, 2014 the Company has recorded $290 (2013: $1,357) in employee and director stock–based

compensation expense, which is a component of selling, general and administrative expense in the Consolidation Statement of Operations

For the years ended December 31, 2014 and 2013, no stock–based compensation expense was allocated to non–controlling

interest.

A summary of the Company’s employee’s restricted stock as of December 31, 2014 and 2013 is presented below:

Non–vested at January 1, 2013
Granted
Vested
Forfeited
Non–vested at December 31, 2013

Granted
Vested

Forfeited
Non–vested at December 31, 2014

Number of
shares

Weighted
average grant
date fair value
5.20
3.68
4.56
4.62
4.56
1.72
3.77

314,667 $
6,000
(264,000)
(4,000)
52,667
147,000
(77,000)

(12,667)
110,000 $

3.68
1.42

On January 28, 2015, 30,000 restricted shares were granted and issued to a certain employee with an aggregated fair value of $16.

The shares vest one–third every six month from the date of issue.

On January 28, 2015, 25,000 restricted shares were granted and issued to a certain employee with an aggregated fair value of $13.

10,000 vested on January 30, 2015, the remaining shares vest one–half on April 16 and October 16, 2015, respectively.

Unrecognized compensation cost

As of December 31, 2014 and 2013, unrecognized compensation costs related to non–vested share–based compensation

arrangements was $101 and $187, respectively. That cost is expected to be recognized over a weighted average period of 0.66 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, each 30
and 60 days subsequent to the date of the agreement; and 10,000 shares each of the Company’s Common stock upon execution of the
agreement and 10,000 shares each of the Company’s Common stock on 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. The

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

On June 16, 2014 the Company entered into a Settlement Agreement with J&S Gaming, Inc. (“J&S”) which provides for the
issuance by the Company of 75,000 shares to J&S and the release by J&S of the Company’s obligation to consummate a previously
contemplated transaction. The stock was recorded at the fair market value of $49 on July 29, 2014, date of approval from NYSE, and was
subsequently issued on August 8, 2014.

For the year ending December 31, 2014 a total of 72,699 shares were granted and issued to certain consultants for services

rendered. The stock was recorded using the closing market value of $54 on respective dates of issuance.

For the year ended December 31, 2014 the Company has recorded $159 (2013: $1,709) in non–employee stock–based

compensation expense, which is a component of selling, general and administrative expense in the Consolidation Statement of Operations.

For the years ended December 31, 2014 and 2013, no non-employee stock-based compensation expense was allocated to non–

controlling interest.

Subsequent to December 31, 2014 and through the date of filing the Annual Report on Form 10–K, the Company granted and
issued a total of 103,607 shares to non-employees for services rendered. The shares were recorded at $62 using the closing market value on
respective dates of issuance.

Warrants

The following table summarizes information about warrants outstanding at December 31, 2014:

Warrants outstanding at January 1, 2013
Issued
Exercised
Expired
Warrants outstanding at December 31, 2013
Issued
Exercised
Expired
Warrants outstanding at December 31, 2014

Number

of warrants

4,038,753 $
–
(3,117,928)
–
920,825 $
100,000
–
–
1,020,825 $

Weighted
average
exercise price
3.68
–
3.75
–
3.44
3.75
–
–
3.47

For the years ended December 31, 2014 and 2013, all issued warrants are exercisable and expire through 2018.

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 10. Non–controlling interest

The Company has the following non–controlling interest:

Non–controlling interest at January 1, 2013
Fair value of non-controlling interest of
FanTD (Note 4)

Investment in MGT Interactive
Non–controlling share of net losses
Non–controlling interest at December 31,
2013
Acquisition of non–controlling interest in
FanTD
Non–controlling share of losses
Non–controlling interest at December 31,
2014

MGT Gaming
768

FanTD

MGT
Interactive

–

1,882

M2P Americas
–
–

(183)

(451)

191

(95)

(5)

Total

768

1,882
191

(734)

585 $

1,431 $

96 $

(5) $

2,107

(215)

370 $

(1,230)
(201)

– $

(4)

92 $

(15)

(20) $

(1,230)
(435)

442

FanTD

On February 10, 2014, the Company and MGT Sports entered into a Separation Agreement and Release (“Separation
Agreement”) with an employee and original founder of FanTD (the “Founder”). As part of the agreement the Company entered into an
Exchange Agreement which provided for the transfer of approximately 5% interest in FanTD, in exchange for 52,500 shares of the
Company’s Common stock. The exchange was subject to the NYSE MKT’s approval of the listing of the additional shares, which was
obtained on April 4, 2014. At the date of approval, the stock was valued at $103 or $1.96 per share. As a result of this transaction $266 was
transferred out of the non–controlling interest into stockholders’ equity.

On September 9, 2014 the Company acquired approximately 16% interest in FanTD for cash consideration of $7, as a result $885

was transferred out of the non–controlling interest into stockholders’ equity.

On December 31, 2014 the Company acquired approximately 16% interest in FanTD, which represented the remaining non–

controlling interest, for cash consideration of $4, resulting in a transfer of $79 out of the non–controlling interest into stockholders’ equity.

Note 11. Operating leases and commitments

Operating leases

On August 20, 2014 the Company entered into a First Lease Modification and Extension Agreement, extending for a period of

one year the current lease on the Harrison office. Under the agreement the total rental payments over the next twelve months are $71.

The total lease rental expense was $113 and $145 for the years ended December 31, 2014 and 2013, respectively.

Total future minimum payments required under operating leases in both 2015 and the aggregate are $60.

Commitments

STATS licensing agreement

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
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
Net deferred tax asset

As of December 31, 2014, 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 capital loss carry–forwards

2014

2013

10,779 $
1,498
188
-
1,598
14,063
(14,063)
– $

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

Amount

34,572
18,052
553

Begins to
expire
Fiscal 2023
Fiscal 2031
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. For the year ended December 31, 2014, the valuation allowance increased by $2,501. 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 years
ended December 31:

Expected Federal Tax
State Tax (Net of Federal Benefit)
Permanent differences
Loss of NOL benefit of closed foreign entity
Write-off of deferred tax asset
Adjustments to deferred tax balances
Foreign tax credit
Other
Change in valuation allowance
Effective rate of income tax

2014

2013

(34.00)%
(5.48)
0.12
—
4.29
(8.34)
—
0.05
43.36

(34.00)%
(6.63)
1.98
142.44
—
—
(1.60)
1.78
103.98

The Company files income tax returns in the U.S. federal jurisdiction, New York State, 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 2011.

Note 13. 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,
2014, and December 31, 2013, are as follows:

Medicsight

Intellectual

Software/Devices Services

property Gaming

Unallocated
corporate/other

Total

Year ended December 31,
2014
Revenue from external customers
Cost of revenue
Gross margin
Operating profit/(loss)

Year ended December 31, 2013
Revenue from external customers
Cost of revenue
Gross margin
Operating profit/(loss)

December 31, 2014
Cash and cash equivalents (excludes
$138 of restricted cash)
Property and equipment
Intangible assets
Goodwill
Additions:
Property and equipment
Intangible assets
Goodwill
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

85 $
–
85
85

78 $
–
78
63

– $
–
–
–

–
–
–

– $

–
–
–

– $
–
–
–

– $
–
–
(487)

971 $
(610)
361
(2,988)

97 $
(63)
34
27

– $
–
–
(1,195)

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

11 $
–
1,386
–

–
–
–

820 $
38
1,030
6,444

41
790
–

– $
–
–
(2,239)

– $
–
–
(6,967)

624 $
5
1
–

–
–
–

1,056
(610)
446
(5,629)

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

1,455
43
2,417
6,444

41
790
–

6 $

338 $

4,298 $

4,642

–
2,007
–

–
–
–

28
416
6,444

42
1,002
6,444

17
–
–

9
–
–

45
2,423
6,444

51
1,002
6,444

– $
–
–
–

–
–
–

– $

–
–
–

Note 14. Related party transactions

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 15. Fair value of financial instruments

U.S GAAP establishes a three-tier hierarchy which prioritizes the inputs used in the valuation methodologies in measuring fair

value:

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 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, 2014, and 2013.

The Company measures 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.

At December 31, 2014, and 2013, the Company has no derivative conversion feature and warrant liabilities.

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, 2013
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 8)
Balance, December 31, 2013

Note 15. Subsequent Events

Derivatives
$

7,166 $
2,204
–
(9,370)
– $

Total

7,166
2,204
–
(9,370
–

The Company has evaluated events that occurred subsequent to December 31, 2014, and through the date of the consolidated

financial statements were issued.

On February 26, 2015, MGT purchased a promissory note (the "Promissory Note") in the principal amount of $250 bearing
interest at the rate of five percent (5%) per annum from Tera Group, Inc. ("Tera"), owner of TeraExchange, LLC, a Swap Execution
Facility regulated by the U.S. Commodity Futures Trading Commission. The aggregate unpaid principal balance and all accrued and
unpaid interest are due and payable upon demand at any time after August 15, 2015.

SUBSIDIARIES OF MGT CAPITAL INVESTMENTS, INC.

Name of subsidiary

Jurisdiction of organization

Exhibit 21.1

MGT Gaming, Inc.

Medicsight, Inc.

Delaware, USA

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

Delaware, USA

subsidiary:

– M2P Americas, Inc.

MGT Interactive, LLC

MGT Sports, Inc. and subsidiary:
– FanTD LLC

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 April 15, 2015, with respect to our audit of the consolidated financial statements of
MGT Capital Investments, Inc. and Subsidiaries as of December 31, 2014, and 2013 and for the years then ended which report is included
in this Annual Report on Form 10–K of MGT Capital Investments, Inc. for the year ended December 31, 2014.

Exhibit 23.1

/s/ Marcum LLP

New York, NY
April 15, 2015

Exhibit 31.1

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.;

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.

April 15, 2015

/s/ ROBERT B. LADD

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

Exhibit 31.2

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.;

(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.

April 15, 2015

/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, 2014, (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.

April 15, 2015

/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.

April 15, 2015

/s/ ROBERT P. TRAVERSA

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