MGT Reports 2014 Fourth Quarter and Full Year Financial Results

DraftDay Attracts Substantial Interest from Outside Investors

News provided by

MGT Capital Investments, Inc.

Apr 15, 2015, 09:00 ET

HARRISON, N.Y., April 15, 2015 /PRNewswire/ -- MGT Capital Investments, Inc. (NYSE MKT: MGT) today reported financial and operational results for the twelve months ended December 31, 2014. Developments during the fourth quarter and recent weeks subsequent to yearend are as follows:

  • Fourth quarter and full year revenue, gross margin and other financial metrics showed strong growth from comparable year ago figures.
  • Announced white label partnership agreement with FanWars LLC.
  • Announced white label partnership agreement with Vivid Entertainment LLC.
  • Announced white label partnership agreement with Seneca Resorts & Casinos.
  • Launched Rapid Fire mobile app on Apple's iTunes App Store.

Financial Results
For the fourth quarter ended December 30, 2014, total revenue was $354,000, as compared to $203,000 for the same period last year. Gross margin totalled $128,000 (36% of revenue), up substantially from a loss of $155,000 in the fourth quarter of 2013. Operating expenses decreased by approximately 32% to $1.5 million from $2.2 million for the same period in 2013.The decrease was primarily due to lower professional fees and corporate governance related costs. Operating loss was $1.4 million during the fourth quarter, comparing favorably to a loss of $2.4 million in the same period of 2013.

For the twelve months ended December 31, 2014, total revenue was approximately $1.1 million as compared with $396,000 for the same period in 2013. Gross margin totalled $446,000 up from a loss of $163,000 in the 2013 period.  The operating loss for the year 2014 was reduced to $5.6 million as compared with $9.5 million for the same period last year.

Cash and cash equivalents as of December 31, 2014 were $1.6 million. During the quarter, net cash used in operating activities was $900,000, as compared to $1.2 million in the third quarter of 2014. The company expects cash utilization to continue to trend lower for 2015, due to the positive contribution from gross margin of MGT Sports and recent cost reductions.  As stated in the Company's 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission, the Company anticipates it has sufficient cash on hand, combined with the gross margin from DraftDay, to continue operations at least through March 31, 2016. 

Management Commentary and Outlook
In the year since acquisition, MGT has transformed DraftDay with a series of improvements to the platform technology and player experience. In addition, the Company was able to significantly reduce operating expenses and improve gross margin. DraftDay has attained enterprise quality, with transparent audited financial reporting and internal controls, employing highly reliable and scalable technology.  The security and regulatory compliance of the platform is confirmed with industry leading KYC (know-your-customer) controls approved by the major credit card processors and gaming attorneys.  At the same time, DraftDay and its white label partners maintain a user interface that is highly rated by players.

Over this same year, the daily fantasy sports business has catapulted into the commercial mainstream with full support of institutional investors and the professional sports leagues. Valuations for the top two participants now approximate $1.0 billion each, with hundreds of millions in funding very recently raised from leading media companies and venture capitalists.

In recent weeks, MGT has communicated with several parties expressing interest in a potential investment or purchase of DraftDay.  The Company is reviewing multiple indications of interest in an effort to create maximum value from DraftDay's position as the third largest daily fantasy site (measured by customer accounts, player funds, number of contests, and other metrics). Although it is MGT's current intention to retain a significant minority stake in the future of this explosive market, there can be no assurance that any on-going discussions will result in a transaction.

About MGT Capital Investments, Inc.
MGT Capital and its subsidiaries operate real money and social gaming sites online and in the mobile space, including ownership of DraftDay.com, the third largest daily fantasy sports wagering platform. MGTSports.com offers a turnkey solution to allow brands the ability to join its active Daily Fantasy Sports Network. DailyFantasyLegend.com, built in partnership with Facebook, is the first virtual currency daily fantasy sports platform.  MGTplay.com offers competitive games of skill playable for real money.

Forward-looking Statements
This press release contains forward-looking statements. The words or phrases "would be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions are intended to identify "forward-looking statements." MGT's financial and operational results reflected above should not be construed by any means as representative of the current or future value of its common stock. All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the Company's plans, beliefs, estimates and expectations. These statements are based on current estimates and projections, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include issues related to: rapidly changing technology and evolving standards in the industries in which the Company and its subsidiaries operate; the ability to obtain sufficient funding to continue operations, maintain adequate cash flow, profitably exploit new business, license and sign new agreements; the unpredictable nature of consumer preferences; and other factors set forth in the Company's most recently filed annual report and registration statement. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risks and uncertainties described in other documents that the Company files from time to time with the U.S. Securities and Exchange Commission.

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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


Three months ended
December 31,

Year ended

December 31,

2014

2013

2014

2013

Revenues:










Software and devices

$

5

$

36

$

85

$

78

Services – Consulting

–

–

–

97

Gaming

349

167

971

221


354

203

1,056

396

Cost of revenues:










Services – Consulting

–

–

–

63

Gaming

226

358

610

496


226

358

610

559












Gross margin

128

(155)

446

(163)












Operating expenses:










General and administrative


1,297

2,078

5,507

9,115

Sales and marketing

151

69

380

161

Research and development 


35

73

188

73


1,483

2,220

6,075

9,349












Operating loss

(1,355)

(2,375)

(5,629)

(9,512)












Other non–operating expense:










Interest and other income

(8)

(13)

(1)

30

Impairment of intangible assets

(135)

–

(135)

–

Gain on sale of patent, net

–

–

–

750

Change in fair value of warrants

–

–

–

(2,204)


(143)

(13)

(136)

(1,424)












Net loss before income taxes and non–controlling interest

(1,498)

(2,388)

(5,765)

(10,936)












Net loss attributable to non–controlling interest

62

366

435

734












Net loss attributable to MGT

$

(1,436)

$

(2,019)

$

(5,330)

$

(10,202)












Less:










Quarterly dividend on Series A Preferred Stock

–

(1)

–

(70)

Net loss applicable to Common shareholders

$

(1,436)

$

(2,020)

$

(5,330)

$

(10,272)












Per–share data:










Basic and diluted loss per share

$

(0.14)

$

(2.08)

$

(0.56)

$

(1.82)












Weighted average number of common shares outstanding

10,432,817

968,372

9,493,057

5,590,620

MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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


December 31,

December 31,

2014

2013

Assets:




Current assets:




Cash and cash equivalents

$

1,455

$

4,642

Accounts receivable

5

43

Prepaid expenses and other current assets

172

132

Total current assets

1,632

4,817






Non–current assets:




Restricted cash

138

140

Property and equipment, at cost, net

43

45

Intangible assets, net

2,417

2,423

Goodwill

6,444

6,444

Other non–current assets

2

4

Total assets

$

10,676

$

13,873






Liabilities:




Current liabilities:




Accounts payable

$

245

$

228

Accrued expenses

180

94

Player deposit liability

952

647

Other payables

2

16

Total current liabilities

1,379

985






Non–current liabilities:




Derivative liability – Warrants

–

–

Total liabilities

1,379

985






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

11

9

Additional paid–in capital

308,288

304,886

Accumulated other comprehensive loss

(281)

(281)

Accumulated deficit

(299,163)

(293,833)

Total stockholders' equity attributable to MGT Capital Investments, Inc.

8,855

10,781

Non–controlling interests

442

2,107

Total stockholders' equity

9,297

12,888






Total liabilities, redeemable convertible preferred stock and stockholders' equity

$

10,676

$

13,873

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SOURCE MGT Capital Investments, Inc.

Related Links

http://www.mgtci.com

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