MGT Reports 2014 Third Quarter Results

DraftDay.com Powers Year over Year Revenue Growth of over 600%

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Nov 17, 2014, 08:30 ET

HARRISON, N.Y., Nov. 17, 2014 /PRNewswire/ -- MGT Capital Investments, Inc. (NYSE MKT: MGT) today reported financial results and operational developments for the fiscal third quarter ended September 30, 2014. Developments during the quarter and recent weeks subsequent to quarter end are as follows:

Third quarter and nine month revenue, gross margin and other financial metrics showed strong growth from comparable year ago figures.
Announced settlement agreement with Iroquois Master Fund.
Scheduled Annual Meeting of Stockholders for December 18, 2014.
Showcased its daily fantasy sports platform at G2E 2014 in Las Vegas with the SHIFT Interactive multi-touch video gaming table.
Announced the first social daily fantasy sports platform on Facebook with beta launch of Daily Fantasy Legend. Working with Facebook marketers to maximize impact of commercial launch.

Financial Results

For the third quarter ended September 30, 2014, total revenue was $297,000, as compared to $40,000 for the same period last year. Gross margin totaled $129,000 (43% of revenue), up substantially from a loss of ($78,000) in the third quarter of 2013. Operating expenses decreased by approximately 42% to $1.6 million from $2.8 million for the same period in 2013. The decrease is primarily due to lower stock–based compensation expense, professional fees and corporate governance related costs. Operating loss was $1.5 million during the third quarter, favorably comparing to a loss of $2.9 million in the same period of 2013.

For the nine months ended September 30, 2014, total revenue was $702,000, as compared with $193,000 for the same period in 2013. Gross margin totaled $318,000 up from a loss of ($8,000) in the corresponding period in 2013. The operating loss for the first nine months of 2014 was reduced to $4.3 million as compared with $7.1 million for the same period last year.

Cash and cash equivalents as of September 30, 2014 were $2.2 million. During the quarter, net cash used in operating activities was $1.2 million, as compared to $2.0 million in the comparable period of 2013. The company expects cash utilization to be materially lower for the remainder of 2014 and for 2015, due to the growing positive contribution from gross margin of MGT Sports along with recent cost reductions.

Management Commentary and Outlook

Robert Ladd, MGT's Chief Executive Officer made the following comments: "The third quarter demonstrated continued development and growth of our daily fantasy sports platform. As we execute, we remain confident that our shareholders will benefit greatly from the rapid expansion of this industry. Recently, the top two sites were accorded extremely high valuation metrics by prominent venture capitalists, and the professional sports leagues have fully embraced the space. The player liquidity and technology platform of DraftDay are valuable assets that are very costly, time consuming and difficult to replicate. We continue to be active in white label and other partnership discussions in order to drive revenue growth.

Based on the Company's internal forecast, we expect to exit 2014 with an annualized revenue run–rate of over $2.0 million. This forecast is predicated on contributions of several white label deals in process, and the current strong momentum of DraftDay.

About MGT Capital Investments, Inc.

MGT Capital and its subsidiaries operate social and real money gaming sites online and in the mobile space, including ownership of the 3rd largest daily fantasy sports wagering platform, DraftDay.com. MGT Sports also provides branded white label solutions that share player liquidity and the company's technology platform. In addition, MGT offers daily fantasy sports contests on Facebook through Daily Fantasy Legend, games of skill through MGTplay.com, and has created an online portal for fantasy sports news and commentary, FantasySportsLive.com. Lastly, the Company owns intellectual property relating to slot machines and has asserted its claims via a patent infringement lawsuit.

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
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per–share amounts)

	September 30,		December 31,
	2014		2013
	(Unaudited)		2013
Assets
Current assets
Cash and cash equivalents	$	2,205	$	4,642
Accounts receivable		10		43
Prepaid expenses and other current assets		172		132
Total current assets		2,387		4,817

Non–current assets
Restricted cash		138		140
Property and equipment, at cost, net		48		45
Intangible assets, net		2,736		2,423
Goodwill		6,444		6,444
Other non–current assets		4		4
Total assets	$	11,757	$	13,873

Liabilities
Current liabilities
Accounts payable	$	209	$	228
Accrued expenses		133		94
Player deposit liability		896		647
Other payables		2		16
Total current liabilities		1,240		985

Total liabilities		1,240		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 September 30, 2014 and December 31, 2013, respectively; 9,845 and 9,413 shares issued and outstanding at September 30, 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 September 30, 2014 and December 31, 2013, respectively. No shares authorized, issued and outstanding at September 30, 2014 and December 31, 2013 respectively		–		–
Common Stock, $0.001 par value; 75,000,000 shares authorized; 10,421,523 and 8,848,686 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively		11		9
Additional paid–in capital		307,931		304,886
Accumulated other comprehensive loss		(281)		(281)
Accumulated deficit		(297,727)		(293,833)
Total stockholders' equity		9,934		10,781
Non–controlling interests		583		2,107
Total equity		10,517		12,888

Total stockholders' equity, liabilities and non–controlling interest	$	11,757	$	13,873

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

	Three months ended September 30
	2014		2013
Revenues
Software and devices	$	–	$	4
Gaming		296		36
Other		1		–
		297		40
Cost of revenues
Gaming		168		118
		168		118

Gross margin		129		(78)

Operating expenses
General and administrative		1,411		2,798
Sales and marketing		121		26
Research and development		40		–
		1,572		2,824

Operating loss		(1,443)		(2,902)

Other non–operating income
Interest and other income		2		16
		2		16

Net loss before income taxes and non–controlling interest		(1,441)		(2,886)

Income tax expense		(10)		–

Net loss before non–controlling interest		(1,451)		(2,886)

Net loss attributable to non–controlling interest		71		232

Net loss attributable to MGT Capital Investments, Inc.	$	(1,380)	$	(2,654)

Less:
Quarterly dividend on Preferred Series A Stock		–		(1)
Net loss applicable to Common shareholders	$	(1,380)	$	(2,655)

Per–share data:
Basic and diluted loss per share	$	(0.14)	$	(0.41)

Weighted average number of common shares outstanding		9,685,023		6,444,850

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

	Nine months ended September 30,
	2014		2013
Revenues
Software and devices	$	80	$	42
Services – Consulting		–		97
Gaming		614		54
Other		8		–
		702		193
Cost of revenues
Services – Consulting		–		63
Gaming		384		138
		384		201

Gross margin		318		(8)

Operating expenses
General and administrative		4,211		7,037
Sales and marketing		229		92
Research and development		153		–
		4,593		7,129

Operating loss		(4,275)		(7,137)

Other non–operating income / (expense)
Interest and other income		7		43
Gain on sale of medical imagine patents		–		750
Change in fair value of warrants		–		(2,204)
		7		(1,411)

Net loss before income taxes and non–controlling interest		(4,268)		(8,548)

Income tax benefit / (expense)		1		(3)

Net loss before non–controlling interest		(4,267)		(8,551)

Net loss attributable to non–controlling interest		373		379

Net loss attributable to MGT	$	(3,894)	$	(8,172)

Less
Quarterly dividend on Series A Preferred Stock		–		(69)
Net loss applicable to Common shareholders	$	(3,894)	$	(8,241)

Per–share data
Basic and diluted loss per share	$	(0.42)	$	(1.66)

Weighted average number of common shares outstanding		9,175,695		4,972,829