MGT NEWSROOM

MGT Provides Investor Update and Financial Results for the Third Quarter of 2016

Nov 15, 2016, 16:07 ET



DURHAM, N.C., Nov. 15, 2016 /PRNewswire/ -- MGT Capital Investments, Inc. (OTC: MGTI) yesterday provided an update on its business and pending acquisitions, as well as its financial results for the three–month period ended September 30, 2016.

"We are excited by the trajectory of our businesses over the past month, which proves that perseverance and unwavering dedication to our set goals will overcome the efforts of others to slow our progress. There are several near–term milestones that will further position us as an innovator in the cybersecurity market and building shareholder value," commented John McAfee, the Company's Executive Chairman and incoming Chief Executive Officer.

"Our Bitcoin mining operations are ramping up quickly, with revenue reaching over $100,000 per month as processing power more than doubled to approximately 5.2 PetaHash in just the past week. As previously disclosed, we are ahead of schedule in building out our Bitcoin mining operations, and we expect to reach our short-term goal of 10 PetaHash at this facility by year end 2016. As one of the leading Bitcoin mining operations in the U.S., we are seeing exciting new partnership opportunities develop, including our recent Letter of Intent to launch a McAfee-branded Bitcoin mining pool with Bitmain Technologies Ltd. of China, the world's leading Bitcoin machine producer," continued McAfee.

"The launch of our initial commercial product, Sentinel was announced in October and we expect to ship product to our initial customers in the coming weeks. Market feedback for Sentinel has been positive and we have begun to build out marketing support with the recent hire of an experienced industry professional. We expect to grow this function over the coming quarters."

"The stockholder-approved acquisitions of D–Vasive and Demonsaw remain pending, as we hope to reach a revised deal structure to benefit existing shareholders. These technologies will immediately bolster our stable of innovative cybersecurity technologies to support the development of new applications and create new product opportunities," concluded McAfee.

Financial Highlights for the third quarter of 2016

Cash used in operations was $1.3 million in the third quarter of 2016, a decrease of $0.8 million, as compared to the quarter ended June 30, 2016. The decrease was primarily driven by lower legal and professional fees as the Company exercises discipline with respect to discretionary spending. This expense control coupled with revenues produced from bitcoin mining operations should result in similar results for the final quarter of 2016.

Cash and cash equivalents were $2.1 million as of September 30, 2016, compared with $0.3 million as of December 31, 2015. In addition, the Company presently has approximately $500,000 of marketable securities available for sale.

The Company's operating loss for the third quarter of 2016 was $10.8 million, an increase of $9.5 million, as compared to the previous quarter. This larger reported loss is wholly attributable to certain non–recurring, non–cash accounting charges, such as warrant modification and stock–based compensation expenses.

Financial results follow; per GAAP requirements, the operations of DraftDay.com are treated as discontinued operations. For further information, please refer to MGT's Form 10–Q filed yesterday with the SEC, and available at the Company's corporate website,www.mgtci.com, or at www.sec.gov.

About MGT Capital Investments, Inc.
MGT Capital Investments, Inc. (OTC: MGTI) is in the process of acquiring a diverse portfolio of cyber security technologies and ramping up its Bitcoin mining operations in the state of Washington. With cyber security industry pioneer, John McAfee, at its helm, MGT Capital is positioned to address various cyber threats through advanced protection technologies for mobile and personal tech devices, including tablets and smartphones. The Company is currently in the process of acquiring D–Vasive, a provider of leading edge anti–spy software, and Demonsaw, a provider of a secure and anonymous file sharing software platform.

MGT Capital intends to change its corporate name to "John McAfee Global Technologies, Inc." upon closing of the D–Vasive transaction.

For more information on the Company, please visit http://ir.stockpr.com/mgtci.

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.

Investor Contact
Garth Russell
Managing Director
KCSA Strategic Communications
grussell@kcsa.com
212.896.1250

Media Contact
Tiffany Madison
Director of Corporate Communications
MGT Capital Investments, Inc.
tmadison@mgtci.com
469.236.9569

(financial tables below)



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



September 30,


December 31,


2016


2015

Assets






Current assets






Cash and cash equivalents

$

2,113


$

359

Prepaid expenses and other current assets


146



61

Investments available for sale


100



444

Digital currencies


45



Notes receivable


640



1,575

Total current assets


3,044



2,439







Non–current assets






Restricted cash




39

Property and equipment, at cost, net


328



35

Intangible assets, net




730

Goodwill




1,496

Note receivable


45



Investments, at cost


1,369



1,380

Total assets

$

4,786


$

6,119







Liabilities and equity






Current liabilities






Accounts payable

$

272


$

63

Accrued expenses


110



15

Other payables


11



1

Total current liabilities


393



79







Non–current liabilities






Notes payable, net of discount


1,579



Total liabilities


1,972



79







Commitments and contingencies






Redeemable convertible preferred stock – Temporary equity






Preferred stock, Series A convertible preferred, $0.001 par value, 1,500,000 shares authorized at September 30, 2016 and December 31, 2015; No shares outstanding at September 30, 2016 and 10,608 shares outstanding at December 31, 2015.




Stockholders' equity






Undesignated preferred stock, $0.001 par value, 8,583,840 shares authorized at September 30, 2016 and December 31, 2015. No shares issued and outstanding at September 30, 2016 and December 31, 2015




Common stock, $0.001 par value; 75,000,000 shares authorized; 25,862,855 and 17,928,221 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively


26



18

Additional paid–in capital


325,316



311,167

Accumulated other comprehensive income / (loss)


(10)



(1,206)

Accumulated deficit


(322,204)



(303,944)

Total stockholders' equity


3,128



6,035

Non–controlling interests


(314)



5

Total equity


2,814



6,040







Total equity, liabilities, redeemable convertible
preferred stock and non–controlling interest

$

4,786


$

6,119









MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) / INCOME
(In thousands, except share and per–share amounts)
(Unaudited)



Nine months ended September 30,


2016


2015

Revenues






Bitcoin mining

$

53


$

Licensing




102

Gaming




2



53



104







Cost of revenues






Bitcoin mining


31



Licensing




5



31



5







Gross margin


22



99







Operating expenses






General and administrative


14,995



2,293

Sales and marketing


110



Research and development 


184





15,289



2,293







Operating loss


(15,267)



(2,194)







Other non–operating (expense) / income






Interest and other income / (expense)


257



(28)

Amortization of debt discount


(41)



Loss on sale of investments


(1,083)



Impairment of investments, at cost


(276)



Impairment of intangible assets


(673)



Loss on sale of assets




(144)

Impairment of notes receivable




(256)

Impairment of goodwill


(1,496)





(3,312)



(428)







Net loss from continuing operations before non–controlling interest


(18,579)



(2,622)







Discontinued operations – DraftDay.com






   Net loss from discontinued operations – DraftDay.com




(787)

   Gain on termination of asset purchase agreement




250

   Loss on sale of assets




(387)





(924)







Net loss before non–controlling interest


(18,579)



(3,546)







Net loss attributable to non–controlling interest


319



103







Net loss attributable to Common stockholders

$

(18,260)


$

(3,443)







Other comprehensive loss






Reclassification adjustment for loss included in net income


1,111



Unrealized holding loss


85



(609)

Comprehensive loss

$

(17,064)


$

(4,052)







Per–share data






Basic and diluted loss per share – continuing operations

$

(0.84)


$

(0.21)

Basic and diluted loss per share – discontinued operations




(0.06)

Basic and diluted loss per share

$

(0.84)


$

(0.27)







Weighted average number of common shares outstanding


21,848,424



12,911,492


MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) / INCOME
(In thousands, except share and per–share amounts)
(Unaudited)



Three months ended September 30,


2016


2015

Revenues






Bitcoin mining

$

53


$

Licensing




90



53



90







Cost of revenues






Bitcoin mining


31



5



31



5







Gross margin


22



85







Operating expenses






General and administrative


10,572



642

Sales and marketing


110



Research and development 


184





10,866



642







Operating loss


(10,844)



(557)







Other non–operating (expense) / income






Interest and other income


221



8

Amortization of debt discount


(41)



Gain on sale of investments


110



Impairment of investments, at cost


(276)



Loss on sale of assets          




(144)

Impairment of notes receivable




(256)



14



(392)







Net loss from continuing operations before non–controlling interest


(10,830)



(949)







Discontinued operations – DraftDay.com






   Net loss from discontinued operations – DraftDay.com




(229)

   Gain on termination of asset purchase agreement




250

   Loss on sale of assets




(387)





(366)







Net loss before non–controlling interest


(10,830)



(1,315)







Net loss attributable to non–controlling interest




(6)







Net loss attributable to common stockholders

$

(10,830)


$

(1,321)







Net loss attributable to common stockholders

$

(10,830)


$

(1,321)







Other comprehensive loss






Reclassification adjustment for loss included in net income


(94)



Unrealized holding gain


3



(609)

Comprehensive loss

$

(10,921)


$

(1,930)







Per–share data






Basic and diluted loss per share – continuing operations

$

(0.42)


$

(0.07)

Basic and diluted loss per share from discontinued operations




(0.03)

Basic and diluted loss per share

$

(0.42)


$

(0.10)







Weighted average number of common shares outstanding


25,859,214



14,123,208

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



Nine months ended September 30,


2016


2015

Cash flows from operating activities






Net loss

$

(18,578)


$

(3,546)

Net loss from discontinued operations




924



(18,578)



(2,622)

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






Depreciation


30



6

Amortization of intangible assets


57



170

Stock–based expense


10,538



223

Reserve for note receivable




250

Warrant modification expense


431



Loss on sale of investments – short term


1,083



Impairment of long–term investments


276



Impairment of intangible assets


673



144

Impairment of goodwill


1,496



Amortization of debt discount


41



Change in operating assets and liabilities






Accounts receivable




(7)

Prepaid expenses and other current assets


(130)



92

Accounts payable


209



50

Accrued expenses


95



9

Other payables


7



1

Net cash used in operating activities


(3,772)



(1,684)







Cash flows from investing activities






Release of restricted cash and security deposit


39



101

Purchase of equipment


(321)



Purchase of investments – short term


(414)



Purchase of investments – long term


(265)



Purchase of note receivable – long term


(45)



(250)

Proceeds from sale of intangible assets




35

Proceeds from sale of investments – short term


1,805



Net cash (used in) / provided by investing activities


799



(114)







Cash flows from financing activities






Proceeds from At–The–Market sales of Common stock, net of fees




1,644

Proceeds from issuance of notes payable and warrants          


2,300



Proceeds from exercise of Common stock warrants


2,427



Net cash provided by financing activities


4,727



1,644







Cash flows from discontinued operations – DraftDay.com






Net cash used in operating activities




(66)







Net change in cash and cash equivalents






Continuing operations


1,754



(220)

Discontinued operations




(807)



1,754



(1,027)

Cash and cash equivalents, beginning of period






Continuing operations


359



648

Discontinued operations




807



359



1,455

Cash and cash equivalents, end of period






Continuing operations


2,113



428

Discontinued operations





$

2,113


$

428

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SOURCE MGT Capital Investments, Inc.

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