UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2007.

	OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

Commission file number: 0-26886

MGT CAPITAL INVESTMENTS, INC.

(formerly Medicsight Inc.)

(Exact name of Registrant as specified in its charter)

Delaware		13-4148725
(State of Incorporation)		(I.R.S. Employer Identification No.)

Kensington Centre, 66 Hammersmith Road, London, W14 8UD, UNITED KINGDOM
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: 011-44-20-7605-7950

Indicate by check whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act):

Large Accelerated Filer o Accelerated filer o Non-accelerated Filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of May 2, 2007 was 38,900,383.

NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, 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. 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, synergies or other financial items; any statements of the plans, strategies and objectives of management for future operations, including the rate of market development and acceptance of medical imaging technology; the execution of restructuring plans; any statement concerning developments, performance or industry rankings relating to products or services; 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 suppliers, customers and 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 2 of this report, and that are otherwise described from time to time in the Company’s Securities and Exchange Commission reports filed after this report. The Company assumes no obligation and does not intend to update these forward-looking statements.

The Company’s main operating currency is UK sterling (£).

INDEX

PART I — FINANCIAL INFORMATION

Item 1	Condensed Consolidated Balance Sheets — March 31, 2007 and December 31, 2006

	Condensed Consolidated Statements of Operations — for the three months ended March 31, 2007 and 2006

	Condensed Consolidated Statements of Cash Flows — for the three months ended March 31, 2007 and 2006

	Notes to Condensed Consolidated Financial Statements

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3	Quantitative and Qualitative Disclosure About Market Risk

Item 4	Controls & Procedures

PART II — OTHER INFORMATION

Item 1	Legal Proceedings

Item 1A	Risk Factors

Item 2	Unregistered Sale of Equity Securities and Use of Proceeds

Item 3	Defaults Upon Senior Securities

Item 4	Submission of Matters to a Vote of Security Holders

Item 5	Other Information

Item 6	Exhibits

SIGNATURES

MGT CAPITAL INVESTMENTS, INC. (FORMERLY MEDICSIGHT, INC.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	March 31 2007			December 31 2006
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	15,404		$	19,757
Marketable securities	5,348			4,978
Other receivables	190			123
Prepaid expenses	236			115
Value added tax receivable	138			333
Total current assets	21,316			25,306

PROPERTY EQUIPMENT, at cost, net of accumulated depreciation of $792 and $768, respectively	847			683
INVESTMENTS, at cost	359			359
SECURITY DEPOSITS	950			921
GOODWILL	11,200			11,200

Total assets	$	34,672		$	38,469

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	1,103		$	1,986
Accrued expenses	1,726			1,385
Current portion of obligations under capital leases	—			7
Total current liabilities	2,829			3,378

MINORITY INTEREST	21,217			21,710

Commitments and contingencies

STOCKHOLDERS’ EQUITY:

Common stock, $0.001 par value, 75,000,000 and 40,000,000 shares authorized, respectively; 38,900,383 shares issued and outstanding	39			39
Share premium	218,513			218,138
Accumulated comprehensive income	930			853
Accumulated deficit	(208,856		)	(205,649		)
TOTAL STOCKHOLDERS’ EQUITY	10,626			13,381

Total stockholders’ equity and liabilities	$	34,672		$	38,469

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

MGT CAPITAL INVESTMENTS, INC. (FORMERLY MEDICSIGHT, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

	Three Months Ended March 31,
	2007			2006

REVENUES	$	—		$	—

EXPENSES:
Selling, general and administrative expenses	3,457			2,468
Research and development cost	546			627
	4,003			3,095

Operating loss	(4,003		)	(3,095		)

OTHER INCOME:
Interest and other income	273			65

Net loss before income taxes and minority interest	(3,730		)	(3,030		)

Minority Interest	523			—

Net loss	$	(3,207	)	$	(3,030	)

PER SHARE DATA:

Basic and diluted loss per share	$	(0.08	)	$	(0.08	)

Weighted average number of common shares outstanding	38,900,383			37,291,216

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

MGT CAPITAL INVESTMENTS, INC. (FORMERLY MEDICSIGHT, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2007			2006

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(3,207	)	$	(3,030	)

Adjustments to reconcile net loss to net cash used in operating activities:
Loss attributable to minority interest	(523		)	—
Stock based compensation expense	375			96
Depreciation	120			61
Loss on disposal of fixed assets	6			—
(Increase)/decrease in assests
Prepaid expenses and other current assets	(188		)	24
VAT receivable	195			(56		)
Increase/(decrease) in liabilities
Accounts payable	(883		)	(408		)
Accounts payable — related parties	—			(1,151		)
Accrued expenses	341			(168		)
Net cash used in operating activities	(3,764		)	(4,632		)

CASH FLOWS FROM INVESTING ACTIVITIES
Cash held for common stock subscribed but unissued	—			4,000
Purchase of marketable securities	(350		)	—
Purchase of fixed assets	(290		)	(88		)
Net cash (used in) provided by investing activities	(640		)	3,912

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital lease obligations	(7		)	(5		)
Proceeds from sale of common stock in subsidiary (net of commissions)	30			990
Net cash provided by financing activities	23			985

Effects of exchange rates on cash and cash equivalents	28			(150		)

NET CHANGE IN CASH AND CASH EQUIVALENTS	(4,353		)	115

CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD	19,757			7,249

CASH AND CASH EQUIVALENTS — END OF PERIOD	$	15,404		$	7,364

SUPLEMENTAL DISCLOSURES OF CASH RECEIVED
Interest received	56			1

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

MGT CAPITAL INVESTMENTS, INC. (FORMERLY MEDICSIGHT, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Summary of Significant Accounting Policies

As of March 31, 2007, there have been no material changes to any of our significant accounting policies, except that we adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109” (“FIN 48”), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement 109, “Accounting for Income Taxes,” and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Our evaluation was performed for the tax years ended December 31, 2003, 2004, 2005 and 2006, the tax years which remain subject to examination by major tax jurisdictions as of March 31, 2007.

Comprehensive Income (Loss)

Comprehensive income as defined by SFAS No. 130, “Reporting Comprehensive Income,” includes net income and items defined as other comprehensive income. SFAS No. 130 requires that items defined as other comprehensive income, such as foreign currency translation adjustments and unrealized gains and losses on certain marketable securities, be separately classified in the financial statements. Such items are reported in the consolidated statements of stockholders’ equity as comprehensive income.

	Three Months ended March 31,
	2007			2006

Net loss as reported	$	(3,207	)	$	(3,030	)
Unrealized foreign exchange gain (loss)	57			209
Unrealized gain on marketable securities	20			—
Comprehensive loss	$	(3,130	)	$	(3,239	)

Recent accounting pronouncements

The company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement 109, “Accounting for Income Taxes,” and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

2. Lease Commitments and Security Deposit

On August 25, 2006, we executed a 10 year agreement with Pirbright Holdings Limited, to lease 8,787 square feet of office space at the Kensington Centre, 66 Hammersmith Road, London W14 8UD, UK, and simultaneously vacated our previous corporate office (46 Berkeley Square, London W1J 5AT, UK).

Under this new lease agreement our UK property rent, services and related costs will be approximately £330,000 ($647,000) per annum, paid quarterly in advance. We have the right to terminate this agreement on the expiry of the fifth year of the lease. Our annual rent is subject to upward only review on August 24, 2011.

We have two 10-month rent-free periods: the first commencing August 25, 2006; the second commencing August 25, 2011. We have accounted for this lease as an Operating Lease, and have accounted for the lease rental expenses on a straight line basis over the period of the lease.

The following is a schedule of the future minimum rental payments required under operating leases that have initial or remaining non cancellable terms in excess of one year (in thousands):

Year Ending December 31,
2007	$	451
2008	649
2009	475
2010	448
2011	178
Later Years	1,865
Total Minimum	$	4,066

3. Marketable securities

In the period ended March 31, 2007 the Company invested in marketable securities, which at March 31, 2007 were as follows (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Carrying Amount
Available for sale
Marketable equity securities at December 31, 2006	$	4,533	$	445	$	—	$	4,978	$	4,978
Marketable equity securities at March 31, 2007	4,883		465		—		5,348		5,348

The increase in net unrealized holding gains on available-for-sale securities in the amount of $20,000 was charged to accumulated other comprehensive income.

4. Segment reporting

Under SFAS no. 131, Disclosures about Segments of an Enterprise and Related Information, 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 members of senior management. The Company’s reportable operating segments are Medicsight and Medicexchange.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. We evaluate performance of our operating segments based on revenue and operating income (loss). Segment information for the period ended March, 31 2007 and 2006 is as follows (in thousands):

	Medicsight			Medicexchange			Corporate and Other			Total
Three months March 31, 2007
Net revenue to external customers	$	—		$	—		$	—		$	—
Operating loss	(2,792		)	(996		)	(215		)	(4,003		)
Assets	10,736			6,326			17,610			34,672


Three months March 31, 2006
Net revenue to external customers	$	—		$	—		$	—		$	—
Operating loss	(1,903		)	(1,041		)	(151		)	(3,095		)
Assets	8,261			311			12,034			20,606

The Company’s main operations and fixed assets are in the UK.

5. Stock-Based Compensation

We have five Stock Option Plans in Medicsight PLC (one of our UK subsidiary companies). The shares in these companies are not publicly traded.

Plan A

On February 26, 2003 we approved stock option plan “A” and in the period ended June 30, 2005 granted options for 2,971,000 shares to employees. At March 31, 2007 there were 888,000 options outstanding and 100% of the options issued were exercisable.

Plan B

Between July 1, 2003 and March 31, 2005 we granted options for 3,420,500 shares under stock option plan “B”. Subsequently on August 15, 2005, we approved the stock option plan “B”. At March 31, 2007 there were 917,000 options outstanding and 911,000 of the options issued were exercisable.

Plan C

Between April 1, 2005 and June 30, 2006 we granted options for 515,000 shares under the stock option plan “C”. On August 15, 2005, we approved stock option plan “C”. At March 31, 2007 there were 265,000 options outstanding and 55,000 of the options issued were exercisable. Options issued under this plan vest in equal one-thirds after employees have been employed for 12, 24 and 36 months from date of grant.

Plan D

On July 13, 2006 we approved stock option plan “D” and granted options for 1,375,000 shares under this plan. At March 31, 2007 there were 1,375,000 options outstanding and none of the options issued were exercisable. Options under this plan vest in equal one-thirds after employees have been employed for 12, 24 and 36 months from the date of grant.

Plan E

On February 22, 2007 we approved and subsequently granted options for 5,900,000 shares under stock option plan “E”. As at March 31, 2007 there were 5,900,000 options outstanding, and none of the options issued were exercisable. Options under this plan vest in equal one thirds after employees have been employed for 12, 24 and 36 months from the grant date.

We have one Stock Option Plan in Medicexchange PLC (one of our UK subsidiary companies). The shares in this company are not publicly traded.

Plan A

On July 13, 2006 we approved Medicexchange PLC stock option plan “A” and granted options for 950,000 shares under this plan. At March 31, 2007 there were 800,000 options outstanding and none of the options issued were exercisable. Options issued under this plan vest in equal one-thirds after employees have been employed for 12, 24 and 36 months from the date of grant.

The following weighted average assumptions were used to estimate the fair value assumptions.

		For all periods shown

Dividend yield		0.0%
Expected volatility		60% — 65%
Risk-free rate		4.65% — 5.25%
Expected life of options		Up to 4 years
Weighted-average grant-date fair value		£0.31 ($0.61)

The assumptions above are based on multiple factors including United Kingdom treasury bonds for the risk-free rate at the time of grant, expected future exercising patterns (we cannot base the estimate on the historical exercise patterns as no options have been exercised) and the volatility of the Company’s own stock price.

The assumptions used in the Black-Scholes option valuation model are highly subjective, and can materially affect the resulting valuation.

The following table summarizes stock option activity for the three month period ended March 31, 2007 and the year ended December 31, 2006 under all option plans:

	Outstanding					Exercisable
	Number of Shares		Weighted- Average Exercise Price			Number of Shares	Weighted- Average Exercise Price

Outstanding at December 31, 2005	4,146,200		£	1.00 ($1.96	)	3,362,850	£	1.00 ($1.96	)

Granted	2,610,000		£	1.05 ($2.06	)
Exercised	—		—
Forfeited	(1,716,200	)	£	1.00 ($1.96	)

Outstanding at December 31, 2006	5,040,000		£	0.91 ($1.79	)	2,256,200	£	1.00 ($1.96	)

Granted	5,900,000		£	0.50 ($0.98	)
Exercised	—		—
Forfeited	(795,000	)	£	0.68 ($1.34	)

Outstanding at March 31, 2007	10,145,000		£	0.59 ($1.15	)	1,854,000	£	0.75 ($1.47	)

The following is a summary of the status of the stock options outstanding at March 31, 2007:

	Outstanding Options					Exercisable Options
	Number	Contractual Life (years)	Average Exercise Price			Number	Average Exercise price

Medicsight Plan A	888,000	6.1	£	0.75 ($1.47	)	888,000	£	0.75 ($1.47	)
Medicsight Plan B	917,000	7.5	£	0.75 ($1.47	)	911,000	£	0.75 ($1.47	)
Medicsight Plan C	265,000	8.2	£	0.75 ($1.47	)	55,000	£	0.75 ($1.47	)
Medicsight Plan D	1,375,000	9.3	£	0.83 ($1.62	)	—	—
Medicsight Plan E	5,900,000	9.9	£	0.50 ($0.98	)	—	—
Medicexchange Plan A	800,000	9.3	£	0.40 ($0.79	)	—	—

On February 22, 2007 we modified the exercise price of 50% of the shares in Medicsight PLC under plans “ A” through to “C” from £1.00 to £0.50 per share. On February 22, 2007 we modified the exercise price of 50% of the shares in Medicsight PLC under plan “ D” from £1.10 to £0.50 per share. No other terms and conditions of the stock options within these plans were modified. The total modification charge in the period ended March 31, 2007 was $133,000.

The Company has recorded the following amounts related to its share-based expenses in the Statement of Operations in the period ended March 31, 2007 (in thousands):

	2007

Selling, general and administrative	$	334
Research and development	41
Total	$	375

No compensation costs were capitalized.

The aggregate intrinsic value for options outstanding and exercisable at March 31, 2007 was approximately $1,365,000.

The average grant date fair value of options was £0.26 ($0.51) and £0.41 ($0.81) for options granted during the period ended March 31, 2007 and the year ended December 31, 2006, respectively.

A summary of non-vested options at March 31, 2007 and change during period ended March 31, 2007 is presented below:

	Number of Options		Weighted Average Grant Date Fair Value

Non-vested at January 1, 2007	2,783,800		£	0.41 ($0.81	)
Granted	5,900,000		£	0.26 ($0.51	)
Vested	(157,800	)	£	0.38 ($0.75	)
Forfeited	(235,000	)	£	0.30 ($0.58	)
Non-vested at March 31, 2007	8,291,000		£	0.31 ($0.60	)

At March 31, 2007, there was $5,002,314 of total unrecognized compensation cost related to non-vested share based compensation arrangements granted under the option plans. The cost is expected to be recognised over a weighted average period of 3.6 years.

6. Minority Interest

The company has minority investors in both Medicexchange and Medicsight PLC as follows (in thousands):

	Medicexchange			Medicsight			Total

Minority Interest at January 1, 2007	$	9,351		$	12,359		$	21,710
Medicexchange China — incorporation	30			—			30
Less — minority share of operating losses	(211		)	(312		)	(523		)
Minority Interest at March 31, 2007	$	9,170		$	12,047		$	21,217

7. Credit Facilities — related party

Asia IT Capital Investments Limited (a related party) has provided us with two credit facilities:

a. The Company — has a credit facility for up to $20 million (expiring in December 2007). Any draw downs against this facility would accrue interest at 2% above US LIBOR. We are restricted from borrowing funds directly or indirectly other than through this facility without the consent of Asia IT Capital Investments Limited;

b. Medicsight PLC (one of our UK subsidiary companies) — has a credit facility for up to £10 million ($19 million) (expiring in December 2007), that is secured by a lien on all of the assets of this company. Any draw downs against this facility would accrue interest at 2% above Sterling LIBOR.

At the period ended March 31, 2007 the Company had no drawings under the $20 million facility with Asia IT, and Medicsight PLC had no drawings under its £10 million ($19 million) facility with Asia IT.

8. Related Party Transactions

A director of Asia IT Capital Investments Limited is a brother of Tim Paterson-Brown (our Chief Executive Officer), a director of the Company since December 2003 and its chief executive officer since September 2004 and a director of Medicsight PLC since September 5, 2003.

9. Recent Accounting Pronouncements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report contains forward-looking statements made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by the use of words such as “anticipate,” “estimates,” “should,” “expect,” “guidance,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning, in connection with any discussion of our financial statements, business, results of operations, liquidity and future operating or financial performance.

MGT Capital Investments, Inc. (formerly Medicsight, Inc.) and its subsidiaries (“MGT”, “the Company”, “we” or “us”) is an investment company with two direct subsidiaries that focus solely on the dynamic and consolidating Healthcare Information Technology sector (HCIT). The Company has developed medical imaging software applications and from this, we are developing the new Medicexchange.com business. Our three primary business objectives are:

· To conceive, develop and commercialize innovative medical imaging applications derived from our core technology known as Medicsight CAD through Medicsight PLC (“Medicsight”);

· To establish a global online community for medical imaging professionals known as Medicexchange.com with a rich selection of specialist clinical content for registered users combined with a product marketplace where medical imaging vendors can sell their solutions online through Medicexchange PLC (“Medicexchange”).

· To continue to invest in the rapidly growing Health Care IT (HCIT) sector.

Medicsight

Since its inception, Medicsight has become one of the world’s leading developers of enterprise-wide Computer-Aided Detection (CAD) software which analyses Computer Tomography (CT) scans for the early detection and measurement of lesions.

Medicsight has focused on two of the leading causes of death, colorectal cancer (also known as colon or bowel cancer) and lung cancer. There is increasing evidence that early detection leads to an improved life expectancy.

We believe that Medicsight’s Colon CAD and Lung CAD products (ColonCARTM, ColonCAD, LungCARTM and LungCAD) have the potential to make a significant positive impact in the early detection and management of disease.

Colon Cancer

World Health Organisation data shows that colon cancer causes 655,000 deaths each year. If detected early enough, 90 percent of cases can be 100 percent curable. Colon cancer is one of the most prevalent cancers in western countries, and is likely to grow faster in developing countries whose populations are consuming more and more of a western style diet.

Many western countries operate colon cancer screening programs, and computer tomography colonography (which is an examination of the large colon using CT x-rays, often abbreviated to CTC, and also known as virtual colonoscopy) is ideally suited for population screening of asymptomatic adults.

Compared with optical colonoscopy (which is an examination of the large colon and the distal part of the small bowel with a fibre optic camera), CTC screening is:

a. less invasive;

b. less time consuming;

c. less costly;

d. and can be at least as effective

as traditional optical colonoscopy procedures.

CTC screening is becoming increasingly available in a routine clinical setting, particularly for symptomatic or screening of high risk patients.

Lung Cancer

Lung cancer is the most common and deadliest of all cancers. Worldwide 1.3 million cases of lung cancer are diagnosed each year, and the disease accounts for 17.1 per cent of all global cancer deaths.

The link between smoking and lung cancer has long been accepted. However, clinical research has shown that if detected early and treated, there is more than an 85 per cent chance of a ten year survival rate from lung cancer.

As smoking increases dramatically in Asia, it is predicted that the number of cases of lung cancer diagnosed each year in Asia will dramatically increase over the next decade.

Medicsight’s Product Development Focus

Developing technology that is used alongside Multi Detector Computer Tomography (MDCT) scanners that enables the early detection of colon and lung cancers has been the core focus of the Company’s product development because MDCT Scanning is clinically recognised as a reliable, non-invasive examination for the detection of colon and lung cancer.

They are trusted diagnostic devices and procedures are quick, non-invasive and safe. However, interpretation and analysis of CT scan data is labour intensive and can be subject to human error.

The most crucial requirements in cancer detection and diagnosis are:

a. the ability to detect potential abnormalities at an early stage; and

b. the ability to monitor any growths accurately over time.

Medicsight’s Colon CAD and Lung CAD products can substantially help radiologists in these requirements.

The CAD products can be applied to both asymptomatic screening populations (i.e. a person with no existing obvious symptoms), and for diagnostic interpretation of symptomatic patients (i.e. a person with obvious symptoms).

In a screening scenario providing population screening of high risk asymptomatic patients, CAD CT seeks to provide a cost effective solution by identifying certain diseases sufficiently early in the life of the disease, to be more cost effective in terms of life years saved and the resource costs of disease management. The application of CAD to aid detection and diagnosis in symptomatic patients supports diagnostic decision-making and treatment planning through the identification and measurement tracking of lesions.

Clinical Validation

Colon CAD

Medicsight’s Colon CAD research has focused on the accurate identification of colon polyps. A recent clinical research study showed the Medicsight ColonCARTM system to have superior detection characteristics when compared with three experienced (human) readers and our software performance has been peer reviewed and commended in a majority of the top internationally recognized medical journals.

Lung CAD

Medicsight’s Lung CAD research has focussed on both the detection of lung lesions (nodules and cancers) and the accuracy of the CAD in automatically measuring lesions. Accurate measurement is crucial for the correct diagnosis and management of lung lesions. Accurate measurement of lesions allows their growth to be tracked over time. Growth rate helps radiologists both to diagnose the nature of disease and to assess the response of disease to treatment.

Clinical Sites

Ever since early development, Medicsight’s Colon and Lung CAD products have been in use in leading healthcare institutions within Europe and the United States, and more recently in Asia, for research and early clinical user assessment. Our Colon CAD products have been used in:

University College Hospital, London St. Mark’s Hospital, London University of Wisconsin Hospital University of Rome, Latina, Italy

The National Cancer Centre, Tokyo

Our Lung CAD products have been used in:

The London Chest Hospital The Royal Brompton Hospital Cornell Medical Center, New York

Vanderbilt Medical Center, Tennessee

The University Health Network, Toronto, Canada

The University of Navarra Medical Center, Pamplona, Spain

The National Cancer Centre, Tokyo

These results have been crucial in developing Medicsight’s CAD products to meet the absolute requirements of clinical end users, and in driving the use of CAD in routine clinical practice. To facilitate this collaborative programme, during 2006 Medicsight held international Medical Advisory Board meetings with key luminaries and practitioners in the fields of CT Colonography and lung disease. Medical Advisory Board meetings took place in Europe, North America and Japan, drawing together international expertise and understanding of the current and future clinical requirements and vision for CAD and medical image analysis software.

The use of Medicsight’s products in clinical practice has seen the recent introduction of Medicsight ColonCAD into the SIGGAR1 Trial in the UK. SIGGAR1 is the largest multi-centre trial of its kind in the UK to date and compares CT Colonography, optical colonoscopy and barium enema via a randomised controlled clinical trial. Medicsight ColonCAD has also been introduced into the STIC Trial in France, a similar programme investigating the medical and economic health benefits of CT colonography. In mid 2007, the first CTC colorectal cancer screening programme in Japan will commence and a key feature of this programme will be the use of Medicsight’s ColonCAD.

Having gained regulatory clearance, Medicsight’s products have become available for use in routine clinical practice.

The Company continues to work with internationally respected medical professionals who are experts in the fields of the colon and the lung.

These relationships include:

Colon CAD Products

Prof. Steve Halligan and Dr. Stuart Taylor at University College Hospital, London

Dr. David Burling at St. Mark’s Hospital, London

Dr. Ning Wu at the Chinese Cancer Institute, Beijing

Dr. Gen Iinuma at the National Cancer Centre, Tokyo

Dr. Perry Pickhardt at the University of Wisconsin Medical Center, Madison, Wisconsin

Lung CAD Products

Dr. Steve Ellis at the London Chest Hospital

Dr. Simon Padley at the Royal Brompton Hospital

Dr. Heidi Roberts at the University Health Network, Toronto, Canada

Dr. Ryutaro Kakinuma at the National Cancer Centre, Tokyo

In a growing commitment to clinician education programmes, Medicsight has also supported the European Society of Gastrointestinal and Abdominal Radiology (ESGAR) through active participation in ESGAR’s series of international CT Colonography workshops. Workshops are targeted and both novices and those currently undertaking CTC practice and give attendees the opportunity to experience Medicsight ColonCAD with hands-on training using multiple Medicsight partner software systems. Further educational involvement has come through Medicsight’s direct support of two Harvard Medical School, Department of Continuing Medical Education Virtual Colonoscopy courses in the United States. Course delegates receive dedicated tutorials lead by CTC luminaries Dr’s Matt Barish and Michael Zalis of Harvard Medical School, and training on Viatronix software systems incorporating Medicsight ColonCAD.

Regulatory Environment

In order to release new products into a specific market, the Company must gain local regulatory approvals for its CAD products.

In the USA, the Food and Drug Administration (FDA) is the regulatory authority. In Europe, regulatory approval is gained through Conformité Europeène (CE) marking. Other markets such as China (SFDA — State Food & Drug Administration); Japan (MHLW — Ministry of Health, Labour and Welfare); Australia (TGA — Therapeutic Goods Administration); South Korea (KFDA — Korea Food & Drugs Administration); and Canada (CMDCAS — Canadian Medical Device Conformity Assessment System) have their own regulatory bodies but these often require companies outside of these markets to show evidence of an existing CE or FDA approval for a product before gaining approval in the local market.

The Medicsight team has a significant amount of experience in preparing, submitting and gaining regulatory approvals.

European (CE) Approval

The Company’s ColonCAD and LungCAD products are approved.

USA (FDA) Clearance

The Company’s CAR products (which are earlier releases of the ColonCAD and LungCAD products) are FDA cleared.

The Company is in the process of completing the FDA’s clearance procedures to have the ColonCAD and LungCAD products cleared for the USA market.

Canada (CMDCAS) Approval

The Company has an ISO13485 certification from a CMDCAS accredited registrar which enables the Company to apply for Medical Device Licenses in Canada.

The Company received Medical Device Licenses for ColonCAD and LungCAD in January 2007.

Asia (China, Japan, Australia and Korea)

The Company expects applications to be submitted to receive approvals for both ColonCAD and LungCAD in each of these markets during 2007.

Medicsight’s Growth Strategy

The strategic objective over the next 1-3 years is to grow sales, make significant profits and to increase shareholder value. During this period, strategic merger and acquisition opportunities will be actively sought.

This is intended to be achieved by:

a. Signing new distribution agreements for ColonCAD and LungCAD.

b. Aggressively driving the use and distribution of the existing ColonCAD and LungCAD products (offices have been established in both Japan and China specifically for this purpose).

c. Generating additional revenue opportunities through the online per click model.

d. Continuing to invest in improved clinical awareness and validation.

e. Working with governments, international health organisations and medical institutions to promote the benefits of early disease detection and to publicise the potential for population screening programmes to reduce premature deaths from diseases that can be curable if detected early in the disease process.

f. Actively promote CAD through support of accredited training programs.

g. To introduce additional products into the Company’s portfolio by a combination of internal research and development and acquisitions.

The Company has signed a number of non-exclusive agreements for the distribution of its products with the following partners:

a. TeraRecon Inc. — which has successfully integrated ColonCADTM and LungCADTM into its Aquarius family of medical imaging applications;

b. Viatronix Inc. — ColonCADTM and LungCADTM have been successfully integrated into its V3DTM Colon software;

c. Vital Images Inc. — ColonCADTM has been successfully integrated into its CT colonography application which is part of the Vitrea software package;

d. 3mensio Medical Imaging BV — which has integrated LungCADTM in the 3viseon range of products Medicsight is also in discussion with a number of other major imaging companies and expects to finalise distribution agreements in Japan and Europe over the coming months.

Competition

The Company’s competitors can be divided into two categories:

a. Multi Detector CT scanner manufacturers such as GE, Hitachi, Philips, Siemens and Toshiba;

b. Independent CAD software providers.

The Company is not aware of any MDCT manufacturers who have a colon CAD product although Siemens has a CAD-like Colon product. Only Siemens has a commercially available lung CAD product although GE has a CAD-like lung product.

In the CAD vendor market, there are a number of small, independent software providers, which include:

a. iMED (Italy) — has developed a Colon CAD product that is CE certified but not FDA approved;

b. Median Technology (France) — has developed a Colon CAD product and a Lung CAD (CAD-lung) — both have CE approval but not FDA approval;

c. QI (Quantitative Imaging) (USA) — has developed a Colon CAD product that is integrated only with the Viatronix platform. This CAD application is not FDA approved;

d. R2 (USA) — has developed a Lung CAD product, that is FDA approved.

An extensive external analysis of peer reviewed clinical research on each of the above Colon CAD applications has proven that Medicsight’s Colon CAD products demonstrated increased positive impact on Reader Performance in the detection of Colon polyps, when compared with the available published data from the commercially available Colon CAD applications of the above listed companies.

At this time, the Company has not commissioned a similar competitive analysis of the Lung CAD applications.

Medicexchange

Medicexchange provides medical imaging professionals with a global web portal containing an online sales channel for diagnostic, treatment and surgery planning solutions. This combined with a variety of relevant clinical papers, training materials and content gives these professionals access to information and products that they otherwise would have difficulty accessing.

Medical imaging vendors are provided with a global online channel through which they can access a large community of medical imaging professionals in order to market and sell their product solutions.

Medicexchange was launched at the Radiological Society of North America (RSNA) conference in Chicago in November 2006.

The Medicexchange portal covers the following imaging specialty areas: Breast, Cardiology, Abdominal-Pelvic, Thoracic and Musculoskeletal. Other areas such as Neurology will be added later.

Medicexchange has offices in the UK, USA and China.

Benefits for Medical Imaging Vendors

Medicexchange provides vendors the opportunity to sell Medical Imaging products directly to radiologists in an efficient and low-cost manner (including web-based downloads).

Medicexchange offers traditional pricing plans in addition to flexible “per use” pricing. This decreases the financial purchasing risk and setup times for radiologists by giving them an attractive pricing model via an online channel.

Marketing and promotional activities are also provided for vendors such as email campaigns, online marketing, print advertising and e-newsletters.

Medical imaging vendors can list their products on Medicexchange without any upfront fees and pay on a per-sale commission basis.

With a local Chinese infrastructure, access to a large Chinese dealer network and a dedicated Chinese language version of the Medicexchange website, Medicexchange is also able to offer vendors a route for entering and selling within China.

Medicexchange is also able to offer assistance with taking vendors through regulatory clearance such as CE (Europe), FDA (USA) and SFDA (China).

Benefits for Radiologists

Medicexchange adds value for radiologists by delivering a centralized meeting place for clinical information, products and collaboration.

Medicexchange intends to offer the widest selection of medical imaging products online, all in one place. These products can be evaluated and purchased directly from the web site.

Medicexchange offers a number of ways for radiologists to purchase products including credit/debit card, pro form invoicing and payments on account. For some products, Medicexchange also plans to offer flexible “per use” pricing to allow the radiologist to pay based on a per-patient or per-study basis.

Medicexchange also offers many products on a trial basis to allow radiologists to evaluate products before they purchase.

Radiologists are also offered a free first line customer support service when they register with Medicexchange.

Market Opportunity

Radiologists expect the frequency of computed tomography (“CT”) procedures to grow by over 35% over the next five years (source: Frost & Sullivan research). Traditional original equipment manufacturers (“OEM”) typically control the access to these applications and charge high per unit price points (typically $50,000 to $200,000). These high price points create long sales cycles. The “per use” pricing model removes this obstacle to purchase. Online product purchasing and downloads create a flexible, on demand usage model.

Radiologists state a preference for the concept of a “per use” pricing model and web-based downloadable tools. Over 80% would consider a dedicated internet portal for their area of specialty a useful service (source: Frost & Sullivan research).

What differentiates the company?

By creating strong relationships with our 3rd party partner vendors Medicexchange intends to develop the clinical information and contacts, provide products and product demonstrations, training and support that will result in Medicexchange achieving its aim to be the leading global portal for clinical vendors and professionals.

Medicexchange aims to provide essential information, training and collaborative tools to attract customers, enable them to use the demonstration applications, purchase the applications and retain them as repeat users.

The Medicexchange portal is a global distribution portal (initially focused in the U.S., Europe and Asia).

With offices in Europe, USA and China, Medicexchange is able to a global service whilst also providing local expertise within specific markets as required.

Recent achievements

— Exclusive sponsor of the AuntMinnie software center

— Exclusive agreement with Chinese Journal of Radiology

— Week on week growth since launch with many thousands of unique visitors to Medicexchange.com each week

— Many agreements signed with Medical Imaging vendors to list their products on Medicexchange.com

— Agreements signed with Chinese dealer network giving access to 80% of Tier 1 and Tier 2 hospitals in Chinese urban centers

— Over 50 providers now supplying the Medicexchange site with updated news and articles

Employees

As of March 31, 2007, the Company and its subsidiaries had 64 employees, all of whom are full-time employees. Our employees are not part of a union. We believe that we have an excellent relationship with our employees.

Patents and Trademarks

Protection of our proprietary technology and our rights over that technology, from copy or unchallenged and improper use, is essential to our future success. Any challenges to, or disputes concerning, our core technology may result in great expense to us, delays in bringing products to market and disruption of our focus on our core activities. They may also result in loss of rights over our technology or the right to operate in particular markets due to adverse legal decisions against us.

The Company has filed patent applications in the United Kingdom, the United States, the European Patent Office, Japan, South Korea, Australia, Canada, and under the International Patent Cooperation Treaty (which currently has 128 member countries) covering our core technologies and their applications. We have recently filed new patent applications covering technology of both Medicsight CAD and Medicexchange and intend to continue filing new applications in the future. Two patents have been granted in the US covering aspects of Medicsight CAD technology. Although prior art searches have been carried out, we cannot provide assurance that any or all of the pending patents will be granted or that they will not be challenged, or that rights granted to us will actually provide us with advantage over our competitors. The Company actively reviews third party patents and is not currently aware of any that our products will infringe.

We have filed applications to register “Medicsight”TM, “Medicsight Colon Screen”TM, “Medicsight Heart Screen”TM, “Medicsight Lung Screen”TM, “Medicsight Colon CAR” TM, “Medicsight Lung CAR” TM, “Medicsight Computer Assisted Reader” TM, “Medicsight See More, Save More” TM, “Lung CAR”™, “Medicsight ImageView”, “MedicRead”, and “MedicView” as trademarks in the United Kingdom, the

European Community and the United States, and in a number of other countries. These trademarks are important to the corporate identity in connection with Medicsight CAD.

Failure to register appropriate patents, copyrights or trademarks in any jurisdiction may impede our ability to create brand awareness in our products, result in expenses in pursuing our rights with respect to our intellectual property, or result in lost revenues due to intellectual property disputes. Where we may be required to purchase licenses from sellers with prior rights in any country, we cannot assure you that we will be able to do so at a commercially acceptable cost.

General

MGT was originally incorporated as a Utah corporation in 1977 and was re-incorporated in Delaware in 2000. At March 31, 2007 the Company’s authorized share capital was 75,000,000 shares of common stock, par value of $0.001.

In January 2007 the Company increased its authorized share capital from 40,000,000 shares to 75,000,000 shares of common stock, par value $0.001 and changed its name from Medicsight, Inc. to MGT Capital Investments, Inc. At May 2, 2007, 38,900,383 shares of common stock had been issued.

Our principal executive office is located at Kensington Centre, 66 Hammersmith Road, London W14 8UD, United Kingdom, telephone 011-44-207-605-7950, facsimile 011-44-207-605-7951.

Our web address is www.mgtci.com. Information on our website is not deemed to be a part of this Quarterly Report.

Critical Accounting Policies and the Use of Estimates

We believe there have been no significant changes in our critical accounting policies during the three months ended March 31, 2007 as compared to our previous disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

The accompanying discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements and the related disclosures, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts in our condensed consolidated financial statements and accompanying notes. These estimates form the basis for making judgments about the carrying values of assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates.

We believe the following policies to be the most critical to an understanding of our financial condition and results of operations because they require us to make estimates, assumptions and judgments about matters that are inherently uncertain.

Stock Based Compensation

We have issued employee stock options from both Medicsight PLC and Medicexchange PLC (our UK subsidiary companies). We use the Black-Scholes option pricing model to estimate the fair value of employee stock options. Calculating the fair value of these stock options requires considerable judgment, including estimating stock price volatility, the amount of options that are expected to be forfeited and the expected life of the options awards.

The value of a stock option is derived from its potential for appreciation. The more volatile the stock, the more valuable the option becomes due to the greater possibility of significant changes in stock price. The expected option term also has a significant effect on the value of the option. The longer the term, the more time the option holder has to allow the stock price to increase without a cash investment and thus, the more valuable the option. When establishing an estimate of the expected term, we consider the vesting period for the award and our estimate of employee’s likely stock option exercises, the expected volatility, and a comparison to relevant peer group data.

The shares underlying our currently awarded stock options are not publicly traded shares. We review our valuation assumptions at each grant date and, as a result, we are likely to change our valuation assumptions used to value stock based awards granted in future periods. Actual results, and future changes in estimates, may differ substantially from our current estimates. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

Results of Operations

Revenues.

For the three month period ended March 31, 2007 and March 31, 2006 our revenues from continuing operations were $nil.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses from continuing operations were (in thousands):

	Three Months ended March 31,
	2007		2006

Selling, general and administrative expenses	$	3,457	$	2,468

Our selling, general and administrative expenses have increased as we expand our international commercial operations. The significant elements being (in thousands):

	Three Months ended March 31,
	2007		2006

Salaries and director’s compensation (including payroll taxes)	$	1,412	$	934
Contractors and consultants	450		117
Stock options	375		96
Professional fees	221		341
Travel	242		148
Property rent and rates	221		156
Marketing, conferences and public relations	308		344
Software licenses	36		161

People and related costs (including Travel costs) have increased due to the expansion of Medicsight and Medicexchange in China and Japan.

Stock option costs increased due to granting of the Medicsight PLC plan E options and the modification of it’s Medicsight PLC plan A to plan D options.

Research and Development (in thousands).

	Three Months ended March 31,
	2007		2006

Research and development expenses	$	546	$	627

Liquidity and Capital Resources

Working Capital Information (in thousands):

	March 31, 2007			December 31, 2006
	(unaudited)

Cash and Cash Equivalents & Marketable Securities	$	20,752		$	24,735

Current Assets	21,316			25,306
Current Liabilities	(2,829		)	(3,378		)
Working Capital Surplus	18,487			21,928

Ratio of Current Assets to Current Liabilities	7.5			7.5

As of March 31, 2007 we had $15,404,000 in cash and cash equivalents (compared to $19,757,000 at December 31, 2006) and $20,752,000 in cash, cash equivalents, and marketable securities compared to $24,735,000 at December 31, 2006.

Net cash used in operating activities was $3,764,000 for the three months ended March 31, 2007 ($4,632,000 for the three month period ended March 31, 2006). This resulted primarily from:

a. our net loss net of minority interests of $3,207,000 ($3,030,000 for the three month period ended March 31, 2006);

b. adjusted for depreciation and stock-based compensation expenses (non cash items) of $495,000 ($157,000 for the three month period ended March 31, 2006);

c. an overall reduction in current assets and liabilities (excluding cash items) of $535,000 in the period ended March 31, 2007 compared to $1,759,000 for the period ended March 31, 2006.

Net cash used in investing activities of $640,000 in the three months ended March 31, 2007 ($3,912,000 for the three months ended March 31, 2006) consisted primarily of:

a. in the three months ended March 31, 2007 we used $350,000 for the purchase of available for sale marketable securities;

b. in the three months ended March 31, 2007 we used $290,000 in capital expenditure ($88,000 for the three months ended March 31, 2006).

c. March 31, 2006 included a $4,000,000 cash held for common stock subscribed but unissued - relating to the December 2005 fund raising;

Net cash flows used in financing activities were $23,000 for the three months ended March 31, 2007 (compared to $985,000 provided by financing activities for the three months ended March 31, 2006). We did not raise any new equity finance in the quarter ended March 31, 2007.

Additional Capital Funding Requirements

To date we have primarily financed our operations through private placements of equity securities. At March 31, 2007 we had issued 38,900,383 of our 75,000,000 authorized share capital.

In addition to the above, we still have the two lines of credit facilities (together totalling $39 million) available from Asia IT Capital Investments Limited (a related party). We do not expect to have to use any part of these credit lines.

Risks and Uncertainties Related to Our Future Capital Requirements

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 the Company’s 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 to satisfy the Company’s cash requirements to implement its 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.

The products derived from our proprietary software, including the Medicsight™ system, are expected to account for substantially all of our revenues from operations in the foreseeable future.

Our technology has not yet been fully commercialized and we have not begun to receive any significant revenues from commercial operations. We cannot assure our stockholders that our technology and products will be commercialized successfully, or that if so commercialized, that 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.

Other Information

None.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We place our investments in a mixture of (a) cash deposits on either overnight or 30 day rates; (b) highly liquid blue chip available-for-sale market securities. A decline in interest rate would have an advserse impact on interest income.

We do not have any debt and we do not use derivative financial instruments.

The Company has the following debt facilities all repayable on demand:

Debt Holder	Facility			Draw Down		Interest rate		At March 31, 2007
Asia IT Capital Investments Limited (a related party)	$	20 million		$	nil	US Libor + 2	%	7.22	%
Asia IT Capital Investments Limited (a related	£	10 million
party)	($19 million		)	$	nil	GBP Libor + 2	%	7.83	%

Since the Company has not drawn down funds under either facility, a hypothetical 100 basis point increase in interest rates would not increase the Company’s interest costs, assuming no draw downs are made which the Company does not anticipate having to use.

Foreign Exchange Risk

We are exposed to foreign currency exchange rate fluctuations related to the operation of our international subsidiaries. Our main operating currency is UK sterling (£). We also have subsidiary operations in Japan and China who operate in their local currencies.

At the end of each reporting period, expenses of the subsidiaries are converted into U.S. dollars using the average currency rate in effect for the period and assets and liabilities are converted into U.S. dollars using the exchange rate in effect at the end of the period.

Additionally, we are exposed to foreign currency exchange rate fluctuations relating to payments we make to vendors and suppliers using foreign currencies.

We currently do not hedge against this foreign currency risk.

Fluctuations in exchange rates may impact our financial condition and results of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” as of March 31, 2007. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. As defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, disclosure controls and procedures are controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2007. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any change occurred during the quarter ended March 31, 2007, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation during the quarter ended March 31, 2007 there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The Company is currently undergoing a comprehensive effort in preparation for compliance with Section 404 of the Sarbanes-Oxley Act of 2002. This will involve the documentation, testing and review of our internal controls under the direction of senior management.

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings

There are currently no pending legal proceedings.

Item 1A.	Risk Factors

Discussion of our business and operations included in this annual report on Form 10-Q 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 financial performance. Each of the risks described below could adversely impact the value of our securities. These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments.

We cannot assure you that the Company will be successful in commercializing the Medicsight CAD products or the Medicexchange portal, or if the products or the portal are commercialized, that they will be profitable to the Company. We face obstacles in commercializing the Medicsight CAD products and the Medicexchange portal and in generating operating revenues as detailed below.

The Company does not believe that there is currently any comparable system that is competitive with the Medicsight CAD products. There are computer-aided diagnostic systems that operate in the field, but, in our view, such other systems are more dependent than ours on human resources to carry out the analysis. We are not aware of other systems in the field that have the automated capability of our products.

The Company has had only a limited operating history and no revenues from its continuing operations upon which an evaluation of its 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 constantly changing industry. There can be no assurance that the Company will be able to achieve profitable operations in the foreseeable future or at all.

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

Technical Risks.

The Medicsight CAD system may not deliver the levels of accuracy and reliability needed, or the development of such accuracy and reliability may be delayed.

Market Risks

The market for the Medicsight CAD products and Medicexchange may be slower to develop or smaller than estimated or it may be more difficult to build the market than anticipated. The medical community may resist the Medicsight CAD and Medicexchange products or be slower to accept them than we expect. Revenues from Medicsight CAD and Medicexchange may be delayed or costs may be higher than expected which may result in the Company requiring additional funding.

Regulatory Risks.

The Medicsight CAD system is subject to regulatory requirements in the United States Europe, Japan, China and our other targeted markets. Necessary regulatory approvals may not be obtained or may be delayed. We may incur substantial additional cost in obtaining regulatory approvals for our products in our targeted markets.

Competitive Risks

There are a number of groups and organizations, such as software companies in the medical imaging field, MDCT scanner manufacturers, screening companies and other healthcare providers that may develop a competitive offering to the Medicsight CAD products and Medicexchange. In addition these competitors may have significantly greater resources than the Company. We cannot make any assurance that they will not attempt to develop such offerings, that they will not be successful in developing such offerings or that any offerings they do develop will not have a competitive edge over Medicsight CAD products and Medicexchange.

Financial Risk

The Company has incurred significant operating losses since inception and has generated no revenues from continuing operations. As a result, the Company has generated negative cash flows from operations and has an accumulated deficit at March 31, 2007. 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 and borrowed funds. While the Company is optimistic and believes appropriate actions are being taken, there can be no assurance that management’s efforts will be successful or that the products the Company develops and markets will be accepted by consumers.

Corporate Structure.

The Company’s corporate structure may make it more difficult or costly to take certain actions. The Company conducts its business through: (a) Medicsight PLC, a U.K. public company which is 77% owned by the Company, and through Medicsight PLC’s subsidiaries in the United Kingdom, the United States, Japan and Gibraltar and; (b) through the Medicexchange subsidiaries, which the Company holdings range between 75% and 90%. Although the Company and Medicsight PLC and Medicexchange PLC share some directors and management, they are required to comply with corporate governance and other laws and rules applicable to public companies in the United Kingdom and the United States. Should the Company propose to take any action, such as a transfer or allocation of assets or liabilities between the Company its subsidiaries, the Company would have to take into consideration the potentially conflicting interests of the Company’s stockholders and the minority stockholders. This may deter the Company from taking such actions that might otherwise be in the best interest of the Company or cause the Company to incur additional costs in taking such actions. The subsidiary companies would not be able to pay dividends or make other distributions of profits or assets to the Company without making pro rata payments or distributions to the respective minority stockholders. Although neither the subsidiary companies nor the Company has plans to pay dividends or make distributions to its shareholders, the Company’s corporate structure may deter its subsidiaries from doing so in the future.

The protection of our intellectual property may be uncertain, and we may face possible 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 nondisclosure 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 a material adverse effect on our business.

If we fail to attract and retain qualified personnel, our business would be harmed.

We expect to rapidly expand our operations and grow our sales, research and development and administrative operations. This expansion is expected to place a significant strain on our management and will require hiring a significant number of qualified personnel. Accordingly, recruiting and retaining such personnel in the future will be critical to our success. 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.

If we do not effectively manage changes in our business, these changes could place a significant strain on our management and operations and, as a result, our business might not succeed.

Our ability to grow successfully requires an effective planning and management process. The expansion and growth of our business could place a significant strain on our management systems, infrastructure and other resources. 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, such failure could have a material adverse effect on our business.

Foreign Exchange Risks

As the Company’s main operating currency is UK sterling (£) and its financial statements are reported in US Dollars, the Company’s assets and liabilities and its results of operations are affected by movements in the $:£ exchange rate.

Other Risks

The Company’s ability to deliver its software could be hindered by risks such as the loss of key personnel or the patents and trademarks being successfully challenged or credit facilities being reduced or terminated by lenders

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

In the three months ended March 31, 2007 no shares in common stock were issued.

Item 3.	Defaults Upon Senior Securities

None.

Item 4.	Submission of Matters to a Vote of Security Holders

None.

Item 5.	Other Information

None.

Exhibits and Reports on Form 8-K

	Exhibits

	31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer — filed herewith).
	31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer — filed herewith).
	32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer — filed herewith).
	32.2		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer — filed herewith).

(b)		Reports on Form 8-K

	None

SIGNATURE

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MGT CAPITAL INVESTMENTS, INC.


	By:	/s/ TIM PATERSON-BROWN
		Tim Paterson-Brown
		Chief Executive Officer

	By:	/s/ ALLAN ROWLEY
		Allan Rowley
		Chief Financial Officer

May 2, 2007