UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 20, 2013
MGT Capital Investments, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 0-26886 | 13-4148725 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
500 Mamaroneck Avenue, Suite 204, Harrison, NY 10528
(Address of principal executive offices, including zip code)
(914) 630-7431
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Explanatory Note
On May 24, 2013, MGT Capital Investments Inc. (“MGT”) filed a Current Report on Form 8-K (“Form 8-K”) related to its acquisition of 63.12% of the outstanding membership interests of FanTD, LLC. In response to parts (a) and (b) of Item 9.01 of such Form 8-K, MGT stated that it would file the required financial information by amendment, as permitted by Items 9.01(a)(4) and 9.01(b)(2) of Form 8-K. MGT hereby amends its Form 8-K filed on May 24, 2013 to provide the required financial information.
Item 9.01. Financial Statements and Exhibits
(a) | Financial Statements of the Acquired Business |
The following financial statements of FanTD LLC are filed as Exhibits 99.1 to this amendment and are incorporated in their entirety herein by reference:
Exhibit 99.1 |
Report of Independent Registered Public Accounting Firm |
Balance Sheet – as of December 31, 2012 and March 31, 2013 (unaudited) |
Statement of Operations from November 2, 2012 (Inception) to December 31, 2012 and for the three months ended March 31, 2013 (unaudited) |
Statement of Members’ Equity as of November 2, 2012 (Inception) to December 31, 2012 and for the three months ended March 31, 2013 (unaudited) |
Statement of Cash Flows from November 2, 2012 (Inception) to December 31, 2012 and for the three months ended March 31, 2013 (unaudited) |
Notes to the Financial Statements |
(b) | Pro Forma Financial Information |
The following pro forma financial information is furnished as Exhibit 99.2:
Exhibit 99.2 |
Unaudited Pro Forma Condensed Combined Balance Sheets – as of March 31, 2013 |
Unaudited Pro Forma Condensed Combined Statement of Operations and Comprehensive Gain for the three months ended March 31, 2013 |
Unaudited Pro Forma Condensed Combined Statement of Operations and Comprehensive Loss for the year ended December 31, 2012 |
Notes to Unaudited Pro Forma Condensed Combined Financial Statements |
(c) | Shell Business Transactions |
Not applicable
(c) | Exhibit |
99.1 | Audited financials of FanTD LLC as of December 31, 2012 and from November 2, 2012 (Inception) to December 31, 2012 |
99.2 | Unaudited Pro Forma Condensed Combined Financial Statements as of March 31, 2013 and for the three months ended March 31, 2013 and from November 2, 2012 (Inception) to December 31, 2012 |
SIGNATURES
Pursuant to 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.
Dated: August 2, 2013
MGT Capital Investments, Inc. | ||
By: | /s/ Robert B. Ladd | |
Name: | Robert B. Ladd | |
Title: | President and Chief Executive Officer |
Exhibit 99.1
Table of Contents
Page | |
Report of Independent Registered Public Accounting Firm | 2 |
Financial Statements | 3 |
Balance Sheet | 3 |
Statement of Operations | 4 |
Statement of Members’ Equity | 5 |
Statement of Cash Flows | 6 |
Notes to the Financial Statements | 7 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Shareholders
of FanTD LLC.
We have audited the accompanying balance sheet of FanTD LLC. (the “Company”) as of December 31, 2012, and the related statements of operations, changes in members’ equity and cash flows for the period from November 2, 2012 (inception) to December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of FanTD LLC., as of December 31, 2012 and the results of its operations and its cash flows for the period from November 2, 2012 (inception) to December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
/s/ Marcum llp
New York, NY
August 2, 2013
2 |
FanTD LLC and Affiliate
BALANCE SHEET
December 31, 2012 | March 31, 2013 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 4,272 | $ | 55,620 | ||||
Prepaid expense | - | 1,666 | ||||||
Total current assets | 4,272 | 57,286 | ||||||
Non-current assets | ||||||||
Property and equipment, net | - | 3,145 | ||||||
Intangible asset, net | 108,889 | 199,025 | ||||||
Security deposit | 1,800 | 1,800 | ||||||
TOTAL ASSETS | $ | 114,961 | $ | 261,256 | ||||
LIABILITIES & MEMBERS' EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable | - | 12,535 | ||||||
Customer deposits | 2,833 | 68,038 | ||||||
Other liabilities | - | 13,480 | ||||||
Due to related party – Members loan | 97,243 | 76,485 | ||||||
Total current liabilities | 100,076 | 170,538 | ||||||
Total Liabilities | 100,076 | 170,538 | ||||||
Members' Equity | ||||||||
Members' Equity | 14,885 | 90,718 | ||||||
TOTAL LIABILITIES & MEMBERS' EQUITY | $ | 114,961 | $ | 261,256 |
The accompanying notes are an integral part of these financial statements.
3 |
FanTD LLC and Affiliate
STATEMENT OF OPERATIONS
Period from November 2, 2012 (Inception) to December 31, 2012 | For the Three Months Ended March 31, 2013 | |||||||
(unaudited) | ||||||||
Revenue | $ | 3,137 | $ | 43,558 | ||||
Cost of sales | (1,704 | ) | $ | (33,100 | ) | |||
Gross Profit | $ | 1,433 | $ | 10,458 | ||||
Operating Expenses | ||||||||
Selling, general and administrative | 48,368 | 124,625 | ||||||
48,368 | 124,625 | |||||||
Net loss | $ | (46,935 | ) | $ | (114,167 | ) |
The accompanying notes are an integral part of these financial statements.
4 |
FanTD LLC and Affiliate
STATEMENT OF MEMBERS’ EQUITY
Members’ Equity, November 1, 2012 (inception) | $ | - | ||
Contributions from members | 61,820 | |||
Net loss | (46,935 | ) | ||
Members’ Equity, December 31, 2012 | $ | 14,885 | ||
Contributions from members | 190,000 | |||
Net loss | (114,167 | ) | ||
Members’ Equity, March 31, 2013 (unaudited) | $ | 90,718 |
The accompanying notes are an integral part of these financial statements.
5 |
FanTD LLC and Affiliate
STATEMENT OF CASH FLOWS
Period from November 2, 2012 (Inception) to December 31, 2012 | For the Three Months Ended March 31, 2013 | |||||||
(unaudited) | ||||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (46,935 | ) | $ | (114,167 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | - | 179 | ||||||
Amortization of intangible assets | 3,111 | 12,949 | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expense | - | (1,666 | ) | |||||
Customer deposits | 2,833 | 65,205 | ||||||
Security deposits | (1,800 | ) | - | |||||
Accounts payable | - | 12,535 | ||||||
Other liabilities | - | 13,480 | ||||||
Net cash used by operating activities | (42,791 | ) | (11,485 | ) | ||||
Cash flows from investing activities | ||||||||
Software and website development | (112,000 | ) | (103,085 | ) | ||||
Purchase of property and equipment | - | (3,324 | ) | |||||
Net cash used by investing activities | (112,000 | ) | (106,409 | ) | ||||
Cash flows from financing activities | ||||||||
Capital contributions | 61,820 | 190,000 | ||||||
Proceeds from member loans | 97,243 | (20,758 | ) | |||||
Net cash provided by financing activities | 159,063 | 169,242 | ||||||
Net change in cash & cash equivalents | 4,272 | 51,348 | ||||||
Cash & cash equivalents, beginning of period | - | 4,272 | ||||||
Cash & cash equivalents, ending of period | $ | 4,272 | 55,620 | |||||
Supplemental cash flow information | ||||||||
Cash paid during the year for: | ||||||||
Interest | $ | - | - | |||||
Income tax | $ | - | - |
The accompanying notes are an integral part of these financial statements.
6 |
FanTD LLC and Affiliate
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM NOVEMBER 2, 2012 (INCEPTION) TO DECEMBER 31, 2012
AND THE THREE MONTH PERIOD ENDED MARCH 31, 2013 (UNAUDITED)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Nature of organization
FanTD LLC (the “Company”) is a New York Limited Liability Company that was formed on November 2, 2012. The Company owns and operates Fanthrowdown.com which is an online fantasy sports platform that enables users to play daily fantasy sports games and win cash prizes. Fanthrowdown.com is an affiliate under common control that has no business operations. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
Unaudited Interim Results
The accompanying unaudited condensed combined financial statements as of March 31, 2013 and for the three month period ended March 31, 2013 have been prepared in accordance with U.S. GAAP for interim financial information. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included in the unaudited interim financial statements. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ended December 31, 2013.
Regulatory Environment
On September 30, 2006, the United States Congress passed the Unlawful Internet Gambling Enforcement Act of 2006 (“UIGEA”). The criminal provisions of UIGEA provide that no person engaged in the business of betting or wagering may knowingly accept directly or indirectly virtually any type of payment from a player in unlawful internet gambling (i.e. bets that are unlawful under other state or Federal laws). Fantasy sports are exempt from the definition of unlawful internet gambling provided that:
· | They are not based on the current membership of an actual sports team or on the score, point spread or performance of teams; |
· | All prizes and awards are established and made known before the start of the contest; |
· | Winning outcomes are based on the skill of the participants and predominately by accumulated statistics of individual performances of athletes, but not solely on a single performance of an athlete. |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates and assumptions
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all investments in highly liquid instruments with maturities of three months or less from the date of purchase and money market funds to be cash equivalents.
Customer deposits
Customer deposits represent cash collected from customers in advance of revenue recognition. These deposits represent customers individual account balances and the funds in which they can participate in daily fantasy sports events. Customers are able to request and withdraw their deposit balance upon request.
7 |
Property, equipment and software
Property, equipment and software are recorded at cost and are depreciated over the estimated useful lives of the related assets. Depreciation and amortization of fixed assets are computed on the straight-line method for financial reporting purposes.
Software developed for internal use
The Company follows the authoritative guidance on accounting for the costs of computer software developed or obtained for internal use. Costs incurred during the preliminary stage are expensed as incurred by the Company. Certain qualifying costs incurred during the application development stage are capitalized as property, equipment and software by the Company. The Company begins capitalization when the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended.
Asset impairment
Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts. Assets would be deemed to be impaired if the forecast of undiscounted future net cash flows is less than the carrying value of the assets. There were no impairments recognized through December 31, 2012 and March 31, 2013.
Revenue recognition
The Company recognizes revenue in accordance with the accounting standard, which requires that four basic criteria be met before revenue can be recognized: (i) persuasive evidence that an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) services have been rendered.
Revenue transactions represent income that is earned as a percentage of the total prize of a fantasy sports game. Once a fantasy sports game concludes, the company recognizes a portion of the total prize as revenue.
Bonus rewards liability
Members may earn bonus rewards based on special promotions. Bonus rewards are accumulated and tracked by the Company on the members’ behalf. Bonus rewards are redeemed and are applied to 5% of the member’s entrance fee when participating in a paid contest. Bonus awards do not expire and there are no limits on the number of bonus awards a member can earn. The Company reserves the right to change this policy in the future. A liability is recorded in the period bonus rewards are earned, and reduced in the period bonus rewards are redeemed. As of December 31, 2012 and March 31, 2013, the bonus rewards liability outstanding was $0 and $12,035, respectively
Advertising and promotion
Advertising and promotion costs are charged to expense as incurred. The total advertising and promotion costs for the year ended December 31, 2012 and the three months ended March 31, 2013 were $5,080 and $29,428, respectively.
Income taxes
The Company is a Limited Liability Company which files as a partnership. As such, it is treated as a "pass-through entity" and not as a taxpaying entity for federal or state income tax purposes. Accordingly, no provision is made for federal or state income taxes since the Company's net income or loss, subject to certain limitations, is included in the federal and state income tax returns of its members.
NOTE 2 – PROPERTY AND EQUIPMENT
Property and equipment | Estimated Useful Life | December 31, 2012 | March 31, 2013 (unaudited) | |||||||
Computer equipment | 3 Years | $ | 0 | $ | 3,324 | |||||
Less: Accumulated depreciation | 0 | (179 | ) | |||||||
Property and equipment, net | 0 | $ | 3,145 |
Depreciation expense for the year ended December 31, 2012 and for the three month ended March 31, 2013 was $nil and$179, respectively.
8 |
NOTE 3 – INTANGIBLE ASSET
On March 13, 2013, the Company purchased certain customer lists and customer accounts from BuzzDraft, LLC (“BuzzDraft”) for a total consideration of $35,000. The Company applied the accounting guidance of Accounting Standard Codification “ASC” 805 and determined the purchase as a acquisition of intangible assets and will record amortization expense over the useful life of the intangible assets.
Intangible assets | Estimated Useful Life | December 31, 2012 | March 31, 2013 (unaudited) | |||||||
Software and website development | 3 Years | $ | 112,000 | $ | 180,085 | |||||
Customer list | 5 Years | 0 | 35,000 | |||||||
Less: Accumulated amortization | (3,111 | ) | (16,060 | ) | ||||||
Intangible assets, net | $ | 108,889 | $ | 199,025 |
Amortization expense for the year ended December 31, 2012 and for the three month ended March 31, 2013 was $3,111 and $12,949, respectively.
Estimated future annual amortization expense as of:
December 31, 2012 | March 31, 2013 (unaudited) | |||||||||||||||||
Software and website development | Customer list | Software and website development | Customer list | |||||||||||||||
2013 | 37,333 | - | 2013 | 47,665.00 | 6,417 | |||||||||||||
2014 | 37,333 | - | 2014 | 60,028.00 | 7,000 | |||||||||||||
2015 | 34,223 | - | 2015 | 56,915.00 | 7,000 | |||||||||||||
2016 | - | - | 2016 | - | 7,000 | |||||||||||||
2017 | - | - | 2017 | - | 7,000 | |||||||||||||
108,889 | - | 164,608 | 34,417 |
NOTE 4 – RELATED PARTY TRANSACTIONS
Loan payable to members
The Company has a loan payable to certain founding members. The loan served to temporarily assist with the Company’s expenditure. The balance of the loan payable as of December 31, 2012 and March 31, 2013 was $97,243 and $76,485, respectively. The loan bears no interest and is payable on demand and no later than December 31, 2013.
NOTE 5 – MEMBERS’ EQUITY
Each Members’ membership interest in the Company shall be represented by the Units held by such Member. The maximum number of Units which the Company is authorized to issue is 10,000. In any vote, consent, approval or other action required to be taken by the Members’, each Unit which is issued and outstanding will be entitled to one vote.
As of December 31, 2012 and March 31, 2013, 1,850 Units and 2,007.50 Units remained outstanding. For the year ended December 31, 2012, the Company received $61,820 in exchange for the 1,850 Units. For the three months ended March 31, 2013, the Company received $190,000 in exchange for the 157.50 Units.
NOTE 6 - COMMITMENTS
Leases
The Company leases approximately 1,100 square feet of space in Saratoga Springs, New York. This lease is a non-cancelable "net lease" and the Company is responsible for the direct payment of any and all costs and expenses in connection with the use and occupancy of the premises in addition to the minimum required lease payments. The lease term is November 1, 2012 through October 31, 2014 and calls for monthly rent payments of $1,800. Total rent expense for the year ended December 31, 2012 and for the three months ended March 31, 2013 was $3,600 and $5,400, respectively. The approximate future minimum annual rentals under the lease are as follows:
9 |
Year Ended December 31, 2012 | Three Months Ended March 31, 2013 (Unaudited) | |||||||||
2013 | $ | 21,600 | 2013 | $ | 16,200 | |||||
2014 | 18,000 | 2014 | 18,000 | |||||||
$ | 39,600 | $ | 34,200 |
NOTE 7 – INCOME TAXES
Pursuant to accounting guidance concerning provision for uncertain income tax provisions contained in Accounting Standards Codification (“ASC”) 740-10, there are no uncertain income tax positions for the year ended December 31, 2012 and for the three months ended March 31, 2013. The federal income tax returns of the Company are subject to examination by the IRS, generally for three years after they are filed.
NOTE 8 – SUBSEQUENT EVENTS
On May 20, 2013, the Company closed a sale of 1,335 Units representing a 63.12% membership interest of the Company to MGT Sports, Inc., a subsidiary of MGT Capital Investments, Inc. (“MGT”) for a total consideration of $5,102,186, which included i) the issuance of 600,000 shares of MGT common stock at a price of $5.03 for a total value of $3,018,000, ii) cash of $202,500 and iii) the fair value for 37% of non-controlling interest in the amount of $1,881,656.
10 |
Exhibit 99.2
Introduction to Unaudited Pro Forma Condensed Combined Financial Information
On May 20, 2013 we completed our acquisition of privately-held FanTD, LLC (“FanTD”). FanTD owns and operates Fanthrowdown.com, one of the leading daily fantasy sports websites. Launched in 2012, Fanthrowdown.com offers daily fantasy gameplay for the NFL, MLB, NCAA (basketball & football), NHL and NBA. Its goal is to offer fantasy sports fans the absolute best play environment and the most popular gameplay styles with a perfect balance between user-friendliness and in-depth statistical analysis. We acquired of 63.12% of the outstanding membership interests of FanTD. The transaction is more fully described in Note 1 to the Unaudited Pro Forma Condensed Combined Financial Statements.
The following unaudited pro forma condensed combined financial information gives effect to the above described acquisition. The following unaudited pro forma condensed combined balance sheet combines the balance sheet of MGT Capital Investments Inc. (MGT) with FanTD as of March 31, 2013, as if the acquisition of FanTD occurred on that date. The following unaudited pro forma condensed combined statements of operations combine the results of operations of MGT with FanTD for the year ended December 31, 2012, and the three month period ended March 31, 2013, as if the acquisition of FanTD had been completed as of January 1, 2012.
The following unaudited pro forma condensed combined financial information is based on historical amounts for the year ended December 31, 2012 and the three months ended March 31, 2013 and certain amounts at the close of the acquisition. The information presented is for illustrative purposes only and is not necessarily indicative of the results of operations of the consolidated company that would have occurred had the acquisition been completed as of the beginning of the periods indicated or that may be attained in the future. Actual future results will likely be materially different from these pro forma results. This unaudited pro forma financial information should be read in conjunction with the historical financial information of MGT and FanTD included elsewhere in this report and in other reports and documents MGT files with the United States Securities and Exchange Commission.
MGT CAPITAL INVESTMENTS, INC.
AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEETS
(In thousands except share and per share amounts)
(Unaudited)
As of March 31, 2013
MGT Capital Investments Inc. | FanTD LLC | Pro Forma Adjustments | Pro Forma Total | |||||||||||||
(a) | (b) | (c) | ||||||||||||||
Assets: | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 2,678 | $ | 56 | $ | (202 | ) | $ | 2,532 | |||||||
Accounts receivable | - | - | - | |||||||||||||
Prepaid expenses and other current assets | 233 | 2 | 235 | |||||||||||||
Total current assets | 2,911 | 58 | (202 | ) | 2,767 | |||||||||||
Non-current assets: | ||||||||||||||||
Restricted cash | 2,039 | - | 2,039 | |||||||||||||
Property and equipment, at cost, net | 21 | 3 | 1 | (d) | 25 | |||||||||||
Intangible assets, net | 1,743 | 199 | 20 | (d) | 1,962 | |||||||||||
Goodwill | - | - | 5,081 | (d) | 5,081 | |||||||||||
Other non-current asset | - | 2 | 2 | |||||||||||||
Total assets | $ | 6,714 | $ | 262 | $ | 4,900 | $ | 11,876 | ||||||||
Liabilities: | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 203 | $ | 13 | $ | $ | 216 | |||||||||
Accrued expenses | 177 | - | 50 | (d) | 227 | |||||||||||
Customer deposits | - | 68 | 68 | |||||||||||||
Other payables | 21 | 13 | 34 | |||||||||||||
Due to Related party | 77 | 77 | ||||||||||||||
Total current liabilities | 401 | 171 | 50 | 622 | ||||||||||||
Non-current liabilities: | ||||||||||||||||
Derivative liability - warrants | 5,044 | - | 5,044 | |||||||||||||
Total liabilities | 5,445 | 171 | 50 | 5,666 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Redeemable convertible preferred stock - temporary equity | ||||||||||||||||
Preferred stock, Convertible Preferred Series A , $0.001 par value; 1,413,572 and 1,394,766 shares authorized at March 31, 2013 and December 31, 2012, respectively; 1,139,870 and 1,394,766 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively | 108 | - | 108 | |||||||||||||
Stockholders' equity | ||||||||||||||||
Undesignated Preferred stock, $0.001 par value; 8,586,428 and 8,605,234 authorized at March 31, 2013 and December 31, 2012, respectively. No shares authorized, issued and outstanding at March 31, 2013 and December 31, 2012 | - | - | - | - | ||||||||||||
Common stock, $0.001 par value; 75,000,000 shares authorized; 3,522,935 and 3,251,187 shares issued and outstanding at March 31, 2013 and December 2012 respectively. | 4 | - | - | (d) | 4 | |||||||||||
Members’ equity | 91 | (91 | )(d) | - | ||||||||||||
Additional paid in capital | 283,296 | 3,612 | (d) | 286,908 | ||||||||||||
Accumulated other comprehensive loss | (281 | ) | - | (281 | ) | |||||||||||
Accumulated deficit | (282,570 | ) | - | (553 | )(d) | (283,123 | ) | |||||||||
Total stockholders' equity - MGT Capital Investments, Inc. | 449 | 91 | 2,968 | 3,508 | ||||||||||||
Non-controlling interests | 712 | 1,882 | (d) | 2,594 | ||||||||||||
Total equity | 1,161 | 91 | 4,850 | 6,102 | ||||||||||||
Total stockholders' equity, liabilities and non-controlling interest | $ | 6,714 | $ | 262 | $ | 4,900 | $ | 11,876 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
MGT CAPITAL INVESTMENTS, INC.
AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE GAIN
(In thousands, except share and per share amounts)
(Unaudited)
Three months ended March 31, 2013
MGT Capital Investments Inc. | FanTD LLC | Pro Forma Adjustments | Pro Forma Total | |||||||||||||
(a) | (b) | (c) | ||||||||||||||
Revenues: | ||||||||||||||||
Software and devices | $ | 11 | $ | $ | 11 | |||||||||||
Services - consulting | 75 | 75 | ||||||||||||||
Gaming | 44 | 44 | ||||||||||||||
86 | 44 | 130 | ||||||||||||||
Cost of revenues: | ||||||||||||||||
Software and devices | - | - | ||||||||||||||
Services - consulting | 63 | 63 | ||||||||||||||
Gaming | 33 | 33 | ||||||||||||||
63 | 33 | 96 | ||||||||||||||
Gross margin | 23 | 11 | 34 | |||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | (1,161 | ) | (125 | ) | (4 | )(d) | (1,290 | ) | ||||||||
Research and development | - | - | ||||||||||||||
(1,161 | ) | (125 | ) | (4 | )(d) | (1,290 | ) | |||||||||
Operating loss | (1,138 | ) | (114 | ) | (4 | )(d) | (1,256 | ) | ||||||||
Other non-operating (expense) / income: | ||||||||||||||||
Interest and other (expense) / income | 24 | 24 | ||||||||||||||
Decrease in fair value of common stock warrants | 2,122 | 2,122 | ||||||||||||||
2,146 | 2,146 | |||||||||||||||
Net income before income taxes and non-controlling interest | 1,008 | (114 | ) | (4 | )(d) | 890 | ||||||||||
Income tax (expense) | (3 | ) | (3 | ) | ||||||||||||
Net income before non-controlling interest | 1,005 | (114 | ) | (4 | )(d) | 887 | ||||||||||
Net income attributable to non-controlling interest | 56 | 56 | ||||||||||||||
Net profit attributable to MGT | $ | 1,061 | $ | (114 | ) | (4 | )(d) | $ | 943 | |||||||
Less: | - | |||||||||||||||
Quarterly dividend on Preferred Series A Stock | (61 | ) | (61 | ) | ||||||||||||
Net income applicable to Common shareholders | $ | 1,000 | $ | (114 | ) | (4 | )(d) | $ | 882 | |||||||
Per-share data: | ||||||||||||||||
Basic net income | $ | 0.33 | $ | $ | 0.26 | |||||||||||
Diluted net income per share | $ | 0.24 | $ | $ | 0.18 | |||||||||||
Weighted average number of common shares outstanding - Basic | 3,075,802 | 300,000 | (e) | 3,375,802 | ||||||||||||
Weighted average number of common shares outstanding - Dilutive | 4,614,577 | 300,000 | (e) | 4,914,577 | ||||||||||||
Net income as reported | $ | 1,005 | $ | (114 | ) | (4 | )(d) | $ | 887 | |||||||
Other comprehensive gain: | - | |||||||||||||||
Unrealized foreign exchange gains | - | - | ||||||||||||||
Comprehensive gain | 1,005 | (114 | ) | (4 | )(d) | 887 | ||||||||||
Comprehensive gain attributable to non-controlling interest | - | - | ||||||||||||||
Comprehensive gain attributable to MGT | $ | 1,005 | $ | (114 | ) | (4 | )(d) | $ | 887 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
MGT CAPITAL INVESTMENTS, INC.
AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
(Unaudited)
For the Year Ended December 31, 2012
MGT Capital Investments Inc. | FanTD LLC | Pro Forma adjustments | Pro Forma | |||||||||||||
(a) | (b) | (c) | ||||||||||||||
Revenues: | ||||||||||||||||
Software and devices | $ | 222 | $ | $ | $ | 222 | ||||||||||
Services - consulting | 187 | 187 | ||||||||||||||
Gaming | - | 3 | 3 | |||||||||||||
409 | 3 | 412 | ||||||||||||||
Cost of revenues: | ||||||||||||||||
Software and devices | 92 | 92 | ||||||||||||||
Services - consulting | 173 | 173 | ||||||||||||||
Gaming | - | 2 | 2 | |||||||||||||
265 | 2 | 267 | ||||||||||||||
Gross margin | 144 | 1 | 145 | |||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 4,551 | 48 | 66 | (d) | 4,665 | |||||||||||
Research and development | 83 | 83 | ||||||||||||||
4,634 | 48 | 66 | (d) | 4,748 | ||||||||||||
- | ||||||||||||||||
Operating loss | (4,490 | ) | (47 | ) | (66 | )(d) | (4,603 | ) | ||||||||
Other non-operating (expense) / income: | ||||||||||||||||
Interest and other (expense) / income | (99 | ) | - | (99 | ) | |||||||||||
Accretion of debt discount and amortization deferred financing costs | (324 | ) | - | (324 | ) | |||||||||||
Loss on extinguishment of convertible note | (355 | ) | - | (355 | ) | |||||||||||
Revaluation of warrant liability | 557 | - | 557 | |||||||||||||
(221 | ) | - | (221 | ) | ||||||||||||
Loss before income taxes | (4,711 | ) | (47 | ) | (66 | )(d) | (4,824 | ) | ||||||||
Income tax (expense) / benefit | (14 | ) | - | (14 | ) | |||||||||||
- | ||||||||||||||||
Net loss | (4,725 | ) | (47 | ) | (66 | )(d) | (4,838 | ) | ||||||||
Net loss attributable to non-controlling interest | 1,121 | - | 1,121 | |||||||||||||
Net loss attributable to MGT Capital Investments, Inc. | $ | (3,604 | ) | $ | (47 | ) | $ | (66 | )(d) | $ | (3,717 | ) | ||||
Less: | ||||||||||||||||
Warrant - Deemed Dividend (in excess of proceeds received) | (2,231 | ) | - | (2,231 | ) | |||||||||||
Preferred Stock dividend | (47 | ) | - | (47 | ) | |||||||||||
Net loss applicable to Common shareholders | $ | (5,882 | ) | $ | (47 | ) | $ | (66 | )(d) | $ | (5,995 | ) | ||||
Per-share data: | ||||||||||||||||
Basic net income | $ | (2.62 | ) | $ | $ | $ | (2.36 | ) | ||||||||
Diluted net income per share | (2.62 | ) | (2.36 | ) | ||||||||||||
Weighted average number of common shares outstanding - Basic | 2,245,465 | 300,000 | (e) | 2,545,465 | ||||||||||||
Weighted average number of common shares outstanding - Dilutive | 2,245,465 | 300,000 | (e) | 2,545,465 | ||||||||||||
Net loss as reported | $ | (4,725 | ) | $ | (47 | ) | $ | (66 | )(d) | $ | (4,838 | ) | ||||
Other comprehensive loss: | ||||||||||||||||
Unrealized foreign exchange gains | 49 | 49 | ||||||||||||||
Comprehensive loss | (4,676 | ) | (47 | ) | (66 | )(d) | (4,789 | ) | ||||||||
Comprehensive loss attributable to non-controlling interest | 1,095 | 1,095 | ||||||||||||||
Comprehensive loss attributable to MGT Capital Investments, Inc. | $ | (3,581 | ) | $ | (47 | ) | $ | (66 | )(d) | $ | (3,694 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
MGT CAPITAL INVESTMENTS, INC. AND SUBSIDIARIES
Notes to the Pro Forma Condensed Combined Financial Statements
(unaudited)
PRO FORMA ADJUSTMENTS
The pro forma adjustments to the condensed combined balance sheet give effect to the acquisition of FanTD as if the transactions had occurred on March 31, 2013.
Balance Sheet – March 31, 2013
a. Derived from the unaudited balance sheet of MGT as of March 31, 2013.
b. Derived from the unaudited balance sheet of FanTD as of March 31, 2013.
c. Reflects the consolidation of MGT and FanTD financial results.
d. Reflects the acquisition of 63.12% membership interest of FanTD and transaction cost accrued for $50,000 relating to finder’s fee expense and issuance of 100,000 shares of MGT Common stock at a price of $5.03, for an aggregate fair value of $503,000, relating to consultant expense. The total purchase consideration of FanTD, consists of the following:
1) issuance of 600,000 shares of MGT common stock at a price of $5.03 (The fair value of the purchase consideration was computed using the publicly traded closing price of the company’s common stock on May 20,2013, the date the acquisition was completed) for a total of $3,018,000
2) cash payment of $202,500 and
3) acquisition of the fair value for 37% of non-controlling interest in the amount of $1,881,686
The following table summarizes the estimated allocation of the purchase price of FanTD based on the March 31, 2013 pro forma balance sheet:
Purchase Price (in 000’s) | ||||
Cash consideration | $ | 202 | ||
Stock consideration (600,000 shares at $5.03 closing price as of May 20, 2013 totals 3,018,000 x 50%) | 1,509 | |||
50% of total stock consideration held in escrow | 1,509 | |||
Fair value of non-controlling interest | 1,882 | |||
Total purchase price | $ | 5,102 | ||
Allocation of purchase price (in 000’s) | ||||
Current assets/(liabilities) | $ | (202 | ) | |
Property and equipment | 4 | |||
Intangible asset – internal developed software | 186 | |||
Intangible asset- customer list | 33 | |||
Goodwill | 5,081 | |||
Total allocation of purchase price | $ | 5,102 |
Statements of Operations – Three Months Ended March 31, 2013
a. | Derived from the audited statement of operations of MGT for the three months ended March 31, 2013. |
b. | Derived from the audited statement of operations of FanTD for the three months ended March 31, 2013. |
c. | Reflects the consolidation of MGT and FanTD financial results. |
d. | The analysis for the allocation of the purchase price between property and equipment and intangible assets has not been finalized. For purposes of this pro forma the depreciation and amortization expense was calculated based on an expense of $17,174 recorded to selling, general and administrative expense. Amortization expense was calculated using the following economic lives: Property and equipment, 3 years; Intangible asset – customer list, 5 years, intangible asset- software and website development, 3 years. Actual future amortization will be based on the results of the asset valuation currently being performed; actual future results may differ from these pro forma results. |
e. | Excludes 300,000 shares of common stock placed into an escrow account to be held for an 6-month period as security for indemnification claims that may arise in connection with the asset purchase transaction. Accordingly, these shares, which are subject to recall, are excluded from the computation of basic loss per share. |
Statements of Operations – Year Ended December 31, 2012
a. | Derived from the audited statement of operations of MGT for the year ended December 31, 2012. |
b. | Derived from the audited statement of operations of FanTD for the year ended December 31, 2012. |
c. | Reflects the consolidation of MGT and FanTD financial results. |
d. | The analysis for the allocation of the purchase price between property and equipment and intangible assets has not been finalized. For purposes of this pro forma the depreciation and amortization expense was calculated based on an expense of $69,564 record to selling, general and administrative expense. Amortization expense was calculated using the following economic lives: Property and equipment, 3 years; Intangible asset – customer list, 5 years, intangible asset- software and website development, 3 years. Actual future amortization will be based on the results of the asset valuation currently being performed; actual future results may differ from these pro forma results. |
e. | Excludes 300,000 shares of common stock placed into an escrow account to be held for an 6-month period as security for indemnification claims that may arise in connection with the asset purchase transaction. Accordingly, these shares, which are subject to recall, are excluded from the computation of basic loss per share. |