Note 11: Share-based compensation

Stock incentive plan

At the annual meeting of the stockholders of MGT held on September 27, 2013, stockholders approved an amendment to the Company’s 2012 Stock Incentive Plan (the “Amended and Restated Plan”) to increase the amount of shares of common stock that may be issued under the Amended and Restated Plan to 1,335,000 shares from 415,000 shares, an increase of 920,000 shares and to add a reload feature. The Amended and Restated Plan is administered by the board of directors or the Compensation Committee of the board of directors, which determines the individuals to whom awards shall be granted as well as the type, terms and conditions of each award, the option price and the duration of each award.

Issuance of restricted shares - directors, officers and employees

The Company in periods preceding January 1, 2013 made grants of restricted shares which vest one-third each six months from the date of issue, except for a specific grant made on December 26, 2012, which vests three and eight months from the date of grant subject to the attainment of certain performance conditions which were achieved in March 2013. The restricted shares are valued using the closing market price on the date of grant, of which the share-based compensation expense is recognized over their vesting period.

On September 30, 2013, 6,000 restricted shares were granted and issued to a certain employee. The restricted shares vest one-third each six months from the date of issue. The unvested shares are subject to forfeiture if the applicable recipient is not a director, officer and/or employee of the Company at the time the restricted shares are to vest. The restricted shares were valued at their fair market value on the date of grant, of which the share-based compensation expense will be recognized over their vesting period. No option grants were issued during the nine months ended September 30, 2013.

A summary of the Company’s employee’s restricted stock as of September 30, 2013 is presented below:

		Weighted
		average grant
	Number of	date fair
	shares	value
Non-vested at December 31, 2012	314,667	$	5.20
Granted	6,000		3.68
Vested	(139,333)		5.34
Forfeited	(4,667)		4.61
Non-vested at September 30, 2013	176,667	$	5.05

The Company has recorded the following amounts related to its share-based compensation expense in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss:

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Selling, general and administrative	$	349	$	220	$	1,052	$	442
Research and development		–		–		–		7
	$	349	$	220	$	1,052	$	449

Of the stock-based expense for the three and nine months ended September 30, 2013, and 2012, $nil and $15, respectively, and $nil and $39 respectively, was allocated to non-controlling interest.

Unrecognized compensation cost

As of September 30, 2013 and 2012, unrecognized compensation costs related to non-vested share-based compensation arrangements was $504 and $1,100, respectively. That cost is expected to be recognized over a weighted average period of 0.49 years.

Share-based compensation – non employees

As a result of MGT’s acquisition of 63.12% of FanTD LLC on May 20, 2013, the Company incurred $503 associated to the issuance of 100,000 shares of the Company’s common stock for a consulting and marketing agreement. These shares were issued on June 29, 2013. The stock was valued using the closing market price on the closing date of the acquisition.

On September 4, 2013, the Company issued 16,611 shares of the Company’s common stock for legal services rendered. The stock was valued at $70 using the closing market price on the date of issuance.

On August 16, 2013, the Company entered into a consulting agreement for investor relation services for a period of six months. In consideration for the services, the Company is paying $6 per month and 30,000 shares of the Company’s Common Stock. The common stock vests over a six month period. In accordance with ASC 505-50-S99 “Equity - Based Payments to Non-Employees”, the Company is recognizing the issuance over the vesting period. For the nine months ended September 30, 2103, the Company issued 2,500 shares with a fair market value of $10 based on the closing market price on August 31, 2013 and 5,000 shares with a fair market value of $18 based on the closing market price on September 30, 2013.

In addition to the above, the Company also issued 170,000 shares of the Company’s common stock to non-employees, as previously disclosed in Note 9 and Note 11. The related issuances was valued at $714.

Warrants

The following table summarizes information about warrants outstanding at September 30, 2013:

		Weighted average
	Number of warrants	exercise price
Warrants outstanding at December 31, 2012	4,038,753	$	3.68
Issued	–		–
Exercised	(2,504,432)		3.73
Expired	–		–
Warrants outstanding at September 30, 2013	1,534,321	$	3.60

For the nine months ended September 30, 2013, all issued warrants are exercisable and expire through 2017. There were no warrants issued for the nine months ended September 30, 2013. On April 26, 2013, the Company made an offer to the holders of the Company’s $3.85 Common Stock Purchase Warrants (the “Warrants”), providing if such holders exercised one Warrant, they would have the right to exchange up to two additional Warrants for 5/8ths per share of Common Stock per Warrant exchanged. The results of the offer were that holders of 715,742 Warrants elected to exercise their Warrants. Total proceeds received from the exercise of 715,742 Warrants were $2,756.

In addition, the allowed maximum of 1,431,486 Warrants were exchanged for 894,683 shares of the Company’s Common Stock, issuable upon shareholder and NYSE MKT exchange approval. On September 27, 2013, at MGT’s annual meeting of stockholders, stockholders approved the issuance of up to 894,683 shares of common stock in exchange for the cancellation of 1,431,486 warrants to purchase shares of common stock at $3.85 per share. The shares were subsequently issued on October 8, 2013. The stock was valued at $3,230, using the closing market price on September 27, 2013.

During the three and nine months ending September 30, 2013, 50,000 and 357,204 of the Company’s $3.00 Common Stock Purchase Warrants were exercised. Of the warrant conversions, 210,529 were cashless and 146,675 were exercised for total proceeds of $440.