Note 1: Organization

MGT Capital Investments, Inc. (“MGT”, “the Company”, “we”, “us”) is a Delaware corporation, incorporated in 2000. The Company was originally incorporated in Utah in 1977. As of September 30, 2013, MGT is comprised of the parent company, majority-owned subsidiary MGT Gaming, Inc. (“MGT Gaming”) and wholly-owned subsidiaries Medicsight, Inc. (“Medicsight”), MGT Capital Solutions, Inc. ( “MGT Capital Solutions”), MGT Interactive LLC, (“MGTI”) and MGT Sports, Inc. (“MGT Sports”) including its majority owned subsidiary FanTD LLC (“FanTD”). Our Corporate office is located in Harrison, New York.

MGT and its subsidiaries are primarily engaged in the business of acquiring, developing and monetizing assets in the gaming space, including casino slot machine, online and mobile gaming.

On April 16, 2013, the Company entered into a Asset Purchase Agreement to acquire certain assets and liabilities of Digital Angel Corporation, a developer and publisher of mobile games designed for tablets and smartphones. On September 30, 2013, the Company entered into a nonexclusive license with Gammaker Pty to further develop and market such games in exchange for a 10% share of the gross revenues generated by Gammaker on such games.

On May 20, 2013, MGT Sports completed the acquisition of 63.12% of the outstanding membership interests of FanTD, which operates a daily fantasy sports website at www.fanthrowdown.com. Launched in 2012, FanThrowdown.com offers players the opportunity to participate in real money daily fantasy gameplay for the NFL, MLB, NCAA (basketball & football), NHL, NBA and professional golf. Players select a roster of athletes across most of the popular sports, and winnings are determined by the same-day performance of these rosters. Daily fantasy sports compress the timeframe of traditional fantasy sports from multi-month seasons into 24-hour periods.

MGT Gaming owns U. S. Patent No. 7,892,088 entitled "Gaming Device Having a Second Separate Bonusing Event" (“the ‘088 Patent”) relating to casino gaming systems and is seeking to enforce its proprietary rights against possible infringers. The ‘088 Patent relates to a gaming system in which a second game played on an interactive sign is triggered once specific events occur in a first game. On November 2, 2012, MGT Gaming filed a lawsuit in the United States District Court for the Southern District of Mississippi (Jackson Division) alleging patent infringement against multiple companies believed to be violating the ‘088 Patent. The lawsuit alleges the defendants Caesars Entertainment (NASDAQ GS: CZR), MGM Resorts International, Inc. (NYSE: MGM), WMS Gaming, Inc. - a subsidiary of WMS Industries, Inc. (NYSE: WMS), Penn National Gaming, Inc. (NASDAQ GS: PENN), and Aruze Gaming America, Inc. either manufacture, sell or lease gaming systems in violation of MGT Gaming's patent rights, or operate casinos that offer gaming systems in violation of MGT Gaming's patent rights. An amended version of the complaint was later filed on December 17, 2012. On August 6, 2013, the Company was issued United States Patent number 8,500,554 entitled, "Gaming Device Having a Second Bonusing Event" (the "554 Patent"). The '554 Patent is a continuation of the key patent already owned by the Company.

The allegedly infringing products manufactured, distributed, used, sold and/or offered for sale by defendants include at least those identified under the trade names: "Pirate Battle," "Battleship," "Clue," "Monopoly," "Rich Life," "Amazon Fishing Competition," "Massive Fishing Competition," "Big Game Competition," "Jackpot Battle Royal," "Wizard of Oz Journey to Oz," "The Great and Powerful Oz," and "Paradise Fishing." On January 3, 2013, WMS (joined by Caesars and MGM) moved to sever the litigation against each defendant into separate actions and to transfer the action against WMS to the Northern District of Illinois and to dismiss the case. Later that same month defendants Aruze Gaming America, Inc. and Penn National Gaming, Inc. filed motions to dismiss, and to transfer venue to Nevada and Pennsylvania, respectively. The court ruled on these motions on October 23, 2013 by: denying each of the motions for change of venue; denying the motion to dismiss with respect to direct infringement; granting the motion to dismiss as to indirect infringement without prejudice to re-pleading those claims; granting the motion to sever the action into three cases, which nevertheless remain consolidated for discovery; and staying the action as to the casino defendants. Aruze filed a separate action in Nevada seeking a declaratory judgment that Aruze does not infringe the '088 Patent and/or that the '088 Patent is invalid or unenforceable has been dismissed. On November 4, 2013, WMS Industries filed a petition for Inter Partes review by the Patent Trial and Appeal Board at the United States Patent and Trademark Office (“PTO”) seeking to invalidate each of the patent claims asserted by MGT Gaming in the Mississippi litigation on the basis of certain prior patents. It is anticipated that WMS will attempt to stay the litigation pending the outcome of the PTO proceeding. The Markman Hearing (also known as a Claims Construction Hearing) remains scheduled for June 5, 2014 at 9:00 AM local time in Jackson, MS before the Honorable District Judge Carlton W. Reeves.

Medicsight was the owner of intellectual property relating to a medical imaging software product. The Company also has developed an automated carbon dioxide insufflation device and receives royalties on a per unit basis from an international manufacturer. On June 30, 2013, the Company completed the sale of Medicsight’s global patent portfolio to Samsung Electronics Co., Ltd. for gross proceeds of $1,500.

MGT Capital Solutions is the owner of the game development studio Hammercat Studios and is in the business of developing and publishing videogames for digital distribution in the mobile app space. On November 11, 2013, MGT Capital Solutions entered into an Agreement and Plan of Reorganization with Avcom, Inc. (“Avcom”), to acquire 100% of the equity interests of Avcom. As a result of the transaction, which is anticipated to close on or about November 30, 2013, MGT Capital Solutions will acquire Avcom’s game development pipeline and game development talent

MGT filed an application for a New Jersey Casino Service Industry Enterprise License (“CSIE”). According to regulations promulgated by the New Jersey Division of Gaming Enforcement (NJDGE), companies providing Internet gaming software or systems, and vendors who manage, control, or administer games and associated wagers conducted through the Internet, must obtain a CSIE. By submitting its application by the July 29, 2013 deadline imposed by the NJDGE, MGT is eligible to be considered for suitability prior to the "go live" date of November 26, 2013 for i-Gaming in New Jersey.

MGT Interactive, LLC has acquired certain assets from Gioia Systems LLC, the inventor and owner of a proprietary method of card shuffling for the online poker market. Trademarked under the name Real Deal Poker, the technology uses patented shuffling machines, along with permutation re-sequencing, allowing for the creation of up to 16,000 decks per minute in real time. Each newly created deck is then “dealt” for a hand of online poker, complete with burn cards and the option for a player to “cut” the deck. In addition to providing a higher level of realism, each deck provides an authentic randomized deal and full audit trail, both missing from currently used random number generating algorithms.