Asset purchases and acquisitions of businesses

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Note 4. Asset purchases and acquisitions of businesses

DraftDay

On April 7, 2014, the Company closed on an Asset Purchase Agreement (“Agreement”) with CardRunners Gaming, Inc. to acquire business assets and intellectual property related to DraftDay.com for cash consideration of $600 and stock consideration of $190, consisting of 95,166 shares of Company’s Common stock at $2.00 per share (valued on the date of close). The Company determined the acquisition constitutes a business in accordance with the guidance of ASC 805 “Business Combinations.”

The following table summarizes the fair values of the net assets/liabilities assumed and the allocation of the aggregate fair value of the purchase consideration to assumed identifiable intangible assets:

Cash	$	600
Common stock – 95,166 shares at $2.00 per share		190
Total purchase price	$	790
Cash	$	547
Customer list		51
Domains		64
Website		675
Player deposit liability		(547)
Total purchase price allocation	$	790

Digital Angel

On May 2, 2013, the Company purchased certain mobile game application assets from Digital Angel Corporation. The purchase price consisted of a cash payment in the amount of $136 and 50,000 restricted shares of the Company’s Common stock with an aggregate fair value of $203 as of the date this transaction was completed. The Company determined the acquisition constitutes a purchase of assets in accordance with the guidance of ASC 805 “Business Combinations.”

The following table summarizes the Company’s allocation of the purchase price to the separable components of the mobile applications based on their relative fair values at the date the purchase was completed:

Purchase price allocation:
Software and hardware	$	28
Trademark		6
Intangible assets – mobile gaming application		305
Net assets acquired	$	339

FanTD

On May 20, 2013, the Company acquired 63% of the outstanding membership interests of FanTD in exchange for an aggregate purchase of $3,220 consisting of 600,000 shares of MGT Common stock at a fair value of $5.03 per share for a total of $3,018 and a cash payment of $202. The fair value of the 37% non–controlling interest retained by the sellers in this transaction amounted to $1,882. The Company determined the acquisition constitutes a business acquisition in accordance with the guidance of ASC 805 “Business Combinations.”

 The following tables summarizes the fair values of the net assets/liabilities assumed and the allocation of the aggregate fair value of the purchase consideration, non–controlling interest and net liabilities to assumed identifiable and unidentifiable intangible assets:

Purchase consideration:
Common stock (600,000 shares at the transaction date fair value of $5.03 per share)	$	3,018
Cash		202
Aggregate purchase consideration		3,220
Fair value of non–controlling interest		1,882
Aggregate fair value of enterprise		5,102
Purchase price allocation:
Net liabilities assumed		(69)
Property and equipment		4
		(65)
Aggregate fair value of purchase consideration, non–controlling interest and net liabilities assumed allocated to intangible assets as follows:
Developed software		186
Customer list		33
Goodwill; the excess consideration over the fair value of allocated assets is recorded as goodwill		4,948
Total purchase price allocation	$	5,102

Revenue and net loss from the acquisition date through December 31, 2013, was $217 and $1,224, respectively.

Fantasy Sports Live

On June 25, 2013, MGT Sports acquired Fantasy Sports Live, which was effectively a customer list associated with a specific gaming application for $30 in cash and the assumption of a $46 customer deposit liability. The Company determined the acquisition constitutes a purchase of assets in accordance with the guidance of ASC 805 “Business Combinations.”

Daily Joust

On July 23, 2013, MGT Sports acquired certain assets from Daily Joust, Inc. The purchase price consisted of a cash payment of $50 for $136 in customer deposits and assumption of a $136 customer liability. The Company determined the acquisition constitutes a purchase of assets in accordance with the guidance of ASC 805 “Business Combinations.”

Real Deal Poker

On September 3, 2013, the Company entered into a Contribution and Sale Agreement (the “Contribution Agreement”) by and among the Company, Gioia Systems, and LLC (“Gioia”) and MGT Interactive, LLC whereby MGT Interactive acquired certain assets from Gioia which was 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. The acquisition includes seven (7) U.S. Patents and several Internet URL addresses, including www.RealDealPoker.com. Pursuant to the Contribution Agreement, Gioia contributed the assets to MGT Interactive in exchange for a 49% interest in MGT Interactive and MGT contributed $200 to MGT Interactive in exchange for a 51% interest in MGT Interactive. The $200 contributed by the Company has been utilized as working capital to cover the direct and associated costs relating to the achievement of a certification from Gaming Laboratories International (“GLI”). The Company has the right to acquire an additional 14% ownership interest in MGT Interactive from Gioia in exchange for a purchase price of $300 after GLI certification is obtained. Gioia, in turn, will have the right to re–acquire the 14% interest for a period of three years at a purchase price of $500. Gioia shall have the right to certain royalty payments from the gross rake payments, and any licensing or royalty income received by MGT Interactive after certain revenue targets are exceeded.

Simultaneously with the entry into the Contribution Agreement, the Company and Gioia entered into a Limited Liability Company Agreement which served as the operating agreement for MGT Interactive, and a consulting agreement (the “Gioia Agreement”) with Gioia to provide services to the Company primarily related to obtaining GLI Certification. The Gioia Agreement terminated on January 31, 2014 or the date on which GLI Certification is obtained. In the event that GLI Certification is obtained prior to January 31, 2013, the Consulting Agreement shall be extended for an additional year. Pursuant to the Consulting Agreement, Gioia will receive a monthly consulting fee of $10 of which $5 is paid in cash per month and $5 is deferred until GLI certification is obtained. The Company expensed $179 for Fiscal 2013. Testing concluded on January 29, 2014, and GLI reported random behavior suitable for the applications that were analyzed. The Company is discussing with GLI the final steps to certification MGT filed for an application for a New Jersey Casino Services Industry Enterprise License with the New Jersey Department of Gaming, as required, to offer internet gambling services. Although obtaining the license is beyond the Company’s control, the Company hopes to obtain the license sometime in 2015.

Avcom

On November 26, 2013, the Company closed on an Agreement and Plan of Reorganization (the “Agreement”) with MGT Capital Solutions, Inc., a wholly owned subsidiary of the Company, Avcom, Inc. and the stockholders and option holders of Avcom, Inc. (“Avcom”). Pursuant to the Agreement, the Company acquired 100% of the capital stock of Avcom. In consideration, the Preferred stockholders of Avcom received $550 in value of the Company’s Common stock and the Common stockholders and option holders of Avcom will receive an aggregate of $1,000 in value of the Company’s Common stock. The value of the Company’s Common stock is based on the volume weighted average closing price for the 20 trading days prior to signing the Avcom Agreement. The acquisition contemplated by the Avcom Agreement closed on November 26, 2013. The Company determined the acquisition constitutes a business acquisition in accordance with the guidance of ASC 805 “Business Combinations.”

One half of the issuance to the Avcom Common stockholders and option holders was placed in escrow and will be released upon the later of (i) the commercial release of an agreed upon game or (ii) six (6) months after closing. In addition, the Common stockholders may be awarded contingent consideration of $1.0 million through the issuance of up to 333,000 of the Company’s Common stock in the event that the game reaches $3.0 million in gross revenues within 18 months of signing the Agreement.

Prior to entering into the Agreement, Avcom had performed certain game development consulting services for the Company for which Avcom received an aggregate of $146 as consideration for such services.

The following tables summarizes the fair values of the net liabilities assumed and the allocation of the aggregate fair value of the purchase consideration to assumed identifiable and unidentifiable intangible assets:

Purchase consideration:
Cash consideration	$	10
Stock consideration (491,035 shares at $3.16 closing price)		1,552
Total purchase consideration	$	1,562
Purchase price allocation:
Current assets and liabilities	$	(6)
Equipment		7
Intangible assets – Patent applications		15
Intangible assets – Website		50
Goodwill; the excess consideration over the fair value of allocated assets is recorded as goodwill		1,496
Total purchase price allocation	$	1,562

In connection with the Agreement, the Company entered into two executive employments agreements. Each executive agreement has a term of two years. Each executive will receive a deferred signing bonus equal to $75 and a base salary of $190 per year. The deferred signing bonus is payable once the Company generates cash revenues in excess of $200 from its product, SlotChamp, net of app store fees. As of December 31, 2014, the Company has not recognized any expense related the deferred signing bonuses as the SlotChamp game has not launched.

Revenue and net loss from the acquisition date through December 31, 2013, was $3 and $22, respectively. 

Pro–forma results

The following tables summarize, on an unaudited pro–forma basis, the results of operations of the Company as though the acquisitions of Avcom, FanTD and DraftDay had occurred as of January 1, 2013. The pro–forma amounts give effect to appropriate adjustments of amortization of intangible assets and interest expense associated with the financing of the acquisition. The pro–forma amounts presented are not necessarily indicative of the actual results of operations had the acquisition transaction occurred as of January 1, 2013.

Year ended December 31, 2014	MGT		DraftDay		Pro–forma total
Revenues	$	1,056	$	192	$	1,248
Net loss		(5,330)		(240)		5,570
Loss per share of Common stock		(0.56)		–		(0.56)
Basic and diluted		9,493,057		–		9,493,057

Year ended December 31, 2013	MGT		FanTD		Avcom		DraftDay		Pro–forma total
Revenues	$	396	$	62	$	110	$	1,190	$	1,758
Net loss		(10,202)		(336)		125		(1,007)		(11,420)
Loss per share of Common stock		(1.84)		–		–		–		(1.84)
Basic and diluted		5,590,620		–		–		–		5,590,620