MGT Capital Investments Inc. (MGTI)

[coolerheadsprevail]

New 8K filed yesterday, 12/10 (during AH, I believe):

http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001144204-13-066582%2Etxt&FilePath=%5C2013%5C12%5C10%5C&CoName=MGT+CAPITAL+INVESTMENTS+INC&FormType=8-K&RcvdDate=12%2F10%2F2013&pdf=

Two primary items discussed in the 8K, the second of which was undoubtedly the catalyst for the sell-off today once the market had an opportunity to react to it:


Strategic Alliance with M2P Entertainment GmbH

On December 4, 2013, MGT Capital Investments, Inc. (the “Company”) entered into a Strategic Alliance Agreement with M2P Entertainment GmbH, a German corporation (“M2P”), the newly formed Delaware corporation, M2P Americas, Inc. (“M2P Americas”) and the Company’s ’s existing subsidiary MGT Studios, Inc. The purpose of the transaction is to allow M2P Americas to market and exploit MP2’s gaming technology in North and South America through M2P Americas. As part of the transaction, the Company acquired 50.1% of M2P Americas and M2P Entertainment acquired 49.9%. The Strategic Alliance Agreement provides that the Company and M2P will jointly cooperate to launch M2P’s gaming technology in North and South America. It further provides M2P Americas with an exclusive royalty free license to M2P’s gaming technology for North and South America.

Pursuant to the terms of the Strategic Alliance Agreement, the Company will advance certain expenses to M2P Americas and the Company and M2P will provide network and human resources support to M2P Americas. The parties also entered into a Stockholders Agreement dated the same date which, among other things, grants M2P an option to purchase 10% of the Company’s ownership in M2P America at book value if the Company does not purchase equity in M2P prior to April 2, 2014.

Any advances by the Company or its subsidiaries to M2P Americas will be considered a loan bearing interest at 4% per annum or the applicable federal rate if greater. The Strategic Alliance Agreement has a term of 20 years, and is filed as Exhibit 10.1 to this Form 8-K.


Warrant Modification Agreement

On December 10, 2013, the Company entered into a Warrant Modification Agreement (the “Agreement”) with Iroquois Master Fund Ltd. (“Iroquois”). Pursuant to the Agreement, Iroquois agreed to immediately exercise its warrant to purchase 613,496 shares of Common Stock, par value $0.001 of the Company, at an exercise price of $1.50 per share, for aggregate gross proceeds to the Company of approximately $920,000, and (ii) agreed to terminate its right of participation in future equity offerings of the Company. In exchange, the Company agreed to reduce the warrant exercise price from $3.85 per share to $1.50 per share, and agreed not to issue any securities at a price below $2.50 per share for a period of 90 days after the date of the Agreement (other than securities granted pursuant to a stock plan or issued in connection with an acquisition). Iroquois acquired the warrant in connection with the Company's November 2012 financing. In connection with the Agreement, the Company will pay to Chardan Capital Markets, LLC (“Chardan”) a placement fee for the solicitation of the exercise of the warrants equal to 8% of the gross proceeds raised, or approximately $73,000 and will reimburse Chardan for up to $7,500 of its legal fees and expenses incurred. The Agreement is filed as Exhibit 10.2 to this Form 8-K.