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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO

SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2009.

OR

For the transition period from                   to                   

MGT CAPITAL INVESTMENTS, INC.

(Exact Name of Registrant as Specified in its Charter)

(formerly Medicsight Inc.)

Kensington Centre, 66 Hammersmith Road, London W14 8UD, United Kingdom

(Address of principal executive offices, including zip code)

011-44-207-605-1151

(Registrant’s Telephone Number, Including Area Code)

Securities registered under section 12(b) of the Exchange Act:  Common stock, par value $0.001 per share

Securities registered under section 12(g) of the Exchange Act:  Not applicable

Name of each exchange on which registered: NYSE AMEX

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o  No x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o No x

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

Indicate by check mark if disclosure of delinquent filers is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the Registrant is a shell Company (as defined in Rule 12b-2 of the Act).  Yes o  No x

As of June 30, 2009, the last day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $9,216,000.

The common stock is the registrant’s only class of stock.

As of March 30, 2010 the registrant had outstanding 32,550,590 shares of common stock, $0.001 par value (excludes 6,349,793 common shares held as treasury stock).

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MGT Capital Investments Inc.

Form 10-K

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All financial amounts are in thousands except share and per share data.

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NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause the results of MGT Capital Investments, Inc. and its consolidated subsidiaries (the “Company”) to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of revenue, gross margin, expenses, earnings or losses from operations, synergies or other financial items; any statements of the plans, strategies and objectives of management for future operations, including the rate of market development and acceptance of medical imaging technology; the execution of restructuring plans; any statement concerning developments, performance or industry rankings relating to products or services; any statements regarding future economic conditions or performance; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include the performance of contracts by suppliers, customers and partners; employee management issues; the difficulty of aligning expense levels with revenue changes; and other risks that are described herein, including but not limited to the specific risks areas discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this report, and that are otherwise described from time to time in the Company’s periodic disclosure statements and for reports filed with the Securities and Exchange Commission. The Company assumes no obligation and does not intend to update these forward-looking statements.

The Company’s main operating currency is UK sterling (£).

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PART I

ITEM 1                                           BUSINESS

MGT Capital Investments, Inc (“MGT”, “we”, “us”, “the Group”, “the Company”) is a holding company.  We currently have a controlling interest in our two main operating subsidiaries: Medicsight plc (“Medicsight”) and Medicexchange Limited (“Medicexchange”).  We also have wholly owned subsidiaries MGT Capital Investments (UK) Limited, MGT Investments (Gibraltar) Limited, Medicexchange Inc. and Medicsight Nominees Limited.

·                               Medicsight and its wholly owned subsidiaries is a medical imaging software development company listed on the AIM Market of the London Stock Exchange (Ticker symbol “MDST”) that develops and commercializes enterprise-wide Computer-Aided Detection (“CAD”) applications which analyze Computer Tomography (“CT”) scans to assist radiologists in the early detection and measurement of colorectal polyps and lung lesions.  Medicsight currently has limited revenue and is awaiting regulatory approvals in key markets.  The Company holds 86 million shares (55%) of the 155 million issued share capital of Medicsight.

·                               Medicexchange and its majority owned subsidiaries provide medical imaging professionals with a global web portal containing an online sales channel for diagnostic, treatment and surgery planning solutions.  This combined with a variety of relevant clinical papers, training materials and content gives these medical imaging professionals access to information and products that they otherwise would have difficulty accessing.  The Company holds 22.5 million shares (73%) of the 30.8 million issued share capital of Medicexchange.  Medicexchange’s shares are not publicly traded.

·                               MGT and its subsidiaries also hold various other investments.  The Company has a 49% holding in Moneygate Group Limited, a UK based firm of Independent Financial Advisors, and equity investments in XShares Group LLC, HipCricket Inc. and Eurindia Limited.

Medicsight

Medicsight plc is an industry leader in the development of Computer-Aided Detection and image analysis software to assist radiologists in the early detection and diagnosis of disease.  The Company’s focus continues to be on developing CAD software applications and related technologies that help clinicians analyze medical images generated from CT scanners for the early detection of potential colonic polyps.

Product development

ColonCAD

Medicsight’s core technology is the proprietary ColonCAD™ algorithm that is integrated (using application protocol interface (“API”) technology) into visualisation workstations for radiologists to use when reviewing a patient’s colon CT scan data.

The CAD algorithm assists the radiologist as they search for polyps in the CT scan image data.  The radiologist uses the visualisation software to review the patient’s CT scan images on the screen and search for polyps (potentially pre-cancerous lesions on the wall of the colon).  After a full review the radiologist then activates the Medicsight ColonCAD™ software - which immediately displays “CAD marks” on the images, drawing the radiologist’s attention to potential polyps.  The radiologist then assesses each marked region in order to make the final decision as to the presence or absence of a polyp.

Clinical studies have demonstrated that radiologists assisted by Medicsight’s ColonCAD™ technology have a significantly higher sensitivity for the detection of patients with polyps in CT colonography compared to unassisted reading (i.e. traditional reading without the use of ColonCAD™).

Medicsight completed work on ColonCAD 4.0 and formally launched this product at the European Congress of Radiology in March 2009. This new release significantly reduces the number of false-positive CAD marks presented to a radiologist reviewing a patient data set.  This should lead to further improvements in reader performance when assisted by the ColonCAD™ software.  We believe that this version of ColonCAD™ extends Medicsight’s position as a provider of one of the world’s leading colon CAD software solutions.

Medicsight’s ColonCAD™ has been developed and validated using a large database of CT scans from hospitals around the world and has been assessed in many clinical studies, the results of which have been published in peer-reviewed publications and presented at leading radiology conferences.

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MedicRead

The MedicRead product is Medicsight’s advanced visualisation software application for CT colonography.  The latest version of this product (version 3.0) was launched in June 2009 and featured improved workflow flexibility, enhanced 3D visualisation options, as well as providing state-of-the-art CAD functionality though its integration with the new ColonCAD 4.0 product.

MedicRead is a flexible option for hospitals and clinics unable to invest large capital sums in new image analysis infrastructure.  MedicRead can be deployed either on a standalone basis or integrated into an existing clinical IT infrastructure (e.g. a PACS environment).

MedicCO2LON

In addition to the computer aided detection software applications, Medicsight have developed an automated carbon dioxide (CO2) insufflation device called MedicCO2LON.

Each patient that has a CT colon scan requires their colon to be insufflated (distended) with either CO2gas or room air administered prior to the acquisition of their CT colonography images.  MedicCO2LON is designed to provide good quality insufflation, which is essential for the acquisition of high quality images from the CT colonography examination.

Longer term projects

Some longer term colon related opportunities that we continue to research include:

·                  Flat lesions (which are non-protruding lesions in the Colon) have recently received much clinical interest.  The Medicsight team are researching CAD technology for the detection of these flat lesions to compliment the existing ColonCAD application.

·                  Optical endoscopy - working with leading London academic and clinical centres, Medicsight is researching the use of CAD and other image analysis technologies in the field of optical endoscopy, with a view to these technologies combining information in real time (i.e. as a clinician examines a patient) from sources of patient data.

Intellectual Property

Medicsight continues to develop its intellectual property portfolio to protect the core technology in its CAD and other products.  During 2009 patents were granted in the UK and US covering aspects of Medicsight CAD algorithms (for both Colon and Lung) as well as image processing methods related to the identification of the boundary of lesions.

Regulatory approvals and submissions

US Food and Drug Administration clearance

In November 2008 Medicsight submitted the ColonCAD™ 510(k) application to the Food and Drug Administration (“FDA”) for clearance in the USA.

In December 2008 we received an Additional Information (“AI”) letter from the FDA and submitted our response to the FDA’s enquires in March 2009.

During the summer of 2009 we had a number of informal meetings and discussions with the FDA as they performed their review of our 510(k) submission.

On January 5, 2010 we received our second Additional Information (“AI”) letter from the FDA, in which the FDA has requested further technical details regarding the clinical trials and data analyses undertaken in our 510(k) submission - which the Company will respond to before the deadline of June 21, 2010.

In February 2010 we received European CE approval for our MedicCO2LON insufflator product.

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Japanese Ministry of Health, Labour and Welfare

In November 2007 we submitted our MedicRead Colon application to the Ministry of Health, Labour and Welfare (“MHLW”) regulatory authorities in Japan.

During 2008 and 2009 we attended a number of meetings with ministry officials, demonstrated the product, answered specific questions regarding the product application and formally responded to questions from the MHLW.

Other regulatory territories

In 2009 version 4.0 of the Medicsight ColonCAD API and MedicRead 3.0 (our visualization workstation which includes version 4.0 of the Medicsight ColonCAD API) received European (CE) approval, Australian approval and Canadian approval.

In November 2009 we submitted MedicRead 3.0 to the Chinese State Food and Drug Administration (“SFDA”) for approval.

Clinical Activity

Medicsight’s Clinical Development team continued their work supported by a network of global medical luminaries.

European Medical Advisory Board meetings were held in January and June 2009 to take advice from clinical experts regarding the continuing development of Medicsight’s product roadmap and clinical research program.

Close collaboration continued with leading Virtual Colonoscopy radiologists - including Professor Perry Pickhardt and Dr. David Kim from the University of Wisconsin Medical School who completed a large research study to evaluate the performance of ColonCAD™ 4.0.

In this study, the performance of Medicsight’s version 4.0 ColonCAD was compared to the sensitivity of experienced radiologists for the ability to detect colorectal polyps on CT colonography image datasets.  The study assessed the CAD’s performance across more than 3,000 patients who had undergone CTC screening for colorectal cancer.

The Medicsight CAD correctly identified (a) 94% of patients who had a polyp that was 6mm or larger; and (b) 96.5% of patients who had a polyp 10mm or larger in size.  (The CAD’s performance at the 10mm or larger threshold is particularly important as polyps in this size range are considered to be significant findings that require further investigation by optical colonoscopy).

In the study, 96% of all individual polyps 10 mm or larger were detected by the Medicsight CAD system. Significantly, the Medicsight CAD detected 15 polyps 6mm or larger that were missed by the experienced radiologists in their unassisted review of the patient data — four of which were clinically significant at larger than 10mm in size.

This study provides clear evidence-based outcomes - demonstrating the added value of Medicsight’s ColonCAD application to the clinician.

The results of this CAD study, the largest of its kind to date, were presented at the 10th International Symposium on Virtual Colonoscopy in Reston, Virginia in October 2009.  A scientific paper on the study is currently undergoing peer-review with a leading journal with publication expected in 2010.

Scientific presentations of Medicsight’s CAD research were also made at the annual European Congress of Radiology (held in Vienna during March 2009), at the 20th Annual Meeting of the European Society of Gastrointestinal and Abdominal Radiology “ESGAR” (Valencia, Spain, June 2009) and the annual Radiological Society of North America “RSNA” conference (Chicago, USA, December 2009).

CAD research focused on investigating the impact of CAD on radiologist readers when interpreting CT colonography images.

In addition to the University of Wisconsin study, the results of research undertaken at University College Hospital, London and the Japanese National Cancer Centre in Tokyo demonstrated the positive benefit of ColonCAD in improving reader performance.

Medicsight continued to support of a number of international CT colonography training workshops, including those delivered by leading US proponents of CT colonography, Professor Perry Pickhardt (University of Wisconsin Medical School) and Judy Yee, MD

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(Associate Professor and Vice Chair of Radiology at the University of California, San Francisco).  Medicsight again supported the bi-annual ESGAR CTC training workshops; held in Harrogate (UK) and Stresa (Italy) during 2009.  These workshops train radiologists to interpret CTC images using the latest visualization and CAD technology and are fundamental to the increasing acceptance and implementation of CT colonography and CAD as a routine imaging examination for investigation of the colon.

Commercial progress

Medicsight’s primary route to market is via partnerships with global advance visualization companies, PACS suppliers and other OEM’s.

In June 2009, Medicsight signed a global partnership agreement with Alma IT Systems of Spain for the integration of Medicsight ColonCAD™ API within Alma Colon, Alma’s latest 3D visualization colon workstation.

This partnership agreement is in addition to our existing agreements with Vital Images Inc., TeraRecon Inc., Viatronix Inc. and Toshiba Medical Visualization Systems (previously Barco NV), Infinitt, Ziosoft Inc., and Intrasense SAS.

In January 2010 we signed a global distribution agreement for MedicCO2LON with MEDRAD Inc.  The product was CE marked in February 2010 and is to be launched in Europe in 2010.  Approval for additional territories will commence in 2010.

Revenue and Growth Strategy

Revenues remain limited and have fallen as a result of reduced foreign exchange rates — Medicsight recorded $180 in 2009 compared to $191 in 2008. Medicsight ended 2009 with net assets of $16,608 including $17,058 of cash and short term deposits.  At various points during the year we have invested our surplus cash in highly liquid, blue chip marketable securities and foreign currencies.  At December 31, 2009 all of our liquid assets were held as short term cash balances, mainly in sterling. Post year end, we continue to hold our surplus cash on short term deposit.

In early 2009 and again at the end of the year the board completed a review of the product development roadmap, the status of regulatory approvals and partner integration activities, and initiated cost restructuring programs to drive cashflow savings without jeopardizing longer term plans.

In addition we expect revenue to be higher this year as European license sales increase and we start the commercialization of our MedicCO2LON insufflation device. We await further news on our US and Japanese regulatory approvals and timescales for them to contribute to revenues.

Competition

The Company’s competitors can be divided into two categories: (a) multidetector computed tomography scanner manufacturers such as GE, Hitachi, Philips, Siemens and Toshiba; and (b) independent CAD software providers.

A number of MDCT manufacturers offer CAD solutions that are available in European markets, however currently the only FDA approved CAD is Siemens Lung CAD.

In the CAD vendor market, there are a number of small, independent software providers, which include:

·                          im3D (Italy) — have developed a Colon CAD product that is CE certified but not FDA cleared;

·                          Median Technologies (France) — have developed a Colon CAD product and a Lung CAD (CAD-lung) — both have CE approval but not FDA clearance;

·                          Mevis Medical Solutions AG (Germany) — have a Lung CAD product that is FDA approved; and

·                          iCAD Inc. (USA) — have developed a Colon CAD product which is CE approved and have submitted to the FDA for approval.

·                          Cadens Imaging (Canada) — have also developed a Colon CAD product which is CE approved and has been submitted to the FDA for approval.

Patents and Trademarks

Protection of our proprietary technology and our rights over that technology, from copy or unchallenged and improper use, is

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essential to our future success. Any challenges to, or disputes concerning, our core technology may result in great expense to us, delays in bringing products to market and disruption of our focus on our core activities. They may also result in loss of rights over our technology or the right to operate in particular markets due to adverse legal decisions against us.

Medicsight has filed patent applications in the United Kingdom, the United States, the European Patent Office, Japan, South Korea, Australia, Canada, and under the International Patent Cooperation Treaty (which currently has 128 member countries) covering our core technologies and their applications.  We have recently filed new patent applications covering technology of both Medicsight CAD and intend to continue filing new applications in the future.  Two patents have been granted in the US covering aspects of Medicsight CAD technology.  Although prior art searches have been carried out, we cannot provide assurance that any or all of the pending patents will be granted or that they will not be challenged, or that rights granted to us will actually provide us with advantage over our competitors. Medicsight actively reviews third party patents and is not currently aware of any that our products will infringe.

“Medicsight” ® , “Medicsight Colon Screen” ® , “Medicsight Lung Screen” ® , “Medicsight Colon CAR” ® , “Medicsight Lung CAR” ® , “Medicsight Computer Assisted Reader” ® , “Medicsight See More, Save More” ®  and “Lung CAR” ®  have been registered as trademarks in the United Kingdom.  “Medicsight” ®   has also been registered in the United States, the European Union, Australia, China and a number of other countries.  “MedicRead” ®  has been registered as a trademark in the European Union.  These trademarks are important to the corporate identity in connection with Medicsight CAD.

Failure to register appropriate patents, copyrights or trademarks in any jurisdiction may impede our ability to create brand awareness in our products, result in expenses in pursuing our rights with respect to our intellectual property, or result in lost revenues due to intellectual property disputes. Where we may be required to purchase licenses from sellers with prior rights in any country, we cannot assure you that we will be able to do so at a commercially acceptable cost.

Medicsight’s admission to the AIM Market of the London Stock Exchange

On June 21, 2007, Medicsight completed its initial public offering on the AIM Market of the London Stock Exchange.  29 million new shares were issued to institutional and other investors at a price of £1.10 ($2.20) per share raising £32,000  ($64,115) gross new money.  Medicsight incurred fees of £1,550 ($3,096), including fees of $298 with Asia IT Capital Investments Ltd (a related party).  £5,500 ($11,100) of the net proceeds were used to repay debt (between Medicsight and the Company).

Immediately prior to the Medicsight IPO the Company sold down, by private placement, 11.7 million of its Medicsight plc shares.  The shares were priced at £1.10 ($2.20) — the same price as the Medicsight IPO.  Gross proceeds on the private placement were £12,845 ($25,736).  We incurred fees with Asia IT Capital Investments Ltd (a related party) of £578 ($1,167).  These proceeds were received on July 27, 2007.

After the Company’s private placement and the Medicsight IPO, the Company held 85 million of the 155 million issued share capital of Medicsight.  Since the IPO the Company bought back 1 million of Medicsight’s shares bringing our holding to 86 million shares, which is 55% of the outstanding share capital of Medicsight.

Medicexchange Limited

Medicexchange is a global imaging portal focusing on the medical vision sector through its website Medicexchange.com.  In the year, Medicexchange disposed of its Chinese website business.  Medicexchange has endeavored to build traffic and registered users, predominantly from North America.

Whilst user numbers have been increasing, revenue generation has not been forthcoming due to tightening of corporate advertising budgets and the general global economic conditions.

We are currently reviewing options for the Medicexchange business.

Other investments

We hold other investments.  In Fiscal 2009 we invested in Moneygate Group Limited (“Moneygate”), a UK based Independent Financial Advisor, acquiring 49% of the business.  We account for our investment in Moneygate as an equity method investment.  We have also advanced a working capital facility as well as a longer term loan to allow the business to grow through acquisition.

As well as holding equity in XShares LLC we have also, in Fiscal 2009, have issued convertible loan notes to XShares.  We also have holdings in Hipcricket Inc. and Eurindia Limited.

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During the Fiscal 2009 we reviewed the value of our holdings in Eurindia Limited and XShares LLC and decided to fully impair the investments and convertible loan notes.

Employees strategy

As of December 31, 2009 the Company and its subsidiaries had 62 employees, all of whom were full-time employees.  Our employees are not part of a union.

Financial Information

Note 19 to the Consolidated Financial Statements provides information on the Company’s segment reporting.

General

MGT was originally incorporated as a Utah corporation in 1977 and was re-incorporated in Delaware in 2000.  At December 31, 2009 the Company’s authorized share capital was 75,000,000 shares of common stock, par value of $0.001.

In January 2007 the Company changed its name from Medicsight Inc. to MGT Capital Investments, Inc.

At March 26, 2009, 38,900,383 shares of our common stock had been issued and 32,550,590 were outstanding.

Our principal executive office is located at Kensington Centre, 66 Hammersmith Road, London W14 8UD, United Kingdom, telephone 011-44-207-605-1151, facsimile 011-44-207-605-1171.

Our web address is www.mgtci.com. Information on our website is not included as a part of this Annual Report.

Available information

We will provide, upon request and free of charge, paper copies of our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments to the foregoing reports, as soon as is reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission.  These materials along with our Code of Business Conduct and Ethics are also available through our corporate website at www.mgtci.com.  A copy of this annual report on Form 10-K is located at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.  Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.  The public may also download these materials from the Securities and Exchange Commission’s website at http://www.sec.gov.  Any amendments to, and waivers of, our Code of Business Conduct and Ethics will be posted on our corporate website.

ITEM 1A.                                       RISK FACTORS

Discussion of our business and operations included in this annual report on Form 10-K should be read together with the risk factors set forth below. They describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties, together with other factors described elsewhere in this report, have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner.  New risks may emerge at any time, and we cannot predict those risks or estimate the extent to which they may affect our financial performance. Each of the risks described below could adversely impact the value of our securities.  These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments.

We cannot assure you that the Company will be successful in commercializing any of the Company’s products and, in particular, the Medicsight products or the Medicexchange portal, or if any of the products or the portal are commercialized, that they will prove to be profitable for the Company.

The Company has only had a limited operating history and has just commenced generating revenue from operations upon which an evaluation of its prospects can be made.  The Company’s prospects must be considered keeping in mind the risks, expenses and difficulties frequently encountered in the establishment of a new business in a constantly changing industry.  There can be no assurance that the Company will be able to achieve profitable operations in the foreseeable future if at all.

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The Company has identified a number of specific risk areas that may affect the Company’s operations and results in the future:

Company specific risks

We may be unable to develop our existing or future technology.

Our Medicsight CAD system may not deliver the levels of accuracy and reliability needed to make it a successful product in the market place.  Additionally, the development of such accuracy and reliability may be indefinitely delayed or may never be achieved.  Failure to develop this or other technology could have an adverse material effect on the Company’s business, financial condition, results of operations and future prospects.

The market for our technology may be slow to develop, if at all.

The market for the Medicsight CAD products and Medicexchange.com may be slower to develop or smaller than estimated or it may be more difficult to build the market than anticipated.  The medical community may resist Medicsight CAD and the Medicexchange.com products or be slower to accept them than we anticipate.  Revenues from Medicsight CAD and Medicexchange.com may be delayed or costs may be higher than anticipated which may result in the Company requiring additional funding.  Medicsight’s principal route to market is via commercial distribution partners.  These arrangements are generally non-exclusive and have no guaranteed sales volumes or commitments.  The partners may be slower to sell our products than anticipated.  Any financial, operational or regulatory risks that affect our partners could also affect the sales of our products.  In the current economic environment, hospitals and clinical purchasing budgets that are reliant on external debt finance may result in purchasing decisions being delayed.  If any of these situations were to occur this could have a material adverse effect on the Company’s business, financial condition, results of operations and future prospects.

We may be slow to receive required regulatory approvals from respective government regulators, if we receive them at all.

The Medicsight CAD system is subject to regulatory requirements in the USA, Europe, Japan, China and our other targeted markets.  Necessary regulatory approvals may not be obtained or may be delayed.  We may incur substantial additional cost in obtaining regulatory approvals for our products in our targeted markets. Any delays in obtaining the necessary regulatory approvals increase the risk that our competitors’ products are approved before our own.  The failure to obtain these approvals on a timely basis and/or the associated costs could have a material adverse effect on the Company’s business, financial condition, results of operations and future prospects.

The medical imaging market we operate in is highly competitive.

There are a number of groups and organizations, such as software companies in the medical imaging field, MDCT scanner manufacturers, screening companies and other healthcare providers that may develop a competitive offering to the Medicsight CAD products and Medicexchange.com.  In addition, these competitors may have significantly greater resources than MGT.  We cannot make any assurance that they will not attempt to develop such offerings, that they will not be successful in developing such offerings or that any offerings they may develop will not have a competitive edge over Medicsight CAD products and Medicexchange.com. With delayed regulatory approvals and/or disputed clinical claims we may not have a commercial or clinical advantage over competitors’ products.  Should a superior offering come to market, this could have a material adverse effect on the Company’s business, financial condition, results of operations and future prospects.

We are a developing company with limited revenues from operations.

We have incurred significant operating losses since inception and have only recently commenced generating revenues from operations.  As a result, we have generated negative cash flows from operations and have an accumulated deficit as of December 31, 2009.  We are operating in a developing industry based on new technology and our primary source of funds to date has been through the issuance of securities and borrowed funds.  There can be no assurance that management’s efforts will be successful or that the products we develop and market will be accepted by consumers.  If our products are ultimately unsuccessful in the market, this could have a material adverse effect on our business, financial condition, results of operations and future prospects.

We face financial risks as we are a developing company

We have incurred significant operating losses since inception and have limited revenue from operations. As a result, we have generated negative cash flows from operations and our cash balances continue to reduce. While we are optimistic and believe appropriate actions are being taken to mitigate this, there can be no assurance that attempts to reduce cash outflows will be successful and this could have a material adverse effect on our business, financial condition, results of operations.

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Our current corporate structure may place us in an unfavorable market position vis-à-vis our competitors.

MGT’s corporate structure may make it more difficult or costly to take certain actions.  We conduct our business through: (a) Medicsight, a UK public company which is 55% owned by the MGT Capital Investments, Inc. and through Medicsight’s subsidiaries in the United Kingdom, the USA, Japan and Gibraltar; and (b) the Medicexchange subsidiaries, in which MGT’s holdings range between 75% and 100%.  Although MGT, Medicsight and Medicexchange share some directors and management, they are required to comply with corporate governance and other laws and rules applicable to public companies in the United Kingdom and the USA.  Should MGT propose to take any action, such as a transfer or allocation of assets or liabilities between MGT and its subsidiaries, MGT would have to take into consideration the potentially conflicting interests of MGT’s stockholders and the non-controlling stockholders.  This may deter MGT from taking such actions that might otherwise be in the best interest of MGT or cause MGT to incur additional costs in taking such actions.  The subsidiary companies would not be able to pay dividends or make other distributions of profits or assets to MGT without making pro-rata payments or distributions to the respective non-controlling stockholders.  Although neither the subsidiary companies nor MGT has plans to pay dividends or make distributions to its shareholders, MGT’s corporate structure may deter its subsidiaries from doing so in the future.  If at any point we are ultimately unable to resolve any of these conflicts, this could have a material adverse effect on the Company’s business, financial condition, results of operations and future prospects.

The protection of our intellectual property may be uncertain, and we may face possible claims of others.

Although we have received patents and have filed patent applications with respect to certain aspects of our technology, we generally do not rely on patent protection with respect to our products and technologies.  Instead, we rely primarily on a combination of trade secret and copyright law, employee and third-party non-disclosure agreements and other protective measures to protect intellectual property rights pertaining to our products and technologies.  Such measures may not provide meaningful protection of our trade secrets, know-how or other intellectual property in the event of any unauthorized use, misappropriation or disclosure.  Others may independently develop similar technologies or duplicate our technologies.  In addition, to the extent that we apply for any patents, such applications may not result in issued patents or, if issued, such patents may not be valid or of value.  Third parties could, in the future, assert infringement or misappropriation claims against us with respect to our current or future products and technologies, or we may need to assert claims of infringement against third parties.  Any infringement or misappropriation claim by us or against us could place significant strain on our financial resources, divert management’s attention from our business and harm our reputation.  The costs of prosecuting or defending an intellectual property claim could be substantial and could adversely affect our business, even if we are ultimately successful in prosecuting or defending any such claims.  If our products or technologies are found to infringe the rights of a third party, we could be required to pay significant damages or license fees or cease production, any of which could have a material adverse effect on our business.  If a claim is brought against us, or we ultimately prove unsuccessful on the claims on our merits, this could have a material adverse effect on the Company’s business, financial condition, results of operations and future prospects.

We may fail to attract and retain qualified personnel.

We expect to rapidly expand our operations and grow our sales, research and development and administrative operations.  This expansion is expected to place a significant strain on our management and will require hiring a significant number of qualified personnel.  Accordingly, recruiting and retaining such personnel in the future will be critical to our success.  There is intense competition from other companies, research and academic institutions, government entities and other organizations for qualified personnel in the areas of our activities.  If we fail to identify, attract, retain and motivate these highly skilled personnel, we may be unable to continue our marketing and development activities, and this could have a material adverse effect on the Company’s business, financial condition, results of operations and future prospects.

If we do not effectively manage changes in our business, these changes could place a significant strain on our management and operations.

Our ability to grow successfully requires an effective planning and management process.  The expansion and growth of our business could place a significant strain on our management systems, infrastructure and other resources.  To manage our growth successfully, we must continue to improve and expand our systems and infrastructure in a timely and efficient manner.  Our controls, systems, procedures and resources may not be adequate to support a changing and growing company.  If our management fails to respond effectively to changes and growth in our business, including acquisitions, this could have a material adverse effect on the Company’s business, financial condition, results of operations and future prospects.

We face risks arising from foreign currency exchange.

As our main operating currency is UK sterling and its financial statements are reported in US dollars, MGT’s assets and liabilities and results of operations are affected by movements in the $:£ exchange rate.  Should there be large or unexpected fluctuations in the $:£ exchange rate, this could have a material effect on the Company’s business, financial condition, results of

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operations and future prospects.  We currently do not engage in hedging activities to minimize the effect of adverse movements in the exchange rate.

We may not be able to quickly realize our investments and receivables at the value at which we have recorded them.

We have a number of investments and receivables held at both at market value and at cost.  There is a risk that we may not be able to swiftly realize these investments and receivables at the fair value or cost at which they are recorded in the financial statements.  If we are unable to quickly realize these investments and receivables at prices we believe to be fair, this could have a material effect on the Company’s business, financial condition, results of operations and future prospects.

General market risks

We may not be able to access credit.

We face the risk that we may not be able to access credit, either from lenders or suppliers, or have facilities reduced or terminated.  Failure to access credit from any of these sources could have a material adverse effect on the Company’s business, financial condition, results of operations and future prospects.

Recent global economic trends could adversely affect our business, liquidity and financial results.

Recent global economic conditions, including disruption of financial markets, could adversely affect us, primarily through limiting our access to capital and disrupting our clients’ businesses.  In addition, continuation or worsening of general market conditions in economies important to our businesses may adversely affect our clients’ level of spending and ability to obtain financing, leading to us being unable to generate the levels of sales that we require.  Current and continued disruption of financial markets could have a material adverse effect on the Company’s business, financial condition, results of operations and future prospects.

We may not be able to maintain effective internal controls.

If we fail to maintain the adequacy of our internal accounting controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404.  Failure to achieve and maintain an effective internal control environment could cause us to face regulatory action and also cause investors to lose confidence in our reported financial information, either of which could have a material adverse effect on the Company’s business, financial condition, results of operations and future prospects.

ITEM 1B.                                       UNRESOLVED STAFF COMMENTS

None.

ITEM 2                                           PROPERTIES

Our principal executive office is located at Kensington Centre, 66 Hammersmith Road, London W14 8UD, United Kingdom where we occupy 8,787 square feet under a lease that expires on August 25, 2016.  We have additional satellite offices in Japan (occupied by Medicsight) and New York City (occupied by Medicexchange).

ITEM 3                                           LEGAL PROCEEDINGS

The Company is not engaged in any material legal proceedings at this time nor are we aware of any pending legal proceedings.

ITEM 4                                           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(Removed and reserved)

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PART II

ITEM 5                                                                                              MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER’S PURCHASES OF EQUITY SECURITIES.

Market information

The Company’s common stock is traded on the NYSE AMEX stock exchange (www.nyse.com) under the symbol “MGT”.  The following table sets forth the range of high and low sales prices per share of our common stock for each quarterly period during 2009 and 2008.

On March 19, 2010 the Company’s common stock closed on the NYSE AMEX US stock exchange at $0.24 per share.

As of March 19, 2010 there were 709 holders of record of the Company’s common stock.

Dividends

The Company has never declared or paid cash dividends on its common stock. The Company currently intends to retain earnings, if any, to support its growth strategy and does not anticipate paying cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of the Company’s Board of Directors after taking into account various factors, including the Company’s financial condition, operating results, current and anticipated cash needs and plans for expansion.

Recent sales of unregistered securities

None.

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ITEM 6                                           SELECTED FINANCIAL DATA.

The following table should be read in conjunction with statements and notes thereto appearing elsewhere in this Form 10-K.

(1)                  Includes equity-based compensation of $1,999 for Fiscal 2009, $3,932 for Fiscal 2008, $1,541 for Fiscal 2007 and $440 for Fiscal 2006.

ITEM 7                                                                                              MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Executive Summary

MGT Capital Investments Inc. achieved the following results in 2009:

·                        Revenue from license and other sales decreased 36% to $228 compared to $354 in 2008.

·            Gross margin decreased 5% to $225 compared to $238 in 2008.

·                        Operating expenses decreased 42% to $17,193 compared to $29,731 in 2008.

·                        Net loss increased 32% to $26,377 and resulted in a loss per share of $0.81 compared to a net loss of $20,001 and net loss per share of $0.60 in 2008.

In Medicsight revenue has fallen in U.S. dollar terms but has edged up in sterling, its local currency.  Revenue has fallen in MedicExchange due to the scaling back of equipment sales.  This focus on on-line sales, predominantly advertizing with minimal cost of sales, has led to an increase in gross margin percentage.

Regulatory approvals and revenue in Medicsight have been delayed and, as a consequence, we have reduced headcount and reduced budgets across all departments and locations.  Combined with a similar program in Medicexchange in Fiscal 2008, overall operating costs have fallen in Fiscal 2009 compared to the prior year, though favorable foreign exchange movements account for some of the fall.  We expect costs to fall further in 2010 as a full year of lower headcount and reduced discretionary spending impacts the statement of operations.

Net loss has increased in Fiscal 2009 due to impairment losses on goodwill and investments.  We reviewed the value of goodwill relating to Medicsight in first quarter of 2009 and, due to Medicsight’s share price, decided to fully impair the value of the goodwill and recorded an impairment charge of $12,157.  Furthermore, we concluded that we should fully impair our investments in XShares Group LLC and recorded an impairment charge of $2,210.

Our balance sheet retains cash of $22,165 compared to cash and marketable securities of $40,178 in 2008. The movement is

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predominantly due to operating losses and investing $2,000 in convertible notes in XShares Group LLC.

Critical accounting policies and estimates

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The notes to the consolidated financial statements contained in this Annual Report describe our significant accounting policies used in the preparation of the consolidated financial statements. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. We continually evaluate our critical accounting policies and estimates.

We believe the critical accounting policies listed below reflect significant judgments, estimates and assumptions used in the preparation of our consolidated financial statements.

Revenue Recognition

Medicsight

We recognize revenue when it is realized or realizable and earned.  We consider revenue realized or realizable and earned when we have persuasive evidence of an arrangement, the product has been shipped or the services have been provided to the customer, the sales price is fixed or determinable and collectability is probable.

License fee revenue is derived from the licensing of computer software.  Maintenance revenue is derived from software maintenance.  Our software licenses are generally sold as part of an arrangement that includes maintenance and support.

We license software and sell maintenance through visualization solution partners and original equipment manufacturers.  We receive regular sales reporting detailing the number of licenses sold by original equipment manufacturers, value-added resellers and independent distributors (collectively, “Resellers”) to end users.  We generally offer terms that require payment 30 days from invoicing.

Provided the Reseller i) assumes all risk of the purchase, ii) has the ability and obligation to pay regardless of receiving payment from the end user, and all other revenue recognition criteria are met, license revenue from Resellers is recognized upon shipment of its product to vendors (“sell-in basis”).

Additionally:

Software — Revenue from license fees is recognized when notification of shipment to the end user has occurred, there are no significant Company obligations with regard to implementation and the Company’s services are not considered essential to the functionality of other elements of the arrangement.

Services — Revenue from maintenance and support arrangements is deferred and recognized ratably over the term of the maintenance and support arrangements.

Multiple-element arrangements — we enter into arrangements with Resellers that include a combination of software products, maintenance and support.  For such arrangements, we recognize revenue using the residual method.  We allocate the total arrangement fee among the various elements of the arrangement based on the fair value of each of the undelivered elements determined by vendor-specific objective evidence.  The fair value of maintenance and support services is evidence of fair value for all elements, revenue is deferred until the earlier of when vendor-specific objective evidence is determined for the undelivered elements (residual method) or when all elements for which we do not have vendor-specific objective evidence of fair value have been delivered.

Medicexchange

We recognize revenue when the following revenue recognition criteria are met:  persuasive evidence of an arrangement exists, services have been rendered, the selling price is fixed or determinable and collectability is reasonable assured.  Deferred revenue is recorded when payments are received in advance of performing our service obligations.

Goodwill

Goodwill and intangible assets with indefinite lives are reviewed for impairment annually or more frequently if events or changes

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in circumstances indicate that the asset might be impaired.  The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill.  We compare the book value to the market value (market capitalization plus a control premium) for the reporting unit.  If the market value exceeds the book value, goodwill is considered not impaired, and thus the second step of the impairment test is not necessary.  If our book value exceeds the market value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any.  The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of the goodwill with the book value of the goodwill.  If the carrying value of the goodwill exceeds the implied fair value of the goodwill, an impairment loss would be recognized in an amount equal to the excess.  Any loss recognized cannot exceed the carrying amount of goodwill.  After a goodwill impairment loss is recognized, the adjusted carrying amount of goodwill is its new accounting basis.  Subsequent reversal of a previously recognized goodwill impairment loss is prohibited once the measurement of that loss is completed.

Equity-based compensation

We recognize compensation expense for all equity-based payments.  Under fair value recognition provisions, we recognize equity-based compensation net of an estimated forfeiture rate and recognize compensation cost only for those shares expected to vest over the requisite service period of the award.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model.  The Black-Scholes option valuation model requires the development of assumptions that are input into the model.  These assumptions are the expected stock volatility, the risk-free interest rate, the option’s expected life and the dividend yield on the underlying stock. Expected volatility is calculated based on the historical volatility of our common stock over the expected option life and other appropriate factors.  Risk-free interest rates are calculated based on continuously compounded risk-free rates for the appropriate term.  The dividend yield is assumed to be zero as we have never paid or declared any cash dividends on our common stock and do not intend to pay dividends on our common stock in the foreseeable future.  The expected forfeiture rate is estimated based on historical experience.

Determining the appropriate fair value model and calculating the fair value of equity-based payment awards require the input of the subjective assumptions described above.  The assumptions used in calculating the fair value of equity-based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management judgment.  As a result, if factors change and we use different assumptions, our equity-based compensation expense could be materially different in the future.  In addition, we are required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest.  If our actual forfeiture rate is materially different from our estimate, the equity-based compensation expense could be significantly different from what we have recorded in the current period.

Research and development

We incur costs incurred in connection with the development of software products that are intended for sale.  Costs incurred prior to technological feasibility being established for the product are expensed as incurred.  Technological feasibility is established upon completion of a detail program design or, in its absence, completion of a working model.  Thereafter, all software production costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value.  Capitalized costs are amortized based on current and future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product.  Amortization commences when the product is available for general release to customers.

We concluded that capitalizing such expenditures on completion of a working model was inappropriate because we did not incur any material software production costs and therefore have decided to expense all research and development costs.  Our research and development costs are comprised of staff, consultancy and other costs expensed on the Medicsight products.

Fair value of financial instruments

On January 1, 2008 the Company adopted certain provisions of FASB ASC 820, “Fair Value Measurements and Disclosures” for financial assets and financial liabilities and on January 1, 2009 for non-financial assets and non-financial liabilities.  This establishes a framework for measuring fair value and expands disclosure about fair value measurements.  Applying fair value measurements to our financial instruments requires management’s judgment, especially when using Level 2 and Level 3 inputs.

Investments

Investments in various corporations where our investment is less than 20% of issued share capital are accounted for under the cost method.  Investments where we hold between 20% and 50% of issued share capital and we have significant influence over the investee are accounted for under the equity method.

Impairment of long-lived assets and long-lived assets to be disposed of

We evaluate the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Our assessment for impairment of an asset involves estimating the

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undiscounted cash flows expected to result from use of the asset and its eventual disposition.  An impairment loss recognized is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Calculating the estimated fair value of an asset involves significant judgments and a variety of assumptions.  Judgments that we make concerning the value of its intangible assets include assessing time and cost involved for development, time to market, and risks of regulatory failure or obsolescence (due to market, environmental or technological advances for example).  For calculating fair value based on discounted cash flows, we forecast future operating results and future cash flows, which include long-term forecasts of revenue growth, gross profits and capital expenditures.

Impairment analyses were performed at various points of the year ended December 31, 2009 and the Company decided to fully impair goodwill relating to Medicsight, its investment in XShares, both the equity and the convertible loan notes, and its holding in Eurindia.

Results of Operations

Fiscal Year Ended December 31, 2009 vs. Fiscal Year Ended December 31, 2008

Revenue and margin

The Company has generated revenues of $228 and gross margin of $225 for Fiscal 2009 compared to $354 and $238 for Fiscal 2008.

Medicsight has sold licenses primarily in Europe where it has regulatory approvals.  Its dollar denominated revenue fell by 6% but increased by 11% in sterling, its functional currency.  Scaling back Medicexchange’s equipment sales towards the end of Fiscal 2008 has reduced Medicexchange revenue by 70% in Fiscal 2009.  The cost of equipment sales has, however, also reduced leading to an increase in gross margin as a percentage of revenue.

Operating expenses excluding goodwill impairment

Operating costs excluding goodwill impairment have reduced due to a reduction in headcount and reduced budgets due to the delay of anticipated regulatory approvals.  The strength of the dollar compared to sterling has also reduced operating expenses in dollar terms by $3,800 (13%).

The Company’s research and development expenses for Fiscal 2009 were $1,998 compared to $3,665 in Fiscal 2008. These costs were comprised of staff, staff related consultancy, stock options and product development software costs expensed on the research and development of Medicsight’s products.  The reduction is due to cutbacks in the research and development department as well as extended dates for product development completion.

The Company’s selling, general and administrative expenses for Fiscal 2009 were $15,195 compared to $26,066 for Fiscal 2008.  Some significant items follow:

People related costs decreased by $5,145 (42%) due to series of headcount reductions in Medicexchange in Fiscal 2008 and Medicsight in Fiscal 2009 and because of foreign exchange movements.  This included $nil bonus payments in Fiscal 2009 compared to $1,286 in the prior year.  Furthermore, foreign exchange movements reduced the expense by $1,900.

Staff who have left the group have forfeited their stock options, reducing the related charge from $3,932 in Fiscal 2008 to $1,999 in Fiscal 2009.  Medicsight stock option Plans C and D were fully vested in 2008 and 2009, reducing the charge recognized.  Stock options were modified for various employees who left Medicsight in Fiscal 2008, which increased the charge in that year.  In Fiscal 2009 all Medicsight employees were give the opportunity to forfeit their existing options in Plans A through I and, in their place receive in Plan J 50% of the number of forfeited options.  This is accounted for as a modification, but the total modification charge was less significant than in 2008.  Also, the effect of foreign exchange reduced the reported charge by $400.

Professional fees increased by $222 (9%) though the increase would have been $493 without favorable foreign exchange movements.  The increase was due to legal fees incurred in investing in Moneygate Group Limited and XShares Group LLC.

Our travel expense has reduced by $758 (42%) due to reduced discretionary budgets, especially in Medicsight, as well as foreign exchange movements as sterling weakened against the dollar. Similarly, marketing, conferences and public relations reduced by $1,865 (72%) as part of the same focus on cost reduction.

Software development and related costs were lower by $769 (41%) due to foreign exchange, the timing of product development

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and the strict cost control discussed above.

Goodwill impairment

At December 31, 2008 our goodwill totaled $12,157, which was entirely related to our shareholding in Medicsight plc.  We assess the impairment of goodwill of our reporting units annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable.  This assessment is based upon an analysis of both the market value and discounted anticipated future cash flow of the reporting unit.

The shares of Medicsight plc are traded on the AIM Market of the London Stock Exchange.  We consider this to be a Level 1 input in the fair value hierarchy as this is an unadjusted quoted price in an active market.

The estimate of future cash flow is based upon, among other things, certain assumptions about expected future operating performance and an appropriate discount rate determined by our management.  Our estimates of discounted cash flows may differ from actual cash flows due to, among other things, timings of regulatory approvals, economic conditions in the healthcare IT market, changes to our business model or changes in operating performance.

In addition, estimates of discounted cash flows would involve assumptions on a business with limited revenue history and developing revenue models, which increase the risk of differences between the projected and actual performance.  Significant differences between these estimates and actual cash flows could materially affect our future financial results.  We consider these to be Level 3 inputs in the fair value hierarchy, as this is an unobservable input with little or no market activity that require significant management judgment.

In the three months ended March 31, 2009, the market value of Medicsight plc, as traded on the AIM Market of the London Stock Exchange, declined from $53,000 to $13,200.  We concluded that this decline in value was a triggering event with respect to the carrying value of our goodwill and we conducted an impairment test of goodwill as of March 31, 2009.  Due to the uncertainties involved in using the unobservable inputs to estimate future cash flows, we used market price, Level 1 inputs, as the primary basis of our impairment review.  As a result of this test we determined that the carrying amount of Medicsight plc exceeded its fair value and recorded an impairment loss of $12,157 during the quarter ended March 31, 2009.

Other income (expense)

Other income moved from income in Fiscal 2008 to an expense in Fiscal 2009.  Fiscal 2009’s expense included impairments of the XShares Group LLC convertible notes ($2,210), XShares Group LLC equity investments ($600), Eurindia ($176) and HipCricket ($701).  Interest income was lower than in the prior year, due to lower cash balances available to generate interest and a significant $3,881 foreign exchange gain in 2008.

Income Tax

Our effective tax rate for fiscal year 2009 was 0%.  The difference in the Company’s effective tax rate from the Federal statutory rate is primarily due to a 100% valuation allowance provided for all deferred tax assets.

Net loss and net loss per share

Net loss was $26,377 for Fiscal 2009 compared to a net loss of $20,001 for Fiscal 2008. Net loss per share for Fiscal 2009 was $0.81 (based on weighted average shares outstanding of 32,550,590), compared to $0.60 for Fiscal 2008 (based on weighted average shares outstanding of 33,188,294). The weighted average shares outstanding decreased as a result of the Fiscal 2008 buyback of 6,349,793 shares that remain in treasury.

Operational currency

The Company’s main operating currency is UK sterling (£). Its results of operations are affected by changes in the $: £ rates used to translate the operational result. For Fiscal 2009 the average rate was $1.5651: £1.00 and for Fiscal 2008 the rate was $1.85: £1.00, an increase of 15 % in the value of the dollar against sterling.

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Fiscal Year Ended December 31, 2008 vs. Fiscal Year Ended December 31, 2007

Revenue and margin

The Company has generated revenues of $354 and gross margin of $238 for Fiscal 2008, compared to $89 and $54 for Fiscal 2007. Both Medicsight and Medicexchange have increased revenues in the period.

Medicsight sold licenses primarily in Europe where it has regulatory approvals.

Medicexchange increased the level of equipment sales in China with revenue of $131 compared to $35 in 2007. Revenue from advertising on its website has increased from $13 in 2007 to $32 in 2008.

Operating Expenses

The Company’s research and development expenses for Fiscal 2008 were $3,665 compared to $2,670 for Fiscal 2007. The Company’s research and development costs were comprised of staff, staff related consultancy, stock options and product development software costs expensed on the research and development of Medicsight’s products.

The Company’s selling, general and administrative expenses for Fiscal 2008 were $26,066 compared to $19,307 for Fiscal 2007, the significant items being:

People related costs increased by $2,223 (21%) as we continued to expand our operations. In Medicsight the commercial team has increased in size in Europe, Japan and seen the full year impact of the US team that started in the fourth quarter of 2007.  In addition, we have seen the effects of exchange rate depreciation on both the dollar and the Yen.

Bonus payments reduced from $2,190 to $1,286 in the year as the prior year included an IPO bonus not repeated in 2008.  In addition, executive and year end bonus payments were lower.

Stock option charges have increased significantly, by $2,391 (155%), in the year. This is as a result of new grants being issued in Medicsight and the full year impact of last year’s grants.  In addition there have been modifications made for some employees who left during the year.

Professional fees increased by $436 (23%) due to increased legal fees related to commercial agreements in addition to fees incurred as part of the share buy back program.

Our travel expense has increased by $531 (41%) as the business has continued to expand internationally and employees have travelled to overseas offices. In addition, further cooperation with overseas partners and involvement in overseas conferences has increased the level of spend.

Software development and related costs increased $883 (139%) as we signed agreements to develop the MedicRead products and perform research and development with University College London.

Marketing, conferences and public relations remained in line with last year as a result of continuing to supporting our Medicsight partners, and promoting our international presence.

Income Tax

Our effective tax rate for fiscal year 2008 was 0%.  The difference in the Company’s effective tax rate from the Federal statutory rate is primarily due to a 100% valuation allowance provided for all deferred tax assets.

Net loss and net loss per share

Net loss was $20,001 for Fiscal 2008 compared to a net loss of $13,800 for Fiscal 2007. Net loss per share for Fiscal 2008 was $0.60 (based on weighted average shares outstanding of 33,188,294), compared to $0.35 for Fiscal 2007 (based on weighted average shares outstanding of 38,900,383). The weighted average shares outstanding decreased as a result of the buyback of 6,349,793 shares that remain in treasury.

Operational currency

The Company’s main operating currency is UK sterling (£). Its results of operations are affected by changes in the $: £ rates used to translate the operational result. For Fiscal 2008, the average rate was $1.85: £1.00 and for Fiscal 2007 the rate was $2.01:£1.00, a decrease of 7.9%.

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Operating results by business segment

We consider MGT’s business segments to be those of its two operating subsidiaries, Medicsight and Medicexchange.

Medicsight

The $12,157 goodwill impairment in the consolidated financial statements related to Medicsight.  This is recorded in the books of MGT Capital Investments, Inc. and is not included in the Medicsight operating segment.

Medicsight has received regulatory approvals in Europe and some other regions of the world.  We are still working with the regulatory bodies in the USA and Japan to receive the necessary approvals in what we consider to be our key markets.  Due to the delay of these approvals, as well as the timing of integrating a version of our CAD with our commercial partners, cost cutting measures were taken by Medicsight in Fiscal 2009.  A headcount reduction was implemented across all departments and locations, as well as tighter budgetary limits on discretionary spend.

Medicsight revenue decreased in dollar terms but increased by 11% in sterling.  Our product is becoming more widely known but sales have disappointed whilst we integrate CAD 4.0 with our partners’ workstations.  We expect the USA and Japan to be bigger drivers of revenue once we and our partners (in whose products our CAD is distributed) receive the necessary approvals.

Our ColonCAD™ product has a very high margin, though revenue from our insufflator product, MedicCO2LON, will generate a greater cost of sales.  Since the end of Fiscal 2009 we have signed an agreement with a global distributor for MedCO2LON and we expect sales to commence in the first half of 2010.  We are currently reviewing our commercial strategy for our MedicRead visualization product.

Included in operating expenses are costs that we allocate to research and development.  This is made up of staff, staff related consultancy, stock options and product development software costs expensed on the research and development of Medicsight’s products.  These have decreased in Fiscal 2009 because, as discussed above, we are cutting down on expenditure in all areas of the business in response to delays in anticipated approvals, whilst not jeopardizing long term product development and commercial opportunities.

The following table shows some of Medicsight’s larger expense categories in operating costs.

Salaries have reduced between 2008 and 2009, though this is partly due to the rate of exchange rates.  We expect to see a more significant fall in the salaries cost in Fiscal 2010 as we see a full year of reduced staff numbers.  No bonuses were paid in Fiscal 2009.

Commercial and marketing costs were sharply reduced as we incurred lower costs at trade shows and conferences, in line with our reduced spending.  Similarly, travel and accommodation costs have reduced as fewer members of staff have travelled to conferences as part of our emphasis on reducing costs.

Professional fees have reduced in dollar terms but have remained largely stable in local currency.  Our professional fees predominantly relate to the cost of being a listed company, as well as ongoing business costs such as contract work and human

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resource consultancy.

Interest and other income reduced in 2009 as we felt the effect of a full year of significantly lower investment returns on cash deposits due to the fall in global interest rates over the last two years.  In 2008 some of our cash was invested blue chip marketable securities with higher investment returns; in 2009 we only held cash.  Furthermore, in 2008 we recorded a $3,881 foreign currency exchange gain on cash that was transferred from US dollars to pounds sterling.  Whilst a similar gain was made in 2009, this only amounted to $309.

Stock based compensation has decreased due to stock option Plans C and D fully vesting.  This reduction in expense was not outweighed by the issuance of new stock option plans.  To motivate our employees and align their interests with shareholders, Medicsight employees were given the opportunity to forfeit their existing options and, for every two forfeited, to be issued a new option in Plan J.  This led us to incur an accounting charge for the modification, to be spread over the term that the options vest, but this charge was significantly lower than modification charges incurred in Fiscal 2008.

Cash and net assets were lower at December 31, 2009 compared to December 31, 2008 predominantly because of cash used in Medicsight’s operations.

Medicexchange

In 2007 Medicexchange’s revenue was derived from both online (predominantly website advertising) and offline equipment sales.  Towards the end of Fiscal 2008 offline sales were scaled back, reducing revenue, as evidenced by the lower revenue in Fiscal 2009.  However, this was compensated for by an increase in online advertising sales with a higher margin in Fiscal 2009.

In 2008 we took the decision to scale back our operations in the UK and refocus on our New York office, reducing staff numbers in London and Beijing.  The effect of this is apparent in Fiscal 2009 with sharply reduced operating costs.  This is demonstrated in the following table.

Salaries are, therefore, 62% lower in Fiscal 2009 than in Fiscal 2008 and no bonuses were paid.  Costs to consultants in 2009 increased, however, reflecting the outsourcing of website management activities.  Lower staff numbers have also manifested themselves in reduced commercial and travel costs.

Professional fees have increased due to the outsourcing of various accounting, legal and other services.

We also use less office space and the lower number of staff has lead to a lower level of ancillary costs.  We have also reduced our discretionary spending, demonstrated by the continued reduction in commercial and marketing costs.

The stock based compensation has reduced due to the number of staff who have left the company and whose options will therefore not vest.

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Other investments

Moneygate

On October 8 2009 we invested a nominal sum in Moneygate Group Limited (“Moneygate”), a UK based Independent Financial Advisor (“IFA”), and acquired 49% of its share capital.  We also provided a £250 ($398) working capital facility and an acquisition facility of £2,000 ($3,186) facility for acquisitions.  As at December 31, 2009 the working capital facility had been fully drawn down as had £100 ($159) of the acquisition facility in anticipation of a potential acquisition that eventually did not occur.

Moneygate’s business plan is predicated on acquisition based growth in the fragmented UK IFA market and we are providing it with the capital to expand.  Moneygate has not yet made any acquisitions but has organically increased the number of IFAs employed.  Its management is currently reviewing a number of potential acquisitions and hopes to complete one by the end of the first half of 2010.

XShares Group LLC

In Fiscal 2007 and 2008 we made a $3,000 equity investment in XShares Group LLC (“XShares”).  XShares is an investment advisor that creates, issues and supports exchange traded funds (ETFs) with a particular healthcare speciality.  XShares’ was unable to produce the revenue it anticipated during the market turbulence of 2007 and 2008.  On December 31, 2008 we therefore impaired the investment to $600, a level we believed was its fair value at that time.

In Fiscal 2009 we invested $2,000 in convertible notes with a principal of $2,100 in XShares.  In the second half of 2009 XShares were attempting to raise funds to drive the business forward.  We planned to receive the return on our investment in the convertible notes in either cash or shares after this fundraising had been completed.

In the last quarter of Fiscal 2009 it became clear that, due to adverse market conditions, the fundraising had not been successful.  Xshares’ management is still focusing on growing the business but is currently marketing a distressed property fund reviewing alternative ways to promote its ETFs or dispose of certain operating units.  As a consequence, we fully impaired our investment, the convertible notes and the interest receivable on the notes, recording a charge of $2,210 in interest and other expense.

HipCricket

In Fiscal 2007 we invested $2,000 in HipCricket Inc. (“HipCricket”), a mobile marketing company.  This was originally accounted for as a marketable security and we valued it at its closing price on the AIM Market.  In Fiscal 2009 HipCricket delisted from the AIM Market at a price of $0.61 per share, valuing our holding at $224.  This reduction is value was accounted for as an other than temporary impairment while the investment was classified as an available for sale marketable security.  At this point we accounted for it as an investment held at cost.

Based on our review of published financial data and discussions with HipCricket management about their business plan, we believe that $224 represents fair value for our holding in HipCricket.

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Liquidity and Capital Resources

Working Capital information

Our cash, cash equivalents and marketable securities have reduced during 2009 predominantly because of the cash used in operating activities.

Cash used in operating activities was lower than in the prior year due to the reduced headcount and concentration on reducing costs discussed above. Significant non-cash items in the reconciliation from net loss to cash used in operating activities are the $12,157 impairment loss on goodwill and the $2,210 impairment of the XShares Group LLC (“XShares”) convertible loan notes.

Included in investing activities in Fiscal 2009 is the payment of $2,000 to invest in XShares convertible loan notes and $546 to provide working capital and acquisition facilities to Moneygate.  This is offset by the receipt of $946 from the sales of marketable securities held at the end of Fiscal 2008.  More cash was used in investing activities in Fiscal 2008 as $2,040 was invested in XShares equity as well a higher net investment in marketable securities.

Also in Fiscal 2008 $20,163 was spent repurchasing our own and Medicsight’s stock, classified in financing activities.  In 2007 the largest movement in cash was due to Medicsight’s fundraising, when $24,569 was raised in a private placement and $61,049 in an IPO.

At the end of 2009 our ratio of current assets to current liabilities was 10.4, similar to that of Fiscal 2008.  Whilst our cash has reduced compared to 2008 our cost reductions have also reduced our current liabilities.

Valuation of investments held at fair value

We attribute our investments using the fair value hierarchy defined in the statement. The hierarchy consists of the following three levels with associated definitions:

Level 1 inputs are unadjusted, quoted prices in active markets for identical assets or liabilities.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.  Level 2 inputs include quoted prices for identical assets or liabilities in markets that are not active, that is, markets in which there are few transactions.

Level 3 inputs are unobservable inputs that are supported by little or no market activity.  These inputs require significant management judgment and reflect our estimate of assumptions that market participants would use in pricing the asset.

As at December 31, 2009 we have no investments that we hold at fair value.

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Investment in Medicsight

MGT Capital Investments, Inc.’s consolidated financial statements include the results and financial condition of its subsidiary, Medicsight.  MGT Capital Investments, Inc.’s holding in Medicsight is 86,000,000 shares out of Medicsight’s issued share capital of 155,524,504 shares.  As of December 31, 2009 Medicsight’s share price closed at £0.079 ($0.13), valuing the holding at £6,794 ($10,821).

As of March 19, 2010 Medicsight’s share price was £0.05 ($0.076) valuing the Company’s investment at £4,300 ($6,658), using a $:£ exchange rate of 1.5274.

Additional capital funding requirements

On June 21, 2007 Medicsight plc completed its initial public offering on the AIM Market of the London Stock Exchange.  Approximately 29,000,000 new shares were issued to institutional and other investors at a price of £1.10 ($2.20) per share raising £32,000 ($64,115) gross new money.  We incurred fees of approximately £1,550 ($3,096), including approximately £147 ($298) with Asia IT Capital Investments Ltd (a related party).  £5,500 ($11,100) of the net proceeds was used to repay debt (between Medicsight plc and the Company).  The remaining £24,900 ($49,800) cash inflow from the IPO was to be used for working capital and business development.

Immediately prior to the Medicsight plc IPO, the Company sold down, by private placement approximately 11,700,000 of its Medicsight plc shares.  The shares were priced at £1.10 ($2.20) — the same price as the Medicsight IPO.  Gross proceeds on the private placement were approximately £12,845 ($25,736).  We incurred fees with Asia IT Capital Investments Ltd (a related party) of approximately £578 ($1,167).

To date we have primarily financed our operations through private placements of equity securities.  In the future we expect to fund our operations by growing revenues and generating profits and a positive operational cashflow.

Risks and uncertainties related to our future capital requirements

To the extent that additional capital is raised through the sale of equity or equity-related securities of the Company or its subsidiaries, the issuance of such securities could result in dilution to the Company’s stockholders.

No assurance can be given, however, that we will have access to the capital markets in the future, or that financing will be available on acceptable terms to satisfy the Company’s cash requirements to implement its business strategies.

If we are unable to access the capital markets or obtain acceptable financing, our results of operations and financial conditions could be materially and adversely affected.  We may be required to raise substantial additional funds through other means.

Our technology has not yet been fully commercialized and we have not begun to receive any significant revenues from commercial operations.  We cannot assure our stockholders that our technology and products will be commercialized successfully, or that if so commercialized, that revenues will be sufficient to fund our operations.

If adequate funds are not available to us, we may be required to curtail operations significantly or to obtain funds through entering into arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies or products that we would not otherwise relinquish.

Capital commitments

On August 25, 2006 we executed a 10 year agreement with Pirbright Holdings Limited to lease 8,787 square feet of office space at the Kensington Centre, 66 Hammersmith Road, London W14 8UD, UK.

Under this lease agreement our UK property rent, services and related costs will be approximately £330 ($524) per annum, paid quarterly in advance.  We have the right to terminate this agreement on the expiration of the fifth year of the lease.  Our annual rent is subject to upward only review on August 24, 2011.  We have two 10-month rent-free periods: the first commencing August 25, 2006; the second commencing August 25, 2011.

We have satellite offices in Tokyo (Japan) and New York.  The Tokyo office is on a three year rental agreement but has agreed with the landlord that they will move out in the second quarter of 2010.  Since the year end we signed a two year lease on a new office in Tokyo.  The New York office has no lease commitment.

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In July 2008 we entered into an agreement with a partner to develop interfaces for our software.  We have committed to pay Euros 1,445 ($2,071) over an expected thirty-six month period.  As at December 31, 3009 we have paid Euros 845 ($1,210).  These payments will be recovered against future royalty payments, should the products be successfully commercialized.  They have been expensed to the income statement and classified as research and development.

The following table analyses our contractual obligations.

Recent accounting pronouncements.

There are no recent accounting pronouncements that have not yet been adopted that the Company believes may have a material impact on its financial statements.

ITEM 7A.                                       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate and Marketable Security Prices Risk - Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We place our investments in a mixture of (a) cash deposits on either overnight or 30 day rates and (b) highly liquid blue chip market securities. A decline in interest rates or a decline in equity and fixed income markets would have an adverse impact on interest income.  We do not have any debt and we do not use derivative financial instruments.

Based upon the balance of our cash and cash equivalents at December 31, 2009, for each one percentage point reduction in interest rates, the Company would suffer a reduction of approximately $222 in interest income.  A severe decline in equity and fixed income markets would be likely to reduce the capital value of the securities held.

Foreign Currency Risk - We are exposed to foreign currency exchange rate fluctuations relating to the operation of our international subsidiaries.  Our main operating currency is UK sterling (£).  We also have subsidiary operations in Japan and China which operate in their local currencies.  At the end of each reporting period, expenses of the subsidiaries are converted into US dollars using the average currency rate in effect for the period and assets and liabilities are converted into US dollars using either historical rates or the exchange rate in effect at the end of the period.  Additionally, we are exposed to foreign currency exchange rate fluctuations relating to payments we make to vendors and suppliers using foreign currencies.  We currently do not hedge against this foreign currency risk.  Fluctuations in exchange rates may impact our financial condition and results of operations.

Our operating costs in Fiscal 2009 were predominantly in UK sterling; we do not foresee any change in Fiscal 2010.  A ten percent increase or decline in the US dollar exchange rate against UK sterling would have created a decline or increase in our Fiscal 2008 operating costs of approximately $1,307.

ITEM 8                                           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Financial Statements and Schedules attached hereto.

ITEM 9                                           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

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ITEM 9A (T).                                CONTROLS AND PROCEDURES

(a)          Evaluation of Disclosure Controls and Procedures.

The Company has established controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.  Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report (the “Evaluation Date”). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective such that information relating to the Company (including its combined subsidiaries) required to be disclosed in the Company’s SEC reports (1) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (2) is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b)          Management’s Annual Report on Internal Control over Financial Reporting

SEC rules implementing Section 404 of the Sarbanes-Oxley Act of 2002 require our 2009 Annual Report on Form 10-K to contain management’s report regarding the effectiveness of internal control over financial reporting. As a basis for our report, we tested and evaluated the design, documentation, and operating effectiveness of internal control.

Management is responsible for establishing and maintaining effective internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, of MGT Capital Investments, Inc. and its subsidiaries. The Company’s internal control over financial reporting consists of policies and procedures that are designed and operated to provide reasonable assurance about the reliability of the Company’s financial reporting and its process for preparing financial statements in accordance with generally accepted accounting principles (“GAAP”).  There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

Management has evaluated the Company’s internal control over financial reporting as of December 31, 2009. This assessment was based on criteria for effective internal control over financial reporting described in the standards promulgated by the PCAOB and in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that MGT Capital Investments, Inc. maintained effective internal control over financial reporting as of December 31, 2009.

This annual report does not include an attestation report of the Company’s independent public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

(c)          Changes in Internal Control Over Financial Reporting

No changes in the Company’s internal control over financial reporting have occurred during the quarter ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B.                                       OTHER INFORMATION.

None

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PART III

ITEM 10                                        DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following table sets forth the current officers and directors of MGT.

Directors are elected in accordance with the Company’s by-laws to serve until the next annual stockholders meeting and until their successors are elected in their stead.  Officers are appointed by the Board of Directors and hold office until their successors are chosen and qualified, until their death or until they resign or have been removed from office. All corporate officers serve at the discretion of the Board of Directors. There are no family relationships between any director or executive officer and any other director or executive officer of the Company.

Tim Paterson-Brown joined the Company in December 2003 as a director, was appointed Chief Executive Officer in September 2004 and Chairman in June 2007.  Tim is also a non-executive director of Medicsight.  He qualified as a Chartered Surveyor with Strutt and Parker in 1984 following degrees at London University and Magdalene College, Cambridge. In 1987 Tim joined Leisure Investments PLC.  Between 1990 and 2003 Tim worked in a variety of capacities to assist and invest in a number of leisure and technology businesses, including Accsys Technologies plc, a UK-listed company, of which Tim is a non-executive Director.  The Board believes that Tim has the experience, qualifications, attributes and skills necessary to serve as CEO because of his years of experience in managing businesses.

Allan Rowley joined the Company in April 2006 as Finance Director of both Medicsight and Medicexchange and was appointed the Company’s Chief Financial Officer in August 2006. As of March 19, 2009 he resigned as Finance Director of Medicsight plc and was appointed Chief Executive Officer of Medicsight plc. He resigned as finance director of MedicExchange on December 23, 2009. Prior to joining, Allan served in a corporate development role at ComMedica Limited, a UK-based medical software company specializing in Picture Archiving & Communication System (“PACS”) software. In this role he worked on financing and acquisition opportunities and on commercial proposals with the sales and finance group. Before joining ComMedica, Allan was revenue controller and a director of European Finance at Bea Systems, a NASDAQ-listed US-based software company.  Allan has several years of experience in public accounting in the United Kingdom and United States with Arthur Andersen and Ernst & Young, respectively. He is a member of the Institute of Chartered Accountants in England and Wales and holds a Master of Philosophy and a Bachelor of Science degree from Aberystwyth University College of Wales. The Board believes that Allan has the experience, qualifications, attributes and skills necessary to serve as CFO because of his years of accounting experience in public practice and in commerce.

Neal Wyman trained as a Chartered Accountant with Coopers and Lybrand before moving to KPMG where he worked in the Far East. He moved into the recruitment industry in London specializing in financial services, gaining experience with a diverse range of clients. He entered executive search in 1981, initially specializing in the financial services industry before broadening into general appointments and professional services. He now focuses on general management, finance and non-executive appointments in both private and quoted companies, with particular focus on venture capital. He is a graduate of the London School of Economics. Neal was appointed an independent director of the Company and a member of the Audit Committee in November 2004.  The Board believes that Neal has the experience, qualifications, attributes and skills necessary to serve as a director because of his years of experience in finance and business.

Dr L. Peter Fielding, M.D. is an experienced physician who provides consulting services to healthcare and academic organizations, in addition to his departmental and institutional responsibilities at WellSpan Surgical Associates. His clients in the past five years have included, in the U.S.A. National Cancer Institute; American Joint Committee on Cancer; Taiko Post University — Connecticut; Purely Cotton Inc. — Seattle; Musculoskeletal Systems Inc. - Pittsburgh; University of Connecticut Medical School, and,

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in the U.K.; Imperial College for Science, Technology and Medicine and the Association of Surgeons in the United Kingdom and Ireland.  Dr Fielding specializes in healthcare strategic planning, organizational structure and operational issues. He has participated in the organization and development of the Pain Relief Center, Hyperbaric Medicine and Advanced Wound Care Center, Clinical Weight Reduction Center, York Hospital Human Motion Institute and the Molecular Biology Research Laboratory. Peter was appointed an independent director of the Company and a member of the Audit Committee in July 2005.    The Board believes that Peter has the experience, qualifications, attributes and skills necessary to serve as a director because of his years of experience in medicine and business.

Peter Venton, OBE has over 30 years’ experience in the computing and telecommunications industry and holds several patents in the sector. He is a former Chief Executive of Plessey Radar and of GEC-Marconi Prime Contracts. Peter currently serves as the Technical Audit Chairman for the Defence Evaluation & Research Agency and joined the Board of Medicsight as an independent director in April 2007.  He was also an independent director of Medicsight between November 2001 and July 2005.  Peter was appointed an independent director of the Company and a member of the Audit Committee in November 2004.  The Board believes that Peter has the experience, qualifications, attributes and skills necessary to serve as a director because of his years of experience in business, finance and audit.

Sir Christopher Paine was the President of the British Medical Association until 2001. He is currently the chairman of the Medical Advisory Board of the International Hospitals Group, chairman of Royal Society of Medicine Support Services Ltd and a trustee of the London Clinic.  He was Medical Director of the Advisory Committee on Distinction Awards for the National Health Service until the end of 1999 and has been President of the Royal College of Radiologists and The Royal Society of Medicine. Sir Christopher is a Medical Oncologist. He was a consultant clinical oncologist from 1970 at the Churchill Hospital in Oxford.  He also served as director of clinical studies at the medical school. He was district general manager of the Oxford Health Authority from 1984-88. In addition, he has served on the Animal Welfare Council and Imperial Cancer Research Fund. Sir Christopher was appointed an independent director of the Company in November 2004.    The Board believes that Sir Christopher has the experience, qualifications, attributes and skills necessary to serve as a director because of his years of experience in medicine.

Dr Allan Miller qualified in medicine at St Bartholomew’s Hospital Medical School, London in 1961. In 1965 Allan was admitted to the Royal College of Physicians. After spending eight years in general practice he joined Hoffman La Roche where he held the positions of Head of Clinical Cardiovascular Research Worldwide, Head of Dermatological Research Worldwide and Head of Clinical Research UK.   Allan spent 14 years as Medical Director for Napp Pharmaceuticals Ltd and four years as European Medical Research Director of the Purdue Pharma, Mundipharma, Napp group based in Cambridge, England.   Allan is a Member of the British Medical Association and a Fellow of the Royal Society of Medicine. Allan was appointed an independent director of the Company in December 2002.  The Board believes that Allan has the experience, qualifications, attributes and skills necessary to serve as a director because of his years of experience in medicine and business.

Corporate Code of Ethics

On December 28, 2007 the Board of Directors adopted a new Code of Business Conduct and Ethics which applies to all directors and employees including the Company’s principal executive officer, principal financial officer and principal accounting officer or persons performing similar functions.

Prior to December 28, 2007 the Company’s employees were subject to the previous Code of Ethics adopted by the Board of Directors on November 25, 2004.

On December 28, 2007, the Board of Directors adopted the MGT Share Dealing Code, an Anti-Fraud Policy, a Whistleblowing Policy and a Fraud Response Plan.  The Board of Directors of Medicsight adopted the Medicsight Share Dealing Code on June 6, 2007.

Copies of the Code of Business Conduct and Ethics, the Anti-Fraud Policy, the Whistleblowing Policy, the MGT Share Dealing Code and the Medicsight Share Dealing Code can be obtained, without charge by writing to the Corporate Secretary at MGT Capital Investments, Inc., Kensington Centre, 66 Hammersmith Road, London W14 8UD, United Kingdom.

Section 16(a) Beneficial Ownership Reporting Compliance

Under the securities laws of the United States, the Company’s directors, its executive officers, and any persons holding more than five percent of the Company’s common stock are required to report their initial ownership of the Company’s common stock and any subsequent changes in that ownership to the Securities and Exchange Commission (the “Commission”).  Specific due dates for these

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reports have been established and the Company is required to disclose any failure to file by these dates.  The Company can report that there were no delinquent filings in Fiscal 2009.

Audit Committee and Audit Committee Financial Expert

On November 25, 2004 the Company’s Board of Directors established an Audit Committee to carry out its audit functions.  At December 31, 2009 the membership of the Audit Committee was Peter Venton as Chairman and Neal Wyman and Dr L Peter Fielding as members.

The Company’s Board of Directors has determined that Peter Venton, an independent director, is the audit committee financial expert, as defined in Regulation S-K promulgated under the Securities and Exchange Act of 1934, serving on its audit committee.

ITEM 11                                        EXECUTIVE COMPENSATION.

Compensation Discussion and Analysis

Goals of our compensation program

We provide a compensation package for our executive officers we refer to as our “named executive officers” that we believe is designed to fairly compensate them and to enhance shareholder value. We have disclosed the compensation packages for our named executive officers in the summary compensation table and related tables below. We have structured our compensation packages to motivate our named officers to achieve the Company’s business objectives and to align their interests with the interests of our shareholders. Specifically, our compensation program is designed to achieve the following objectives:

·                                   Attract and retain excellent executives who are appropriate for the Company’s needs;

·                                   Motivate and reward executives whose knowledge, skills and performance are critical to the Company’s success;

·                                   Motivate the executives to increase shareholder value for both the Company and its subsidiary operations through the use of options; and

·                                   Tie compensation to corporate and individual performance.

We use various elements of compensation to reward specific types of performance. Our employment agreements for each for our named executive officers determine the salary of each officer, which provides the basic level of compensation for performing the job expected of them. We use cash bonus awards as an incentive that provides a timely reward for attainment of exemplary corporate and individual performance in a particular period. We use stock options to provide a long term incentive, which adds value to compensation packages if the value of our common stock rises and aligns the interest of our executives with those of shareholders.

Elements of our compensation program

Our total compensation package for named executive officers consists of salary, bonuses and options. Each element of compensation is considered separately and we do not generally take into account amounts realized from prior compensation in establishing other elements of compensation. Our goal is to provide a total compensation package that we believe our named officers and our shareholders will view as fair and equitable. We consider the pay of each named executive officer relative to each other named executive officer so that the total compensation program is consistent for our executives. This is not a mechanical process, and our Board of Directors has used its judgment and experience and works with our Remuneration and Nomination Committees to determine the appropriate mix of compensation for each individual.

Named Executive Officers

We have the following named executive officers:

·                                    Tim Paterson-Brown - Chairman and Chief Executive Officer, MGT Capital Investments, Inc. and Non-executive Director, Medicsight plc.

·                                    Allan Rowley - Chief Financial Officer, MGT Capital Investments, Inc. and Chief Executive Officer of Medicsight plc.

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·                                    David Sumner - Executive Chairman, Medicsight plc.

·                                    Alex Van Klaveren — Chief Executive Officer, Medicexchange Limited.

Salary

Each named executive officer’s employment agreement determines his salary which varies with the scope of his responsibilities.  These agreements provide for an annual base salary of $382 (£240) for Tim Paterson-Brown; $319 (£200) for Allan Rowley; $319 (£200) for David Sumner and $160 for Alex Van Klaveren.  We believe that the annual salary must be competitive with the market with respect to the skills and experience that are necessary to meet the requirements of the named executive officers’ position with us.

Bonus

The employment agreement in effect for each named executive officer provides for the possibility of a cash performance bonus as determined by our Board of Directors based upon the attainment of performance goals conveyed to the officer. The Board of Directors has the discretion to increase the cash performance bonus for any year.

Stock options and option exercises of stock vested

Options to the named executive officers may be granted from the Company and or its subsidiaries. We have stock option plans in MGT Capital Investments, Inc. and in its subsidiary companies Medicsight (whose shares are listed on the AIM market of the London Stock Exchange under the ticker symbol MDST.L) and Medicexchange (whose shares are not listed on any stock exchange).

We award options to align the interests of our executives with the interest of our shareholders by having the realizable value depend on an increase in our stock price. We believe this will motivate our officers to return value to our shareholders through future appreciation of our stock price. The options provide a long term incentive because they vest over a period of time (typically three years) and remain outstanding for ten years, encouraging executives to focus energies on long term corporate performance. The vesting periods are designed to encourage retention of our officers.

In Fiscal 2009 none of the named executive officers exercised any of their stock options that had vested.

Pension and retirement benefits

Our named executive officers do not participate in any deferred benefit retirement plans such as a pension plan.

Non-qualified deferred compensation

We do not have any deferred compensation programs for our named executive officers.

Other benefits

We provide private health care insurance to some of our named executives.

Performance awards

Our named executive officers are entitled to cash bonuses, as determined by our Remuneration and Nominations Committees and Board of Directors, based upon the attainment of commercial goals conveyed to that executive.

Our Compensation process

We have a Remuneration and Nominations Committee that is comprised of Neal Wyman and Peter Venton (two of the Company’s independent directors) that determines the compensation of the MGT Capital Investments, Inc.’s executive officers. The Board of Directors generally follows these recommendations.  Medicsight plc has its own Remuneration and Nominations Committee and Board of Directors that determines the executive compensation for David Sumner (Executive Chairman) and Allan Rowley (Chief Executive Officer).  MGT Capital Investments, Inc., in its capacity as corporate director of Medicexchange, determines the executive compensation for the Chief Executive Officer of Medicexchange (Alex Van Klaveren).

We do not formally benchmark our compensation against any peer group. However we informally consider competitive market practices with respect to the salaries and total compensation of our named executive officers. We review the market practices by reviewing publicly available information of other companies in the HCIT sector and our geographical areas. However while we

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review such market information, it is only one factor we considered in establishing compensation, and we did not make use of any formula incorporating such data.

Generally in determining whether to increase or decrease compensation to our named executive officers, we take into account any changes, of which we are aware, in the market pay levels, the performance of the executive officer, any increase or decrease in responsibilities and roles of the executive officer, the business needs for the executive officer, the transferability of managerial skills to another employer, the relevance of the executives officers experience to other potential employers and the readiness of the executive officer to assume a more significant role within the organization.

Change in Control

The Company may immediately terminate the employment of any named executive officer for gross misconduct.  Both Tim Paterson-Brown and Allan Rowley have change in control provisions in their service contracts.  On a change in control event, Tim Paterson-Brown would be entitled to an immediate payment of 3 years’ basic salary and all stock options would become immediately vested and exercisable within the following 3 years.  On a change in control event, Allan Rowley would be entitled to an immediate payment of 2 years’ basic salary and all stock options would become immediately vested and exercisable within the following 2 years.

Stock ownership guidelines

We have not implemented any stock ownership requirements for our named executive officers. We have issued stock options to our named executive officers which we believe allows management to own equity in the Company and accordingly align their interest with those of other shareholders.

Summary Compensation Table

The following table summarizes Fiscal Years 2009, 2008 and 2007 compensation for services in all capacities of the Company’s named executive officers and other individuals:

(1)           Tim Paterson-Brown was appointed Chief Executive Officer on September 21, 2004 and Chairman on June 21, 2007.

(2)           Allan Rowley was appointed Chief Financial Officer on August 4, 2006.

(3)           Alex Van Klaveren was appointed CEO of Medicexchange Limited on September 15, 2008.

(4)           This column discloses the dollar amount of the aggregate grant date fair value of options granted in the year.

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Outstanding Equity Awards at December 31, 2009