This report contains forward-looking statements made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by the use of words such as "anticipate", "estimates", "should", "expect", "guidance", "project", "intend", "plan", "believe" and other words and terms of similar meaning, in connection with any discussion of our financial statements, business, results of operations, liquidity and future operating or financial performance. Please also refer to our "Note Regarding Forward Looking Statements" at the front of this Form.

Executive Summary

MGT Capital Investments, Inc. achieved the following results in the first quarter of 2009:

† Revenue from license and other sales increased 42% to $74 compared to $52 in 2008.

† Gross margin increased 80% to $72 compared to $40 in 2008.

† Other operating expenses, excluding the goodwill impairment, decreased 32% to $4,146 compared to $6,100 in 2008.

† $12,157 of goodwill relating to Medicsight was fully impaired.

† Net loss increased 305% to $15,330 and resulted in a loss per share of $0.47 compared to a net loss of $3,779 and net loss per share of $0.10 in 2008. The large increase was due to the impairment of goodwill relating to Medicsight.

While remaining small in value, revenue has increased due to higher sales of sales of Medicsight products and we expect revenue to continue to grow year after year.

Operating costs, excluding the goodwill impairment, have reduced by $1,954 due to a general focus on reducing costs and significantly because of a fall in the value of sterling from $1.99:£1 to $1.42:£1. On a like for like exchange rate, operating costs for the three months ended March 31, 2008 would have been approximately $4,548.

Our balance sheet remains strong with cash, cash equivalents and marketable securities of $33,726 compared to $40,178 in December, 2008. The movement is mainly attributable to cash used in operating activities ($5,173), cash used in investing activities ($14) and the effects of exchange rates ($501).

Goodwill impairment

At December 31, 2008, our goodwill totaled $12.2 million, 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 defined in SFAS No. 157 "Fair Value Measurements", 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 defined in SFAS No. 157 "Fair Value Measurements", as this is an unobservable input with little or no market activity that require significant management judgment.

We conducted our annual impairment test of goodwill as of December 31, 2008 in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets." As a result of this test we determined that no adjustment to the carrying value of goodwill was required.

In the period between December 31, 2008 and March 31, 2009, the market value of Medicsight plc, as traded on the AIM Market of the London Stock Exchange, declined from $53.0 million to $13.2 million. Following this decline in value we conducted an impairment test of goodwill as of March 31, 2009 in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets." Due to the uncertainties involved in using the unobservable inputs to estimate future cash flows, we used market price, Level 1 inputs as the 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 $12.2 million during the quarter ended March 31, 2009.

Critical accounting policies and estimates

The accompanying discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements and the related disclosures, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts in our condensed consolidated financial statements and accompanying notes. These estimates form the basis for making judgments about the carrying values of assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates.

We believe the following policies to be the most critical to an understanding of our financial condition and results of operations because they require us to make estimates, assumptions and judgments about matters that are inherently uncertain.

Revenue Recognition

Medicsight

The Company recognizes revenue in accordance with American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP") 97-2, Software Revenue Recognition, as amended by SOP 98-4 and SOP 98-9, as well as Technical Practice Aids issued from time to time by the AICPA, and SEC Staff Accounting Bulletin No. 104. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has 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. The Company's software licenses are generally sold as part of an arrangement that includes maintenance and support.

The Company licenses software and sells maintenance through visualization solution partners and original equipment manufacturers. The Company receives regular sales reporting detailing the number of licenses sold by original equipment manufacturers, value-added resellers and independent distributors (collectively, "Resellers") to end users. The Company generally offers 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 - The Company enters into arrangements with Resellers that include a combination of software products, maintenance and support. For such arrangements, the Company recognizes revenue using the residual method. The Company allocates 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 the Company does 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

We account for goodwill in accordance with the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 142, goodwill and intangible assets with indefinite lives are reviewed for impairment annually or more frequently if events or changes 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 in accordance with SFAS No. 123(R). Under the fair value recognition provisions of SFAS No. 123(R), 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

Costs incurred in connection with the development of software products that are intended for sale are accounted for in accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed". 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.

The Company concluded that capitalizing such expenditures on completion of a working model was inappropriate because the Company did not incur any material software production costs and therefore has decided to expense all research and development costs. The Company's 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 the provisions of SFAS No. 157, "Fair Value Measurements," for financial assets and financial liabilities. Applying fair value measurements to our financial instruments requires management's judgment, especially when using Level 2 and Level 3 inputs as defined in SFAS 157's fair value hierarchy.

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

The Company evaluates 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. The Company's assessment for impairment of an asset involves estimating the 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 the Company makes 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 margins and capital expenditures.

Results of Operations

Three months ended March 31, 2009 vs. March 31, 2008

Revenue and Margin

We have generated revenues of $74 and gross margin of $72 for the three months ended March 31, 2009, compared to $52 and $40 for the three months ended March 31, 2008. Medicsight increased revenues in the period and Medicexchange's fell slightly.

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

Medicexchange generated revenue from advertising sales in China and the USA.

Operating Expenses

Our research and development expense for the three months ended March 31, 2009 was $459 compared to $595 for the three months ended March 31, 2008. Our 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.

Our selling, general and administrative expenses for the three months ended March 31, 2009 were $3,687 compared to $5,505 for three months ended March 31, 2008, with the significant items being:

† A strengthening of the dollar against Sterling has reduced all elements of selling, general and administrative expenses by approximately $1,350 in the three months ended March 31, 2009 compared to the three months ended March 31, 2008.

† People related costs decreased by $283 (11%) due to a reduced head count in Medicexchange, a lower provision for bonus costs and reduced recruitment costs.

† Stock option charges have decreased by $610 (56%) from the first quarter of 2008 due to the effect of modifications made to plans in the first quarter of 2008, pushing up the cost in that period, and the fall in the value of sterling against the dollar.

At the end of the quarter ended March 31, 2009 we implemented a redundancy program in Medicsight to reduce costs. As a consequence, we expect people related costs to continue to decrease. Related redundancy costs amounted to $102.

Professional fees in MGT Capital Investments, Inc.'s company only income statement have increased due to costs relating to a strategic review.

Following an impairment review, we fully impaired $12,157 of goodwill relating to Medicsight, compared to a $nil impairment charge in the three months ended March 31, 2008. As explained in the executive summary, we based our fair value measurements on the market price of Medicsight shares listed on the AIM Market of the London Stock Exchange as of March 31, 2009.

Interest and other income included an expense of $695 in the three months ended March 31, 2009 compared to income of $508 in the same period in the prior year. The expense related to a $739 impairment of Hipcricket and a $25 impairment of other marketable securities. This expense was included in net loss as we considered the loss to be other than temporary. In the same period in the prior year gains made on these marketable securities were included in other comprehensive income. Also included in interest and other income was interest income of $69 compared to $508 in the three months ended March 31, 2008. The fall was due to lower the lower level of cash held and lower interest rates.

Income Tax

Our effective tax rate for the three months ended March 31, 2009 is 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 attributable to equity holders of MGT Capital Investments, Inc. was $15,330 for the three months ended March 31, 2009

compared to a net loss of $3,779 for the three months ended March 31, 2008. Net loss per share for the three months ended March 31, 2009 was $0.47 (based on weighted average shares outstanding of 32,550,590), compared to $0.10 for the three months ended March 31, 2008 (based on weighted average shares outstanding of 38,846,986).

Operational currency

Our main operating currency is UK sterling. Its results of operations are affected by changes in the $: £ rates used to translate the operational result. For three months ended March 31, 2009 the average rate was $1.43: £1.00 and for three months ended March 31, 2008 the rate was $1.99:£1.00, a decrease of 28%.

Operating results by business segment

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

Medicsight



                                                                 Three months ended March 31,
                                                                  2009                 2008

Revenue                                                      $            61      $            34
Selling, general and administration costs                              3,136                3,466
Research and development                                                 459                  595
Operating expense                                                      3,595                4,061
Stock-based compensation (included in operating expenses)                310                  706
Operating loss                                                        (3,534 )             (4,027 )
Interest and other income                                                 39                  312




              March 31,     December 31,
                2009            2008

Cash         $    22,348   $       26,624
Net assets        21,597           25,302

Medicsight revenue improved in the three months ended March 31, 2009 due to increased interest in our ColonCAD™ product as it develops traction in the market. While we have regulatory approval in a number of territories, our revenues have been generated in the EU. We expect European revenues to continue to improve year after year, but believe that the US and Japanese markets offer a higher revenue opportunities once regulatory approval is granted. Support and maintenance revenue is currently low, but we intend to build this as a revenue stream.

The fall in the value of sterling against the dollar is the main reason for the decrease in operating costs.

Research and development 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 three months ended March 31, 2009 due to the fluctuations in currency exchange rates.

In local currency terms, bonus charges fell as we believe that, after the redundancy program in Medicsight, any potential year end performance related bonuses would, in total, be lower than in the previous year. The stock option charge fell as we made modifications to certain options in the three months ended March 31, 2008 and the charge has not been repeated in the three months ended March 31, 2009.

We are currently streamlining Medicsight's operations and reducing staff numbers in order to reduce our operating costs and cash flow. We therefore expect costs in 2009 to be lower due to reduced salary and discretionary expenses. This headcount reduction is being implemented across multiple departments and all locations.

Interest and other income was generated by returns on the investment of the proceeds from the IPO in June 2007. Interest income has fallen in the first quarter of 2009 compared to the same period in 2008 as the level of cash invested was lower , combined with lower investment returns due to significantly lower interest rates. We believe that continuing low interest rates, combined with lower cash balances, will mean a lower level of interest and other income during Fiscal 2009 compared to Fiscal 2008.

Cash and net assets were lower at March 31, 2009 compared to December 31, 2008 because of Medicsight's net loss and also as sterling fell in value against the US dollar.

Medicexchange



                                                                 Three months ended March 31,
                                                                  2009                 2008

Revenue from external customers                              $            13      $            18
Cost of revenue                                                            2                   12
Gross margin                                                              11                    6
Operating expenses                                                      (274 )               (940 )
Operating loss                                                          (263 )               (934 )
Stock-based compensation (included in operating expenses)                  5                  125




                     March 31,    December 31,
                       2009           2008

Cash                $     1,300   $       1,322
Net (liabilities)        (1,698 )        (1,412 )

In the first quarter of 2008 Medicexchange's revenue was derived from both online and offline sales; in the same period in 2009 we focused on online sales, leading to a lower level of sales but at a higher margin. The online sales were split between the US and China 60%/40% respectively. We expect our focus to continue be on online sales.

We have reduced our spend on operations. In September 2008 we made the decision to scale back our London cost base and increased our emphasis on our New York office as this is closer to our target market. We have also outsourced some of our website costs to external contracts to reduce our cost. Salary costs have fallen after a number of London and Beijing-based staff left the business. Also, all Medicexchange's Beijing employees have now started to work for Medicsight and are no longer a cost to Medicexchange. Our China business is now focused solely on the Shanghai-based Maydeal website.

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 reduction in all other listed cost categories.

Liquidity and Capital Resources



Working Capital information



                                                    March 31,     December 31,
                                                      2009            2008
Working capital summary
Cash, cash equivalents and marketable securities   $    33,726   $       40,178
Current assets                                          34,523           41,212
Current liabilities                                     (3,210 )         (4,340 )
Working capital surplus                            $    31,313   $       36,872
Ratio of current assets to current liabilities            10.8              9.5




                                                             Three months ended March 31,
                                                               2009               2008
Cash flow summary
Cash (used for) provided by
Operating activities                                      $       (5,173 )  $         (5,840 )
Investing activities                                                 (14 )            (6,581 )
. . .