UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
SCHEDULE
14A
(RULE
14a–101)
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [ ]
Check
the appropriate box:
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[X]
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Preliminary
Proxy Statement
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[ ]
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a–6(e)(2))
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[ ]
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Definitive
Proxy Statement
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[ ]
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Pursuant to §240.14a–12
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MGT
Capital Investments, Inc.
(Name
of Registrant as Specified in its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
[X]
No fee required.
[ ]
Fee computed on table below per Exchange Act Rules 14a–6(i)(1) and 0–11.
(1)
Title of each class of securities to which transaction applies:
(2)
Aggregate number of securities to which transaction applies:
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0–11 (set forth the amount
on which the filing fee is calculated and state how it was determined):
(4)
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(5)
Total fee paid:
[ ]
Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0–11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule
and the date of its filing.
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Amount Previously Paid:
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Date Filed:
MGT
Capital Investments, Inc.
512
S. Mangum Street, Suite 408
Durham,
NC 27701
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
To
be held on March [ ], 2018
To
our Stockholders:
NOTICE
IS HEREBY GIVEN that a special meeting of the stockholders (the “Special Meeting”) of MGT Capital Investments, Inc.
(the “Company”), a Delaware corporation, will be held beginning at [10 a.m. EST] on March[ ], 2018, at
the Company’s offices located at 512 S. Mangum Street, Suite 408, Durham, NC 27701 for the following purposes:
1.
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To
amend the Company’s Restated Certificate of Incorporation to increase the Company’s authorized common stock (“Common
Stock”) from 75,000,000 shares to 125,000,000 shares;
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2.
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To
authorize the Board of Directors, without further action of the stockholders, to implement a reverse split of the Company’s
Common Stock at a ratio of 1–for–2 at any time before the 2018 annual meeting of stockholders; and
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3.
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To authorize the chairman of the Special Meeting
to adjourn the meeting to a later date or dates to allow further solicitation in the event there are insufficient votes to
approve Proposal 1 or Proposal 2.
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4.
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To
transact any other business as may properly come before the meeting or any adjournment or postponement thereof.
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The
foregoing items of business are more fully described in the Proxy Statement that is attached and made a part of this Notice. Our
Board of Directors has fixed the close of business on February [ ], 2018, as the record date (the “Record Date”)
for the determination of stockholders entitled to notice of, and to vote at, the Special Meeting. Only stockholders of record
of the Common Stock at the close of business on the Record Date will be entitled to notice of, and to vote at, the Special Meeting
or any adjournment thereof.
Your
vote is important regardless of the number of shares you own. Only record or beneficial owners of the Common Stock as of the Record
Date may attend the Special Meeting in person. Stockholders are urged to review the materials attached to this Notice of Special
Meeting of Stockholders carefully and to use this opportunity to take part in the Company’s affairs. When you arrive at
the Special Meeting, you must present photo identification, such as a driver’s license. Beneficial owners also must provide
evidence of stock holdings as of the Record Date, such as a recent brokerage account or bank statement.
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By
Order of the Board of Directors,
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/s/
Robert B. Ladd
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Robert
B. Ladd
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President,
Chief Executive Officer and Director
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Dated:
February [ ], 2018
TABLE
OF CONTENTS
MGT
Capital Investments, Inc.
512
S. Mangum Street, Suite 408
Durham,
NC 27701
PROXY
STATEMENT FOR THE
SPECIAL
MEETING OF STOCKHOLDERS
To
be held on March [ ], 2018
This
Proxy Statement relates to a special meeting of stockholders (the “Special Meeting”) of MGT Capital Investments, Inc.
(“MGT” or the “Company”). The Special Meeting will be held on March[ ], 2018 (Tuesday), at
[10:00 a.m.] EST, at the Company’s offices located at 512 S. Mangum Street, Suite 408, Durham, NC 27701 or at such other
time and place to which the Special Meeting may be adjourned or postponed. The enclosed proxy is solicited by our Board of Directors
(the “Board”). This Proxy Statement is first being mailed to stockholders entitled to notice of and to vote at the
Special Meeting on or about February [ ], 2018.
ABOUT
THE SPECIAL MEETING
What
is the purpose of the Special Meeting?
At
the Special Meeting, stockholders will be asked to vote upon the matters described in this Proxy Statement, including: to approve
a proposal to amend the Company’s Restated Certificate of Incorporation to increase the Company’s authorized Common
Stock from 75,000,000 shares to 125,000,000 shares (the “
Authorized Capital Increase
” or “
Proposal
1
”) and to approve a proposal that would allow the Board to implement a reverse split of the Common Stock at a ratio
of 1–for–2 at any time before the 2018 annual meeting of stockholders (the “
Reverse Stock Split
”
or “
Proposal 2
” and, together with Proposal 1, the “
Proposals
”).
Why
is the Company seeking stockholder approval in connection with the Authorized Capital Increase?
We
are a Delaware corporation. Pursuant to Delaware General Corporation Law, Section 242, a corporation needs a majority of the outstanding
stock of each class entitled to vote thereon to vote in favor of any proposal that would amend the company’s certificate
of incorporation to increase its authorized capital stock or combine the outstanding shares of any class or series of a class
of shares into a lesser number of outstanding shares. Therefore, we need a majority of the outstanding Common Stock to vote in
favor of Proposal 1 and Proposal 2, respectively.
What
happens if stockholders approve Proposal 1?
If
the stockholders vote to approve Proposal 1, the Company will be authorized to issue up to 125,000,000 shares of Common Stock
and will file with the Delaware Secretary of State a certificate of amendment to the Company’s Restated Certificate of Incorporation
reflecting the increase in the Company’s authorized stock.
What
happens if stockholders do not approve Proposal 1?
If
the stockholders fail to approve Proposal 1, the Company will remain authorized to issue only up to 75,000,000 shares of Common
Stock. As a consequence, if all outstanding stock options and warrants were exercised, and all convertible notes were converted,
the Company would have insufficient authorized but unissued shares of Common Stock to accommodate all exercises and conversions,
and to issue shares for which it is otherwise contractually obligated, and could be in breach of its contractual obligations under
the relevant instruments. Such breaches may also require the Company to record on its balance sheet a liability that would decrease
stockholders’ equity.
What
happens if stockholders approve Proposal 2?
If
the stockholders vote to approve Proposal 2, the Board of Directors will be authorized to, without further action of the stockholders,
implement a reverse split of the Common Stock at a ratio of 1–for–2 at any time before the 2018 annual meeting of
stockholders and file with the Delaware Secretary of State a certificate of amendment to the Company’s Restated Certificate
of Incorporation reflecting the reverse split of the Company’s Common Stock.
What
happens if stockholders do not approve Proposal 2?
If
the stockholders fail to approve Proposal 2, the Company will not be authorized to effect the Reverse Stock Split.
What happens if stockholders
approve Proposal 3?
If stockholders approve
Proposal 3, the person designated to serve as chairman of the Special Meeting will have the authority to adjourn the meeting to
a later date or dates. The purpose of the adjournment would be to allow the Company’s management additional time to solicit
votes to approve Proposal 1 or Proposal 2, or both of them, if the an insufficient number of shares has been voted in favor of
such proposals, or either of them, for their approval at the Special Meeting.
What happens if stockholders
do not approve Proposal 3?
If stockholders do not approve Proposal 3, the chairman of the Special Meeting will
not have the authority to adjourn the Special Meeting to allow the Company’s management additional time to solicit votes
to approve Proposal 1 or Proposal 2. The chairman would retain the authority to adjourn the meeting for another reason that is
not reasonably foreseeable a reasonable time prior to the meeting pursuant to general proxy authority or as otherwise permitted
by law.
Who
is entitled to attend and vote at the Special Meeting?
Only
stockholders of record of Common Stock at the close of business on the Record Date, February [ ], 2018, or their duly
appointed proxies, are entitled to receive notice of, and to vote the shares that they held on the Record Date at, the Special
Meeting or any postponement or adjournment thereof. At the close of business on February [13], 2018, there were 63,953,234 shares
of Common Stock issued and outstanding that are entitled to vote at the Special Meeting. Each such share is entitled to one vote
in connection with all proposals to be considered at the Special Meeting.
How
do I vote?
You
may vote on matters to come before the meeting in two ways: (i) you can attend the Special Meeting and cast your vote in person;
or (ii) you can vote by completing, signing and dating the enclosed proxy card and returning it to the Company by mail or facsimile.
If you sign and return the proxy card, you will have authorized the individuals named on the proxy card, referred to as the proxy
holders, to vote your shares according to your instructions or, if you provide no instructions, according to the recommendations
of the Board. With respect to any other matter that properly comes before the Special Meeting, the proxy holders will vote as
recommended by the Board or, if no recommendation is given, in their own discretion. If your shares are held in the name of a
brokerage firm, bank, or other nominee in “street name,” you will receive a voting instruction form from your broker
or the broker’s agent asking you how your shares should be voted.
What
if I vote and then change my mind?
If
you are a holder of record of Common Stock, you may revoke your proxy at any time before it is exercised by either (i) sending
the Company’s Secretary a notice of revocation; (ii) sending in another duly executed proxy bearing a later date; or (iii)
attending the meeting and casting your vote in person. Your last vote will be the vote that is counted. If you hold your Common
Stock in “street name,” you must follow the instructions of your brokerage firm, bank or other nominee if you wish
to change your vote.
Where
can I get more information about the Special Meeting?
The
Special Meeting will be held on March [ ], 2018, at [10:00 a.m.] EST, at the Company’s offices located
at 512 S. Mangum Street, Suite 408, Durham, NC 27701 or at such other time and place to which the Special Meeting may be adjourned
or postponed. For additional details about the Special Meeting, including directions to the site of the Special Meeting and information
about how you may vote in person if you so desire, please contact Investor Relations by telephone at (919) 973–0954. If
you plan to attend the Special Meeting, we would appreciate if you notify Investor Relations by calling this number.
What
is the Board’s recommendation?
The
Board recommends a vote FOR each of the proposals described in this Proxy Statement.
What
constitutes a quorum for purposes of the Special Meeting?
The
presence at the Special Meeting, in person or by proxy, of the holders of 50.1% of the issued and outstanding shares of Common
Stock on the Record Date will constitute a quorum, permitting the Company to conduct business at the Special Meeting. Proxies
received but marked as abstentions will be included in the calculation of the number of shares considered to be present at the
Special Meeting for purposes of determining whether a quorum is present.
What
vote is required to approve each item?
Pursuant to applicable
Delaware law, approval of each of Proposal 1 and Proposal 2 requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock. A properly executed proxy marked “ABSTAIN” with respect to a proposal will not
be voted or treated as a vote cast in respect of such Proposal, although it will be counted for purposes of determining whether
a quorum is present. Accordingly, an abstention will have the same effect as a vote against Proposal 1 and Proposal 2.
Proposal 3 requires
the affirmative vote of the holders of a majority of
the
shares of Common Stock present and voting at the Special Meeting on the proposal. An abstention will have no effect on Proposal
3
How
will shares held in “street name” be voted?
If
your shares are held in “street name” through a brokerage firm, bank, or other nominee , you will receive a voting
instruction form from such holder asking you how your shares should be voted at the Special Meeting. The rules of the New York
Stock Exchange determine whether matters presented are “routine,” in which case nominees can vote in their discretion
without the instruction of the beneficial holders, or “non–routine,” in which case nominees cannot vote without
the instruction of the beneficial holders. The Proposals are considered “routine” matters, so that nominees will have
the discretion to vote on these matters without any instructions from the beneficial owner. Accordingly, unless you direct your
nominee how you wish your shares to be voted, your nominee may vote the shares, or may abstain from voting your shares, in its
discretion.
Can
I dissent or exercise rights of appraisal?
Neither
Delaware law nor MGT’s governing documents provide stockholders with dissenters’ or appraisal rights in connection
with the Proposals.
How
will proxies be solicited and who pays for this proxy solicitation?
The
Company will bear the entire cost of solicitation, including the preparation, printing and mailing of this Proxy Statement, the
proxy card and any additional solicitation materials furnished to the stockholders. In addition to soliciting proxies by mail,
our officers, directors, and employees, without receiving any additional compensation, may solicit proxies by telephone, fax,
in person, or by other means. Copies of solicitation materials will be furnished to brokerage houses, banks and other nominees
holding shares in their names that are beneficially owned by others so that they may forward the solicitation materials to such
beneficial owners and we will reimburse such brokerage firms, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in connection therewith.
I
share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional
copy of the proxy materials?
The
SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy
statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement
addressed to those stockholders. This process is commonly referred to as “householding.”
Brokers
may be householding our proxy materials. A single set of proxy materials may be delivered to multiple stockholders sharing an
address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your
broker that it will be householding communications to your address, householding will continue until you are notified otherwise
or until you notify your broker or the Company that you no longer wish to participate in householding.
If,
at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual
report, you may (1) notify your broker or (2) contact Investor Relations by telephone at (919) 973–0954. Stockholders who
receive multiple copies of the proxy statement or annual report at their address and would like to request householding of their
communications should contact their broker or [the Company at 512 S. Magnum Street, Suite 408 Durham, NC 27701, or 914–630–7430.]
In addition, we will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy
of the Proxy Statement to a stockholder at a shared address to which a single copy of the documents was delivered.
Where
can I access this Proxy Statement online?
The
Proxy Statement and related materials are available online at ________.
SPECIAL
NOTE REGARDING FORWARD–LOOKING STATEMENTS
This
Proxy Statement may contain “forward–looking statements” and information relating to our business that are based
on our beliefs as well as assumptions made by us or based upon information currently available to us. When used in this Proxy
Statement, the words anticipate,” “believe,” “estimate,” “expect,” “intend,”
“may,” “plan,” “project,” “should” and similar expressions are intended to identify
forward–looking statements. These statements reflect our current views and assumptions with respect to future events and
are subject to risks and uncertainties. Actual and future results and trends could differ materially from those set forth in such
statements due to various factors. These forward–looking statements speak only as of the date of this Proxy Statement. Subject
at all times to relevant securities law disclosure requirements, we expressly disclaim any obligation or undertaking to disseminate
any update or revisions to any forward–looking statement contained herein to reflect any change in our expectations with
regard thereto or any changes in events, conditions or circumstances on which any such statement is based. In addition, we cannot
assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward–looking statements.
BACKGROUND
The
Company held its 2017 annual meeting of stockholders on December 19, 2017. Among the proposals presented for a vote of stockholders
at the annual meeting were proposals:
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To
authorize the Board of Directors, without further action of the stockholders, to amend the Company’s Restated Certificate
of Incorporation to increase the Company’s authorized common stock (“Common Stock”) from 75,000,000 shares
to 200,000,000 shares; and
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To
authorize the Board of Directors, without further action of the stockholders, to implement a reverse split of the Company’s
Common Stock, at a ratio within the range of 1–for–2 to 1–for–7 at any time after the annual meeting,
but before the 2018 annual meeting of stockholders.
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On
December 27, 2017, the Company issued a press release announcing that, due to an error describing voting procedures in the proxy
statement for the annual meeting, the Company decided to reject the approvals of these two proposals. The Company explained that
the proxy statement had mischaracterized these matters as “non-routine,” such that brokerage firms, banks and other
nominees could not vote on these matters in their discretion, when in fact the measures are considered “routine,”
allowing nominees to vote in their discretion. This error may have caused stockholders not to vote on the proposals, assuming
their non-votes would not be tallied.
The
Company is therefore resubmitting these two proposals to stockholders at the Special Meeting. As described elsewhere in this Proxy
Statement, the Proposals are “routine” under the rules of the New York Stock Exchange, allowing brokerage firms, banks
and other nominees to vote in their discretion in the absence of direction from their clients.
PROPOSAL
NO. 1
To
approve an amendment to the Company’s Restated Certificate of Incorporation to increase the Company’s authorized common
stock from 75,000,000 shares to 125,000,000 shares.
At
the Special Meeting, the stockholders will be requested to approve an amendment to the Company’s Restated Certificate of
Incorporation to increase the authorized common stock of the Company, par value $0.001 per share (the “Common Stock”),
from 75,000,000 shares to 125,000,000 shares.
If
Proposal No. 1 is approved, the Company intends to file promptly a Certificate of Amendment to our Restated Certificate of Incorporation
reflecting the increase in our authorized Common Stock, substantially on the form of
Appendix A
, with the Delaware Secretary
of State.
Reasons
for the Increase in Authorized Shares
The
purpose of the increase in the number of authorized shares of our Common Stock is to make shares available for a variety of corporate
purposes, including acquisitions, equity financings and grants of stock and stock options, issuance of warrants and convertible
securities and other transactions in which the Company’s Board of Directors may determine that it is in the best interests
of the Company and its stockholders to issue shares of Common Stock.
The
Company currently has [63,953,234] shares of Common Stock outstanding. As of [February 13, 2018, an additional [6,000,000] shares
of Common Stock are issuable upon the exercise of outstanding stock options, [12,865,701] shares of Common Stock are issuable
upon the exercise of outstanding warrants to acquire Common Stock, [270,764] shares of Common Stock are issuable upon conversion
of outstanding convertible notes, and [2,000,000] shares of Common Stock are issuable pursuant to a certain stock purchase agreement.
Under the Company’s 2016 Stock Option Plan, grants of shares or options to acquire an additional [3,646,808] shares of Common
Stock may be awarded. If all outstanding stock options and warrants were exercised, all convertible notes were converted and all
shares issuable pursuant to the stock purchase agreement are issued, the Company would have insufficient authorized but unissued
shares of Common Stock to accommodate all such exercises, conversions, contractual issuance obligations and could be in breach
of its contractual obligations under the relevant instruments. Such breaches may also require the Company to record on its December
31, 2017 balance sheet a liability that would decrease stockholders’ equity in an amount presently estimated by the Company
to be approximately $45 million. By increasing the authorized number of shares of Common Stock, the Company will have sufficient
authorized but unissued shares to honor the exercise of all outstanding stock options and warrants, the conversion of all outstanding
convertible notes and its other contractual commitment to issue shares. The increase in the number of authorized shares of Common
Stock will also permit the Company to make additional grants under the 2016 Stock Option Plan, as appropriate. The Company believes,
moreover, that if the increase in authorized shares were approved at the Special Meeting, prior to the issuance of its 2017 financial
statements, it would not be required to record a liability on its December 31, 2017 balance sheet related to the lack of authorized
shares.
Effects
of the Increase in Authorized Shares
If
Proposal No. 1 is approved, the authorized shares of Common Stock will be increased from 75,000,000 shares to 125,000,000 shares.
The
rights and preferences of the shares of Common Stock prior and subsequent to the increase in the Company’s authorized capital
will remain the same. It is not anticipated that the Company’s financial condition, management’s percentage ownership,
the number of stockholders, or any aspect of the Company’s business will materially change as a result of the Authorized
Capital Increase. The increase in authorized shares will not affect any stockholder’s percentage ownership interests in
the Company or proportionate voting power.
The
Company’s Common Stock is currently registered under Section 12(g) of the Securities Exchange Act of 1934 (the “
Exchange
Act
”). The proposed increase in the Company’s authorized capital will not affect the registration of the Common
Stock under the Exchange Act or the Company’s obligation to file reports and other documents with the Securities and Exchange
Commission, as required pursuant to the rules and regulations under the Exchange Act.
However,
while increase in authorized shares will not have an immediate effect on the rights of existing stockholders, it may have a dilutive
effect on the Company’s existing stockholders if additional shares are issued.
Anti-Takeover
Effects
The
increase in the number of authorized but unissued Common Stock will have an “anti-takeover effect”
by
permitting the issuance of shares to purchasers who might oppose a hostile takeover bid or oppose any efforts to amend or repeal
certain provisions of our Certificate of Incorporation or Bylaws. The increased number of available authorized but unissued shares
would give the Company’s management more flexibility to resist or impede a third party takeover bid that provides an above
market premium that is favored by a majority of the unaffiliated stockholders. However, the Company has no current intent or plan
to employ the additional shares as an anti-takeover device.
Vote
required
The
approval of Proposal No. 1 requires the affirmative vote of the holders of a majority of the issued and outstanding shares of
Common Stock entitled to vote at the Special Meeting.
Recommendation
THE
BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF THE INCREASE IN AUTHORIZED CAPITAL STOCK.
Accordingly,
the Board unanimously recommends that stockholders vote “FOR” Proposal 1.
PROPOSAL
NO. 2
To
AUTHORIZE THE COMPANY’s BOARD OF DIRECTORS TO IMPLEMENT A reverse stock split AT A RATIO of 1–for–2 AT ANY TIME
AFTER THIS SPECIAL MEETING BUT PRIOR TO THE NEXT ANNUAL MEETING of stockholders.
The
Board of Directors is seeking stockholder authorization to implement a reverse stock split of the Company’s Common Stock,
at a ratio of 1-for-2 (the “
Reverse Stock Split
”) in the discretion of the Board at any time prior to the 2018
Annual Meeting.
If
Proposal No. 2 is approved, the Reverse Stock Split would be implemented by the Company’s filing a Certificate of Amendment
to our Restated Certificate of Incorporation, substantially in the form attached hereto as
Appendix B
, with the Delaware
Secretary of State.
Except
for any changes resulting from the treatment of fractional shares (as described below), each stockholder will hold the same percentage
of the Common Stock outstanding immediately after the Reverse Stock Split as such stockholder held immediately prior to the Reverse
Stock Split. The Reverse Stock Split would not change the number of authorized shares of Common Stock.
Reasons
for the Reverse Stock Split
We
believe that the Reverse Stock Split could enhance the appeal of our Common Stock to the financial community, including institutional
investors and the general investing public. We believe that some institutional investors and investment funds are reluctant to
invest in lower–priced securities or may even be prohibited from buying stocks whose price is below a certain threshold
and that brokerage firms may be reluctant to recommend lower–priced stock to their clients This may be due in part to a
perception that lower–priced securities are less promising as investments, are less liquid (i.e., more difficult to sell
if an investor wishes to sell its shares) or are less likely to be followed by institutional securities research firms and therefore
tend to have less third–party analysis of the company available to investors. We believe that the reduction in the number
of issued and outstanding shares of our Common Stock achieved by the contemplated Reverse Stock Split and the anticipated increased
stock price resulting from the Reverse Stock Split, may encourage interest and trading in our Common Stock and a broader market
for our Common Stock than which currently exists and result in greater liquidity for our stockholders.
In
addition to increasing the price of our Common Stock to a level more appealing for investors, we believe that the Reverse Stock
Split would decrease stock price volatility by lessening the effect of small price changes in our Common Stock.
Additionally,
the Company currently intends to apply to list its Common Stock on either the Nasdaq stock exchange (“
Nasdaq
”)
or the New York Stock Exchange (“
NYSE
”) and an increased price per share may improve the Company’s chances
of meeting the Nasdaq’s or NYSE’s initial listing standards with respect to price per share. We believe that being
listed on either Nasdaq or NYSE will improve the liquidity of our Common Stock and provide the Company with greater recognition
and visibility.
The
Board of Directors currently intends to implement the Reverse Stock Split only if the Company is required to increase its stock
price to meet the listing standards of Nasdaq or NYSE as applicable, but may determine to implement the Reverse Stock Split for
the other reasons described in this Proxy Statement without regard to the listing of our Common Stock.
Notwithstanding
approval of Proposal 2 by the stockholders, the Board may, in its sole discretion, determine not to implement the Reverse Stock
Split.
We
cannot guarantee or predict with certainty that all or any of the anticipated beneficial effects on the trading market and price
per share of the Common Stock will occur or what effect the Reverse Stock Split will have on the trading market and price per
share of the Common Stock, particularly over the longer term. Some investors may view a Reverse Stock Split negatively, which
could result in a decrease in price per share and investment appeal. Additionally, any improvement in liquidity due to increased
institutional or brokerage interest may be offset by the lower number of outstanding shares.
There
are currently no specific plans, arrangements, agreements or understandings for the issuance of additional shares of Common Stock
that would be triggered by the Reverse Stock Split.
Determination
of the Ratio
Our
Board of Directors has determined that the Reverse Stock Split’s ratio of 1-for-2 is in the best interests of the Company
and its stockholders. Such determination was based upon many factors, including:
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the
historical and projected performance of our Common Stock;
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prevailing
market conditions;
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general
economic and financial conditions prevailing in our industry and in the marketplace;
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the
projected impact of the Reverse Stock Split ratio on trading liquidity in our Common Stock;
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our
current and anticipated market capitalization resulting from the Reverse Stock Split (including the number of shares of Common
Stock issued and outstanding);
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the
prevailing trading price for our Common Stock and the volume levels thereof; and
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the
potential devaluation of our Common Stock as a result of the Reverse Stock Split.
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Increase
in Authorized Shares of Common Stock and “Anti–Takeover” Effect
Our
Certificate of Incorporation currently authorizes 75,000,000 shares of Common Stock. If Proposal No. 1 is approved, the number
of authorized shares of Common Stock would increase to 125,000,000 shares. The Reverse Stock Split would not change the number
of authorized shares of Common Stock. Therefore, because the number of issued and outstanding shares of Common Stock would decrease,
the number of shares remaining available for issuance by us in the future would increase. Currently, the Company has insufficient
shares available for issuance if all currently outstanding stock options and warrants to acquire Common Stock were exercised in
full and all outstanding convertible notes were converted in full, as discussed under Proposal No. 1. Also, the Company may lack
sufficient authorized but unissued shares to satisfy the issuance of additional grants under its 2016 Stock Option Plan. If the
Reverse Stock Split is approved and implemented the Company will have sufficient authorized but unissued shares to accommodate
the exercise in full of all outstanding stock options and warrants to acquire Common Stock and to grant of additional awards under
the 2016 Stock Option Plan, irrespective of whether Proposal No. 1 to increase the number of authorized shares of Common Stock
is approved.
If
the Reverse Stock Split is approved there should also be additional shares available for issuance for various other corporate
purposes, as described under Proposal No. 1, irrespective of whether of Proposal No. 1 is approved, which the Company believes
will provide flexibility to meet its business needs and to take advantage of favorable business opportunities. The availability
of these authorized but unissued shares could also have anti-takeover effects, as described under Proposal No. 1, by permitting
the issuance of shares to purchasers who might oppose a hostile takeover of the Company or the elimination of corporate defenses
to actions not approved by management.
If
Proposal No. 1 to increase the number of authorized shares of our Common Stock is approved, the Reverse Stock Split will still
have the effect of increasing the number of shares available for future issuance, but its consequences in this regard will be
less pronounced.
Effects
of the Reverse Stock Split
As
of [February 13], 2018, we had [63,953,234] shares of Common Stock outstanding, an additional [6,000,000] shares of Common Stock
issuable upon the exercise of outstanding stock options, [12,865,701] shares of Common Stock issuable upon the exercise of outstanding
warrants to acquire Common Stock, [270,764] shares of Common Stock issuable upon conversion of outstanding convertible notes,
and [2,000,000] shares of Common Stock issuable pursuant a certain stock purchase agreement. Under the Company’s 2016 Stock
Option Plan, grants of shares or options to acquire additional [3,646,808] shares of Common Stock may be awarded. If the Reverse
Stock Split is approved and implemented, it will have a proportionate effect on all of these share numbers.
After
the Reverse Stock Split is implemented, every two shares of our Common Stock that a stockholder owns will be combined and converted
into a single share of Common Stock. We estimate that following the implementation of the Reverse Stock Split, we would have approximately
the same number of stockholders. Except for any changes resulting from the treatment of fractional shares, implementation of the
Reverse Stock Split will not change any stockholder’s proportionate ownership interest in the Company. The implementation
of the Reverse Stock Split may, however, increase the number of stockholders of the Company who own “odd lots” of
less than 100 shares of the Common Stock. Odd lots may be more difficult to sell, and brokerage commissions and other costs of
transactions in odd lots are generally higher than the costs of transactions of more than 100 shares of Common Stock.
The
Reverse Stock Split, in addition to reducing by one half the number of shares issuable upon exercise of the outstanding stock
options and Common Stock warrants, and the conversion of outstanding convertible notes, will have the effect of increasing by
a factor of two the exercise price of the options and warrants and the conversion price of the convertible notes.
The
Reverse Stock Split will not affect the par value of the Common Stock.
Although
the Board expects that the reduction in outstanding shares of Common Stock will result in an increase in the per share price of
the Company’s Common Stock, there is no guarantee that such increase in market price will occur. Similarly, there is no
guarantee that if the per share price of the Common Stock increases as a result of the Reverse Stock Split, such increase in the
per share price will be permanent. Further, the Reverse Stock Split may subject stockholders to the following risks:
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Should
the per–share price of the Common Stock decline after implementation of the Reverse Stock Split, the percentage decline
may be greater than would occur in the absence of the Reverse Stock Split.
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While,
the anticipated increase in per-share price of the Common Stock due to the Reverse Stock Split is expected to encourage interest
in the Common Stock and result in greater liquidity for our stockholders, the Common Stock’s liquidity could also be
adversely affected by the reduced number of shares outstanding after the Reverse Stock Split.
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The
Reverse Stock Split could be viewed negatively by the market and, consequently, lead to a decrease in our overall market capitalization.
It is often the case that the reverse split adjusted stock price and market capitalization of companies that effect a reverse
stock split decline.
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Treatment
of Fractional Shares
No
fractional shares will be issued as a result of the Reverse Stock Split. Stockholders who would otherwise be entitled to receive
fractional shares will automatically be entitled to receive an additional share of Common Stock. In other words, any fractional
share will be rounded up to the nearest whole number.
Exchange
of Stock Certificates
The
combination of, and reduction in, the number of shares of our outstanding Common Stock as a result of the Reverse Stock Split,
if approved by stockholders and implemented by the Company, will occur automatically on the date that the Certificate of Amendment
providing for the Reverse Stock Split is filed with the Delaware Secretary of State (the “Effective Date”), without
regard to the date that stock certificates representing the outstanding shares of the Common Stock prior to the Effective Date
are physically surrendered for new stock certificates.
As
soon as practicable after the Effective Date, transmittal forms will be mailed to each holder of record of certificates of the
Common Stock to be used in forwarding such certificates for surrender and exchange for certificates representing the number of
shares of the Common Stock such stockholder is entitled to receive as a result of the Reverse Stock Split. Our transfer agent
will act as exchange agent for purposes of implementing the exchange of the stock certificates. The transmittal forms will be
accompanied by instructions specifying other details of the exchange. Upon receipt of the transmittal form, each stockholder should
surrender the certificates representing the number of shares of Common Stock held by such stockholder prior to the Reverse Stock
Split in accordance with the applicable instructions. New certificates will not be issued to a stockholder until the stockholder
has surrendered his or her outstanding certificate(s) together with the properly completed and executed transmittal form to the
transfer agent.
Any
stockholder whose certificate has been lost, destroyed or stolen will be entitled to a new certificate only after complying with
the requirements that we and our transfer agent customarily apply in connection with replacing lost, stolen or destroyed certificates.
No
service charges, brokerage commissions or transfer taxes shall be payable by any holder of any old certificate, except that if
any new certificate is to be issued in a name other than the name in which the old certificate(s) was registered, it will be a
condition of such issuance that (i) the person requesting such issuance must pay to us any applicable transfer taxes or establish
to our satisfaction that such taxes have been paid or are not payable, (ii) the transfer complies with all applicable federal
and state securities laws, and (iii) the surrendered certificate is properly endorsed and otherwise in proper form for transfer.
STOCKHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATES AND SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM
FROM OUR TRANSFER AGENT.
If
the Reverse Stock Split is effected, stockholders who hold uncertificated shares (i.e., shares held in book-entry form on the
records of our transfer agent and not represented by a physical certificate) will not need to take any action and the transfer
agent will adjust their holdings electronically to give effect to the Reverse Stock Split.
If
your shares are held in “street name” in an account at a brokerage firm, bank or other nominee, then you are the beneficial
owner, rather than the registered owner, of those shares. We intend to treat stockholders holding Common Stock in street name
in the same manner as registered stockholders. Brokerage firms, banks and other nominees will be instructed to effect the Reverse
Stock Split for their account holders holding Common Stock in street name. However, these nominees may have different procedures
than the Company’s procedures for registered stockholders for processing the Reverse Stock Split. If you hold your shares
with a brokerage firm, bank or other nominee and if you have any questions in this regard, we encourage you to contact your nominee.
Accounting
consequences
The
par value of the Common Stock will remain unchanged at $0.001 per share after the Reverse Stock Split. As a result, our stated
capital, which consists of the par value per share of the Common Stock multiplied by the aggregate number of shares of the Common
Stock issued and outstanding, will be reduced proportionately at the Effective Date. Our additional paid–in capital, which
consists of the difference between our stated capital and the aggregate amount paid to us upon the issuance of all currently outstanding
shares of Common Stock, will be increased by a number equal to the decrease in stated capital. Further, net loss and net income
per share, book value per share and other per-share amounts will be increased as a result of the Reverse Stock Split because there
will be fewer shares of Common Stock outstanding.
No
appraisal rights
Under
the Delaware General Corporation Law, stockholders are not entitled to appraisal rights as a result of the proposed Reverse Stock
Split.
No
going private transaction
Notwithstanding
the decrease in the number of outstanding shares following the implementation of the Reverse Stock Split, the Board of Directors
does not intend for the Reverse Stock Split to be the first step in a “going private transaction” within the meaning
of Rule 13e–3 of the Exchange Act, and the implementation of the proposed Reverse Stock Split will not cause the Company
to go private.
Certain
material U.S. Federal Income Tax consequences of the Reverse Stock Split
The
following is a summary of certain material U.S. federal income tax consequences of the Reverse Stock Split to holders of our Common
Stock. It addresses only U.S. stockholders who hold the pre–Reverse Stock Split Common Stock and post–Reverse Stock
Split Common Stock as “capital assets” within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the “Code”). This discussion does not purport to be a complete discussion of all possible federal income
tax consequences of the Reverse Stock Split and does not account for or consider the federal income tax consequences to stockholders
in light of their individual investment circumstances or to stockholders subject to special treatment under the federal income
tax laws, including but not limited to:
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banks,
financial institutions, thrifts, mutual funds or trusts;
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tax–exempt
organizations;
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insurance
companies;
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dealers
in securities or foreign currency;
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real
estate investment trusts, personal holding companies, regulated investment companies, or passive foreign investment companies;
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foreign
or United States expatriate stockholders;
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stockholders
who are not “United States persons,” as defined in Section 7701 of the Code;
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controlled
foreign corporations;
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stockholders
with a functional currency other than the U.S. dollar;
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stockholders
who hold the pre–Reverse Stock Split Common Stock as part of a straddle, hedge, constructive sale, conversion transaction,
or other integrated investment;
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common
trusts;
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traders,
brokers, or dealers in securities who elect to apply a mark–to–market method of accounting;
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partnerships
or other pass–through entities or investors in such entities;
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stockholders
who are subject to the alternative minimum tax provisions of the Code;
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stockholders
who acquired their pre–Reverse Stock Split Common Stock pursuant to the exercise of employee stock options, through
a tax–qualified retirement plan, or otherwise as compensation; or
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holders
of warrants or stock options.
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In
addition, this discussion does not address any tax considerations under state, local, gift, or foreign tax laws.
This
summary is based upon the Code, existing and proposed U.S. Treasury regulations promulgated thereunder, legislative history, judicial
decisions, and current administrative rulings and practices, all as in effect on the date hereof and all of which are subject
to differing interpretations. Any of these authorities could be repealed, overruled, or modified at any time. Any such change
could be retroactive and, accordingly, could cause the tax consequences of the Reverse Stock Split to vary substantially from
the consequences described herein. Further, no ruling from the Internal Revenue Service (the “IRS”) or opinion of
legal or tax counsel will be obtained with respect to the matters discussed herein, and there is no assurance or guarantee that
the IRS would agree with the conclusions set forth in this summary. This information is not intended as tax advice to any person
and may not be relied upon to avoid penalties.
STOCKHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT, INCLUDING
THE APPLICABILITY OF ANY STATE, LOCAL, GIFT, OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX LAWS, AND ANY PENDING OR PROPOSED
LEGISLATION OR AUTHORITY.
The
Reverse Stock Split is intended to constitute a “recapitalization” within the meaning of Section 368(a)(1)(E) of the
Code. Certain filings with the IRS must be made by the Company and certain “significant holders” of the Common Stock
in order for the Reverse Stock Split to qualify as a recapitalization. The tax consequences discussed below assume that the Reverse
Stock Split is treated as a recapitalization and that the Common Stock is held by each stockholder as a capital asset:
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A
stockholder generally will not recognize gain or loss as a result of the Reverse Stock Split.
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A
stockholder’s aggregate tax basis in the post–Reverse Stock Split Common Stock received as a result of the Reverse
Stock Split will generally be equal to the aggregate tax basis of the pre–Reverse Stock Split Common Stock exchanged
therefor.
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A
stockholder’s holding period for the Common Stock held post–Reverse Stock Split will include the holding period
of the pre–Reverse Stock Split Common Stock exchanged.
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No
gain or loss for federal income tax purposes will be recognized by the Company as a result of the Reverse Stock Split.
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The
foregoing discussion is intended only as a summary of certain U.S. federal income tax consequences of the Reverse Stock Split
and does not purport to be a complete analysis or listing of all potential U.S. federal income tax consequences of the Reverse
Stock Split.
Votes
required
The
approval of the Reverse Stock Split, which may be implemented by the Board of Directors at any time before the 2018 annual meeting
of stockholders, requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Common Stock
entitled to vote at the Special Meeting.
Recommendation
THE
BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF THE REVERSE STOCK SPLIT WHICH MAY BE IMPLEMENTED BY THE
BOARD OF DIRECTORS AT ANY TIME PRIOR TO THE 2018 ANNUAL MEETING OF STOCKHOLDERS.
Accordingly,
the Board unanimously recommends that stockholders vote “FOR” Proposal 2.
PROPOSAL NO. 3
TO AUTHORIZE THE CHAIRMAN
OF THE SPECIAL MEETING TO ADJOURN THE MEETING TO A LATER DATE OR DATES TO ALLOW FURTHER SOLICITATION IN THE EVENT THERE ARE INSUFFICIENT
VOTES FOR APPROVAL OF PROPOSAL NO. 1 OR PROPOSAL NO. 2.
Reason for the Proposal
If approved, Proposal
No. 3 would allow the chairman of the Special Meeting to adjourn the meeting to a later date or dates to allow the Company’s
management additional time to solicit votes to approve Proposal No. 1 or Proposal No. 2.
Each of Proposal No.
1 and Proposal No. 2 requires for approval the affirmative vote of the holders of a majority of the outstanding shares of Common
Stock. If a quorum is present and Proposal No. 3 is approved, but the Company has not received the requisite vote for approval
of Proposal No. 1 or Proposal No. 2, the chairman of the Special Meeting will be authorized to adjourn the meeting, on one or
more occasions, so that the Company may solicit additional votes in favor of Proposal No. 1 or Proposal No. 2.
Consequences if Proposal No. 3 Is Not
approved
If stockholders do
not approve Proposal No. 3, the chairman of the Special Meeting will not have the authority to adjourn the Special Meeting to
allow the Company’s management additional time to solicit votes to approve Proposal No. 1 or Proposal No. 2. The chairman
would retain the authority to adjourn the meeting for another reason that is not reasonably foreseeable a reasonable time prior
to the meeting pursuant to general proxy authority or as otherwise permitted by law.
Vote required
The approval of Proposal
No. 1 requires the affirmative vote of the holders of a majority of shares of Common Stock present, in person or by proxy, and
voting at the Special Meeting on the proposal. If a quorum is present at the meeting, a stockholder’s failure to vote, or
a vote to abstain, will have no effect on the vote to approve Proposal No. 3.
Recommendation
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” PROPOSAL
NO. 3
Beneficial
Ownership of Common Stock by Certain Beneficial Owners and Management
The
following tables set forth certain information regarding beneficial ownership of the Common stock as of the Record Date, of:
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Each
person serving as a director, a nominee for director, or executive officer of the Company;
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All
executive officers and directors of the Company as a group; and
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All
persons who, to our knowledge, beneficially own more than five percent of the common stock.
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“Beneficial
ownership” here means direct or indirect voting or investment power over outstanding stock and stock which a person has
the right to acquire now or within 60 days after February __, 2018. See the accompanying footnotes to the tables below for more
detailed explanations of the holdings. Except as noted, to our knowledge, the persons named in the tables beneficially own and
have sole voting and investment power over all shares listed.
Percentage
beneficially owned is based upon [63,953,234] shares of Common Stock issued and outstanding as of [February 13], 2018.
Each
share of Common Stock has one vote per share of Common Stock held.
Name
of Beneficial Owner (1)
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Numbers
of
shares of
Common Stock
beneficially
owned
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Percentage
of
Common Stock
beneficially
owned
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Robert
B. Ladd (2)
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2,240,000
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3.50
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%
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H.
Robert Holmes
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752,819
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1.18
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%
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Michael
Onghai
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600,000
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*
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%
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Nolan
Bushnell
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350,000
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*
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Officers
and directors as a group (4 persons):
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3,942,819
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6.17
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%
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John
McAfee (3 )
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6,000,000
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8.58
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%
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Joseph
DiRenzo Sr. (4)
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5,672,000
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8.35
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%
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*
Less than 1%
(1)
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Unless
otherwise noted, the addresses for the above persons are care of the Company at 512 S. Mangum Street, Suite 408, Durham, NC
27701.
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(2)
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Includes
666,667 shares of restricted stock that vest on July 7, 2018, subject to the terms of Mr. Ladd’s Employment Agreement,
as amended.
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(3)
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Includes
(i) options to purchase 1,000,000 shares of the Company’s Common Stock at a per share price of $0.25; (ii) options to
purchase 2,000,000 shares of the Company’s Common Stock at a purchase price of $0.50 per share; and (iii) options to
purchase 3,000,000 shares of the Company’s Common Stock at a purchase price of $1.00 per share. Mr. McAfee’s beneficial
ownership is calculated based on the number of shares that would be outstanding as if Mr. McAfee exercised his options to
purchase the same number of shares of the Company’s common stock as of February [13], 2018.
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(4)
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As
reported on Schedule 13D/A filed by Mr. DiRenzo with the SEC on October 16, 2017, and as adjusted for subsequent conversions
and exercises, Mr. DiRenzo is the beneficial owner of (i) 1,672,000 shares of the Company’s Common Stock and (ii) 4,000,000
shares of common stock issuable upon exercise of certain warrants. Mr. DiRenzo’s beneficial ownership is calculated
based on the number of shares that would be outstanding as if Mr. DiRenzo exercised his warrants to purchase the same number
of shares of the Company’s common stock as of February [13], 2018.
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DESCRIPTION
OF CAPITAL STOCK
We
have authorized capital stock consisting of 75,000,000 shares of common stock, $0.001 par value per share and 10,000,000 shares
of preferred stock, $0.001 par value per share (“Preferred Stock”). As of the date of this Proxy Statement, there
are [63,953,234] shares of Common Stock outstanding and no shares of Preferred Stock outstanding.
The
following description of our capital stock is a summary only and is subject to applicable provisions of the Delaware General Corporations
Law, and our Restated Certificate of Incorporation and Bylaws, each as amended from time to time.
Common
Stock
Each
holder of Common Stock has the right to one vote for each share of Common Stock registered in the holder’s name on the books
of the Company with respect to all matters submitted to a vote of stockholders. The holders of our common stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of Directors out of legally available funds. Upon liquidation,
dissolution or winding-up, the holders of our common stock are entitled to share ratably in all assets that are legally available
for distribution. The holders of our common stock have no preemptive, subscription, redemption or conversion rights.
The
rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights
of the holders of any series of preferred stock, which may be designated solely by action of the Board of Directors and issued
in the future. Holders of Common Stock are entitled to such dividends as may be declared by the Board of Directors from time to
time, provided that required dividends, if any, on Preferred Stock have been paid or provided for. In the event of the liquidation,
dissolution, or winding up, whether voluntary or involuntary, of the Company, the assets of the Company available for distribution
to stockholders, remaining after the payment to holders of Preferred Stock of the amounts, if any, to which they are entitled,
will be distributed pro rata to the holders of Common Stock.
Our
common stock is quoted on the OTCQB marketplace under the ticker symbol “MGTI.”
Preferred
Stock
The
shares of Preferred Stock may be divided and issued from time to time in one or more classes and/or series within any class or
classes as may be determined by the Board of Directors of the Company, each such class or series to be distinctly designated and
to consist of the number of shares determined by the Board of Directors. The Board of Directors is vested with authority to adopt
resolutions with respect to any unissued and/or treasury shares of Preferred Stock to issue the shares, to fix the number of shares
constituting any class or series, and to provide for the voting powers, designations, preferences and relative, participating,
optional or other special rights, qualifications, limitations or restrictions, if any, of Preferred Stock, and each class or series
thereof, in each case without approval of the stockholders.
The
number of shares, voting powers, designations, preferences and relative, participating, optional or other special rights, qualifications,
limitations or restrictions, if any, of any class or series of Preferred Stock which may be designated by the Board of Directors
may differ from those of any and all other class or series at any time outstanding.
OTHER
MATTERS
As
of the date of this Proxy Statement, the Board does not intend to present at the Special Meeting any matters other than those
described herein and does not presently know of any matters that will be presented by other parties. If any other matter is properly
brought before the meeting for action by stockholders, proxies in the enclosed form returned to us will be voted in accordance
with the recommendation of the Board or, in the absence of such a recommendation, in accordance with the judgment of the proxy
holder.
WHERE
YOU CAN FIND MORE INFORMATION
The
Company is subject to the informational requirements of the Exchange Act and files reports, proxy statements and other information
with the Securities and Exchange Commission (the “SEC”). The public may read and copy any materials that we file with
the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information
on the operation of the Public Reference Room by calling 1-800-SEC-0330. The statements and forms that the Company files with
the SEC have been filed electronically and are available for viewing or copy on the SEC maintained Internet site that contains
reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC. The
Internet address for this site can be found at: www.sec.gov.
STOCKHOLDER
PROPOSALS FOR THE 2018 ANNUAL MEETING
Our
bylaws provide that, for matters to be properly brought before an annual meeting, business must be either (i) specified in the
notice of annual meeting (or any supplement or amendment thereto) given by or at the direction of the Board of Directors, (ii)
otherwise brought before the annual meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought
before the annual meeting by a stockholder.
Stockholder
proposals intended for inclusion in our proxy statement relating to the next annual meeting in 2018 must be received by us no
later than June 28, 2018. If the date of next year’s annual meeting is moved by more than 30 days before or after the anniversary
date of this year’s annual meeting, then the deadline for inclusion of a stockholder proposal in our proxy materials is
instead a reasonable time before we begin to print and send our proxy materials for that meeting. Any such proposal must comply
with Rule 14a–8 of Regulation 14A of the proxy rules of the SEC.
Notice
to us of a stockholder proposal, including director nominations, submitted otherwise than pursuant to Rule 14a–8 also will
be considered untimely if received at our principal executive offices other than during the time period set forth below and will
not be placed on the agenda for the meeting. In addition to any other applicable requirements, for business to be properly brought
before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to our secretary.
To be timely, a stockholder’s notice must be delivered to the secretary at our principal executive offices not later than
the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th)
day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the
date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice
by the stockholder must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior
to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual
meeting and the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by us.
SPECIAL
MEETING AND VOTING INFORMATION
Outstanding
Voting Securities and Voting Rights
The
subject class of securities to which this proxy statement relates is our Common Stock, $0.001 par value per share. Each share
of common stock is entitles the holder thereof to one vote.
Record
Date
Only
stockholders of record at the close of business on the record date, February [22], 2018, are entitled to receive notice of and
to vote at the Special Meeting or any adjournments or postponements thereof. As of the close of business on the record date, the
Company had [63.953,234] shares of Common Stock outstanding and entitled to vote at the Special Meeting.
Information
Concerning Proxies; Revocation of Proxies
Sending
in a signed proxy will not affect your right to attend the Special Meeting and vote in person. All proxies which are properly
completed, signed and returned to us prior to the Special Meeting, and which have not been revoked, unless otherwise directed
by you, will be voted in accordance with the recommendations of the Board of Directors set forth in this proxy statement. You
may revoke your proxy at any time before it is voted either by (i) filing with the Secretary of the Company, at its principal
executive offices, 512 S. Mangum Street, Suite 408, Durham, NC 27701, a written notice of revocation or a duly executed proxy
bearing a later date, or (ii) by attending the Special Meeting, delivering written notice of revocation of your proxy and voting
your shares in person.
If
you hold your shares in “street name” through a brokerage firm, bank or other nominee, you must follow the instructions
of your nominee in order to revoke your proxy.
Solicitation
of Proxies
The
expenses of this solicitation will be paid by the Company. To the extent necessary to ensure sufficient representation at
the Special Meeting, proxies may be solicited by any appropriate means by officers, directors and regular employees of the
Company, who will receive no additional compensation therefor. The Company has retained Okapi Partners LLC to solicit
proxies for the Special Meeting and will pay Okapi Partners an initial fee of $10,000 and additional fees to be determined at
the conclusion of the solicitation plus reimbursement of out-of-pocket expenses. The Company will pay persons holding
common stock in their names or in the names of their nominees, but not owning such stock beneficially (such as brokerage
firms, banks and other nominees), for the reasonable expense of forwarding soliciting material to their
principals.
Quorum
and Certain Voting Matters
A
majority of the outstanding shares of common stock must be represented in person or by proxy at the Special Meeting in order to
constitute a quorum for the transaction of business. There is no cumulative voting. Abstentions will be treated as Common Stock
present and entitled to vote for purposes of determining the presence of a quorum.
The
affirmative vote holders of a majority of all shares of Common Stock issued and outstanding and entitled to vote at the Special
Meeting will be required to approve each of Proposal No. 1, to increase the number of authorized shares of Common Stock, and Proposal
No. 2, to authorize the Reverse Stock Split. The affirmative vote of the holders of a majority of the shares present, in person
or by proxy, and voting at the Special Meeting on the proposal is required to approve Proposal No. 3.
The
executive officers and directors of the Company and certain of their affiliates, who together own or vote approximately [6.2]%
of the voting power of the shares outstanding and entitled to vote, have indicated they will vote in favor of both Proposals.
Under
Delaware law, a proxy marked “ABSTAIN” is not considered a vote cast. Accordingly, an abstention will have the effect
of a vote against Proposal No. 1 or Proposal No. 2, as the case may be, but will have no effect on the vote to approve
Proposal No. 3.
Each
of Proposal No. 1, Proposal No. 2 and Proposal No. 3 is considered “routine” under the rules of the New York
Stock Exchange, so that brokerage firms, banks and other nominees that do not receive voting instructions from their clients may
vote the shares of Common Stock held for the account of their clients in their discretion on these proposals.
Voting
of Proxies
Shares
represented by properly executed proxies will be voted at the Special Meeting in accordance with the instructions specified thereon.
If no instructions are specified, the shares represented by any properly executed proxy will be voted “FOR” each of
Proposal No. 1, Proposal No. 2 and Proposal No. 3.
Adjournment
or Postponement
If
Proposal No. 3 is approved, the chairman of the Special Meeting will be authorized to adjourn the meeting to a later date or dates
to allow the Company’s management additional time to solicit votes to approve Proposal No. 1 or Proposal No. 2.
The
Special Meeting may otherwise be adjourned or postponed to the extent permitted by law. Any adjournment may be made
without notice, other than by an announcement made at the Special Meeting. The favorable vote of a majority of the shares of our
common stock present in person or represented by proxy and entitled to vote on the adjournment proposal, may adjourn the Special
Meeting.
Any adjournment or postponement of the Special Meeting will allow our stockholders who have already sent in their proxies
to revoke them at any time prior to their use at the Special Meeting was adjourned or postponed.
STOCKHOLDERS
ARE URGED TO IMMEDIATELY MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOUR VOTE IS IMPORTANT.
MGT
Capital Investments, Inc.
/s/
Robert B. Ladd
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Robert
B. Ladd
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President
and CEO
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February
_, 2018
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Appendix
A
Certificate
of Amendment
of
Restated
Certificate of Incorporation
of
MGT Capital Investments, Inc.
MGT
Capital Investments, Inc., organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify:
FIRST
: That the Board of Directors of MGT Capital Investments, Inc. adopted a proposed amendment of the Restated Certificate of
Incorporation of said corporation to effect an increase of authorized capital stock, as more completely set forth below, declaring
said amendment to be advisable.
The
proposed amendment reads as follows:
The
first paragraph of Article IV of the Restated Certificate of Incorporation is hereby amended and restated as following:
“The
Board of Directors of the Corporation has the authority to establish more than one class or series of shares and to set the relative
rights and preferences of any such different class or series. The total authorized number of shares of the Corporation is 135,000,000
shares, divided into 125,000,000 shares of common stock, par value $0.001 per share (“Common Stock”) and 10,000,000
shares of preferred stock, par value $0.001 per share (“Preferred Stock”), as more fully described below:”
SECOND:
That, pursuant to a resolution of its Board of Directors, a special meeting of the stockholders of MGT Capital Investments,
Inc. was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware
at which meeting the necessary number of shares as required by statute were voted in favor of granting the Board of Directors
the authority to amend the Restated Certificate of Incorporation to increase the authorized shares of the Company’s Common
Stock
THIRD:
That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN
WITNESS WHEREOF,
the said corporation has caused this certificate to be signed on this __ day of ________________, 2018.
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MGT
CAPITAL INVESTMENTS, INC.
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By:
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Name:
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Title:
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Appendix
B
Certificate
of Amendment
of
Restated
Certificate of Incorporation
of
MGT Capital Investments, Inc.
MGT
Capital Investments, Inc., organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify:
FIRST
: That the Board of Directors of MGT Capital Investments, Inc. adopted a proposed amendment of the Restated Certificate of
Incorporation of said corporation to effect a reverse stock split of the Common Stock of the corporation, as more completely described
below, declaring said amendment to be advisable.
SECOND:
That, pursuant to a resolution of its Board of Directors, a special meeting of the stockholders of MGT Capital Investments,
Inc. was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware
at which meeting the necessary number of shares as required by statute were voted in favor of granting the Board of Directors
the authority to amend Article IV of the Restated Certificate of Incorporation by adding the following:
Upon
the filing and effectiveness (the “Effective Time”) of this Certificate of Amendment pursuant to the General Corporation
Law of the State of Delaware, each two shares of the Corporation’s Common Stock issued and outstanding immediately prior
to the Effective Time shall, automatically and without any action on the part of the respective holders thereof, be reclassified
and combined into one (1) validly issued, fully paid and non-assessable share of Common Stock, subject to the treatment of fractional
share interests described below (the “Reverse Stock Split”). No fractional shares of Common Stock shall be issued
as a result of the Reverse Stock Split. Fractional shares will be rounded up to the next whole share. The Corporation will issue
one full share of the post Reverse Stock Split Common Stock to any stockholder who would have been entitled to receive a fractional
share as a result of the process.
THIRD:
That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN
WITNESS WHEREOF,
the said corporation has caused this certificate to be signed on this __ day of ________________, 2018.
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MGT
CAPITAL INVESTMENTS, INC.
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By:
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Name:
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Title:
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Form
of Proxy
VOTE
BY INTERNET - www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions
to obtain your records and to create an electronic voting instruction form.
VOTE
BY PHONE _________________
Use
any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date
or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to ____________________________________.
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FOR
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AGAINST
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ABSTAIN
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1.
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To
authorize the Board of Directors, without further action of the stockholders, to amend the Company’s Restated Certificate
of Incorporation to increase the Company’s authorized common stock (“Common Stock”) from 75,000,000 shares
to 125,000,000 shares.
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2.
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To
authorize the Board of Directors, without further action of the stockholders, to implement a reverse split of the Company’s
Common Stock, at a ratio of 1-for-2at any time after the Annual Meeting, but before the 2018 annual meeting of stockholders.
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3.
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To authorize the chairman of the Special Meeting to adjourn
the meeting to a later date or dates to allow further solicitation in the event there are insufficient votes to approve Proposal
1 or Proposal 2.
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And
to transact any other business as may properly come before the meeting or any adjournment or postponement thereof.
The
Board of Directors recommends you vote FOR Proposals 1, 2 and 3.
For
address change/comments, mark here.
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YES
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NO
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Please
indicate if you plan to attend this meeting.
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Please
sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give
full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign
in full corporate or partnership name, by authorized officer.
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Signature
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Date
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Signature
(Joint Owners)
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Date
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MGT
CAPITAL INVESTMENTS, INC.
Special
Meeting of Stockholders
March
___, 2018 10:00 AM
This
proxy is solicited by the Board of Directors
The
stockholder(s) hereby appoints Robert Ladd and Dmitry Molotkov, and each of them acting separately, as proxy with the power to
appoint (his/her) substitute, and hereby authorizes them, and each of them acting singly, to represent and to vote, as designated
on the reverse side of this ballot, all of the shares of (Common/Preferred) stock of MGT CAPITAL INVESTMENTS, INC. that the stockholder(s)
is/are entitled to vote at the Special Meeting of stockholder(s) to be held at 10:00 AM, EST on March __, 2018, at the offices
of MGT Capital Investments, Inc., 512 S. Mangum Street, Suite 408, Durham, NC 27701, and any adjournment or postponement thereof.
This
proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted
in accordance with the Board of Directors’ recommendations.
Address change/comments:
MGT Capital Investments (PK) (USOTC:MGTI)
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