A review of its 10-K reveals too many red flags.

In 2008 alone, the management team paid themselves an all time high total compensation of $4.5mn or 1/3 of the market cap at year end! (Reg Flag #1). Not bad for a year when the MGT share price was down by almost 90%.


I struggle to justify some of their titles and positions, some of which look redundant, and it's hard to see where MGT starts and where Medicsight stops. (Red Flag #2).

MGT Capital is in breach of NYSE exchange rules. It has been so for almost the past 7 months, for failing the routine of holding a simple AGM. It's missed 2 deadlines to do so already. (Red Flag #3). It risks being delisted (!!!!!).

Insitutional ownership is too low (Red Flag #4). A fragmented, private investor shareholder base tends to be more docile and easier to mislead. It also makes the share price easier to manipulate. The share price chart looks essentially flat for at least 3 prolonged periods of time. The last one from 11/04 to 01/06 (Red Flag #5)

Item 13 in the 10-K: "Related Transactions". "Asia IT", controlled by William Paterson-Brown's - yes TIM's BROTHER! holds significant cash on behalf of MGT in exchange for above market interest rates. STINKS! (Red Flag #6)

Asia IT has received up to $6.1mn in fees and commissions from MGT since 2005. MGT has also bought $5mn in 2 companies related to Tim's brother Will (Red Flag #7!) So it seems that Tim and Will have taken $11mn from MGT in the past 4 years.

#8: Asia IT has no website to speak of. Looks like Asia IT effectively exists for the purpose of performing related interest transactions for MGT.

All these dodgy transactions, plus executive compensation, seem to exceed to the current market cap of MGT. At this rate, Tim Paterson-Brown, family and friends will have deprived MGT of all its funds in no time! No wonder they cannot even hold an AGM!

Red Flag #9: auditing firm: "Amper, Politziner & Mattia". Never heard of them.

Red Flag #10: MGT changed its headquarters from NY to London. A London HQ makes US regulatory scrutiny harder?

Red Flag #11: Tim Paterson-Brown's background is a Chartered Surveyor. Wonder how he got the job. Before that, and this is ommited in his 10-K biography (Red Flag #12), from 1993-2004 (relevant enough?), Tim and bother Will (yes, MGT's investment banker!) were involved in "Purely Cotton", a toilet paper company that went bankrupt amidst allegations of fraud. Why ommitt this messy bankruptcy from his CV?

Red Flag #13: the Investor Relations site of MGT is badly out of date. Even the tiniest of small caps maintains a properly updated IR site. But again, even the tiniest of small caps manages to call an AGM...

Red Flag #14: MGT's balance sheet shows a negative $239mn in "Accumulated [Shareholders] Equity". Of these, only $80mn relate to Medisights negative retained earnings. Where have the other $160mn gone? It's admirable that Tim Patterson-Brown has retained his job for 6 years. No wonder MGT's share price lost almost 90% of its value last year! And no wonder MGT's share price trades at a discount to its alleged NAV! At this rate of value destruction Tim Patterson-Brown ain't no Warren Buffet!

Too many red flags to even give MGT the benefit of the doubt as a legitimate concern. INVEST IN EITHER AT YOUR OWN RISK.