United States

Technology

August 15, 2016

MGT Capital Investments, Inc.

Edward Woo, CFA

(949) 259-4932
ewoo@ascendiant.com

Initiating Coverage with BUY and $6 Target

Transformative deal to move into cyber security can be major catalyst for
the stock. With leadership from industry pioneer John McAfee, we believe
risk/reward favorable.
New focus on cyber security: After several years of pursuing social/casino
gaming, MGT last year decided to exit this space. It is now focused on
partnering with industry pioneer John McAfee to move into cyber security.

COMPANY
UPDATE

Rating: Buy
Ticker:

MGT

Price:

$3.18

Target:

$6.00

A bet on McAfee: In May, MGT announced that it has entered into an

agreement to acquire certain technology and assets from D-Vasive Inc., a
provider of anti-spy software, for 44 million shares of MGT stock (representing
~66% ownership of the combined company). In conjunction with the
acquisition, MGT announced the proposed appointment of John McAfee as
Executive Chairman and Chief Executive Officer.
Start-up risks/rewards: With limited financials, we acknowledge that MGTs
move into cyber security is in start-up phase. If the proposed transactions go
through (which would require shareholder approval at its shareholders
meeting tentatively scheduled for August 24), MGT plans to invest significantly
in the development of cyber security products. While we do not know the
specifics of these products or its timeline, we do know that Mr. McAfee is still
highly regarded in the cyber security industry (despite some distractions in the
recent past) and his experience include some major accomplishments.
Large market potential: We believe there are substantial market demand for
cyber security products. Revenue and market valuations for companies in this
sector are in the multi-billions. While extremely competitive with many larger
and established companies, we believe that the rapid pace of evolving and
persistent technologies will present opportunities for new entrants like MGT
to enter this very large market.
However, challenges exist: Competition in cyber security software from many
sources exists and getting new products to succeed (even if they are superior)
with customers (either consumers or enterprises) is a major challenge.
Recent execution uneven: While MGTs share price since its announcement to
enter cyber security (in May) has been phenomenal (from $0.36 to its current
price of $3.18), MGTs stock has underperformed over the past several years
due to uneven financial performance and a lack of consistent profitability in its
gaming investments. Because of this, its liquidity has been tight.
No estimates for now: Due to the early stage nature of MGTs move into cyber
security, we are not publishing detailed forward estimates for the company.
We plan to publish our estimates once we have better financial visibility.
Valuation difficult: As a start-up, valuation is always very difficult due to
limited financial visibility and/or products. However, we believe concerns are
outweighed by its growth prospects and valuation. We believe that by
partnering with Mr. McAfee, MGT can deliver solid upside to its current share
price with startup/VC type of investment returns (multiples of investments).
Positive risk versus reward: Though we acknowledge that there are many risks
in the company (including the very early stage of its new business), we believe
that the large market opportunities presents a high reward for these risks
resulting in a positive risk versus reward scenario for an investment in MGT.
Our $6 price target is based on a comparative multiple analysis (10x estimated
revenue of $35 million within the next 5 years) (which we caution is subject to
many assumptions and variables which may not ultimately be realized). This
represents significant upside from current share price and we believe
appropriately balances out the companys high risks with its high prospects.
Company Description
Based in Harrison, NY, MGT was primarily in the business of acquiring and
developing assets in the online, mobile gaming, and social casino industry but
is now focusing on cyber security.

Stock Data
Exchange:
52-week Range:
Shares Outstanding (million):
Market cap ($million):
EV ($million):
Debt ($million):
Cash ($million):
Avg. Daily Trading Vol. ($million):
Float (million shares):
Short Interest (million shares):
Dividend, annual (yield):
Revenues (US$ million)

NYSE
MKT
NasdaqGS
$0.15
5.58
$13.29
- 21.21
1827
$57
$487
$57
$325
$0$93
$0$255
$33
$3.0
1824
4 3.7
$0 (NA%)

2012E
Revenues (US$
million) 2012E
(New)
(Old)
2015A
Q1 Mar
73A
71E
(Cur.)
Q2 Jun
137E
Q1
Mar
0A
Q3 Sep
361E
363E
Q2
Jun
0A
Q4 Dec
164E
Q3
Sep
0A
Total
735E
Q4 Dec
0A
EV/Revs
0.4x
Total
0A

2013E
(New)
2016A
79E
(Cur.)
146E
0A
379E
172E
775E

2013E
(Old)
76E
381E

0.4x

EV/Revsper ShareN/A
Earnings
(pro forma)
Earnings per 2012E
Share (pro 2012E
forma)
Q1 Mar
Q2 Jun
Q1 Mar
Q3 Sep
Q2 Jun
Q4 Dec
Q3 Sep
Total
Q4 Dec
Total
P/E
P/E

(New)
2015A
(0.59)A
(Cur.)
0.09E
(0.11)A
1.23E
(0.06)A
0.24E
(0.09)A
$1.09E
(0.09)A
(0.34)A
16.5x
N/A

(Old)
(0.60)E
0.10E
0.25E

2013E
(New)
2016A
(0.31)E
(Cur.)
0.14E
(0.07)A
1.40E
0.32E
$1.60E

2013E
(Old)

11.3x

EBITDAS* (US$ million)

Q1 Mar
Q2 Jun
Q3 Sep
Q4 Dec
Total
EV/EBITDAS

2012E
(New)
(18)A
3E
57E
14E
57E
5.7x

2012E
(Old)
(18)E
4E
58E
15E
58E

2013E
(New)
(8)E
5E
66E
18E
81E

2013E
(Old)

4.0x

*EBITDAS defined as earnings before interest, taxes,

Important Disclosures
Ascendiant Capital Markets LLC seeks to do business
with companies covered by its research team.
Consequently, investors should be aware that the
firm may have a conflict of interest that could affect
the objectivity of this report. Investors should
consider this report as only a single factor in making
an investment decision.
For analyst certification and other important
disclosures, refer to the Disclosure Section, located
at the end of this report, beginning on page 9.

6E

82E

MGT: MGT Capital Investments, Inc.

Exhibit 1: Timeline of Recent MGT Capital Investments News

November 17, 2015 MGT announced that it is considering all methods to create value for shareholders, including potential mergers,
spinoffs, distributions and other strategic actions. This follows its September announcement that it has closed the sale of its daily fantasy
sports business for over $5.0 million (in cash and securities).
May 9, 2016 - MGT announced that it has entered into an agreement to acquire certain technology and assets from D-Vasive Inc., a
provider of leading edge anti-spy software. In conjunction with the acquisition, MGT announced the proposed appointment of John McAfee
as Executive Chairman and Chief Executive Officer. MGT also intends to change its corporate name to John McAfee Global Technologies,
Inc. Major terms of the deal include the payment to D-Vasive Inc. stockholders of 23.8 million restricted shares of MGT stock and $300,000
in cash.
May 26, 2016 MGT announced that it has entered into an agreement to acquire certain technology and assets from Demonsaw LLC, a
provider of a secure and anonymous file sharing software platform. In conjunction with the acquisition, MGT announced the proposed
appointment of Eric J. Anderson (founder of Demonsaw) as Chief Technology Officer. Major terms of the deal include the payment to
Demonsaw LLC members of 20.0 million restricted shares of MGT stock.
July 8, 2016 MGT filed a Preliminary Proxy Statement for its upcoming meeting of shareholders. In order to simplify the transactions
with D-Vasive, Inc. and Demonsaw LLC, the two acquisitions have been combined into one. MGT will acquire the same agreed-upon
assets and the sellers will receive the same agreed-upon consideration (a total of 43,800,000 shares).
August 2, 2016 - MGT sold $2,050,000 in unsecured promissory notes in a private placement (due September 30, 2019 with 12%
interest).
August 24, 2016 Tentative date for Annual Shareholder Meeting.
Source: Company reports.

Exhibit 2: MGT Capital Investments Proposed Transaction

MGT has entered into an Asset Purchase Agreement (APA) to acquire certain assets related to DVasive, a business in the
development and marketing of certain privacy and antispy applications (that seek access to personal contacts, cameras and other
information on smart phones, tablets and other mobile devices). These include applications for use on mobile devices, intellectual
property, customer lists, databases, sales pipelines, proposals and project files, licenses and permits. DVasives financial operations
has been minimal.
Upon closing of the transaction, the company will pay:
(i) $300,000 (the Closing Cash),
(ii) 8,760,000 unregistered shares of MGT common stock (the Escrow Shares) to be held in escrow for six months; and
(iii) 35,040,000 unregistered shares of MGT common stock (the Closing Shares).
The closing of the transaction is contingent on the approval of MGTs shareholders.
The company also agreed as part of the closing conditions to enter into certain consulting agreements with Future Tense Secure
Systems, Inc., certain employment agreements with key management of DVasive and an employment agreement with John McAfee
pursuant to which Mr. McAfee will join the company as Executive Chairman of the Board of Directors and Chief Executive Officer. MGT
also intends to change its corporate name to John McAfee Global Technologies, Inc.

Source: Company reports, and Ascendiant Capital Markets estimates

August 15, 2016

Ascendiant Capital Markets, LLC

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MGT: MGT Capital Investments, Inc.

Exhibit 3: John McAfees Background

John McAfee
Proposed Executive Chairman and Chief Executive Officer
Mr. McAfee, age 71, is a technology innovator who is best known for starting one of the first leading anti-virus software company,
McAfee Associates, in 1987. McAfee Associates was subsequently acquired by Intel for $8 billion in 2010, though Mr. McAfees
involvement with the company ended in 1994. Mr. McAfees extensive experience in computing include UNIVAC, Xerox, NASA, Booz
Allen Hamilton and Lockheed-Martin. Since leaving McAfee Associates, Mr. McAfee has founded several more companies, including
Tribal Voice, developer of one of the first instant messaging platforms; QuorumEx, a biotech research startup; and Future Tense
Central, developer of a suite of mobile security apps including D-Central and D-Vasive. Mr. McAfee also served on the Board of Zone
Labs, a network security company, and with Everykey, makers of the Everykey personal security device.
Source: Company reports, John McAfee/YouTube, and Ascendiant Capital Markets estimates

Exhibit 4: MGT Capital Investments Proxy Statement for Annual Meeting (as filed Preliminary on 8/8/16)

Proposals for Shareholders (each requires majority vote of the shares present or by proxy):
1. To elect the five (5) nominees named in the attached proxy statement as directors to be elected for the term provided herein and until
their successors have been elected and qualified;
2. To ratify the appointment of Friedman LLP as the Companys independent registered certified public accounting firm for the year
ending December 31, 2016;
3. To authorize the issuance of 43,800,000 shares (Purchase Price Shares) of Common Stock to certain sellers (Sellers) set forth on
the signature page of that certain Asset Purchase Agreement, dated May 9, 2016, as amended July 7, 2016 (the APA) (1) , a copy of
such amendment is attached as Annex A to this proxy statement pursuant to which the Company shall purchase certain assets from
such Sellers in accordance with NYSE MKT Company Guide Section 712; and
4. To approve the Companys 2016 Stock Option Plan (the Plan) and approve the issuance of 6,000,000 options and 2,000,000
restricted stock under the Plan to certain officers of the Company.
5. To authorize an amendment to the Companys Restated Certificate of Incorporation to increase the Companys authorized common
stock from 75,000,000 shares to 250,000,000 shares of common stock.
6. To authorize the Companys Board of Directors to reduce the ratio of the previously approved reverse stock split from a range of 1
for8 to 1for40 to a ratio of not less than 1for2 and to authorize the Board of Directors to extend the implementation of the
previously approved stock split (at a new ratio of not less than 1for2) to any time after the Meeting, but before the 2017 annual
meeting of stockholders.
7. To ratify the employment agreements for Mr. Robert Ladd and Mr. John McAfee.
8. To ratify amendment of the Companys Restated Certificate of Incorporation to change its name to be John McAfee Global
Technologies, Inc.
9. To transact any other business as may properly come before the meeting or any adjournment or postponement thereof.
Source: Company reports.

August 15, 2016

Ascendiant Capital Markets, LLC

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MGT: MGT Capital Investments, Inc.

Exhibit 5: Leading Security Software Companies

Company
AVG Technologies NV
CyberArk Software Ltd.
FireEye Inc.
Imperva Inc.
Infoblox Inc.
Palo Alto Networks, Inc.
Proofpoint Inc.
Symantec Corp.

Ticker
AVG
CYBR
FEYE
IMPV
BLOX
PANW
PFPT
SYMC

Market Cap.
(blns)
$
1.3
$
1.8
$
2.4
$
1.5
$
1.1
$
11.4
$
3.2
$
13.9

Annual
Market
Revenues
Cap. /
(blns)
Revenues
$
0.4
3.2x
$
0.2
10.2x
$
0.7
3.4x
$
0.3
5.9x
$
0.4
2.8x
$
1.3
8.8x
$
0.3
10.5x
$
3.6
3.9x
Average
Median

6.1x
4.9x

Closing Price
(as of 8/12/16)
$
24.76
$
52.95
$
14.36
$
46.51
$
19.36
$
127.18
$
74.88
$
22.54

$
$
$
$
$
$
$
$

EPS
0.87
0.73
(3.59)
(0.19)
(0.14)
(2.53)
(3.24)
3.83

Average
Median

P/E
28.5x
72.5x
-4.0x
-243.5x
-138.3x
-50.3x
-23.1x
5.9x
-44.0x
-13.6x

Source: Yahoo! Finance, company reports, and Ascendiant Capital Markets estimates

August 15, 2016

Ascendiant Capital Markets, LLC

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MGT: MGT Capital Investments, Inc.

Exhibit 6: MGT Capital Investment Inc. Stock Price (5 Years)

Source: Nasdaq.com

August 15, 2016

Ascendiant Capital Markets, LLC

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MGT: MGT Capital Investments, Inc.

FINANCIAL MODEL

MGT Capital Investments, Inc.

Income Statement ($ mils)
Mar-15 Jun-15
Fiscal Year End: December 31 Q1A
Q2A
Total Revenue
Cost of Revenues
Gross Profit
Sales and marketing
Research and development
General and administrative
Restructuring and other
Total operating expenses

0.000

Sep-15
Q3A

Dec-15
Q4A

0.261

0.090

(0.247)

0.104

0.000

0.096
0.165

0.005
0.085

(0.096)
(0.151)

0.005
0.099

0.000
0.000

(0.039)

0.000
0.000
2.821
1.068
3.889

0.654

0.039

0.133
0.564
0.658

Mar-16 Jun-16 Sep-16 Dec-16 2016 Mar-17 Jun-17 Sep-17 Dec-17 2017
Q1A
Q2E
Q3E
Q4E FY-E Q1E
Q2E
Q3E
Q4E FY-E

1.065
0.275
1.340

0.981

Operating income (loss)

(1.340)

(0.855)

(0.786) (0.809)

(3.790) (0.654)

Interest income (expense)

Other income (expense)
Income before income taxes
Income taxes
Net income (loss)

(0.041)
0.087
(1.294)

0.005
(0.001)
(0.851)

0.008 0.005
(0.543) (0.511)
(1.321) (1.315)

(1.294)

(0.851)

(1.321) (1.315)

(0.023) 0.025
(0.968) (0.708)
(4.781) (1.337)
0.000 0.000
(4.781) (1.337)

Nonrecurring/noncash adjustments
Net income (pro forma)
(1.294)

(0.851)

(1.321) (1.315)

0.000
(4.781) (1.337)

Shares, Basic
Shares, Diluted

11.260
11.300

13.578
13.600

14.123 14.123
14.200 14.200

13.894 18.003
13.950 18.100

EPS Basic (Pro forma)

($0.11)

($0.06)

($0.09) ($0.09)

($0.34) ($0.07)

EPS Diluted (Pro forma)

($0.11)

($0.06)

($0.09) ($0.09)

($0.34) ($0.07)

Margins
Gross margin
Sales and marketing
Research and development
General and administrative
Operating margin
Tax rate, GAAP
Net margin

#DIV/0! 63.2%
94.4% 61.1%
95.2%
#DIV/0! 14.9%
0.0% 15.8%
0.0%
#DIV/0!
0.0%
0.0%
0.0%
0.0%
#DIV/0! 375.9% 713.3% -53.8% 2712.5%
NM -327.6% -873.3% 327.5% -3644.2%
0.0%
0.0%
0.0%
0.0%
0.0%
NM -326.1% -1467.8% 532.4% -4597.1%

1.020

0.642
0.229
0.871

2015
FY-A

Y/Y % change
Total Revenue
Gross margin
Sales and marketing
Research and development
General and administrative
Operating income (loss)
Net income (loss)
EPS Diluted (Pro forma)

0.654

#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
NM
0.0%
NM
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
-39%
-51%
3%
-35%

Source: Company reports and Ascendiant Capital Markets estimates.

August 15, 2016

Ascendiant Capital Markets, LLC

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MGT: MGT Capital Investments, Inc.

MGT Capital Investments, Inc.

Balance Sheet ($ mils)
Fiscal Year End: December 31

Mar-15
Q1A

Jun-15
Q2A

Sep-15
Q3A

Dec-15
Q4A

Mar-16
Q1A

1.380

1.097

0.428

0.359

0.189

0.005
0.155

0.012
0.123

0.251
1.791

0.251
1.483

0.012
0.049
1.041
1.875
3.405

0.061
0.444
1.575
2.439

0.003
0.880
0.640
1.712

0.033
2.267
6.444
0.039

0.026
2.117
6.444
0.039

0.005
1.259
1.496
0.039

0.035
0.730
1.496
0.039

0.030
0.673
1.496

1.380

1.380

0.030
1.380

Assets
Cash and cash equivalents
Short term investments
Restricted cash
Accounts receivable, net
Prepaid expenses and other
Investments available for sale
Notes receivable
Total current assets
Property and equipment, net
Intangibles, net
Goodwill
Restricted cash
Note receivable
Long term investments
Other
Total assets

10.574

10.109

7.584

6.119

5.321

0.404
0.312
0.776

0.324
0.152
0.744

0.249
0.189
0.137

0.063
0.015
0.001

0.122
0.037
0.012

1.492

1.220

0.575

0.079

0.171

Other long term liabilities

Long term debt
Total other liabilities

0.000

0.000

0.000

0.000

0.000

Minority Interest

0.355

0.333

0.243

0.005

(0.018)

Liabilities and stockholders equity

Accounts payable
Accrued liabilities
Other
Short term debt
Total current liabilities

Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17

Q2E
Q3E
Q4E
Q1E
Q2E
Q3E
Q4E

Common stock
0.013
0.014
0.014
0.018
0.018
Additional paid-in capital
309.452 310.108 310.248 311.167 311.207
Retained earnings
(300.457) (301.285) (302.606)
(1.206)
(0.776)
Accumulated other comprehensive income
(0.281)
(0.281)
(0.890) (303.944) (305.281)
Other
Total stockholders equity
9.082
8.889
7.009
6.040
5.150
Total stockholders equity and liabilities
10.574

10.109

7.584

6.119

5.321

Jun-15
Q2A

Sep-15
Q3A

Dec-15
Q4A

Mar-16
Q1A

Balance Sheet Drivers

Mar-15
Q1A
Book & Cash Value (per share)
Book Value per Share (diluted)
Cash per Share (diluted)
Net cash per Share (diluted)
Source: Company reports and Ascendiant

August 15, 2016

$0.80
$0.65
$0.49
$0.12
$0.08
$0.03
$0.12
$0.08
$0.03
Capital Markets estimates

$0.43
$0.03
$0.03

Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17

Q2E
Q3E
Q4E
Q1E
Q2E
Q3E
Q4E

$0.28
$0.01
$0.01

Ascendiant Capital Markets, LLC

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MGT: MGT Capital Investments, Inc.

MGT Capital Investments, Inc.

Cash Flow Statement ($ mils)
Fiscal Year End: December 31

Mar-15 Jun-15 Sep-15 Dec-15

Q1A
Q2A
Q3A
Q4A

Cash flow from operating activities

Net income
(1.381) (0.850)
Depreciation
0.004 0.013
Amortization
0.057 0.243
Stock comp
0.094 0.085
Deferred income taxes
Other gains/losses
Acquisition expense
Other
0.275 (0.275)
Changes in operating assets and liabilities:
Accounts receivable
(0.007)
Note receivable
Prepaid expenses & other current0.012
assets 0.038
Accounts payable
0.168 (0.089)
Accrued expenses
0.132 (0.160)
Deferred revenue
Income tax payable and other
0.001 (0.211)

2015
FY-A

0.572

0.360

Cash provided by (used in) financing

0.712activities
0.932
Effect of exchange rate on cash

Mar-17 Jun-17 Sep-17 Dec-17

Q1E
Q2E
Q3E
Q4E

2017
FY-E

0.012

0.005
0.000
0.042 (0.012) 0.080
(0.029) (0.186) (0.136)
0.037 (0.174) (0.165)
0.000
0.211 0.010 0.011

0.037

0.058
0.059
0.022
0.011

(0.674) (2.424) (0.376)

Cash flow from investing activities

Purchases of property and equipment
(0.038) (0.038)
Additions to intangible assets
0.035
0.035
Purchase/sale short-term investments
0.000
Acquisitions
(0.250)
(0.250)
Other
(0.150) (0.001) 0.252
0.101

Cash flow from financing activities

Issuance of debt
Repayment of debt
Issuance of stock
1.072
Repurchase of common stock
Proceeds from stock option exercises
Other
(0.360)
Dividends and distributions

2016
FY-E

(1.315) (1.576) (5.122) (1.360)

(0.011) 0.008 0.014 0.006
(0.130) 0.057 0.227 0.057
0.044 0.068 0.291 0.040
0.000
0.394 0.628 1.022 0.731
0.144 0.144
0.858 0.347 1.205

Net cash (used in) provided by operating

(0.638) (1.213)
activities
0.101

Net cash used in investing activities

(0.150) (0.001)

Mar-16 Jun-16 Sep-16 Dec-16

Q1A
Q2E
Q3E
Q4E

(0.038) (0.152)

0.197
0.009
0.206

0.000
0.000
0.855 2.499
0.000
0.000
(0.807) (0.212) (1.019)
0.000
(0.807)

0.643

1.480

0.000

0.000

Net increase (decrease) in cash (0.076)

and equivalents
(0.282) (0.669) (0.069) (1.096) (0.170)
Beginning cash and equivalents 1.455 1.379 1.097 0.428 1.455 0.359
Ending cash and equivalents
1.379 1.097 0.428 0.359 0.359 0.189
Source: Company reports and Ascendiant Capital Markets estimates

August 15, 2016

Ascendiant Capital Markets, LLC

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MGT: MGT Capital Investments, Inc.

ANALYST CERTIFICATION
Each analyst hereby certifies that the views expressed in this report reflect the analysts personal views about the subject securities
or issuers. Each analyst also certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to
the specific recommendations or views expressed in this report. The analyst who prepared this report is compensated based upon
the overall profitability of Ascendiant Capital Markets, LLC, which may, from time to time, include the provision of investment
banking, financial advisory and consulting services. Compensation for research is based on effectiveness in generating new ideas for
clients, performance of recommendations, accuracy of earnings estimates, and service to clients.

MGT Capital Investments, Inc.

Ascendiant Capital Markets, LLC has received compensation for advisory or investment banking services from the company
in the past 12 months.

IMPORTANT DISCLOSURES
This report has been distributed by Ascendiant Capital Markets, LLC and is for the sole use of our clients. This report is based on
current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied
on as such. This report contains information from various sources, including United States government publications, The Wall Street
Journal and other periodicals, Yahoo! Finance and other sources, and is for informational purposes only and is not a recommendation
to trade in the securities of the companies mentioned within the report. We seek to update our research and recommendations as
appropriate, but the large majority of reports are published at irregular intervals as we consider appropriate and, in some cases, as
constrained by industry regulations.
We may have a business relationship with companies covered in this report. Ascendiant Capital Markets, LLC may make a market in
the securities of the subject company. We and our affiliates, officers, directors, and employees will from time to time have long or
short positions in, act as principal in, and buy or sell, the securities or derivatives (including options and warrants) thereof of covered
companies referred to in this report. This report is not an offer to sell or the solicitation of an offer to buy any security in any
jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account
the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any
information in this report is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax
advice. The price and value of the investments referred to in this report may fluctuate.
Following are some general risks that can adversely impact future operational and financial performance and share price valuation:
(1) industry fundamentals with respect to legislation, mandates, incentives, customer demand, or product pricing; (2) issues relating
to competing companies or products; (3) unforeseen developments with respect to management, financial condition or accounting
policies or practices; or (4) external factors that affect the interest rates, currency, the economy or major segments of the economy.
Past performance is not a guide to future performance, future returns are not guaranteed, and loss of original capital may occur.
Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable
for all investors. Our report is disseminated primarily electronically, and, in some cases, in printed form. The information contained
in this report is not incorporated into the contents of our website and should be read independently thereof. Copyright 2016
Ascendiant Capital Markets, LLC. No part of this material may be copied, photocopied or duplicated by any means or redistributed
without the prior written consent of Ascendiant Capital Markets, LLC.

Risks & Considerations

Risks to attainment of our share price target include changes and demand for technology, investor sentiment for investing in
technology stocks, and consumer sentiment and industry growth for security software companies, competition, and changing
macroeconomic factors.

Ascendiant Capital Markets, LLC Rating System

BUY:

We expect the stock to provide a total return of 15% or more within a 12-month period.

HOLD:

We expect the stock to provide a total return of negative 15% to positive 15% within a 12-month period.

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SELL:

We expect the stock to have a negative total return of more than 15% within a 12-month period.

Total return is defined as price appreciation plus dividend yield.

Ascendiant Capital Markets, LLC Rating System

Prior to January 31, 2014, ASCM used the following rating system:
Strong Buy:

We expect the stock to provide a total return of 30% or more within a 12-month period.

Buy:

We expect the stock to provide a total return of between 10% and 30% within a 12-month period.

Neutral:

We expect the stock to provide a total return of between minus 10% and plus 10% within a 12-month period.

Sell:

We expect the stock to provide a total return of minus 10% or worse within a 12-month period.

Speculative Buy:

This rating is reserved for companies we believe have tremendous potential, but whose stocks are illiquid or
whose equity market capitalizations are very small, often in the definition of a nano cap (below $50 million in
market cap). In general, for stocks ranked in this category, we expect the stock to provide a total return of 50%
or more within a 12-month period. However, because of the illiquid nature of the stocks trading and/or the nano
cap nature of the investment, we caution that these investments may not be suitable for all parties.

Total return is defined as price appreciation plus dividend yield.

Ascendiant Capital Markets, LLC Distribution of Investment Ratings (as of July 15, 2016)
Investment Banking Services
Past 12 months

Rating
Buy
Hold
Sell
Total

Count
35
5
0
40

Percent
88%
13%
0%
100%

Count
4
0
0
4

Percent
11%
0%
0%
10%

Other Important Disclosures

Our analysts use various valuation methodologies including discounted cash flow, price/earnings (P/E), enterprise value/EBITDAS,
and P/E to growth rate, among others. Risks to our price targets include failure to achieve financial results, product risk, regulatory
risk, general market conditions, and the risk of a change in economic conditions.

Dissemination of Research
Ascendiant Capital Markets, LLC research is distributed electronically via the Thomson Reuters platforms, Bloomberg, Capital IQ and
FactSet. Please contact your investment advisor or institutional salesperson for more information.

General Disclaimer
The information and opinions in this report were prepared by Ascendiant Capital Markets, LLC. This information is not intended to
be used as the primary basis of investment decisions and because of individual client objectives it should not be construed as advice
designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer
or solicitation with respect to the purchase or sale of any security. The reader should assume that Ascendiant Capital Markets, LLC
may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers
discussed herein. The opinions, estimates, and projections contained in this report are those of Ascendiant Capital Markets, LLC as
of the date of this report and are subject to change without notice. Ascendiant Capital Markets, LLC endeavors to ensure that the
contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are
accurate and complete. However, Ascendiant Capital Markets, LLC makes no representation or warranty, express or implied, in
respect thereof, takes no responsibility for any errors and omissions contained herein, and accepts no liability whatsoever for any
loss arising from any use of, or reliance on, this report or its contents. Information may be available to Ascendiant Capital Markets,
LLC, or its affiliates that is not reflected in this report. This report is not to be construed as an offer or solicitation to buy or sell any
security.

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Additional Disclosures
Ascendiant Capital Markets, LLC is a broker-dealer registered with the United States Securities and Exchange Commission (SEC) and
a member of the FINRA and SIPC. Ascendiant Capital Markets, LLC is not a Registered Investment Advisor nor is it an investment
advisor registered with the Securities and Exchange Commission or with the securities regulators of any state, and at the present
time is not eligible to file for federal registration.

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