Zattikka PLC Business Update (9683K)

TIDMZATT

RNS Number : 9683K

Zattikka PLC

05 August 2013

 
 For immediate release   5 August 2013 
 

ZATTIKKA PLC

('Zattikka' or the 'Company')

Update re: insolvency proceedings, appointment of administrator and sale of assets

Further to the announcements made on 22 July, 29 July and 1 August 2013, Zattikka is announcing today a series of events and transactions.

Sneaky Games

The Company has agreed to sell Sneaky Games, Inc. (SGI) to Seal Gaming LLC, a group led by David Godwin and David Jarvie, two previous shareholders in SGI. The transaction is expected to complete by 15:00 BST today.

The assets sold subject of the transaction include 100 per cent. of the shares held by Zattikka in SGI, all games operated by SGI including the recently launched Arena of Heroes (AoH), and a license to use and adopt SNAP source code for internal purposes, with no continuing obligations on Zattikka. For the year ended 31 December 2012 (pro-forma unaudited), SGI recorded revenue bookings of $0.5m and attributable adjusted EBITDA loss of $0.8m. For the six months ended 30 June 2013 (unaudited), the Directors of Zattikka expect SGI to have recorded revenue bookings of $0.1m and attributable adjusted EBITDA loss of $1.1m. While AoH is a promising new game franchise, it will require a further period of development, marketing and adaptation to achieve success, which Zattikka can no longer finance.

The consideration received is the surrender and cancellation of $1.2m of loan notes and accrued interest payable by Zattikka and issued to the previous vendors of SGI in April 2012. These proceeds will reduce the indebtedness of the Company. The transaction will also include the return via blank stock transfer forms of 1.6m of ordinary shares in Zattikka held by the previous vendors of SGI , representing approximately 7.3% of the outstanding shares of Zattikka. Any transfer of these shares will be determined by the administrator.

Intention to appoint Administrator

The Company announces its intention to appoint David Dunckley and Ian Corfield of Grant Thornton as joint administrators (the "Administrators") to complete the restructuring of the Company. This appointment is expected to be approved by 16.30 BST today.

Immediate Next Steps

The Company is in advanced negotiation for the sale of Concept Art House Inc. and certain assets of Hattrick Europe Limited which are expected to close later today. As part of that process, the Board will first appoint the Administrators to the Company and its subsidiary, Hattrick Europe Limited, and shortly thereafter it is anticipated the Administrators will complete the sales referred to above. Both transactions are expected to close by 17:00 BST today.

Concept Art House, Inc.

The Administrators anticipate that by 17:00 BST today the Company will have completed the sale of Concept Art House, Inc. (CAH) to CAH Holdings Group, Inc., a group led by James Zhang and Matthew Le Merle, two previous shareholders in CAH. This disposal does not require the approval of shareholders pursuant to the AIM rules, as the disposal has arisen due to insolvency.

Certain of the holders of the CAH vendor loan notes, including James Zhang, a substantial shareholder of Zattikka, are related parties to Zattikka, for the purposes of Rule 13 of the AIM Rules for Companies. The directors of Zattikka consider, having consulted with Canaccord Genuity Limited, that the terms of the agreement to dispose of CAH are fair and reasonable insofar as Zattikka shareholders are concerned.

The assets sold subject to the transaction include 100 per cent. of the shares held by Zattikka in CAH, all games operated by the Zattikka AppStore to the extent transferable (excluding Hattrick) and CAH's Shanghai based subsidiary, Yi Yi Ju (Shanghai) Software Technology Co Limited. Specifically this does include the recently launched Legacy of a Thousand Suns game (LoTS) and also includes a license to use and adopt SNAP source code for internal purposes, with no continuing obligations on Zattikka. For the year ended 31 December 2012 (proforma unaudited), CAH recorded revenue bookings of $4.2m and attributable adjusted EBITDA of $0.1m. For the six months ended 30 June 2013 (unaudited), the Directors of Zattikka expect CAH to have recorded revenue bookings of $2.2m and attributable adjusted EBITDA of $0.1m. The core art service business continues to grow but with increasing pressure on margins. While LoTS is a promising derivative of the Facebook game operated by 5(th) Planet Games, it will also require a further period of development, marketing and adaptation to achieve success, which CAH and Zattikka can no longer finance.

The company has $2.4m of vendor loan notes payable to the previous vendors of CAH, which in the Directors' opinion the Company will unlikely to able to refinance when they become due. The consideration received is the surrender and cancellation of at least 97% ($2.5m) of the loan notes and accrued interest payable by Zattikka and issued to the previous vendors of CAH in April 2012, and $0.4m of cash. These proceeds will be available to reduce the indebtedness of the Company. The transaction will also include the return via blank stock transfer forms of at least 97% (4.3m) of the ordinary shares in Zattikka held by the previous vendors CAH, representing approximately 19.2% of the outstanding shares of Zattikka. These shares may be transferred to any person other than a director of the Company or anyone acting in concert (as defined in the City Code on Takeovers and Mergers) with a director or any connected person of a director. Any transfer of these shares will be determined by the administrator.

Hattrick Europe Limited ("HEL")

The Administrator is further anticipating that by 17:00 BST today the Company, HEL and Hattrick Holdings Ltd (a Gibraltar subsidiary of the Company) will have completed the sale of certain key assets in respect of the Hattrick and Popmundo games (HEL) to Hattrick Limited, a group led by Mattias Soderhielm and Johan Gustafsson, two previous leading shareholders in Hattrick Holdings Limited (Vendors) which sold these assets to the Company in April 2012. This disposal does not require the approval of shareholders pursuant to the AIM rules as the disposal has arisen due to insolvency.

The assets sold subject of the transaction include HEL's intellectual property rights, certain server equipment and various key contracts. For the year ended 31 December 2012 (proforma unaudited), HEL recorded revenue bookings of $5.5m and attributable adjusted EBITDA of $1.4m. For the six months ended 30 June 2013 (unaudited), the Directors of Zattikka expect HEL to have recorded revenue bookings of $2.8m and attributable adjusted EBITDA of $0.9m. Despite a promising Q1, new global pricing structure, and tutorial improvement being rolled out in Q3, the core Hattrick game has continued to perform weaker than anticipated by the Directors in regard to new subscriber growth later in Q2 and the outlook for H2 now looks unachievable. In addition, the Vendors had an interest payment due in June on the vendor loan note amendment which, in view of the trading weakness and reduced cash flow the Company cannot make.

The consideration received is the surrender and cancellation of all of the EUR6.4m loan notes issued to the previous vendors of HEL in April 2012 and all related accrued interest payable by Zattikka (including accrued interest already demanded by the noteholders) and Euros 1.2m of cash. These proceeds will be used first to repay Barclays Bank plc who have security over the HEL shares and assets and thereafter reduce the general indebtedness of the Company. The transaction will also include the return via blank stock transfer forms of 1.65m ordinary shares in Zattikka, representing approximately 7.4% of the outstanding shares of Zattikka. These shares may be transferred to any person other than a director of the Company or anyone acting in concert (as defined in the City Code on Takeovers and Mergers) with a director or any connected person of a director. Any transfer of these shares will be determined by the administrator.

Further Steps

The result of these transactions will be to reduce the indebtedness of the Company by approximately $14.5m and the net indebtedness of the Company will be approximately $2.5m as a result. The cash from the disposals above will be used to settle the costs of the Administrations of the Company and HEL including the above transactions and then on a pari passu basis in accordance with the statutory priority the remaining liabilities of the Company and HEL, stemming largely from the original acquisitions, listing and diligence on possible further acquisitions. As noted above, the Company and HEL have therefore entered into administration. The Company's shares will remain suspended from trading on AIM.

Further announcements will be made by the Company as and when appropriate.

For further information, please contact:

 
Zattikka 
Mark Opzoomer, Chief Executive       [phone] 
 Officer                              6410 
Rob Gorle, Chief Financial Officer 
 Canaccord Genuity Limited 
  Nominated Adviser and Broker        [phone] 
  Simon Bridges / Peter Stewart        8000 
 

For more information visit www.zattikka.com

This information is provided by RNS

The company news service from the London Stock Exchange

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