REG - capAI PLC - Execution of Heads of Terms for Game42

capAIAnnouncement

04/08/2025 10:30

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RNS Number : 8390T  capAI PLC  04 August 2025

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4 August 2025

capAI plc

(the "Company" and, together with its subsidiaries and subsidiary
undertakings, the "Group" or "capAI")

 

Execution of Heads of Terms for Game42

 

capAI (LSE: CPAI) is pleased to announce that it has entered into non-binding
heads of terms ("HOTs") with R42 Group LLC ("R42") in relation to Game42, an
AI-driven book-to-game platform that converts written content into immersive,
interactive gameplay experiences ("Game42").

 

The proposed transaction, which remains subject to receipt of regulatory
approval and entry into an agreed form of definitive licence and option
agreement ("LOA"), would support the ongoing buildout of capMedia, the
Company's dedicated AI-powered media division.

 

Game42 remains under active development by R42, with delivery of a minimum
viable product ("MVP") targeted by 31 December 2025. The licence and option
rights that would be granted to capAI under the LOA would only become
effective upon formal delivery of a completion notice (the "Completion
Notice") confirming the platform is ready for commercialisation.

 

Further details are provided below.

 

About Game42

 

Game42 is a next-generation generative artificial intelligence ("AI") platform
that transforms written content into immersive, interactive game experiences.
It combines intelligent narrative adaptation, procedural level design, dynamic
dialogue systems, and AI-powered character rendering. The platform is designed
to serve independent authors, content studios, and intellectual property
("IP") holders by significantly reducing the cost, complexity, and development
time of traditional game production.

 

By leveraging generative AI, Game42 allows creators to produce high-quality
game assets and storylines with minimal technical overhead, enabling literary
IP to be rapidly adapted into playable formats. The platform is strategically
positioned within one of the fastest-growing segments of the entertainment
market.

 

The AI in gaming segment, valued at US $3.28 billion in 2024, is projected
to grow to US $51.26 billion by 2033, representing a compound annual growth
rate ("CAGR") of 36.1%. 1 

 

Market Opportunity and Disruption Potential

 

The global entertainment and media industry is projected to grow from about
US$3.0 trillion in 2024 to US$3.5 trillion by 2029, led by advertising, live
events, and video games, with AI‑driven personalisation and digital formats
increasingly central. PwC's Global Entertainment & Media Outlook 2025-2029
highlights the expanding opportunity across creative and immersive sectors. 2 

 

Within this ecosystem, gaming is one of the largest and faster-growing
consumer content verticals. The global gaming market is projected to grow from
US $269 billion in 2025 to over US $435 billion by 2030, with a CAGR of
approximately 10.4% according to Mordor Intelligence. 3 

An alternative projection from Grand View Research suggests the market could
reach US $505 billion by 2030, driven by growth in mobile, cloud, AR/VR, and
esports, with creator tools and generative AI emerging as additional
catalysts. 4 

 

In parallel, the AI in gaming segment, valued at US $3.28 billion in 2024,
is forecast to reach US $51.26 billion by 2033, representing a CAGR of
36.1%, and highlighting the transformative impact of AI-assisted production,
automation, and interactive storytelling.1

These trends, from scalable game automation to story-to-interactive
adaptation, signal a fundamental shift in how games are conceived, developed,
and monetised. Game42 is built to unlock this opportunity, offering a platform
that compresses production timelines, lowers development costs, and seamlessly
extends literary IP into a high-growth interactive medium.

 

Proposed Transaction Structure and Conditions

 

The proposed transaction is subject to regulatory clearance. Upon receiving
such regulatory clearance, the Company and R42 intend to execute an agreed
form LOA pursuant to the previously announced strategic alliance between the
two parties.

 

Subject to any amendments necessary to reflect the fact that Game42 is in
development and has not yet reached MVP status, the HOTs mirror the structure
announced on 7 July 2025 for Author42.

 

The terms of the proposed transaction specified in the HOTs (which would only
be effective on receipt of regulatory clearance and entry by the parties into
the agreed form LOA) include, inter alia:

 

·      Since Game42 is still in development by R42, any rights granted
to capAI shall only commence upon delivery of the Completion Notice by R42 to
capAI.

 

·      The Completion Notice shall confirm, in good faith and in
consultation with the capAI / R42 Alliance Steering Committee, that Game42
meets the mutually agreed MVP criteria and is functionally complete and ready
for commercialisation.

 

·      R42 shall use commercially reasonable efforts to deliver the
Completion Notice by 31 December 2025, it being acknowledged by the Parties
that this is a non-binding estimate subject to development progress.

 

·      If the Completion Notice has not been delivered by 30 June 2026,
either party may terminate the LOA with immediate effect by written notice to
the other party, without liability, save in respect of any clauses that are
normally expressed to survive termination.

 

·      capAI shall be granted an exclusive worldwide licence for a
12-month period to operate the Game42 platform, commencing only upon capAI's
receipt of the Completion Notice (the "Licence Period"), which carries no
upfront payment or consideration, giving capAI operational freedom without
initial capital outlay.

 

·      capAI shall retain full commercial and operational control and
shall be entitled to 100% of revenue generated under the licence.

 

·      During the Licence Period, capAI shall commercially advance
Game42 in good faith, including maintaining a dedicated development team,
overseen via the capAI / R42 Alliance Steering Committee.

 

·      capAI has the right, but not the obligation, to acquire 100% of
the Game42 IP (including any enhancements or derivative works) at any time
during the Licence Period ("Option"); R42 cannot oblige capAI to exercise the
Option.

 

·      If the Option is exercised by capAI, capAI shall issue £2
million in new ordinary shares to R42, with the number of new ordinary shares
calculated based on a volume-weighted average price (VWAP) over a defined
pricing period prior to exercise.

 

·      To preserve regulatory flexibility, should the issuance of such
new ordinary shares exceed applicable thresholds or require prior shareholder
approval, capAI and R42 may agree to settle part or all of the consideration
in the form of unsecured convertible loan notes carrying a 10% non-compounding
interest rate on equivalent terms.

 

·      As further consideration, to the extent the Option is exercised
by capAI, R42 shall also be entitled to 20% of any net proceeds from a future
monetisation, sale, or liquidity event involving all or substantially all of
the Game42 IP.

 

·      If capAI does not exercise the Option within the Licence Period,
all rights revert to R42, including any improvements or derivative works
created by capAI.

 

This structure provides capAI with commercial flexibility during development
while securing long-term strategic value alignment with R42.

Governance and Related Party Considerations

 

The HOTs have been entered into within the framework of the strategic alliance
between capAI and R42. Professor Ronjon Nag, Executive Director of capAI and
Founder of R42, has recused himself from all negotiations and approvals
relating to the proposed transaction from capAI's perspective. The Company's
board of directors has implemented appropriate governance protocols, including
independent review of the terms.

 

Management Commentary

 

Richard Edwards, Executive Chairman of capAI, commented:

 

"Game42 is expected to build on the early momentum of Author42 and take capAI
into the high-growth gaming sector; one of the most dynamic segments in global
media. This initiative reflects our model of combining capital discipline with
breakthrough AI innovation. As Game42 reaches MVP and moves toward
commercialisation, we see meaningful potential to reshape how interactive
content is created, distributed, and monetised. We will keep the market
updated as regards regulatory clearance, which is necessary before we can
enter into the agreed form LOA with R42."

 

Professor Ronjon Nag, Executive Director of capAI, added:

 

"Our strategic alliance continues to deliver high-impact platform
opportunities, and Game42 is no exception. By automating and accelerating game
development workflows, it unlocks new creative and commercial frontiers for
authors, IP holders, and players alike. This is precisely the kind of scalable
AI-native business our strategic alliance was built to launch."

 

The Company will provide further updates as regulatory clearance is obtained
and the LOA is executed.

 

For the purposes of UK MAR, the person responsible for arranging release of
this Announcement on behalf of capAI is Richard Edwards, Executive Chairman.

 

Enquiries

 

Company:

capAI plc hello@capaiplc.com

 

Broker Enquiries:

Peterhouse Capital Limited Tel: +44 (0) 207 469 0930

 

Important Legal Information

 

The information contained in this Announcement is for background purposes only
and does not purport to be full or complete, nor does this Announcement
constitute or form part of any invitation or inducement to engage in
investment activity. No reliance may be placed by any person for any purpose
on the information contained in this Announcement or its accuracy, fairness or
completeness. The contents of this Announcement are not to be construed as
legal, financial or tax advice.

 

This Announcement does not constitute or form part of any offer or invitation
to sell or issue, or any solicitation of any offer to purchase or subscribe
for, any securities, nor shall it (or any part of it), or the fact of its
distribution, form the basis of, or be relied on in connection with, any
contract therefor.

 

This Announcement may include forward-looking statements, which are based on
current expectations and projections about future events, including about the
Group's operations, strategy, financial performance, development milestones,
and the future prospects of its business divisions, including capMedia Inc and
the Game42 platform. These statements may include, without limitation, any
statements preceded by, followed by or including words such as "target",
"believe", "expect", "aim", "intend", "may", "anticipate", "estimate", "plan",
"project", "will", "can have", "likely", "should", "would", "could" and any
other words and terms of similar meaning or the negative thereof.

 

Forward-looking statements are based on current expectations and are subject
to various risks and uncertainties that could cause actual outcomes to differ
materially. These risks include, but are not limited to: successful execution
of definitive agreements; regulatory approvals; development timelines; market
acceptance; technological shifts; and broader economic conditions. No
representation or warranty is made or will be made that any forward-looking
statement will come to pass, and no assurance can be given that any
forward-looking statement will prove accurate. Except as required by law,
capAI undertakes no obligation to revise or update any forward-looking
statement. The forward-looking statements in this Announcement speak only as
at the date of this Announcement.

 1 
https://www.grandviewresearch.com/industry-analysis/ai-gaming-market-report
(https://www.grandviewresearch.com/industry-analysis/ai-gaming-market-report)

 

 2 
https://www.pwc.com/gx/en/news-room/press-releases/2025/pwc-global-entertainment-media-outlook.html
(https://www.pwc.com/gx/en/news-room/press-releases/2025/pwc-global-entertainment-media-outlook.html)

 

 3  https://www.mordorintelligence.com/industry-reports/global-gaming-market
(https://www.mordorintelligence.com/industry-reports/global-gaming-market)

 

 4  https://www.grandviewresearch.com/industry-analysis/gaming-industry
(https://www.grandviewresearch.com/industry-analysis/gaming-industry)

 

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