REG - capAI PLC - Licence and Option Agreement for Game42

capAIAnnouncement

02/09/2025 07:30

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RNS Number : 6241X  capAI PLC  02 September 2025

THIS ANNOUNCEMENT ("ANNOUNCEMENT") AND THE INFORMATION CONTAINED HEREIN IS
RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR
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WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE PROHIBITED BY ANY
APPLICABLE LAW.

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
REGULATION 2014/596/EU, WHICH IS PART OF THE DOMESTIC LAW OF THE UNITED
KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND ("UK") PURSUANT TO THE MARKET
ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI 2019/310) ("UK MAR"). UPON THE
PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION (AS DEFINED IN UK
MAR) IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 

2 September 2025

capAI plc

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

 

Execution of Licence and Option Agreement for Game42, an AI-Powered
Book-to-Game Platform

 

 

capAI (LSE: CPAI) is pleased to announce that, having addressed the necessary
regulatory considerations, it has executed a definitive Licence and Option
Agreement ("LOA") with R42 Group LLC ("R42") for Game42, a generative
artificial intelligence ("AI") platform designed to convert written content
into immersive, interactive gameplay experiences ("Game42").

 

The LOA follows the non-binding heads of terms ("HOTs") between capAI and R42,
announced on 4 August 2025, and the terms remain aligned with that framework.
Game42 remains under active development by R42, with delivery of a minimum
viable product ("MVP") targeted by 31 December 2025. Consistent with the HOTs,
the licence and option rights that are granted to capAI under the LOA will
only become effective upon formal delivery of a mutually agreed completion
notice (the "Completion Notice") confirming Game42 is ready for
commercialisation.

 

Creator42's development has allowed for accelerated MVP delivery, while Game42
is advancing along its original timetable, reflecting the greater scope of its
build-out. The Board sees this as a natural sequencing: with Author42 now
commercialising and Creator42 next in line, Game42 provides the subsequent
phase of growth in the pipeline. This measured progression ensures each
platform is validated before launch, creating a consistent cadence of product
rollouts across publishing, screen, and gaming. The Board believes this
disciplined approach positions the Group to capture long-term value across
multiple high-growth markets.

 

Game42 also creates natural synergies with Author42 and Creator42, enabling
authors not only to write and publish their works but also to extend them into
interactive game formats. This forms part of capMedia's wider strategy to
deliver a fully integrated suite of products and services for creators across
publishing, screen, and gaming. The Board believes this holistic approach
strengthens the Group's competitive position and enhances its ability to
capture value across multiple fast-growing entertainment verticals.

 

About Game42

 

Game42 is a next-generation generative 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 IP
holders by significantly reducing the cost, complexity, and development time
of traditional game production. By leveraging generative AI, Game42 enables
rapid adaptation of literary IP into playable formats, strategically
positioning itself within one of the fastest-growing segments of the
entertainment industry.

 

Principal Commercial Terms

 

Under the LOA, capAI has secured an exclusive, worldwide right to use,
develop, commercialise and sub-license Game42, for a period of 12 months
("Licence Period"), with full operational and strategic control. The Licence
Period and all rights under the LOA will only commence upon delivery of a
mutually agreed Completion Notice confirming Game42 is ready for
commercialisation.  The LOA also grants capAI a discretionary option (the
"Option") to acquire full ownership of the intellectual property ("IP")
associated with Game42.

 

Key terms include:

 

No Upfront Cost, Immediate Control

The LOA has been executed as a deed, and carries no upfront payment or
consideration, giving capAI operational freedom without initial capital
outlay.

 

Commencement of Rights

Since Game42 is still in development by R42, capAI's Licence Period and all
associated rights shall only commence upon delivery of a Completion Notice by
R42 to capAI.

 

Completion Notice

The Completion Notice shall confirm, in good faith and in consultation with
the capAI / R42 committee formed under the Alliance Agreement entered into
between capAI and R42 (the "Alliance Steering Committee") , that Game42 meets
the mutually agreed MVP criteria and is functionally complete and ready for
commercialisation, albeit not necessarily final or market-polished.

 

Development Timeline

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.

 

Termination Right

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.

 

Good Faith Development Obligation

Following delivery of the Completion Notice, capAI will be committed to
advancing Game42 in good faith, including maintaining a dedicated development
team, overseen via the capAI / R42 Alliance Steering Committee, and
undertaking any final development work during the initial stages of the
Licence Period as part of the broader commercialisation roadmap.

 

Discretionary Option to Acquire Full IP Ownership

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; R42 cannot oblige capAI to exercise the Option under the terms
of the LOA.

 

£2 Million Option Consideration

If exercised, capAI will settle the £2 million Option consideration through:

 

·      the issue of new ordinary shares of nominal value £0.00001 each
in the capital of capAI ("Ordinary Shares"), valued using the 20-trading day
volume-weighted average price per Ordinary Share prior to Option exercise
("Consideration Shares"); or

 

·      if regulatory constraints apply (e.g., Rule 9 of the UK Takeover
Code or insufficient prospectus headroom), a combination of Consideration
Shares (subject to such regulatory constraints) and non-transferable unsecured
convertible loan notes ("UCLNs"). The UCLNs would carry a 10% non-compounding
annual interest rate.

 

Admission

Any Consideration Shares issued under the Option (or new Ordinary Shares
issued upon UCLN conversion) will be admitted to listing on the equity shares
(transition) category of the Official List of the Financial Conduct Authority
("FCA") and to trading on the main market for listed securities of London
Stock Exchange plc.

 

Exit Participation (Post-Acquisition)

 

Upon full Game42 IP transfer, R42 will be entitled to 20% of the net proceeds
from any monetisation, sale, or liquidity event involving all or substantially
all of the Game42 IP. This ensures long-term alignment without affecting
capAI's operational control.

 

Reversion Rights

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 balanced structure provides capAI with near-term flexibility while
securing long-term strategic alignment with R42.

 

Related Party Considerations

 

The entry by capAI and R42 into the LOA constitutes a material related party
transaction for the purposes of DTR 7.3 and was, accordingly, voted upon by
the statutory directors of capAI (the "Directors") deemed independent in
relation to the LOA, comprising Richard Edwards, Sarah Davy and Marcus Yeoman
(excluding Professor Nag, who constituted a "related party" (as such term is
defined in IFRS)), and such independent Directors consider the material
related party transaction in respect of the LOA to be fair and reasonable from
the perspective of the Company and holders of Ordinary Shares ("Shareholders")
who are not a related party. Shareholders should note that Professor Nag
recused himself from all deliberations concerning the LOA, ensuring robust
governance and full compliance with applicable regulatory standards. These
steps reflect the Company's ongoing commitment to transparent corporate
governance and robust Shareholder protections

 

Substantial Property Transaction

 

The grant of the Option does not itself constitute a substantial property
transaction for the purposes of section 190 of the UK Companies Act 2006, as
amended ("CA 2006").

 

However, if capAI elects to exercise the Option, such exercise would require
R42 to transfer the Game42 IP and the Company to allot and issue of the
Consideration Shares and UCLNs (as applicable and in compliance with
applicable regulatory obligations) by the Company on exercise of the Option
under the LOA constitute a 'substantial property transaction' under section
190 of CA 2006, as the Company will allot and issue Consideration Shares
and/or UCLNs with an aggregate value of £2,000,000 to R42, which is a body
corporate connected with Ronjon Nag, a Director designated as Executive
Director.

 

The Company may therefore proactively seek Shareholder approval of such
possible 'substantial property transaction' at a forthcoming general meeting.
This approach reflects the Board's commitment to ensuring full compliance with
the relevant thresholds, disclosure obligations, and governance procedures
under applicable regulation.

 

Management Commentary

 

Richard Edwards, Executive Chairman of capAI, commented:

 

"With Author42 already live and Creator42 accelerated toward launch, Game42
represents the next logical step in our pipeline. While it requires more
development work and sits behind the other two platforms in terms of timing,
it addresses one of the largest opportunities in global media: gaming. This
structure gives us near-term operational flexibility, while preserving the
option to own the IP outright in due course."

 

Professor Ronjon Nag, Executive Director of capAI, added:

"Generative AI is reshaping creative industries one by one. Game42 brings that
transformation into gaming - compressing timelines, reducing costs, and
enabling entirely new forms of interactive storytelling. Together with
Author42 and Creator42, it further strengthens the unique ecosystem capAI is
building across media and entertainment."

 

Further updates will be provided as Game42 progresses toward full launch.

 

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
Groups 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.

 

 

 

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