In a major update to the ASX today, the independent game developer said it would be undertaking a share placement to raise $7m in working capital and reach cash-flow breakeven by the third quarter of this financial year.
The company’s ASX fundamentals show a net loss of $7.14m. Mighty Kingdom’s share price has also plummeted from its initial price of $0.26c when it listed in April 2021 to $0.04c when it entered a trading halt on Monday.
“As part of this capital raising process, the Company is undertaking a significant refocus and restructure of its business plan, management and board with the intent of delivering shareholder value,” the ASX announcement states.
“MK will focus on deliverability and accountability against this refined business plan as the Adelaide based group looks to cements its position as one of the country’s largest game developers.”
After a period, which has been very disappointing both corporately and from a shareholder perspective, this restructure and capital raising represents a very significant change in Mighty Kingdom’s outlook going forward.
The market responded positively to today’s announcement, with the company’s share price rising 18 per cent to $0.045c after resuming trading this morning.
The restructure plan comes after Mighty Kingdom’s June quarter cash flow report, published on Friday, saw it declare total available funding for future operating activities at $3.96m – enough to sustain it for just over three months, according to the report.
The poor result meant the company was required to answer questions about its financial position and sustainability of operations.
Mighty Kingdom stated that it expected its net operating cash flows would improve over the next six months “as a result of forecasted revenue growth and cost cutting from next quarter”.
“Mighty Kingdom has been working on a number of solutions to ensure continuity of its operations and to achieve its strategic goals, including … making decisive changes in the business to focus on revenue generation and cost reduction,” the June report states.
Mighty Kingdom, Adelaide’s biggest independent game developer with a primary focus on mobile titles, has reported numerous hiccups this year.
Sales from its first console game, “Conan Chop Chop”, were lower than expected, and the firm also ceased development on mobile game Ava’s Manor after reviewing the product’s financial results.
A spokesperson for Mighty Kingdom told InDaily that delays in game launches had also impacted the company.
“Mighty Kingdom invested heavily in resources and technology to rapidly scale the company,” the spokesperson said.
“Delays in launches of some titles has seen pressure placed on the business.
“Mighty Kingdom is confident that the company is tracking in the right direction and that this current raise and refocusing of the business will lead to strong outcomes.”
Mighty Kingdom’s June cash flow report flagged that its original intellectual property initiatives are being “re-evaluated and re-scoped” to ensure the company “delivers successfully on its long-term strategy”.
Mighty Kingdom managing director Phil Mayes conceded to the ASX this morning that it had been a disappointing period for the company.
“After a period, which has been very disappointing both corporately and from a shareholder perspective, this restructure and capital raising represents a very significant change in Mighty Kingdom’s outlook going forward,” he told the ASX.
“We now have an immediate focus on revenue in building a sustainable business that will allow us to have options moving forward.
“With some significant new shareholders and Directors who can assist us on this path, we anticipate a far more successful FY23.”
The company today announced the appointment of three new board members from the entertainment industry to help with the restructure process and ensure “accountability against forecasts”.
Former Fremantle Media CEO Ian Hogg, former WIN Corporation boss David Butorac and Done+Dusted chief operating officer Melanie Fisher will now sit on the Mighty Kingdom board, which is chaired by former ABC managing director Michelle Guthrie.
Tony Lawrence, Mighty Kingdom’s chief operating officer, has resigned as a non-executive director but is staying on with the company.
According to Mighty Kingdom’s June quarter report, staff costs are by far the company’s biggest expense – accounting for more than $14.5m in spending last financial year. The company says it employs more than 160 developers.
InDaily asked the company whether its flagged cost cutting measures would result in staff redundancies, and whether it could guarantee employees would not lose their jobs.
In response, a spokesperson said: “Mighty Kingdom has conducted a review and has made some changes to help the executive team focus on achieving our targets”.
“People are our biggest cost, but they are also how we generate revenue.
“Our focus is on growing revenue to meet that target, and that means we need people to deliver that revenue.
“Delivery of this objective will stem from the increased inbound interest from Tier 1 counterparties seeking Mighty Kingdom’s work for hire capacity.”
Mighty Kingdom was the recipient of a $480,000 state government grant in 2018 to hire 16 employees and develop “Kitty Keeper” – a game the company dubbed “the largest independent game ever made in SA”, although it was deleted after less than two years on the global market.
The company was founded in 2010 and listed on the ASX in April 2021. It’s currently based on King William Street.
Mighty Kingdom has called an extraordinary general meeting to be held in mid-September this year.
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