Sports Stars Media : Disposal, Subscription and Investing Policy

9 April 2014

Sports Stars Media plc

("SSM" or the "Company")

Disposal of trading businesses, subscription to raise £300,000 at 0.06p per share, appointment of proposed directors and adoption of investing policy

Introduction

On 14 February 2014, the Company provided a trading update in respect of the group's financial position for the year ended 31 December 2013. In this update, the Group reported that the Group's revenue for that year had been negligible, which largely reflected a slower than anticipated initial take-up of The Mourinho product range as a result of which and, as had been previously highlighted, the Group expected to make a loss for the year. The unaudited profit and loss account, balance sheet and cashflow statement for the year ended December 2013, show that the Group made a loss of €577,577 (2012: loss of €386,799) on revenue of €82,433 (2012: €25,966). Trading since the year end has continued to be poor with unaudited revenues for the two months ended 28 February 2014 of €1,184 and losses of €226,485, and cash balances at 28 February of €76,830.

The announcement also stated that the initial take up of The Game by Ronaldo had exceeded management expectations and that it intended to launch a number of new marketing initiatives in order to capitalise on the opportunities available to it which required additional funds, and the Group was reviewing funding options for this and its ongoing working capital requirements.

In order to address the Group's working capital requirements, the Company has taken informal soundings from existing and potential investors which have indicated negligible appetite for a fund raising for the Company if it remains listed on AIM.  The Directors believe that this is due to a lack of revenue visibility, historic and ongoing losses, the volatility of the Company's share price and the fact that many of its shareholders are not based in the UK. Conversely, however, there appears to be interest from overseas investors, including existing shareholders, if the Company were to be unquoted.

The board has now concluded that due to the limited resources and difficult trading conditions faced by the trading subsidiaries, the performance of the Company and its subsidiaries is not currently strong enough to generate revenues to support the costs associated with being quoted on a public market.

The Board is therefore faced with a situation where, if the Company is to remain as an AIM listed company, it will be unable to raise funds to enable it to continue to trade, let alone invest in the development of its trading businesses.  Alternatively, the board could propose a delisting, which it believes would be supported by sufficient shareholders for it to become effective which would mean that there was effectively no market in the ordinary shares.  Finally, and as proposed in a circular to be posted to shareholders today, the Company could dispose of the Business, introduce new funds, appoint new directors, and adopt a new investing policy.

Having considered these alternatives at length with its advisers the board has concluded that the best available option is to dispose of the Business to Golden Rays Ventures ("Golden Rays"), a newly incorporated company owned by the members of the consortium, who are all shareholders in the Company (the "Consortium"), which will also assume certain liabilities of the Company. 

Pursuant to a sale and purchase agreement ("SPA") between the Company and Golden Rays, Golden Rays has agreed to acquire the Business and to assume the liabilities for an initial nominal consideration of £1 ("Disposal"). Golden Rays will also make an additional payment to the Company of £636,000 if certain trigger events are achieved ("Additional Payment"). 

The Company has entered into a deed poll conditional upon completion of the Disposal, whereby the Company has undertaken, subject to any legal constraints, to pay the Additional Payment  (less costs and expenses incurred by the Company in connection with the deed poll) if received pursuant to the SPA to shareholders whose name appears on the register of members of the Company as at 9.00 a.m. on 9 May 2014 but excluding the members of the Consortium, ("Qualifying Shareholders") (the "Deed Poll"). This amount, if paid to Qualifying Shareholders would be worth approximately 0.20 pence per share (not taking into account any legal or administrative costs).

In addition, Golden Rays has agreed to assume responsibility for all liabilities in relation to a shareholder loan of £215,498.70.  All other outstanding loans by the Company to the Business and vice versa will be eliminated pursuant to the SPA.

In order to recapitalise the Company, Peterhouse has conditionally raised £300,000 at 0.06 pence per Subscription Share, through the subscription of 500,000,000 new Ordinary Shares representing 53.7% of the issued ordinary share capital. The members of the Consortium have each agreed to sell their entire holdings in SSM (being 203,536,656 Ordinary Shares in aggregate, representing 47.2 per cent. of the existing issued ordinary share capital) to the investors, on a pro rata basis to their investment, for a nominal sum of £1, the effect of which is to reduce the price per share being paid by the Investors to 0.04 pence per share.

In view of the Company's requirement for working capital, should the Resolutions not be approved at the General Meeting, the Board would have to consider a delisting from AIM; were this not approved, it is unlikely that the Company would have sufficient working capital to continue to trade.

Subject to the Resolutions being passed, it is proposed that immediately following the General Meeting, David Ajemian and Cameron Pearce will join the Board as Non-Executive Chairman and as Non-Executive Director and that all of the Existing Directors will resign from office.

Accordingly, the Company is today posting a circular to shareholders ("Circular") containing a notice convening a general meeting of the Company ("General Meeting") to be held on Friday, 9 May 2014 at 11.00 a.m.

The Circular contains proposals (the "Proposals") for, inter alia:

·     disposal of the business including trading subsidiaries (the "Disposal")

·     subscription to raise £300,000

·     appointment of proposed directors

·     adoption of investing policy

·     adoption of new articles of association

·     change of name

The Disposal and Related Party Transaction

Pursuant to Rule 15 of the AIM Rules for Companies, the Disposal is considered a fundamental change in the business and it also constitutes a substantial property transaction for the purposes of section 190 of the Companies Act, requiring the consent of Shareholders.  The Disposal is also a related party transaction under the AIM Rules as each of Carlos Amaro, Sonia Magalhaes, Pedro Maria and Miguel Mascarenhas is interested in Golden Rays as proposed directors and shareholders, and they are all directors of SSM and, in the case of Carlos Amaro, Pedro Maria and Miguel Nascarenhas, also significant shareholders as they own 10 per cent. or more of the existing issued share capital of SSM.  Given their interest in the Disposal none of the above has taken any part in the negotiations between the Company and Golden Rays regarding the terms of the Disposal.

The Independent Directors consider, having consulted with Sanlam Securities UK Limited, the Company's nominated adviser, that the terms of the Disposal are fair and reasonable insofar as the Company's Shareholders are concerned.

Following completion of the Disposal, the Company will be an investing company under the AIM Rules and as such will be required to make an acquisition or acquisitions which constitutes a reverse takeover under the AIM Rules or otherwise implement its proposed Investing Policy on or before the date falling twelve months from the adoption of the Investing Policy failing which, the Company's Ordinary Shares would then be suspended from trading on AIM. In the event that the Company's Ordinary Shares are so suspended and the Company fails to obtain Shareholders' consent to renew such policy, admission to trading on AIM would be cancelled six months from the date of suspension. 

The Subscription and the Warrants

Conditional upon the approval of the Proposals at the General Meeting, Peterhouse has placed 500,000,000 new Ordinary Shares at a price of 0.06 pence raising £300,000 before transaction expenses of £77,000. The Directors have considered whether it would be possible to offer shareholders the opportunity to participate in the Subscription but have concluded that the costs thereof would be prohibitive in the context of the amount being raised.

In connection with the Subscription, it is proposed that the Company enter into a warrant instrument (the "Warrant Instrument") pursuant to which the Company will issue one warrant for every three Ordinary Shares subscribed for ("New Warrants") or a total of 166,666,667 New Warrants. Entry into the Warrant Instrument is conditional on Admission of the Subscription Shares, and on approval of all of the Resolutions.

The New Warrants may be exercised at any time within 18 months of the completion of the Subscription and shall entitle the holders to be issued with one Ordinary Share for each New Warrant exercised, subject to payment of an amount equal to the subscription price being 0.06 pence for each New Warrant exercised. 

In addition, Berwick Capital Limited will be issued with 30,000,000 New Warrants in connection with services rendered to the Company in connection with the Subscription and this transaction. The New Warrants may be exercised at any time within 18 months of the completion of the General Meeting and shall entitle the holder to be issued with one Ordinary Share for each New Warrant exercised, subject to payment of an amount equal to the Subscription Price for each New Warrant exercised.

In addition, 30,000,000 New Warrants will be issued to Cameron Pearce.

The New Warrants will not be admitted to trading on AIM.

Use of Proceeds

As part of the Proposals, the Board has come to agreements with certain creditors to settle the amounts owed to them by the Company. Following the settlement of these creditors, the Company will be substantially free of debt, apart from those occurring from ongoing administrative costs. The ongoing annual costs of the Company are expected to be no more than £140,000. 

The proceeds of the Subscription will be used to settle outstanding creditors, as mentioned above, and, in the opinion of the Proposed Directors, will provide the Company with sufficient working capital for at least 12 months from becoming an Investing Company.

Following completion of the Proposals, the Company will be a cash shell with cash of approximately £160,000.

Sale of Ordinary Shares to Peterhouse

Should Shareholders wish to divest their investment in the Company, such Shareholders may do so by notifying Peterhouse within 14 calendar days of the date of this Circular. Peterhouse has agreed to arrange the execution of a sale of any Ordinary Shares held by Shareholders wishing to sell the same to its clients for £0.0006 per Ordinary Share. This sale facility effectively values the whole of the issued Ordinary Shares, prior to the Subscription, at approximately £258,788.

Alternatively, Shareholders are free to retain their Ordinary Shares or sell them in the market as they see fit. Shareholders wishing to take advantage of the above sale facility should contact Peterhouse directly on 020 7469 0934 or 020 7469 0936.

Change of Name

Subject to Shareholders' approval of the Proposals, it is proposed that the name of the Company be changed to Stallion Resources plc.

Proposed Directors

Subject to the Resolutions being passed, it is proposed that immediately following the General Meeting, David Ajemian and Cameron Pearce will join the Board as Non-Executive Chairman and as Non-Executive Director and that all of the Existing Directors will resign from office.

David Ajemian (aged 35) - Non-Executive Chairman

David Ajemian is an entrepreneur and investor based in London.  Mr Ajemian is the founder of the United Lions Sports Agency and conducts business between the UK, Europe and the Middle East.  He is accredited by FIBA and FIFA as a licensed players' agent for both basketball and football.  His investments include the real estate sector in the Middle East.

Cameron Pearce (aged 42) - Non-Executive Director

Mr Pearce has extensive professional experience in both the Australian and United Kingdom finance industries. In recent times he has provided corporate, strategic, financial and advisory assistance to private and public companies in both Australia and the United Kingdom. Mr Pearce is a member of the Australian Institute of Chartered Accountants and has been in commerce over fifteen years holding senior financial and management positions in both publically listed and private enterprises in Australia, Europe, Asia, Africa and Central America. Mr Pearce has considerable corporate and international expertise and over the past decade has focussed on mining and exploration activities. Mr Pearce is currently a Non-Executive Director of ASX listed Magnolia Resources Limited and AIM listed CEB Resources plc.

Cameron Pearce and David Ajemian, the Proposed Directors, have invested £25,000 each as part of the Subscription. As a result, following Admission, Cameron Pearce will hold 58,628,054 Ordinary Shares representing 6.3% of the issued share capital of the Company and 43,888,888 New Warrants. David Ajemian will hold 58,628,054 Ordinary Shares representing 6.3% of the Company and 13,888,888 New Warrants.

Investing Policy

The Company's proposed new Investing Policy is to invest in and/or acquire companies and/or projects within the natural resources and/or energy sector with potential for growth. The Company will also consider opportunities in other sectors as they arise if the Proposed Directors consider there is an opportunity to generate an attractive return for Shareholders.

In selecting investment opportunities, the Proposed Directors will focus on businesses, assets and/or projects that are available at attractive valuations and hold opportunities to unlock embedded value.

Where appropriate, the Proposed Directors may seek to invest in businesses where it may influence the business at a board level, add their expertise to the management of the business, and utilise their significant industry relationships and access to finance. The ability to work alongside a strong management team to maximise returns through revenue growth will be something the Proposed Directors will focus upon initially.

The Company's interests in a proposed investment and/or acquisition may range from a minority position to full ownership and may comprise one investment or multiple investments. The proposed investments may be in either quoted or unquoted companies; be made by direct acquisitions or farm-ins; and may be in companies, partnerships, earn-in joint ventures, debt or other loan structures, joint ventures or direct or indirect interests in assets or projects.  The Proposed Directors may focus on investments where intrinsic value can be achieved from the restructuring of investments or merger of complementary businesses.

The Proposed Directors expects that investments will typically be held for the medium to long term, although short term disposal of assets cannot be ruled out if there is an opportunity to generate an attractive return for Shareholders. The Proposed Directors will place no minimum or maximum limit on the length of time that any investment may be held. The Company may be both an active and a passive investor depending on the nature of the individual investment.

There is no limit on the number of projects into which the Company may invest, and the Company's financial resources may be invested in a number of propositions or in just one investment, which may be deemed to be a reverse takeover under the AIM Rules. The Directors intend to mitigate risk by appropriate due diligence and transaction analysis. Any transaction constituting a reverse takeover under the AIM Rules will also require Shareholder approval. The Proposed Directors considers that as investments are made, and new promising investment opportunities arise, further funding of the Company may also be required.

Where the Company builds a portfolio of related assets it is possible that there may be cross holdings between such assets. The Company does not currently intend to fund any investments with debt or other borrowings but may do so if appropriate. Investments in early stage assets are expected to be mainly in the form of equity, with debt potentially being raised later to fund the development of such assets. Investments in later stage assets are more likely to include an element of debt to equity gearing. The Proposed Directors may also offer new Ordinary Shares by way of consideration as well as cash, thereby helping to preserve the Company's cash for working capital and as a reserve against unforeseen contingencies including, for example, delays in collecting accounts receivable, unexpected changes in the economic environment and operational problems.

Investments may be made in all types of assets and there will be no investment restrictions on the type of investment that the Company might make or the type of opportunity that may be considered. The Company may consider possible opportunities anywhere in the world.

The Proposed Directors will conduct initial due diligence appraisals of potential business or projects and, where they believe further investigation is warranted, intend to appoint appropriately qualified persons to assist. The Proposed Directors believe they have a broad range of contacts through which they are aware of various opportunities which may prove suitable, although at this point only preliminary due diligence has been undertaken. The Proposed Directors believe their expertise will enable them to determine quickly which opportunities could be viable and so progress quickly to formal due diligence. The Company will not have a separate investment manager. The Company proposes to carry out a comprehensive and thorough project review process in which all material aspects of a potential project or business will be subject to rigorous due diligence, as appropriate.

As an Investing Company, the Company will be required to make an acquisition or acquisitions which constitutes a reverse takeover under the AIM Rules or otherwise implement its proposed Investing Policy on or before the date falling twelve months from the adoption of the Investing Policy failing which, the Company's Ordinary Shares would then be suspended from trading on AIM. In the event that the Company's Ordinary Shares are so suspended and the Company fails to obtain Shareholders' consent to renew such policy, the admission to trading on AIM would be cancelled six months from the date of suspension.

Financial Information on the Company and Group

Members of the Consortium holding more than 3% in SSM or Directors of SSM

* Director of Stars Sports Media plc

^ Both Mr Miguel Mascarenhas and Mr Carlos Amaro will hold more than 10% in the issued share capital of Golden Rays

A copy of the Circular is available at the Company's website www.sportsstarsmedia.com.

The definitions used above have the same meaning as they have in the Circular.

For further additional information please contact: