chinadotcom corporation (Nasdaq: CHINA), an integrated enterprise software and mobile applications company, today announced its 81%-owned subsidiary, hongkong.com Corporation, has made further progress with its strategic investment in Beijing17game Network Technology Co. Ltd ("17game").
The company has recently amended its investment agreements previously signed with 17game and released a third tranche of the funding to 17game based on the amended agreement. The funding shall be used solely for working capital of 17game. As a show of its commitment to 17game, hongkong.com has also acquired a small minority equity interest in 17game from one of its existing shareholders. Recently, 17game launched the close beta test of its online game, Travia, and has achieved results exceeding internal targets.
In early August, 17game issued roughly 50,000 test account login ids for the close beta test of the online game Travia against an overwhelming demand from eager gamers. Travia is a 3D fantasy massively multiplayer online role- playing game ("MMORPG") embedded with 3D EAX sound effects which enable game players to play in a more exciting and close-to-reality environment. The initial responses of the close beta test were encouraging. In addition to a high level of participation from users during the test, 17game has also obtained valuable feedback for further refinement of the game for the eventual open launch. 17game expects to launch a second round of close beta test in September and the open test of the game in October this year. Depending on the results of the open test the game may be commercialized by the end of the year.
17game has a well-established distribution network across China for the games it licenses, including Internet cafes, software distributors, bookstores, convenience stores and department stores. The strategic investment in 17game by hongkong.com provides an opportunity for chinadotcom to expand in the high growth online games sector in China through hongkong.com and further strengthen the existing vertical online game channel of its portal.
Under the Agreement, hongkong.com has agreed to provide a senior secured convertible loan of US$3.2 million to 17game. It is contemplated under the Agreement that the funding will be converted into 17game shares upon the final drawdown. While 17game currently does not have an immediate financial contribution to chinadotcom and hongkong.com, the transaction documents enable hongkong.com to ultimately acquire a controlling position of up to 100% in 17game over time, with consideration to be paid on an earn-out formula based on a single-digit earnings multiple over the next two years.
