PCF GROUP (PEOPLE CAN FLY) WILL HAVE A NEW SHAREHOLDER — KRAFTON INC., ONE OF SOUTH KOREA’S LARGEST GAME PUBLISHERS AND DEVELOPERS

PCF GROUP (PEOPLE CAN FLY) WILL HAVE A NEW 10% SHAREHOLDER — KRAFTON INC., ONE OF SOUTH KOREA’S LARGEST GAME PUBLISHERS AND DEVELOPERS

KRAFTON, Inc. (NASDAQ: 259960.KS—“KRAFTON”), PCF Group and Sebastian Wojciechowski have concluded an investment agreement (the “Agreement”) under which KRAFTON has undertaken to subscribe for newly issued series F shares under the planned SPO to constitute 10% of the share capital of PCF Group post-SPO, and thus over 60% of the planned issue of shares.  The issue price of the shares to be subscribed by KRAFTON has been set above the average market price of the shares from the last month at PLN 40.20 per share – irrespective of the number of shares subscribed for by investors participating in the SPO and the issue price for the other investors participating in the SPO.

According to the Agreement, KRAFTON will take part in the offering of series F shares approved by the Extraordinary General Meeting of PCF Group at the end of February 2023 (SPO) and become a 10% shareholder post-SPO.  The Agreement sets out: (i) the terms and conditions of KRAFTON’s equity investment including standard representations and warranties by KRAFTON, PCF Group and Sebastian Wojciechowski; (ii) KRAFTON’s rights related to certain publishing opportunities connected to Project Victoria or Project Bifrost; (iii) lock-up declarations by KRAFTON and Sebastian Wojciechowski, which will remain in force until 28 March 2024; (iv) certain anti-dilution protections in favor of KRAFTON; (v) parties’ pre-emption rights, and KRAFTON’s tag-along right which corresponds to the drag-along right held by Sebastian Wojciechowski; and (vi) the Company’s disclosure obligations to KRAFTON.

Moreover, the Agreement provides that if PCF Group ever considers publishing either Project Victoria or Project Bifrost in a model other than that defined in PCF Group’s new strategy — i.e. in a model different than self-publishing — KRAFTON will have a right of first negotiation of a publishing agreement and a right of first refusal of a publishing agreement, with respect to any such agreements concerning these two projects.

“We announced our new strategy not only with a view to dynamizing the growth of People Can Fly, but also to attract partners to implement it” said Sebastian Wojciechowski, CEO of People Can Fly and largest shareholder of PCF Group.  “Conclusion of the investment agreement with KRAFTON, with whom we share our business ambitions and our shooter DNA, is excellent news for our studio and confirmation of the quality of the projects we are carrying out in the self-publishing model. It is also a signal that as a Group we are heading in the right direction, and global industry players recognize it.”.

Wojciechowski added: “I would also like to emphasize that the Agreement between PCF Group and KRAFTON has a very clearly defined legal framework, and warrants our full independence and confidentiality in executing projects with other partners.”.

KRAFTON is comprised of independent game development studios coming together with the aim of creating innovative and exciting experiences for gamers all over the world.  The group includes PUBG STUDIOS, Bluehole Studio, RisingWings, Striking Distance Studios, Dreamotion, Unknown Worlds, 5minlab, Neon Giant and KRAFTON Montréal Studio, each of which has unique experience.  KRAFTON’s game portfolio includes such well-known titles as PUBG: Battlegrounds, NEW STATE Mobile, The Callisto Protocol, Moonbreaker, TERA and ELYON.

KRAFTON’s CEO CH Kim said, “KRAFTON will strive to secure more opportunities in second-party publishing this year so that more IPs can get a chance to bat in the market” and added, “we will continue to raise KRAFTON’s profile based on such major strategic partnership with a highly competent global developer such as PCF.”.

The Agreement is concluded for a term of 10 years.  KRAFTON may terminate it in certain circumstances, in particular if the SPO is cancelled or is not completed within 10 business days following the publication of the quarterly report for the first quarter of 2023.

***

People Can Fly was founded in 2002 and is one of the pioneers on the market for shooter games in Europe, and one of the top three most experienced Polish developers of games from the AAA segment.  People Can Fly has developed such games as Painkiller (launched in 2004), Bulletstorm (2011), Gears of War: Judgment (2013) and Outriders (2021).

There are currently over 600 people working in the Group, two-thirds of them in Europe and one-third in North America, of whom 400 are game developers.

In January 2023 the Group updated its strategy, with the aim of strengthening the Group’s publishing activity and executing most projects in the self-publishing model and in the Game as a Service model.  The Company also intends to continue expanding its teams of game developers.

People Can Fly is currently working on seven projects at various stages of development. The game code-named Project Thunder, for virtual reality (VR) platforms, developed by the subsidiary Incuvo, will be launched later in 2023.  Incuvo is also working on further expansion of the game Green Hell VR, which launched last year.  This year it will launch on further VR platforms (HTC and Sony NGVR).

Three games from the AAA segment are in the pre-production phase, and the company plans to release Project Dagger, Project Bifrost and Project Victoria in the self-publishing model, with launches planned for 2025–2026.  The launch of the game code-named Project Gemini, which People Can Fly is developing in the work-for-hire model with the group’s long-time partner Square Enix, is planned for 2026.

Another game in the People Can Fly pipeline is Project Red, from the compact-AAA segment, currently at the concept stage.

According to preliminary estimated results for 2022 published on 31 January 2023, last year the Group generated consolidated sales revenue of PLN 170 million and EBITDA of PLN 48.5 million.  The Company plans to publish the full annual report for 2022 on 28 April 2023.

The shares of PCF Group, which owns the People Can Fly studio, have been listed on the Warsaw Stock Exchange since December 2020.

Based out of South Korea, KRAFTON, Inc. is a collective of independent game development studios bound by a passion for creating innovative and engaging entertainment experiences for gamers worldwide.  Founded in 2007, KRAFTON consists of PUBG STUDIOS, Bluehole Studio, RisingWings, Striking Distance Studios, Dreamotion, Unknown Worlds, 5minlab, Neon Giant and KRAFTON Montréal Studio, each with its own unique expertise.

KRAFTON is responsible for premier entertainment properties, including PUBG: BATTLEGROUNDS, The Callisto Protocol, NEW STATE MOBILE, Moonbreaker, TERA and ELYON.  With a team of 3,000 members across nine countries, KRAFTON is a technology-driven company that boasts world-class capabilities as it seeks to expand its areas of business beyond games to multimedia entertainment and deep learning.  For more information, visit www.krafton.com

***

This material is for information purposes only and has been prepared by PCF Group S.A (the “Company”) exclusively in order to provide essential information on the issuance and offering of its new shares. This material is by no means intended, whether directly or indirectly, to promote the offering, subscription or purchase of the Company’s shares referred to herein (the “Placement Shares”) and is not an advertisement or promotional material prepared or published by the Company for the purpose of promoting the Placement Shares, their offering or  subscription,  or for the purpose of encouraging an investor, whether directly or indirectly, to acquire or subscribe for the Placement Shares.

The Placement Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or with any securities market regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold, pledged, taken up, resold, transferred or delivered, directly or indirectly, in or into the United States absent registration under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. The Placement Shares have not been approved, disapproved or recommended by the U.S. Securities and Exchange Commission, any state securities commission in the United States or any other U.S. regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the Placement Shares.  Subject to certain exceptions, the securities referred to herein may not be offered or sold in the United States, Australia, Canada, Japan, South Africa or to, or for the account or benefit of, any national, resident or citizen of the United States, Australia, Canada, Japan and the Republic of South Africa.

No prospectus will be made available in connection with the matters referred to herein and no such prospectus is required to be published (pursuant to the Prospectus Regulation (EU) 2017/1129, as amended).

This material and the terms and conditions set out herein are for information purposes only and are directed only at persons who are: (a) persons in Member States of the European Economic Area who are qualified investors (as defined in Article 2(e) of the Prospectus Regulation  (EU) 2017/1129, as amended (“Qualified Investors”); or (b) in the United Kingdom, Qualified Investors who (i) are persons with professional experience in matters relating to investments falling within the definition of “investment professional” in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”); (ii) are persons falling within Article 49(2)(a) through (d) (“high net worth companies, unincorporated associations, etc.”) of the Order; or (iii) are persons to whom it may otherwise be lawfully communicated; or (c) are qualified institutional buyers in the United States as defined in Rule 144A under the U.S. Securities Act (all such persons  being collectively referred to as “eligible persons“). This material and the terms and conditions set out herein must not be acted or relied on by persons who are not eligible persons.

This material does not identify or suggest, or purport to identify or suggest, the risks (direct or indirect) that may be associated with an investment in the Placement Shares.

This material does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of any securities in any jurisdiction. This material does not constitute a recommendation concerning any investor’s decision with respect to the offering, subscription and/or purchase of the Placing Shares. Each investor or prospective investor should conduct their own investigation, analysis and evaluation of the business and data described in this material and publicly available information. The price and value of securities may go down as well as up. Past performance is not a guide to future performance.