Gizmondo may hand over Smart Adds Inc. to repay $21m debt

January 16th, 2006, 19:49 Posted By: wraggster

Tiger Telematics, the US parent company of struggling handheld console firm Gizmondo, has revealed that it has offered the stock, IP and patents of its Smart Adds subsidiary as equity on a $21.2 million loan from two shareholders.

Under the terms of the deal, the loan - which is well overdue to be repaid - is being converted into a Sterling loan of GBP 12.68 million ($22.46 million), which is to be paid in full by June 30th this year.

However, there's a catch - the loan will have to be repaid in full on March 30th unless Tiger Telematics can raise $75 million in new equity or debt by that date, which the company says it is currently working towards securing. In the eventuality that it can get the $75 million, GBP 1.68 million of the loan must be repaid immediately, with the remainder to come before June 30th.

If the company doesn't get its financing, and can't repay the loan, the two shareholders will be compensated by being handed the patents and intellectual property rights to the Smart Adds system, which pushes video ads to mobile devices (specifically, the Gizmondo), as well as the stock of the Smart Adds Inc subsidiary.

The loan was received from major shareholders David Warnock and Simon Davies in May 2005 in the form of two short-term loans - one payable on October 31st 2005, and the other on November 30th, 2005.

Originally, the loans were underwritten by just over a million shares of Tiger Telematics' common stock, and were described in the company's 10-K regulatory filing last September as being "guaranteed by the company and by Carl Freer and Stefan Eriksson, personally."

Freer and Eriksson both departed from Gizmondo on October 20th last year, with Eriksson in particular leaving under a cloud after it was revealed that he, along with two other Gizmondo staff members, had convictions in Sweden for mobster-related charges including financial fraud.

At the time, Michael Carrender - who replaced Freer as the CEO of Gizmondo - told the press that an independent counsel would be appointed to look into irregularities in Gizmondo's transactions under Freer and Eriksson's tenure.

Late last year, the firm confirmed that valuation and appraisal-consulting firm Marshall and Stevens had been appointed to assist in the investigation of a number of transactions in which Freer and Erkisson may have had personal interest.

Among the transactions being examined is a payment of $3.5 million to software development firm Northern Lights, which was co-owned by Freer and Eriksson, payments of $174,000 to Freer's wife for consultancy services, and a complex transaction which saw Panama-based Asiatic Bank and Finance paying $7.6 million, which was owed to Freer and Eriksson, to a number of small companies on behalf of Gizmondo - with the sum then being reimbursed to Freer and Eriksson by Gizmondo directly.

As yet, the company has not announced any results from its internal investigation into these and several other transactions.

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