By: Dylan Sikes - AllPennyStocks.com News

Wednesday, January 21, 2015

Generally speaking, news of a buyout is exactly what an investor loves to hear. Well, most of the time, anyway. It’s certainly not music to an investor’s ears when the press about being acquired includes words like “stalking horse” and “bankruptcy.” Shares of Hippcricket, Inc. (OTCQB:HIPP) are cratering Wednesday morning after saying that it will be bought by Sito Mobile Ltd. (OTCBB:SITO) for $4.5 million as part of a prepackaged bankruptcy plan. Hipcricket markets its AD LIFE platform, a unified mobile engagement platform designed to drive awareness, sales and loyalty that has been used for some 400,000 campaigns. Revenue through the first six months of fiscal 2015 ended August 31, 2014 (the last quarter reported by Hipcricket) totaled $14.34 million, up from $13.46 million in the year prior period. The company posted a net loss of a staggering $51.35 million, although $35.1 million of that was attributed to goodwill impairment. In fiscal 2014, the company reported 27% year-over-year revenue growth to $26.7 million. Net loss in fiscal 2014 was $22.3 million.

The bottom line remained that even with increasing revenue, Hipcricket was in a world of trouble financially and couldn’t make the necessary changes to try and drive towards profitability.

Now the company has entered into an asset purchase agreement with Sito Mobile as the stalking horse bidder to acquire Hipcricket’s assets for only $4.5 million. A stalking horse bid serves as the minimum offer for a business, which could still be topped by others. To make the sale happen, Hipcricket has filed a for Chapter 11 bankruptcy protection and filed a motion seeking authorization to approve bid procedures under Section 363 of the U.S. Bankruptcy Code.

Hipcricket expects daily operations will not be interrupted during the proceedings, which are still subject to approval by the court, and that it will maintain current employee benefits, payrolls, etc. Sito Mobile has agreed to provide up to $3.4 million in debtor-in-possession financing to help Hipcricket meet these obligations. If the deal goes approved, Sito intends to keep the current Hipcricket staff employed and honor all customer contracts, agreements and services. Hipcricket chief executive Todd Wilson may stay on for six to twelve months as a consultant to Sito Mobile to assist in the merger of the two companies.

"While we have implemented various cost-cutting initiatives and explored a wide variety of strategic alternatives, the benefits of these efforts could not be fully realized and liabilities continued to mount,” commented Wilson in the press release today. “As such, the Board determined that a sale of assets via a court-supervised process provides Hipcricket the most viable option to protect our human capital and maximize recovery for our stakeholders.”

"As a result of this transaction, if approved, Sito Mobile will become one of the largest pure-play, publicly traded companies in the mobile marketing and advertising space," said Jerry Hug, Chief Executive Officer of Sito Mobile, in a separate release. “Consistent with our goal to accelerate our growth, if completed, the acquisition of Hipcricket will bolster our services and solutions and increase our revenue from a customer base which would then include 38 of the Fortune 100 companies,” he added.

Shares of SITO are still trading near an all-time low, but have risen 9.3% in early Wednesday action to 17 cents each. Shares of HIPP are down 80% at only $0.0026.

Copyright © 2015 AllPennyStocks.com. All rights reserved. Republication or redistribution of AllPennyStocks.com's content is expressly prohibited without the prior written consent of AllPennyStocks.com. AllPennyStocks.com shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.