SOURCE: IMPERUS Technologies Corp.

Imperus Technologies Corp.

October 14, 2014 18:00 ET

Imperus Technologies Corp. Executes Agreement to Purchase Social Game Developer Diwip Ltd. for up to US$100 Million

TORONTO, ON--(Marketwired - October 14, 2014) - Imperus Technologies Corp. ("Imperus" or the "Company") (TSX VENTURE: LAB) (FRANKFURT: ISX) (Frankfurt WKN: A12B58) is pleased to announce that it has executed a share purchase agreement (the "Agreement") dated October 14, 2014 with Diwip Ltd. ("Diwip") and its shareholders pursuant to which Imperus will acquire all of the issued and outstanding shares of Diwip (the "Transaction").

Completion of the Transaction is subject to a number of conditions, including among other things, the approval of the TSX Venture Exchange (the "Exchange") and, if required, the approval of the shareholders of Imperus.

Diwip Transaction Highlights

  • Diwip is an independent supplier of proprietary software, a leader in its field with approximately 24 million registered customers
  • Diwip is a consistent supplier of highly ranked games to Facebook, iOS, Android and other social networks
  • Diwip increased revenues from approximately US$7.8 million in 2011 to US$28.3 million in 2013
  • Diwip generated approximately US$14.7 million of EBITDA1 in 2013
  • Closing Purchase Price (as defined below) for Diwip of US$50,000,000, as well as Earn-Out Payments (as defined below) of up to US$50,000,000 over two years after closing depending on the achievement of certain financial targets. Diwip's Senior Management / Founders are highly incentivized via earn-out payment provisions tied directly to Diwip's financial results
  • Imperus will acquire the entire share capital of Diwip and will retain Diwip's Senior Management / Founders and approximately 50+ employees
  • The Transaction will provide Imperus immediate access to the US and other markets. Diwip has customers in approximately 220 countries, with the top five (by revenue) as at June 30, 2014 being: the US, Canada, Australia, Great Britain and France
  • Diwip has invested in the development of a complete suite of Mobile games expected to be ready for deployment in the first quarter of 2015

Note 1: "EBITDA" is a non-IFRS financial measure. See "Caution Regarding Non-IFRS Measures" at the end of this press release.

About Diwip

Diwip, a private software company based in Tel Aviv, Israel, is a developer of social and mobile gaming for PC, Mac, iOS and Android platforms.

Diwip is involved in the business of constructing a social gaming experience consisting of a full suite of attractive and compelling casino-themed games -- including slots, bingo, Texas hold'em Poker, roulette, blackjack and video poker -- under the Best Casino and Slots Club brands. Diwip designs, develops and distributes its social casino-themed games within online social networks (such as Facebook) and mobile platforms (such as Android or iPhone). All of Diwip's games are free to play, and Diwip generates revenue through the in-game sale of virtual goods and advertising.

Diwip was incorporated on October 3, 2010 under the laws of Israel. Its head and registered office is located in Tel Aviv, Israel. As of the date hereof, Diwip has 200 ordinary shares issued and outstanding, which are held equally by its two founders, Mr. Ehud Kantzuker and Mr. Yaniv Gamzo (the "Diwip Principals"). Mr. Kantzuker is a director, co-CEO and Chief Product Officer (CPO) of Diwip, and Mr. Gamzo is a director, co-CEO, and Chief Technical Officer (CTO) of Diwip. There are no other directors or senior officers of Diwip. Biographical information about Messrs. Kantzuker and Gamzo is set out below under "Management and Directors after Completion of the Transaction".

The Transaction

The following is a summary of the Transaction and certain terms and conditions contained in the Agreement. The Agreement may be viewed on Imperus' SEDAR profile at www.sedar.com.

Pursuant to the Transaction, Imperus will acquire, either directly or indirectly through a wholly-owned subsidiary, all of the issued and outstanding shares of Diwip (collectively, the "Purchased Shares"). As consideration for the Purchased Shares, Imperus will pay the Diwip Principals a closing purchase price of US$50,000,000 (the "Closing Purchase Price"), as well as a contingent earn-out payment of up to US$50,000,000 (the "Earn-out Payments"), as further described below.

The Closing Purchase Price is payable on the closing of the Transaction, as follows: (a) US$40,000,000 shall be paid in cash and (b) US$10,000,000 shall be satisfied by the issuance of common shares of Imperus ("Common Shares"). The Common Shares issuable at the closing of the Transaction are to be issued at a price per share that is equal to the volume weighted average price of the Common Shares ("VWAP") on the Exchange for a period of 30 consecutive trading days ending on the third trading day prior to the closing date (the "Trading Period"); provided that, if trading in the Common Shares is halted during the Trading Period, which halt remains in effect for seven or more trading days (whether consecutive or not) during the Trading Period, the Common Shares will be issued at an issue price equivalent to the issue price per security offered under the Financing (as defined below), all subject to the requirements of the Exchange. The Closing Purchase Price is subject to a working capital adjustment typical of transactions of this nature.

In addition to the Closing Purchase Price, as further consideration for the Purchased Shares, the Diwip Principals are entitled to Earn-out Payments upon the achievement of certain financial milestones, as follows: (a) a payment of US$12,500,000, payable within 60 days after the first anniversary of the closing date, which amount may be increased to US$25,000,000 or decreased to US$0, should an agreed upon multiple of annualized revenue and annualized EBITDA of Diwip in the first year after closing be above or below a target milestone; and (b) a payment of US$12,500,000, payable within 60 days after the second anniversary of the closing date, which amount may be increased to US$25,000,000 or decreased to US$0, should an agreed upon multiple of annualized revenue and annualized EBITDA of Diwip in the second year after closing be above or below a target milestone.

All Earn-out Payments will be paid in cash and Common Shares at a 4:1 ratio. The Common Shares issuable in respect of the Earn-out Payments are issuable at a price per Common Share that is equal to the greater of the 30 day VWAP ending on the third trading day prior to the applicable payment of the earn-out, and CDN$0.53 (the "Minimum Issue Price") (or such higher price as may be required by the Exchange).

In the event that Imperus does not pay all or any portion of the Earn-out Payments to a Diwip Principal when due under the terms of the Agreement (the "Earn-out Due Date"), such unpaid amount will be deemed to be extended as a loan by such Diwip Principal to Imperus. The outstanding amount under such loan will bear interest at the rate of 20% per annum until repaid, with a term expiring 60 days after the Earn-out Due Date (or earlier in certain circumstances). After such 60 day period (or in certain circumstances earlier), such Diwip Principal may initiate collection proceedings of the amount that is due (plus accrued interest) and may, at its option, for a period of 18 months thereafter, convert any outstanding principal and interest under such loan into Common Shares at a conversion price equal to the greater of the 30 day VWAP ending three trading days prior to the conversion and the Minimum Issue Price (or such higher price as may be required by the Exchange).

The Agreement contains customary representations, warranties, covenants, indemnities, non-solicitation covenants and other ancillary agreements that are appropriate for transactions of this nature. The Agreement may be terminated, and the Transaction not consummated, in certain circumstances: (a) by mutual consent of the parties, (b) by either party if the Transaction has not been completed by December 14, 2014 (the "Closing Deadline") (subject to an extension of up to fourteen days in certain circumstances); (c) by either party, if a condition to closing in such party's favour is not satisfied (or waived, if capable of waiver) on or before the closing date, and (d) by Imperus, if there has been a breach of the representations of any of the Diwip Principals in certain circumstances.

Although the issue price for the Common Shares issuable to the Diwip Principals is not known at this time, for purposes of this press release, assuming an issue price of $0.57 (being the last closing market price prior to this release), the Diwip Principals are expected to collectively receive approximately 17,543,859 Common Shares at closing of the Transaction, representing approximately 23.5% of the issued and outstanding Common Shares of Imperus on the closing of the Transaction, without making any adjustments for conversion from US dollars to Canadian dollars, without taking into effect the Financing and without taking into account Common Shares issuable pursuant to the Earnout Payments, if any.

Conditions to Completion of the Transaction

There is no assurance that Imperus will consummate the Transaction. Completion of the Transaction is subject to a number of conditions, including, among others: (i) Exchange approval and any other regulatory approval that may be required; (ii) approval from the shareholders of Imperus, if required; and (iii) completion of the Financing. If such conditions are not satisfied or waived (if capable of waiver) on or before the Closing Deadline (unless extended), the Agreement may be terminated.

Imperus Shareholder Approval

If shareholder approval is required, an Imperus special shareholders' meeting is expected to be held to approve the Transaction and certain other matters. It is expected that a management information circular ("Management Information Circular") containing detailed information on the Transaction will be sent to Imperus shareholders in the coming months.

Financing

In conjunction with, and as a condition of completion of, the Transaction, Imperus plans to carry out an equity and/or debt offering (the "Financing") to raise gross proceeds of CDN$60,000,000, or such other amount as Imperus determines. The gross proceeds will be used principally to satisfy the cash portion of the Closing Purchase Price and the expenses relating to the Transaction, as well as for general working capital purposes. The terms and conditions of the Financing will be determined by Imperus in the context of the market, details of which will be set out in a subsequent news release and in the Management Information Circular (or such other disclosure document as may be prepared in connection with the Transaction in accordance with the requirements of the Exchange).

Business of Imperus and Diwip after Completion of the Transaction

Should the Transaction be completed, Diwip will become a wholly-owned (direct or indirect) subsidiary of Imperus, and Imperus will continue to operate the Diwip business through such subsidiary as well as continue to operate Imperus' other existing business lines.

Management and Directors after Completion of the Transaction

It is not expected that the Transaction will result in any change to the management or board of directors of Imperus.

On closing of the Transaction, the Diwip Principals will resign from their positions as directors of Diwip, and will continue in senior officer roles with Diwip, as follows: Mr. Kantzuker as co-President and Chief Product Officer (CPO) of Diwip, and Mr. Gamzo as co-President and Chief Technical Officer (CTO) of Diwip. The directors of Diwip on closing of the Transaction will be appointed by Imperus and have not been identified at this time.

The following information about Messrs. Kantzuker and Gamzo is provided for information purposes only. Additional disclosure will be contained in the Management Information Circular (or such other disclosure document as may be prepared in connection with the Transaction in accordance with the requirements of the Exchange).

Mr. Kantzuker is the co-founder of Diwip and is a resident of Tel Aviv, Israel. He has served as the Co-CEO of Diwip since April 2013 and as CPO of Diwip since the incorporation of Diwip in 2010, and he is primarily responsible for content and the product roadmap at Diwip. Mr. Kantzuker obtained a degree in Software Engineering from Tel-Aviv Afeka College for Engineering in 2010. From 2008 to 2010, Mr. Kantzuker was a software engineer in a private software start-up company involved in the business of optimization and development of algorithms.

Mr. Yaniv Gamzo is the co-founder of Diwip and is a resident of Tel Aviv, Israel. He has served as the Co-CEO of Diwip since April 2013 and as CTO of Diwip since the incorporation of Diwip in 2010, and he is primarily responsible for managing Diwip's system infrastructure and directing Diwip's mobile efforts. Mr. Gamzo obtained a degree in Software Engineering from Tel-Aviv Afeka College for Engineering in 2008, and has held roles as a software engineer with several large companies. From 2008 to 2010, Mr. Gamzo was a software engineer with NICE Actimize, a public company that provides financial crime, risk and compliance solutions for regional and global financial institutions and government regulators. Prior thereto, Mr. Gamzo was involved with several large companies, including AOL-ICQ.

Selected Financial Information Regarding Diwip

For the year ended December 31, 2013, Diwip had total assets of US$13,195,828, total liabilities of US$13,310,746, revenues of US$28,347,695 and net profit for the year of US$12,888,630, based on audited financial statements prepared in accordance with international financial reporting standards.

For the six month period ended June 30, 2014, Diwip had total assets of US$5,391,235, total liabilities of US$708,026, revenues of US$12,336,722 and net profit for the period of US$4,798,127, based on unaudited financial statements prepared in accordance with international financial reporting standards.

It is expected that the Management Information Circular (or such other disclosure document as may be prepared in connection with the Transaction in accordance with the requirements of the Exchange) will contain the audited financial statements of Diwip for the years ended December 31, 2013, 2012 and 2011, the unaudited interim financial statements of Diwip for the six month period ended June 30, 2014, and pro forma financial statements as may be required by the policies of the Exchange.

The financial statements of Imperus may be viewed on SEDAR at www.sedar.com.

"We are very excited about this transaction, and the tremendous value it brings to both parties and their shareholders," said Daniel Kajouie, President and CEO of Imperus. Mr. Kajouie went on to say, "The acquisition of Diwip provides Imperus immediate access to a broad market base. Diwip's proprietary online social gaming and mobile gaming products are synergistic with the Imperus product line and our philosophies. Messrs. Gamzo and Kantuzker have built a great company to date, and we are thrilled to have them join our team with a common vision of building Imperus to great new heights."

About Imperus

Imperus Technologies Corp. specializes in the convergence of social networking, mobile gaming, and real money gaming and is the developer of CASINA, an award winning social gaming software platform. Imperus was the winner of "The Most Innovative Start-up Company of the Year" at the 2013 GIGSE Conference, in San Francisco, California. The Company's wholly owned subsidiary, Vast Studios, specializes in the development and delivery of hidden object games, having delivered 18 titles to date, of which 8 are classified "collector's editions". 

CASINA, the Company's flagship product was developed for social, mobile, and monetized gaming. CASINA is considered to be the first true social network built for the online gaming market providing audiences with a product differentiator from a social interaction perspective, and is on track to host one of the largest portfolio of games. CASINA is designed to be future ready, scalable, modular, with the capability to expand integrations without limitation, and is capable to support third-party game integrations, cashier support, customer support, social networking, and backend operator support. For clients operating within fully regulated markets, CASINA offers a turnkey solution, including a full commerce application and back office suite.

With experienced social gaming leadership and development teams, Imperus looks to leverage the anticipated growth in regulated, real-money, social, mobile and online gaming through the application of the social graph and the gamblification of social games.

Cautionary Statements

Completion of the Transaction is subject to a number of conditions, including Exchange acceptance and shareholder approval. The Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Management Information Circular (or such other disclosure document as may be prepared in connection with the Transaction in accordance with the requirements of the Exchange) to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Imperus should be considered highly speculative.

The Exchange has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the contents of this press release.

Neither the Exchange nor its Regulation Services Provider (as that term is defined in policies of the Exchange) accepts responsibility for the adequacy or accuracy of this release.

All information contained in this news release with respect to Imperus and Diwip was supplied by the parties respectively, for inclusion herein, and each party and its directors and officers have relied on the other party for any information concerning the other party.

This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Not for distribution to U.S. Newswire Services or for dissemination in the United States. Any failure to comply with this restriction may constitute a violation of U.S. Securities laws.

Caution Regarding Non-IFRS Financial Measures

In addition to IFRS measures, this press release contains certain financial measures that do not have any standardized meaning prescribed by IFRS. Therefore, these financial measures may not be comparable to similar measures presented by other issuers. In this press release, Imperus uses the non-IFRS measures "EBITDA" and "annualized EBITDA". See below for Management's reconciliation of the most comparable IFRS measure to "EBITDA". The term "annualized EBITDA", as used in this press release, relates to the determination of the Earnout Payments after closing, and such term has a defined meaning under the Agreement, which definition specifically excludes from the calculation of "EBITDA" additional income and expense items that are not set out in the reconciliation of "EBITDA" below. See the Agreement for the definition of "Annualized EBITDA" in this respect.

Imperus' method of calculating "EBITDA" may differ from that of other issuers or companies operating in similar sectors and, accordingly, may not be comparable to similar measures presented by other issuers. The most comparable IFRS measure to "EBITDA" is net profit for the year, and set forth below is a reconciliation of such amount to "EBITDA":

   
  2013
  US$
(in thousands)
   
Revenue 28,347.7
   
Net profit for the year 12,888.6
Add: Depreciation and amortization 35.6
Add: Income taxes 1,786.2
EBITDA 14,710.4
  

Caution Regarding Forward Looking Information

Certain information in this press release constitute "forward looking" information which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company and Diwip to be materially different from any future results, performance or achievements expressed or implied by such forward looking information. When used in this press release, such information may use such words as "may", "will", "expect", "believe", "plan" and other similar terminology. Forward looking information in this press release includes, but is not limited to: details regarding the Transaction and the expectation that Imperus will consummate the Transaction generally upon the terms as currently contemplated; expectation for holding a shareholder meeting and distributing the Management Information Circular with respect to the Transaction; proposals regarding the Financing; that Diwip's Senior Management and employees will be retained as contemplated; that Diwip's complete suite of Mobile games will be completed and be ready for deployment in the first quarter of 2015; that Diwip will continue to operate in current markets and that the Transaction will provide Imperus with access to such markets; that CASINA will be the first true social network built and regulated for the online gaming market; that CASINA is on track to have the largest portfolio of games available for social online gaming; and that the regulated, real-money online gaming market is anticipated to grow. These statements and information reflect management's current expectations regarding future events and operating performance and speak only as of the date of this press release.

The forward looking information involves a number of risks and uncertainties, including, but not limited to: failure to obtain regulatory and shareholder approval for the Transaction and the Financing; failure to complete the Financing on terms acceptable to the Company; failure of Diwip to deploy its Mobile games as anticipated; competition in the industry and markets in which the Company and Diwip operates; the Company's and Diwip's stage of development, long term capital requirements and future ability to fund operations; delays with the launch of the Company's flagship product and the acceptance of the product in the target market; regulatory requirements; general economic, market or business conditions; and future developments in the sectors of the economy in which the business of the Company and Diwip operates. Certain forward looking information is based on certain assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities. The foregoing list of factors is not exhaustive. Please see the Company's prospectus dated October 23, 2013 and other documents available on www.sedar.com, for a more detailed description of the risk factors. Additional risk factors regarding Diwip and the Transaction will be contained in the Management Information Circular (or such other disclosure document as may be prepared in connection with the Transaction in accordance with the requirements of the Exchange).

The statements in this news release are made as of the date of this release. Forward-looking statements in respect of the Company or Diwip, as the case may be, are made based on the beliefs, estimates and opinions of the management of the Company or Diwip, respectively, on the date the statements are made, and neither the Company nor Diwip undertakes any obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable law.

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