Gaming Realms Regulatory News (GMR)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

Gaming Realms Plc

("Gaming Realms," the "Company" or the "Group")

Proposed Acquisition of gaming assets from RealNetworks, Inc.

Placing of up to 50 million New Ordinary Shares of 10 pence each at a price of 25 pence per share

Notice of General Meeting

Gaming Realms, the creator and developer of interactive next generation online gaming products, announces that it has conditionally agreed to acquire from RealNetworks, Inc. ("RealNetworks" or the "Seller"), the following assets: GameHouse US and Canadian Game studios; Social & Mobile Freemium portfolio games and publishing network; Slingo Brand & Patents; certain game domains including Sudoku.com and Mahjong.com; an intellectual property licence relating to the GameHouse Promotion Network and the entire issued share capital of Backstage Technologies (together, the "Acquisition").

The total consideration for the Acquisition is $18 million, and is comprised of a $10 million cash payment on completion and two tranches of $4 million each in deferred consideration ("Deferred Consideration"), payable 12 and 24 months after completion respectively. Up to 50 per cent. of each tranche of Deferred Consideration can, at the election of RealNetworks, be satisfied by the issue of ordinary shares in the Company ("Deferred Consideration Shares").

In addition, the Company announces that it has conditionally raised £12.5 million through the proposed placing ("the Placing") of up to 50 million new ordinary shares of 10 pence each in the capital of the Company ("Placing Shares") at a price of 25 pence per Placing Share ("Placing Price"). The Placing will fund up to $14 million of the consideration in respect of the Acquisition and will also provide, inter alia, ongoing working capital for the enlarged Group.

Unless otherwise noted herein, the defined terms used in this announcement are defined in the appendix to this announcement.

Highlights

▪ Acquisition is directly in line with the Group's strategy to build an international portfolio of engaging casual gaming brands

▪ Acquisition provides the Group with a direct entry point into the valuable North American market which, together with its UK footprint, creates an international platform for future growth and geographical expansion

▪ Slingo assets provide the Group with entry into the fast growing Social Casino Gaming segment of online gaming

▪ Acquisition enhances the Group's freemium game development capabilities

▪ Gaming Realms proprietary platform will, on completion of the Acquisition, host Spin Genie, Pocket Fruity and Slingo branded game formats

▪ Acquisition offers the opportunity to grow the acquired brands via the Group's proprietary mobile platform

▪ Group's platform will provide increased CRM and data driven player marketing to the acquired assets through Quick Think Media and Blueburra

▪ Acquisition will provide the Group with high value intellectual property and game domain ownership including Sudoku.com and Mahjong.com

▪ Acquisition brings an experienced management team with sector experience from companies such as GTECH, Aristocrat, Double Down Interactive and Xbox Live

Overview of Slingo

▪ Since licensing Slingo Riches in April 2015 it became the most popular game on the Group's Spin Genie site within four weeks of launch

▪ Established in 1996, Slingo is a leading casual online real-money game which combines Slot and Bingo functionality

▪ Players have downloaded more than 50 million Slingo games and played them more than 5 billion times

▪ Slingo was bought by RealNetworks for $15.6 million in July 2013 and generated revenues of $6 million in 2014

Current Trading

▪ Quarter on quarter revenue up 12% to £4.2 million (Q1/15: £3.8 million)

▪ Quarter on quarter real money gambling revenue up 29% to £2.4 million (Q1/15: £1.8 million)

▪ New depositing players increased 3% to 36,992 (Q1/15: 35,857)

▪ Launch of Slingo Riches for real money gaming on platform in April 2015. Number one performing game since launch accounting for 11.4% of gross gaming revenue

Commenting on the Acquisition, Patrick Southon, Chief Executive Officer of Gaming Realms, said:

"This is a landmark acquisition for Gaming Realms transforming the Group into a truly international developer, distributor and marketer in the burgeoning casual and real-money sectors. I am very proud of the hard work everyone at Gaming Realms has put into getting us into this position in the last 18 months.

"The successful integration of the Blueburra and Quick Think Media businesses and completion of our proprietary mobile specialist platform means we have scalable infrastructure to grow the acquired assets.

"We will also benefit from increased capabilities in marketing and game development, adding domain and intellectual property for future growth. Slingo is a well-established brand and has already benefited from sitting on our platform alongside our Pocket Fruity and Spin Genie brands. The addition of Slingo to our existing portfolio creates an exciting player offering. We are very much looking forward to working with the teams transferring as part of the deal. The enlarged business will form a solid bedrock for the further implementation of our strategy."

The Directors believe that the Acquisition will transform the Group into an international, multi-brand developer in real and casual gaming and that it will greatly enhance the Group's capabilities in development, distribution, marketing and ownership of intellectual property.

Atul Bali, a current Non-executive director of Gaming Realms has, conditional upon, inter alia, Completion, agreed to split his time between being Executive Director and deputy chairman of Gaming Realms while continuing to perform his duties as president of the games division of RealNetworks. Mr Bali is a US permanent resident (UK national) with significant experience in the sector (President Aristocrat Americas, CEO Gtech G2) and will be primarily responsible for managing the Transferred Assets, hence his proposed appointment to the executive team.

Completion of the Acquisition and Placing are conditional on, inter alia, the passing of the resolutions to authorise the Directors to issue the Placing Shares and the Deferred Consideration Shares. A circular will be posted to shareholders of the Company today, containing a notice convening a General Meeting to be held at 44 Southampton Buildings, London, WC2A 1AP at 10.00 a.m. on 10 August 2015.

- Ends -

For more information contact:

Forward looking statements

This document includes "forward-looking statements" which include all statements other than statements of historical facts, including, without limitation, those regarding the Group's financial position, business strategy, plans and objectives of management for future operations, or any statements proceeded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or negatives thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the actual results, performance or achievements of Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. These forward looking statements speak only as at the date of this document. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based unless required to do so by applicable law or the AIM Rules.

Letter from the Chairman

Introduction

The Company has announced that it has conditionally agreed to acquire the Transferred Assets and the Transferred Shares, made up of, GameHouse US and Canadian Game studios, social and mobile freemium portfolio games and publishing network, Slingo brand & patents, certain game domains, an intellectual property licence relating to the GameHouse Promotion Network and the entire issued share capital of Backstage Technologies.

The total consideration is $18 million to be satisfied by a payment of $10 million in cash upon Completion and $4 million in deferred consideration payable on the First Anniversary and $4 million in deferred consideration payable on the Second Anniversary. Up to 50 per cent. of each tranche of the deferred consideration can, at the election of the Seller, be satisfied by the issue of new Ordinary Shares on or around each payment date. The Directors believe that the Acquisition will enhance the capability of the Company in the areas of freemium game development, mobile game distribution, North American expansion, data science driven player marketing and customer relationship management. They further believe that the Acquisition will provide the Company with high value intellectual property and game domain ownership.

In connection with the Acquisition, the Company is also announcing a conditional Placing by Cenkos and Whitman Howard to raise gross proceeds of approximately £12.5 million (£11.9 million net of Placing expenses) by the issue and allotment of up to 50 million Placing Shares, with new and existing investors, at the Placing Price in order to fund up to $14 million of the total cash consideration element of the Acquisition as well as, inter alia, providing the Company with ongoing working capital.

The Acquisition and Placing are conditional upon (among other things) the passing of the Resolutions in order to ensure that the Directors have the necessary authority to allot the Placing Shares for cash on a non-pre-emptive basis. A General Meeting is therefore being convened at 10.00 a.m. on 10 August 2015 at 44 Southampton Buildings, London, WC2A 1AP for the purpose of considering the Resolutions. The Notice of General Meeting containing the Resolutions is set out at the end of the Circular.

If the Resolutions are duly passed it is expected that the Acquisition will be completed on 10 August 2015 and the Placing Shares will be admitted to trading on AIM at 8:00 a.m. on 11 August 2015.

The purpose of the Circular is to explain the terms of the proposed Acquisition, provide details of the proposed Placing, explain why the Directors are seeking authority from the Shareholders to issue and allot the Placing Shares, and why they recommend that you vote in favour of the Resolutions.

Background to and reasons for the Acquisition

Since the management team came back together in 2012, management has focused on building and marketing a new generation of social and real money games, predominantly delivered via mobile gaming. To this end it has built a business-intelligence led proprietary platform specifically designed for mobile gaming. The platform has significant capabilities which the Directors believe will enable the Company to accelerate the growth of its current and future assets. The Company additionally uses a third-party gaming platform for its bingo-related activities.

The key assets transferred pursuant to the Acquisition comprise:

▪ GameHouse US and Canadian Game studios - GameHouse US and Canadian Game studios, has approximately 55 staff located in Seattle, Washington, USA and Victoria, British Columbia, Canada

▪ Social & Mobile Freemium portfolio games and publishing network - Backstage Technologies develops and publishes freemium mobile and social casino, bingo, puzzle, instant win and hidden object games including GameHouse Casino + and over 90 Slingo games such as Slingo Adventure and Slingo Shuffle

▪ Slingo Brand & Patents - The Acquisition also includes all the intellectual property rights relating to Slingo, over 90 Slingo games and certain bingo related games. These intellectual property rights are currently licensed to the real money gaming and lottery industries, including Gaming Realms (which currently has an exclusive licence for the UK)

▪ Mahjong.com and Sudoku.com URL domains - In addition the Company is acquiring Mahjong.com, Sudoku.com and slingo.com domains, as part of the Transferred Assets

▪ Intellectual property licence relating to the GameHouse Promotion Network - The Acquisition will provide the Company with a perpetual licence to the GameHouse Promotion Network platform technology, enabling algorithmic acquisition and engagement of players within iOS, Android and Mobile web applications

Strategic fit and synergies

The key executives within the existing Gaming Realms business and those joining through the Acquisition share a common vision about the value of Slingo as a brand for real and social gaming, which the Directors believe will translate post acquisition into a number of synergies such as cross promotion to a shared audience profile and economies of scale in customer acquisition costs, (commonly referred to as CPA). In addition, the Company's game development activities will benefit from the skills and expertise of the employees transferred as part of the Acquisition and enable new product lines to be developed in the Mahjong and Sudoku game genres. The Directors also expect the Acquisition to enable cost synergies through owning the game format and licence of its currently licensed Slingo games activities.

Furthermore, the Directors believe there will be a number of more direct benefits such as:

▪ Addition of revenue-enhancing new products;

▪ Unique intellectual property, including brand domains and a data science platform;

▪ Access to the North American market which will add scale to the Company's existing operations; and

▪ Addition of key senior management with complementary skills and experience.

The Company, as enlarged by the Acquisition, plans to use Slingo as part of its international strategy, not only in generating social and licence revenue from jurisdictions where online gambling is not regulated, but also to be used as an acquisition channel in new territories for the Group where Slingo has a greater penetration in users through its social games.

More specifically, the Directors believe that the Acquisition will provide the Company with a North American presence as well as adding scale in the mobile and social games arena and creating new revenue growth. The GameHouse management team, with sector management experience from companies such as Double Down Interactive, Xbox Live and Wizards of the Coast will also join as part of the Acquisition.

The Directors also intend that the Acquisition will contribute towards building a cross platform global mobile player and game publishing network in the freemium category leveraging the existing data science platform, core brands (e.g. Slingo), domain properties (mahjong.com, sudoku.com and slingo.com) studio talent and developer relationships. The Directors believe that the combination of the regulated gambling and freemium gaming capabilities arising from the Acquisition will create a platform capable of serving the global audience for, and the cross promotion and monetisation of, the enlarged Group's portfolio of casino, bingo, Slingo and other relevant casual games.

Board

Atul Bali, a current Non-executive Director of Gaming Realms has, conditional on, inter alia, Completion, agreed to split his time between being Executive Director and deputy chairman of Gaming Realms while continuing to perform his duties as president of the games division of RealNetworks. Mr Bali is a US permanent resident (UK national) with significant experience in the sector (President Aristocrat Americas, CEO Gtech G2) and will be primarily responsible for managing the Transferred Assets, hence his proposed appointment to the executive team.

Mr Bali's service agreement as a proposed Executive Director of the Company will provide for an annual salary of $320,000 and he will be granted options over 5 million Ordinary Shares. The service agreement may be terminated upon 15 months' notice by either party. Mr Bali's appointment as an Executive Director is conditional on the Resolutions being passed at the General Meeting and Completion taking place.

A further non-executive director will be appointed to the Board in due course and a further announcement will be made in due course following the outcome of the search process which is already underway.

Financial Information on the Transferred Assets and Transferred Shares

In the 12 months ended 31 March 2015, the turnover attributed to the Transferred Assets and Transferred Shares was $6.3 million and the loss before tax was $12.9 million. The loss before tax has not been adjusted to reflect the lower level of overheads being assumed by the Company in respect of the Acquisition. The reduced overheads arise as a result of a smaller number of employees transferring to Gaming Realms on Completion.

Current trading

Growth in revenue in the second quarter of the year has been positive as set out below, with Slingo Riches contributing strongly in the period since launch:

▪ Quarter on quarter revenue up 12% to £4.2 million (Q1/15: £3.8 million)

▪ Quarter on quarter real money gambling revenue up 29% to £2.4million (Q1/15: £1.8 million)

▪ New depositing players increased 3% to 36,992 (Q1/15: 35,857)

▪ Launch of Slingo Riches for real money gaming on platform in April 2015. Number 1 performing game since launch accounting for 11.4% of gross gaming revenue

Principal terms of the Acquisition

Under the terms of the Acquisition Agreement, the Company has conditionally agreed to acquire the Transferred Assets and Transferred Shares described above in the "Background to and the reasons for the Acquisition and the Placing".

The total consideration of $18 million, subject to certain adjustments, is to be satisfied as follows:

▪ $10 million in cash at Completion, subject to adjustment based on the working capital of BackStage Technologies;

▪ $4 million on the First Anniversary (up to 50 per cent. to be satisfied in Ordinary Shares, at the election of the Seller, at the Closing Price); and

▪ $4 million on the Second Anniversary (up to 50 per cent. to be satisfied in Ordinary Shares, at the election of the Seller, at the Closing Price).

The Acquisition is conditional upon: inter alia, the passing of the Resolutions. If any such conditions are not satisfied or, if applicable, waived, the Acquisition will not proceed.

Further detail on the Acquisition Agreement is set out in Part II of the Circular posted to shareholders and available on the Company's website.

The Placing

The Placing Shares have been conditionally placed by Cenkos and Whitman Howard, as agents for the Company, with new and existing institutional and other investors in accordance with the terms of the Placing Agreement.

Subject to Admission, the Company will issue up to 50 million Ordinary Shares at the Placing Price, raising approximately £11.9 million net of expenses. The Placing Shares will represent approximately 20 per cent. of the Enlarged Share Capital. The Placing Price represents a discount of approximately 19.4 per cent. to the closing price on 23 July 2015 (the last practicable day prior to the publication of the Circular).

Furthermore, certain of the Executive Directors intend to subscribe for such number of Placing Shares as is equal to, in aggregate, approximately £646,250 at a price per share to be agreed between the Company and Cenkos but being no less than the Placing Price.

The Placing Shares will, when issued, rank in full for all dividends declared, made or paid after the date of their issue and otherwise pari passu with the Existing Ordinary Shares.

The Placing Agreement

Cenkos and Whitman Howard have entered into the Placing Agreement with the Company whereby they have agreed to use their reasonable endeavours, as agents for the Company, to procure placees for up to 50 million Placing Shares at the Placing Price.

The Placing Agreement contains warranties from the Company in favour of Cenkos and Whitman Howard in relation to, inter alia, the accuracy of the information in this document and other matters relating to the Group and its business. In addition, the Company has agreed to indemnify Cenkos and Whitman Howard in relation to certain liabilities it may incur in respect of the Placing.

The Placing is conditional on, inter alia, the Executive Directors, subscribing for such number of Placing Shares as is equal to, in aggregate, approximately £646,250 at a price per share to be agreed between the Company and Cenkos but being no less than the Placing Price, the Placing Agreement becoming or being declared unconditional in all respects and it not being terminated before Admission and on Completion of the Acquisition and Admission.

Cenkos and Whitman Howard have the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event of a breach of the warranties or a material adverse change.

Application will be made to the London Stock Exchange Plc for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the Placing Shares will commence on AIM at 8:00 a.m. on 11 August 2015.

On Admission, the Enlarged Share Capital is expected to be 245,170,489 Ordinary Shares and the Placing Shares will represent approximately 20 per cent. of the Enlarged Share Capital.

Use of Proceeds

The net proceeds of the Placing will be used as set out below:

▪ to fund up to £9 million ($14 million) of the total cash consideration in connection with the Acquisition; and

▪ £2.9 million in respect of general working capital (including acquisition costs).

Concert Party

As set out in the Company's Admission Document dated 15 July 2013, the existing Concert Party is interested in over 30 per cent but less than 50 per cent of the Existing Ordinary Shares. Following Completion and Admission, the Concert Party's aggregate interest in the Enlarged Share Capital will be approximately 27.2 per cent. Whilst the Concert Party holds less than 30 per cent. of the issued share capital, if any of the members were to purchase or subscribe for any shares in the Company which takes their or the Concert Party's aggregate interest above 30 per cent., under Rule 9 of the Code that person (and potentially the Concert Party in its entirety) will normally be required to make an offer to all Shareholders for those shares it does not own (in cash at the highest price paid in the last 12 months).

General Meeting

Set out at the end of Circular posted to shareholders and available on the Company's website is a notice convening the General Meeting to be held at 44 Southampton Buildings, London, WC2A 1AP at 10.00 a.m. on 10 August 2015 for the purposes of considering and, if thought fit, passing the Resolutions.

The Resolutions proposed are:

a) an ordinary resolution to authorise the Directors to allot and issue the Placing Shares and the Deferred Consideration Shares; and

b) a special resolution, to permit the Directors to allot the Placing Shares for cash on a non-pre-emptive basis.

The authorities set out in Resolutions 1 and 2 are in addition to the existing authorities granted at the annual general meeting held on 4 June 2015.

As noted in Part II of the Circular, the requirement to issue Deferred Consideration Shares is at the sole election of the Seller and, further the number of such Deferred Consideration Shares to be issued is not currently known. The maximum number of Deferred Consideration Shares to be issued will be $4 million divided by the Deferred Relevant Value (as defined in Part II). In order to ensure that the Company is able to issue the Deferred Consideration Shares in accordance with the Acquisition Agreement, the Company is seeking a specific authority which uses the nominal value of the Ordinary Shares as the Deferred Relevant Value.

If the Resolutions are not passed at the General Meeting the conditions of the Placing Agreement and the Acquisition Agreement will not be satisfied. Consequently, in these circumstances, neither the Placing nor the Acquisition will occur.

Action to be taken

A Form of Proxy for use at the General Meeting accompanies the Circular posted to shareholders and available on the Company's website. Whether or not you intend to attend the General Meeting it is important that you complete and sign the Form of Proxy. It should be completed and signed in accordance with the instructions thereon and returned to the Company's registrars, Computershare Investor Services Plc, The Pavilions, Bridgwater Road, Bristol BS99 6ZY as soon as possible, but in any event, so as to be received by no later than 10.00 a.m. on 6 August 2015 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting).The completion and return of a Form of Proxy will not preclude the Shareholders from attending the General Meeting and voting in person should they so wish.

If you hold your shares in the Company in uncertificated form (that is, in CREST) you may vote using the CREST proxy appointment service in accordance with the procedures set out in the CREST Manual (please also refer to the accompanying notes to the Notice of the General Meeting set out at the end of the Circular). Proxies submitted via CREST must be received by the Company by no later than 10.00 a.m. on 6 August 2015 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting).

Directors' Recommendation

The Board considers that the terms of the Acquisition and the Placing are fair and reasonable insofar as the Shareholders as a whole are concerned.

Accordingly, the Board unanimously recommend Shareholders to vote in favour of the Resolutions to be proposed at the General Meeting as they intend to do so in respect of their own beneficial holdings amounting, in aggregate, to 42,657,915 Ordinary Shares, representing approximately 21.86 per cent. of the Existing Ordinary Shares.

APPENDIX

DEFINITIONS

The following definitions apply throughout the document, unless the context requires otherwise: