Gaming Realms Regulatory News (GMR)

22 February 2019

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Gaming Realms plc

("Gaming Realms" or the "Company" or, together with its subsidiaries, the "Group")

Proposed sale of Bear Group Limited, licensing of real money gaming platform and sale of residual interest in River UK Casino Limited

and

Notice of General Meeting

Gaming Realms plc (GMR.L), the developer, publisher and licensor of mobile real money and social games, announces that the Company has entered into agreements with River iGaming plc, a company listed on the Merkur Market of the Oslo Bors ("River iGaming" which, together with its subsidiaries and associated companies, are the "River Group Companies") and certain other River Group Companies. Under these agreements, which are conditional amongst other things upon shareholder and regulatory approval, the Company will sell the entire issued share capital of Bear Group Limited ("Bear Group"), the Company's real money operating subsidiary, to River Game Operations Limited ("RGO", a River Group Company) and grant River Technologies Limited ("RTL", also a River Group Company) a sole perpetual licence to the Group's real money gaming platform, as well as sell its residual 30% stake in River UK Casino Limited ("River UK Casino") to River iGaming.

The cash consideration for these transactions will total £11.5 million, which will include the settlement of the contracted deferred consideration of £4.2 million owed by River UK Casino to the Group (due in October 2020) under the terms of the Acquisition (as defined below) (the "Contracted Deferred Consideration"). All the above proposed transactions comprise the "Transaction" as described in further detail below. 

Transaction highlights and background:

· RGO will acquire Bear Group and RTL will be granted a sole perpetual licence to the Group's real money gaming platform

· River iGaming will acquire the Company's 30% stake in River UK Casino and accelerate payment of the Contracted Deferred Consideration

o As announced on 27 June 2018, River UK Casino agreed to acquire certain real money gaming brands owned by Gaming Realms, namely Pocket Fruity, Spin Genie, Britain's Got Talent Games, X Factor Games and the associated business (the "Acquisition")

o Following completion of the Acquisition, River iGaming held a 70% stake in River UK Casino and the Company held the remaining 30% stake (subject to a mutual put and call option arrangement exercisable no later than 31 October 2020)

o Gaming Realms is of the opinion that River UK Casino is unlikely to meet the £2.2 million EBIT target for the 12 months to 30 June 2019 required for the Company to gain any further deferred consideration in connection with the Acquisition (as set out on 27 June 2018) beyond the Contracted Deferred Consideration

o The Transaction will terminate the terms of the Acquisition documents, save for continuation of certain of the warranties given by the Company pursuant to the Acquisition documents

· The total consideration payable to the Group on completion of the Transaction (unless otherwise stated) is £11.5 million in cash (which includes the settlement of the Contracted Deferred Consideration) and comprises:

o a total payment of £7.0 million under the terms of the Share Purchase Agreement entered into today in relation to the Transaction pursuant to which the Group shall sell both the entire issued share capital of Bear Group and its 30% stake in River UK Casino. Of such total payment, £5.5 million is payable on completion and £1.5 million is payable without set-off on or before 31 December 2020; and

o a payment of £4,497,000 million in respect of the sole perpetual licence of the Group's real money gaming platform and £3,000 in respect of the 30% stake in River UK Casino

· River UK Casino has repaid the Company's outstanding working capital loan to River UK Casino of £0.9 million (net of any sums owing by the Group)

· The net consideration from the Transaction will provide sufficient working capital for the development of games, the remote game server and worldwide licensing. In addition, it will provide resources for the repayment by the Group of the £3.5 million loan from JPJ Group Plc (entered into in December 2017)

· The Group will retain the Slingo brand and slingo.com IP, and shall, on completion, enter into a white label agreement with River iGaming ensuring that the Group's slingo.com brand can continue to operate on the Bear Group gaming platform

· For the 12 months ended 31 December 2017 (audited) ("FY17"), Bear Group and the real money gaming platform, being sold as part of the Transaction, delivered £8.8 million of net gaming revenue and adjusted EBITDA of £0.5 million

· The Transaction is subject to the approval of both Gaming Realms' and River iGaming's shareholders, as well as the UK and Alderney Gambling Commissions, and certain other third party consents, and is expected to complete in Q2 2019

Strategic rationale

· The Transaction is in line with the Company's strategy of focusing its resources on content development and international licensing of the Slingo brand and IP. Gaming Realms is already building an excellent pedigree in this area having developed and launched approximately 20 games to date, and the Board believes it makes strategic sense to build on this success. The revenue from games licensing grew 220% from £0.55 million in FY17 to £1.75 million for the unaudited 12 months ended 31 December 2018 ("FY18")

· The Transaction is expected to result in a reduction of the Group's operating and administrative expenses amounting to approximately £3 million on an annualised basis

Current Trading

The Board announces that the unaudited trading results for FY18 are expected to show revenue and adjusted EBITDA in line with market expectations, with an adjusted EBITDA loss of approximately £0.7 million (unaudited). As a result of the Transaction and looking to the future, the Group will focus on the development and licensing of proprietary online games, which had a strong FY18, and revenue for the first six weeks of 2019 was running 118% above the daily average of FY18. 

Commenting on the proposed Transaction, Patrick Southon, CEO of Gaming Realms, said:

"The new UK regulatory environment, together with increases in Point of Consumption tax, has made it increasingly difficult to operate a sole UK facing casino and real money platform. However, the acquisition of the Slingo brand and IP in 2015 has enabled the Company to become a highly regarded developer and licensor of games in the international gaming market. This is a high growth market and one that the Board believes can be further developed for the benefit of shareholders."

Notice of General Meeting

The Transaction is deemed to be a "fundamental change of business" as described in Rule 15 of the AIM Rules for Companies and, therefore, the Company is required to seek the consent of Gaming Realms' shareholders, which it is doing by way of a resolution (the "Resolution") to be proposed at a general meeting to be held at 11.30 a.m. on Monday, 18 March 2019 at the offices of Memery Crystal LLP, 165 Fleet St, London EC4A 2DY (the "General Meeting"). The Transaction is also conditional on the approval of River iGaming's shareholders and on receiving regulatory and certain third party consents.

The Notice of General Meeting and accompanying circular, which will provide further details of the proposed Transaction, will be sent to Gaming Realms' shareholders and will be available on the Company's website on Friday, 22 February 2019.

Intentions to vote in favour

The Directors, who in aggregate hold 48,734,052 ordinary shares of 10p each in the Company ("Ordinary Shares"), representing 17.1% of the current issued share capital, have irrevocably agreed to vote in favour of the Resolution to be proposed at the General Meeting.

As at 20 February 2019 (being the latest practicable date prior to the publication of this announcement), 284,428,747 Ordinary Shares were in issue (no Ordinary Shares were held in treasury). Accordingly, the total number of voting rights of the Company as at 20 February 2019 was 284,428,747.

Enquiries:

About Gaming Realms

Gaming Realms creates and publishes innovative real money and social games for mobile, with operations in the UK, US and Canada. Through its unique IP and brands, Gaming Realms is bringing together media, entertainment and gaming assets in new game formats. The Gaming Realms management team includes accomplished entrepreneurs and experienced executives from a wide range of leading gaming and media companies.

Disclaimer

The Transaction described in this announcement is conditional, inter alia, on receiving certain third party consents and the Resolution being passed by Gaming Realms' shareholders at the General Meeting to be held at 11.30 a.m. on Monday, 18 March 2019 at the offices of Memery Crystal LLP, 165 Fleet St, London EC4A 2DY for the purpose of considering and, if thought fit, passing the Resolution.

Akur Limited ("Akur"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority ("FCA"), is acting exclusively for the Company and for no-one else in connection with the matters set out in this announcement. Akur will not regard any other person (whether or not a recipient of this announcement) as its client in relation to the Transaction and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Transaction or any transaction or arrangement referred to in this announcement.

Peel Hunt LLP (''Peel Hunt''), which is authorised and regulated in the United Kingdom by the FCA, is acting exclusively for the Company and for no one else in relation to the matters set out in this announcement. Peel Hunt will not regard any other person (whether or not a recipient of this announcement) as its client in relation to the Transaction and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing any advice in relation to the Transaction or any transaction or arrangement referred to in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed on Akur or Peel Hunt by FSMA or the regulatory regime established thereunder, neither Akur nor Peel Hunt makes any representation express or implied in relation to, or accepts any responsibility whatsoever for, the contents of this announcement or any other statement made or purported to be made by it or on its behalf in connection with the Transaction. Both Akur and Peel Hunt (and their affiliates) accordingly, to the fullest extent permissible by law, disclaim all and any responsibility or liability (save for any statutory liability) whether arising in tort, contract or otherwise which it might have in respect of the contents of this announcement or any other statement made or purported to be made by it or on its behalf in connection with the Transaction.