ESPI 18/2021 Signing a significant investment agreement

Management Board of IMS S.A. (“Issuer”) informs that on 24th June this year investment agreements were signed concerning the acquisition of the capital in the subsidiary Closer Music Sp. z o.o. (‘the Company’, ‘Closer Music’), dealing with the development and commercialisation of its own music libraries. The company will issue and sell shares representing a total of 0.60% of the share capital to two new investors with many years of experience in managing investment funds for the amount of PLN 301.8 thousand, i.e. at the estimated valuation of 100% of Closer Music shares amounting to PLN 50 million. The parties have set the deadline for completion of the investment at the end of July 2021. The funds raised will be used to further expand Closer Music’s music libraries.

The issued number and % of shares for new investors take into account the already granted and not yet taken up shares from the Incentive Program for 2020 for the members of the management board of Closer Music and shares which will most probably be issued as part of the conversion of the Issuer’s loans granted to the Company (PLN 2 850 000 of loans from IMS S.A. for 40% of shares in Closer Music calculated taking into account this 40% of the issue – “post-money”, a favourable form of issue for the lender). However, if the Issuer did not exercise its right to convert the loans in whole or in part in the future, the investors shall be obliged to adequately, proportionally redeem the acquired shares at their nominal price or to make an appropriate, proportional additional payment for each of the acquired shares so that the valuation of Closer Music, agreed upon by the parties to the transaction, amounting to PLN 50 million, would be maintained.

The Agreement needs to be approved of the Issuer’s Supervisory Board and  the Closer Music General Meeting of Shareholders needs to adopt necessary resolutions for it to be implemented. In the event of refusal to issue the necessary approval or failure to adopt resolutions, the Agreement shall be automatically terminated, and its provisions shall have no legal effect.

The Issuer expects to raise further funding for Closer Music in the coming months. In particular, in the second to third quarter of 2022, the Issuer will seek to raise financing in the USA for a company related to Closer Music in the USA, which the Issuer intends to set up in the coming weeks to conduct activities identical to Closer Music Sp. z o.o. – i.e. construction and commercialisation of music libraries, in the United States, which is the largest music market in the world. Taking into account the prospects for companies creating music content and the related publicly available valuations of other companies in the broadly defined industry, as well as the consistent implementation of the Closer Music strategy, IMS S.A. expects the capitalisation of Closer Music in the next round of financing carried out in the United States to be at least several times higher than the current PLN 50 million.

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