ESPI 24/2021 Signing a significant investment agreement

Management Board of IMS S.A. (“Issuer”) informs that on 27th July this year another an investment agreement was signed concerning the acquisition of 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 1.82% in the increased share capital to the new investor for PLN 748 thousand, i.e. at the estimated valuation of 100% of Closer Music shares amounting to PLN 40 million. The discount in relation to the original issue price (giving a valuation of approximately PLN 50 million) results from the fact that the investor, a lawyer permanently residing in the USA with many years of international experience in the field of copyright, will be involved in the development and building of Closer Music’s market position in the United States. The parties have set the deadline for completion of the investment at the end of August 2021. The funds raised will be used to further expand Closer Music’s music libraries.

The issued number and % of shares for the new investor 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 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).

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

In June and July this year, investment agreements were signed to raise a total of PLN 1.2 million for Closer Music. 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 related company in the USA, which will conduct business identical to Closer Music Sp. z o.o. – i.e. it will be involved in the construction and commercialisation of music libraries in the United States, 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 valuation.

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