Great NewsCONTAGIOUS GAMING TO ACQUIRE ESTABLISHED UK ONLINE BINGO PROVIDER CHELBIS Contagious Gaming Inc. has entered into an agreement to acquire all of the issued and outstanding securities of Chelbis Company Ltd. The purchase price (described below) will be paid through a combination of common shares of Contagious Gaming and cash, and will include deferred consideration tied to performance in respect of a meaningful portion of the purchase price. The cash portion of the purchase price will be financed with cash on hand. Chelbis owns and operates well-established and successful websites House of Bingo, Gone Bingo, and Harrys Bingo, as well as bingo networks Best Bingo Network, Super Bingo Network and Fun Bingo Network. It also manages more than 14 white label bingo partner websites within its networks. Chelbis was established in Malta in 2007 and has since served over three million players with approximately 99 per cent of revenues generated from the United Kingdom. Chelbis has handled over $31.6-million (17.4 million British pounds) in net win on a cash basis since 2011 and wagers of over $3.4-billion (1.9 billion British pounds) since inception. Chelbis's offering caters to all player segments, including value-orientated and casual players, but its focus is on the high-roller player base. Its high-roller players have a player lifetime of over four years and account for 50 per cent of total deposits since inception. Chelbis utilizes Cozy Games Management Ltd.'s gaming software platform, which provides its players with 71 on-line games and 46 mobile games. Peter Glancy, chief executive officer and director of the company, commented: "The acquisition of Chelbis is expected to be materially accretive, diversifying our revenue streams, providing consistent cash flow and allowing us to capitalize on synergies which should ultimately increase margins and reduce costs. We look forward to completing the acquisition of Chelbis and welcoming them as Contagious Gaming shareholders." Madhu Avalur, CEO of Chelbis, commented, "We look forward to completing the acquisition and joining the Contagious Gaming team where we will be able to leverage our resources and create synergies to drive value for shareholders." CHELBIS SUMMARY OF FINANCIALS FOR YEAR ENDED DEC. 31, 2013 (In thousands) Audited Adjusted Revenue $4,955 $4,955 Expense 3,442 2,722 Operating income 1,513 2,233 Taxes, interest and other 526 83 Net income 987 2,151 Plus Interest (6) (6) Tax 532 89 Depreciation and amortization 67 67 EBITDA 1,580 2,300 The purchase price for the acquisition will be $4.05-million plus earn-out consideration equal to fiscal year 2015 net income and fiscal year 2016 net income. It shall be paid as follows: Initial share consideration of common shares to be paid on closing of $2.79-million at the deemed price of 80 cents per share or the trading price plus a premium (as defined below); Total cash consideration of $1.26-million is expected to be paid as follows: $720,000 in cash due on closing of the acquisition; $270,000 in cash due at the later of Dec. 31, 2015, or the date in which the Chelbis fiscal year 2015 corporate tax return is received; $270,000 due six months following the 2015 payment. Earn-out consideration to be calculated and paid as follows:Earn-out payment equal to the consolidated net profit after taxes for Chelbis for the period 12 months ended Dec. 31, 2015, payable at the discretion of Contagious Gaming in either cash payable 60 days after the completion of the fiscal 2015 audited financial statements for Chelbis or common shares at the 10-day volume-weighted average price (VWAP) of common shares trading on the Toronto Stock Exchange or the TSX Venture Exchange prior to the delivery of Chelbis audited financial statement for fiscal 2015; Earn-out payment equal to the net profit for Chelbis for the period 12 months ended Dec. 31, 2016, payable at the discretion of Contagious Gaming in either cash payable 60 days after the completion of the fiscal 2016 audited financial statements for Chelbis or common shares at the 10-day volume-weighted average price of common shares trading on the TSX prior to the delivery of Chelbis audited financial statement for fiscal 2016. The deemed price per common share shall be: 80 cents; or in the event that common shares are trading on the TSX-V at a price less than 80 cents per common share, then the deemed price per common share shall be equal to the prior trading day's closing price of the TSX-V common shares of the day of executing the definitive agreement plus a premium equal to 50 per cent of the difference in the trading price and 80 cents. Closing conditions Chelbis is being acquired free of any long-term debt and shall be delivered with unrestricted cash equal or exceeding $540,000 (300,000 British pounds). The acquisition is subject to completion of customary due diligence, negotiation and settlement of a definitive agreement, and approval of the TSX Venture Exchange. Rational for acquisition Significant synergies as a combined entity Ability to leverage Contagious Gaming's software platform and library of content for deployment into Chelbis's established network with turnkey player liquidity of over $3.4-billion (1.9 billion British pounds) of wagers since inception; Chelbis's existing customer relationship management (CRM) infrastructure can be used to handle the company's requirements for Goal Time in a cost-effective manner under the current cost structure; Access to a dedicated team of approximately 90 employees in a low-cost jurisdiction, adding additional bandwidth which can be utilized by the company; functions include customer relationship management, fraud prevention, marketing, information technology and accounting. Attractive purchase price with a record of revenues and cash flow Purchase price of $4.05-million plus earn-out consideration of fiscal 2015 net income and fiscal 2016 net income; Fiscal 2013 adjusted earnings before interest, taxes, depreciation and amortization of approximately $2.3-million and adjusted net income of approximately $2.2-million; Chelbis to be delivered with unrestricted cash equal to or exceeding $540,000. Aligned and experienced management team Chelbis's founder and senior executive is its current sole shareholder and will be aligned as a significant Contagious Gaming shareholder following the closing of the acquisition; The Chelbis executive will be further incentivized through the earn-out consideration which is tied directly to the future performance of Chelbis; The Chelbis executive brings over 18 years of experience as an operator and investor of several gaming and other technology investments. Regulated markets and operations Chelbis's on-line activities operate within regulated jurisdictions pursuant to licences issued by the U.K. Gambling Commission. Its player base comprises entirely customers within regulated jurisdictions, predominantly in the U.K. The regulatory regime pursuant to which Chelbis operates is consistent with the Contagious Gaming model to ensure the integrity of gaming and marketing activity. We seek Safe Harbor.