PopReach Acquires Schiefer ChopShop (SCS)

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Award winning brand transformation company adds depth, new capabilities and financial scale to PopReach's Brand Solutions offerings

TORONTO, April 19, 2023 /CNW/ - PopReach Corporation ("PopReach" or the "Company") (TSXV: POPR) (OTCQX: POPRF) today announced that it has acquired 100% of the issued and outstanding stock of Schiefer Media, Inc. ("SCS"), a brand transformation company headquartered in Costa Mesa, California (the "Transaction") for a total aggregate purchase price of up to approximately US$14.9 million, with the total consideration consisting of a combination of cash, debt and stock and inclusive of potential earn out payments earned and payable over two years upon the achievement of certain financial performance objectives.

"SCS is a next-generation digital agency with a foundation in data science that aligns perfectly with our strategy to consolidate best of breed companies, rooted in technology and data, to build a rich ecosystem of services and solutions that delivers unmatched value to brands and advertisers," said Jon Walsh, CEO of PopReach. "The strength of their financial profile, blue chip customer base, and potential cross-sell opportunities within our brand solutions offerings provides many levers for us to drive growth and returns for PopReach and its shareholders."

Added Ted Hastings, Executive Chairman of PopReach "This is the second material acquisition we've completed since the PopReach and Federated Foundry merger that uses a balanced allocation of cash, debt, and shares. It again demonstrates our ability to find and execute on accretive deals in a challenging equity market, and how we will increase revenue, EBITDA, and corresponding free cash flow as we continue to scale."

• Expands Brand Solutions offerings: SCS is a digital agency that brings media, creative and content together in a data-first offering that complements the competencies and service offerings PopReach delivers to brands and advertisers through Q1Media and Contobox.
  
  
• Award winning work with a diverse customer base: SCS has won dozens of industry awards for its work with leading global brands across a diversified range of industries.
  
  
• Track record for integration and execution: SCS has grown through a history of solid organic growth combined with four successful acquisitions, which fits well with PopReach's strategy to continue being acquisitive of profitable, complementary and synergistic businesses. The organization has accumulated extensive in-house expertise with technology driven services that leverage proprietary tools, systems and processes to deliver strong profit margins.

SCS was founded in 2016 through the combination of media agency, Schiefer Media and content creative studio, ChopShop Entertainment. In 2018, SCS acquired digital production agency, Fuel Industries, and in 2021 it acquired digital performance marketing boutique, Swarm. Today, SCS has approximately 100 employees with offices in Costa Mesa, California, Atlanta, Georgia, and Ottawa, Canada.

Through a comprehensive suite of services in strategy, media, creative, content and analytics, SCS has developed a unique data-first digital marketing offering to help brands perform. SCS serves clients across a diverse set of industries including CPG, Retail, Fashion Lifestyle, Automotive, Food & Beverage, Home Improvement and Entertainment.

SCS will continue to be led by its Chief Executive Officer, James Schiefer, who will be an insider of PopReach by virtue of being an officer of SCS.

The following table sets out certain unreviewed and unaudited SCS financial information for the 12 months ended December 31, 2022.

Pursuant to the definitive transaction agreement (the "Transaction Agreement") entered into on April 18, 2023 among PopReach, SCS Acquisition, Inc. ("Acquisition Subsidiary"), a wholly owned subsidiary of PopReach, SCS and the stockholders of SCS (the "Stockholders"), Acquisition Subsidiary acquired all of the issued and outstanding stock of SCS from the Stockholders for aggregate consideration of up to approximately US$14.9 million, being comprised of US$2.0 million in cash (the "Cash Consideration"), the issuance of 4,400 Class B non-voting shares of Acquisition Subsidiary (the "Class B Shares"), the issuance of a vendor take back note in the amount of US$5.5 million (the "VTB Note"), the issuance of a convertible debenture in the aggregate principal amount of US$750,000 (the "Debenture"), and earn out payments of up to $1.5 million payable in each of the first two years following closing of the Transaction (the "Closing") based upon the achievement of certain financial performance objectives by SCS.

The Class B Shares are exchangeable at the option of the Stockholders into common shares of the Company (the "PopReach Shares") at any time following Closing on the basis of 5,000 PopReach Shares for every 1 Class B Share, entitling the Stockholders to an aggregate of 22,000,000 PopReach Shares, with an approximate value of US$3.6 million based on the April 18, 2023 closing price per PopReach Share of $0.22 (the "Closing Price") and a C$:US$ exchange rate of 1.33. The Class B Shares do not entitle the Stockholders to vote on any matters in respect of Acquisition Subsidiary, other than as required pursuant to applicable law, nor do the Class B Shares entitle the Stockholders to any rights in respect of PopReach, voting or otherwise, until such time as the Class B Shares have been exchanged for PopReach Shares.

The VTB Note is non-interest bearing and is repayable as follows: (i) US$4.0 million on the earlier to occur of any future increase to, or refinancing of, PopReach's senior debt facility and May 31, 2025 (the "Initial Maturity Date"); and (ii) US$1.5 million on May 31, 2025 (the "Subsequent Maturity Date").

The Debenture is non-interest bearing, repayable on the Subsequent Maturity Date and convertible into PopReach Shares at the option of the holders exercisable at any time prior to the Subsequent Maturity Date at US$0.78 per PopReach Share representing a premium to the Closing Price of approximately 475%. The Debenture and the VTB Note are each secured by a security interest granted to the Stockholders over the assets of SCS, which security interest ranks subordinate to PopReach's senior lender.

Each of the Stockholders have, pursuant to the Transaction Agreement, agreed to customary standstill provisions for a period of at least two years following Closing. Furthermore, the Stockholders have agreed to certain restrictions against the transfer of 3,600 of the Class B Shares (including any PopReach Shares issued in connection with the exchange thereof) and any PopReach Shares issued pursuant to the Debenture (collectively, the "Locked-Up Shares"), over a three year period, with 1/3rd of such Locked-Up Shares being released from restrictions every 12 months commencing on the one year anniversary of Closing.

The Company has sourced bridge financing (the "Bridge Financing") in the principal amount of US$2 million from a third-party lender (the "Bridge Lender") to fund the Cash Consideration payable on Closing. The Bridge Financing, together with a loan fee in the amount of $500,000 (the "Loan Fee"), is repayable on the Initial Maturity Date pursuant to the terms of an unsecured promissory note issued by Acquisition Subsidiary to the Bridge Lender on April 18, 2023. In the course of negotiations with the Stockholders, the consideration payable in connection with the Transaction was reduced by an amount equal to the Loan Fee in order to expedite Closing by facilitating the Bridge Financing. The principal amount under the Bridge Financing does not bear interest unless repayment is not made within six months following Closing ("Early Repayment Term"). If repayment is not made within the Early Repayment Term, the principal amount outstanding will bear interest at the rate of 10% per annum until full and final repayment is made and the Company will be required, subject to approval of the TSX Venture Exchange (the "Exchange"), to grant a security interest over its assets to the Bridge Lender, which security interest will rank subordinate to PopReach's senior lender. The Bridge Lender is arm's length to PopReach and is also arm's length to SCS and the Stockholders.

The Transaction has been conditionally approved by the Exchange, subject to customary conditions, and remains subject to final acceptance by the Exchange.

The Company prepares its financial statements in accordance with International Financial Reporting Standards ("IFRS"). However, the Company considers certain non-IFRS financial measures as useful additional information to assess its financial performance. These measures, which it believes are widely used by investors, securities analysts and other interested parties to evaluate its performance, do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to financial measures determined in accordance with IFRS. Non-IFRS measures include "Adjusted EBITDA".

Consolidated adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") is a non-IFRS measure of financial performance. The presentation of this non-IFRS financial measure is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with IFRS and may be different from non-IFRS financial measures used by other companies. Company management defines Adjusted EBITDA as IFRS Net income (loss) adding back finance costs, income taxes, depreciation amortization, gain/loss on disposal of assets and extinguishment of loans, fair value gain/loss on financial liabilities and contingent consideration, and excludes discontinued operations and the effects of significant items of income and expenditure which may have an impact on the quality of earnings, such as impairments where the impairment is the result of an isolated, non-recurring event. It also excludes the effects of equity-settled share-based payments, foreign exchange gains/losses, changes in deferred revenues, changes in deferred cost of sales, and other extraordinary one-time expenses.

Management believes Adjusted EBITDA is a useful financial metric to assess its operating performance on a cash basis before the impact of non-cash and extraordinary one-time items.

The following table presents the Company's calculation of SCS's Adjusted EBITDA for the twelve months ended December 31, 2022, in thousands of US dollars:

PopReach, a Tier 1 Issuer on the Exchange, with shares also trading on OTCQX® Best Market, is a multi-platform technology company focused on acquiring, optimizing and scaling companies and assets that provide services, technology or products within the digital media ecosystem. The Company's portfolio includes: PopReach Games, a free-to-play mobile game publisher; NotifyAI, a push notification subscription and monetization platform; Q1Media, a digital media advertising services provider; Contobox, an award-winning personalization, eCommerce and creative advertising technology platform; and Ubiquity, an omnichannel marketing network and technology platform.

Additional information about the Company is available at www.sedar.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Certain information in this news release constitutes forward-looking statements and forward-looking information under applicable Canadian securities legislation (collectively, "forward-looking information"). Forward-looking information include, but are not limited to, statements with respect to and the business, financials and operations of the Company. Forward-looking information in this news release includes, without limitation, the anticipated benefits of the Transaction, the anticipated effect of the Transaction on PopReach's strategy, operations and financial performance, PopReach's ability to acquire and integrate new businesses and technologies and PopReach's ability retain key employees of SCS.

Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events. Forward looking information is necessarily based on a number of opinions, assumptions and estimates. PopReach has made certain material assumptions, including but not limited to: prevailing market conditions; general business, economic, competitive, political and social uncertainties; and the ability of PopReach to execute and achieve its business objectives, to develop the forward-looking information in this news release. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

While considered reasonable by the Company as of the date of this news release, such opinions assumptions are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements and future events to be materially different from those expressed or implied by such forward-looking information, including but not limited to the factors described in greater detail in the public documents of the Company available at www.sedar.com. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. Investors are cautioned that undue reliance should not be placed on any such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the Company. The Company does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.

SOURCE PopReach Corporation

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