Imperus Technologies Corp. ANNUAL CONSOLIDATED ......2015/12/31 · Mississauga, Ontario April 25, 2016 Imperus Technologies Corp. 3 See accompanying notes to these annual consolidated

Imperus Technologies Corp.

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2015 and 2014

(In Canadian dollars)

Independent Auditors’ Report

To the Shareholders of Imperus Technologies Corp.:

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Imperus Technologies Corp.,

which comprise the consolidated statements of financial position as at December 31, 2015 and 2014 and

the consolidated statements of loss and comprehensive loss, changes in shareholders' equity and cash flows

for the years then ended, and a summary of significant accounting policies and other explanatory

information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial

statements in accordance with International Financial Reporting Standards, and for such internal control as

management determines is necessary to enable the preparation of consolidated financial statements that are

free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those

standards require that we comply with ethical requirements and plan and perform the audits to obtain

reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

financial statements. The procedures selected depend on the auditor's judgment, including the assessment

of the risks of material misstatement of the financial statements, whether due to fraud or error. In making

those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair

presentation of the financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal

control. An audit also includes evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by management, as well as evaluating the overall presentation

of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial

position of Imperus Technologies Corp. as at December 31, 2015 and 2014, and its financial performance

and cash flows for the years then ended in accordance with International Financial Reporting Standards.

Chartered Professional Accountants

Licensed Public Accountants

Mississauga, Ontario

April 25, 2016


3 See accompanying notes to these

annual consolidated financial statements.

Approved on behalf of the board:

Bernard Wilson James Lanthier

Director Director

in Canadian Dollars

December 31, December 31,

Note 2015 2014

CURRENT ASSETS

Cash and cash equivalents 6,716,076$ 26,326$

Accounts receivable 7 2,582,900 160,000

Tax credits receivable 568,196 428,608

Income taxes receivable 378,560 -

Prepaids and other receivables 6 4,992,494 509,691

Unbilled revenue - 100,393

15,238,226 1,225,018

Note receivable 7 - 707,870

Long-term prepaids 6 268,949 -

Equipment 8 419,487 159,522

Unallocated purchase price 5 - 1,128,278

Goodwill 5 49,138,046 -

Intangibles 5, 9 76,946,020 2,343,757

Deferred income tax assets 25 685,265 -

142,695,993$ 5,564,445$

CURRENT LIABILITIES

Accounts payable and accrued liabilities 10 6,809,849$ 1,915,082$

Bank loans 11 136,644 78,250

Debentures payable 12 - 2,501,737

Deferred revenue 201,331 -

Current portion of long-term debt 13 1,165,609 -

Current portion of loan payable 14 27,680,000 -

35,993,433 4,495,069

Long term debt 13 2,522,647 254,737

Loan payable 14 55,568,716 -

Employee benefits payable 15 63,968 -

Deferred income tax liability 25 19,820,740 -

113,969,504 4,749,806

Share Capital 16 46,671,302 13,840,778

Warrants 17 13,388,410 1,111,113

Options 18 3,316,328 1,158,480

Contributed surplus 1,993,630 157,947

Accumulated other comprehensive income 10,472,497 -

Deficit (47,115,678) (15,453,679)

28,726,489 814,639

142,695,993$ 5,564,445$

Nature of operations 1

Commitments 24

Subsequent events 26

ANNUAL CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

ASSETS

LIABILITIES

SHAREHOLDERS' EQUITY




Certain comparative figures have been reclassified to conform to the presentation in the current year.


in Canadian Dollars


2015 2014

REVENUE Note

Game revenue 24,023,983$ -$

Interest income 27,263 57,184

24,051,246 57,184

EXPENSES

Gaming commissions 6,905,056 -

Advertising and marketing 4,187,175 756,030

Salaries and benefits 4,116,462 433,439

Professional fees 865,588 674,555

Subcontractors 910,176 1,233,864

General and administration 1,249,792 221,458

Regulatory fees and investor relations 103,807 103,988

Travel and accommodation 415,135 269,697

18,753,191 3,693,031

5,298,055 (3,635,847)

Due diligence and transaction costs 3,987,124 1,195,775

Severance and restructure costs 1,042,700 -

Depreciation of equipment 8 58,002 24,266

Amortization of intangibles 9 8,120,893 -

Stock-based compensation 18 2,929,683 595,196

16,138,402 1,815,237

OPERATING LOSS (10,840,347) (5,451,084)

OTHER CHARGES

Interest and accretion 12,14 9,731,854 332,483

Foreign exchange loss 6,405,637 (104,049)

Changes in value of long-term debt 13 (25,424,689) -

Impairment of goodwill 5 24,445,283 -

15,158,085 228,434

(25,998,432) (5,679,518)

Income taxes

Current 25 1,403,751 -

Deferred 25 (1,680,651) -

(25,721,532) (5,679,518)

Discontinued operations 20 (1,349,929) (1,392,066)

Impairment charge 5,7,9 (4,590,538) -

(5,940,467) (1,392,066)

TOTAL NET (LOSS) FOR THE YEAR (31,661,999) (7,071,584)

OTHER COMPREHENSIVE INCOME

Item that may be subsequently reclassified to profit or loss:

Exchange differences on translation of foreign operations 10,472,497 -

(21,189,502)$ (7,071,584)$

Basic and diluted (loss) per share - continuing operations ($0.17) ($0.12)

Basic and diluted (loss) per share - discontinued operations ($0.04) ($0.02)

Weighted average number of shares, basic and diluted 153,330,020 57,002,332

ANNUAL CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

OPERATING INCOME/(LOSS) BEFORE Due diligence and transaction costs, Severance

and restructure costs, Depreciation of equipment, Amortization of intangibles and Stock-

based compensation

NET (LOSS) AND COMPREHENSIVE (LOSS) FOR THE YEAR

(LOSS), CONTINUING OPERATIONS, BEFORE INCOME TAX

NET (LOSS), CONTINUING OPERATIONS

NET (LOSS), DISCONTINUED OPERATIONS




Certain comparative figures have been reclassified to conform to the presentation in the current year.


in Canadian Dollars

December 31, 2015 December 31, 2014

Operating Activities

Net (loss) for the year, continuing operations (25,721,532)$ (5,679,518)$

Adjustments for:

Depreciation of equipment 58,002 24,266

Amortization of intangibles 8,120,893 -

Stock-based compensation 2,929,683 724,346

Accretion and change in value of long-term debt (21,285,831) -

Prepaid interest accretion 5,592,840 -

Unrealized foreign exchange 6,994,921 -

Impairment of goodwill 24,445,283 -

Accrual of interest income (34,900) (57,184)

Accrual of interest on debentures - 230,810

Deferred income taxes (1,680,651)

Employee benefits (36,394) -

(617,686) (4,757,280)

Change in working capital items:

Accounts receivable 39,936 (33,024)

Prepaid and other receivables (185,827) (240,651)

Unbilled revenue 100,393 (100,393)

Accounts payable and accrued liabilities (8,979,225) 1,097,264

Deferred revenue 6,587 -

Income taxes receivable (195,360) -

Tax credits receivable (139,588) 158,510

Cash used in operating activities, continuing operations (9,970,770) (3,875,574)

Cash used in discontinued operations (867,422) (845,007)

Investing Activities

Purchase of equipment (28,825) (122,761)

Increase in note receivable - (165,417)

Investment in intangibles (543,488) (854,352)

Net cash paid in Vast acquisition - (375,409)

Net cash paid in Diwip acquisition (48,871,016) -

Net cash paid in Akamon acquisition (24,574,841) -

Cash used in investing activities (74,018,170) (1,517,939)

Financing Activities

Issuance of share capital 24,725,575 -

Share issuance costs (1,643,535) -

Proceeds from exercise of options and warrants 285,514 1,285,534

Issuance of debentures - 2,439,340

Repayment of debentures and interest (2,678,835) -

Loan proceeds 80,199 -

Proceeds of debt issuance 72,010,640 -

Interest and fees paid on debt issuance (1,155,196) -

Cash provided by financing activities 91,624,362 3,724,874

Cash used by financing activities, discontinued operations (78,250) (421,750)

Increase (decrease) in cash and cash equivalents 6,689,750 (2,935,396)

Cash and cash equivalents, beginning of the year 26,326 2,961,722

Cash and cash equivalents, end of the year 6,716,076$ 26,326$

ANNUAL CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended





in Canadian Dollars

Contributed

Other

Comprehensive

Number of shares Share Capital Warrants Options Surplus Income Deficit Total

December 31, 2014 58,856,323 13,840,778$ 1,111,113$ 1,158,480$ 157,947$ -$ (15,453,679)$ 814,639$

Issuance of shares 70,644,500 24,725,575 - - - - - 24,725,575

Cost of issue - (2,722,277) 1,078,742 - - - - (1,643,535)

Issuance of shares related to Vast acquisition 213,216 61,299 - - - - - 61,299

Issuance of shares related to Diwip acquisition 30,558,280 15,890,306 - - - - - 15,890,306

Issuance of shares related to Akamon acquisition 4,538,297 771,510 - - - - - 771,510

Issuance of warrants on financing - (6,273,231) 6,273,231 - - - - -

Issuance of warrants - - 6,081,000 - - - - 6,081,000

Exercise of warrants 757,670 430,707 (145,193) - - - - 285,514

Warrants issued on exercise of broker options - (53,365) 53,365 - - - - -

Stock-based compensation - - - 2,929,683 - - - 2,929,683

Cancellation/expiry of stock options and warrants - - (1,063,848) (771,835) 1,835,683 - - -

Translation loss on foreign subsidiaries - - - - - 10,472,497 - 10,472,497

Net loss for the year - - - - - - (31,661,999) (31,661,999)

December 31, 2015 165,568,286 46,671,302$ 13,388,410$ 3,316,328$ 1,993,630$ 10,472,497$ (47,115,678)$ 28,726,489$

December 31, 2013 53,689,860 11,526,654$ 1,305,513$ 756,188$ -$ -$ (8,382,095)$ 5,206,260$

Stock-based compensation - - - 595,196 - - - 595,196

Exercise of options 175,000 95,208 - (34,957) - - - 60,251

Cancellation of options - - - (157,947) 157,947 - - -

Issuance of debenture warrants - - 7,236 - - - - 7,236

Exercise of warrants 3,083,824 1,550,978 (323,444) - - - - 1,227,534

Warrants issued on exercise of agent options - (121,808) 121,808 - - - - -

Issuance of debenture shares 313,349 148,880 - - - - - 148,880

Issuance of shares related to Vast acquisition 1,279,290 511,716 - - - - - 511,716

Issuance of shares for debt 315,000 129,150 - - - - - 129,150

Net loss for the year - - - - - - (7,071,584) (7,071,584)

December 31, 2014 58,856,323 13,840,778$ 1,111,113$ 1,158,480$ 157,947$ -$ (15,453,679)$ 814,639$

ANNUAL CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Imperus Technologies Corp. Notes to the Annual Consolidated Financial Statements December 31, 2015 and 2014 (in Canadian dollars)

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1. Nature of Operations Imperus Technologies Corp. ("Imperus" or "the Company") was incorporated under the British Columbia Corporations Act on February 9, 2011 as Wedona Capital Inc. (“WCI”). The Company was incorporated as a "Capital Pool Corporation" ("CPC"), as this term is defined in the policies of the TSX Venture Exchange (the "Exchange"). On November 7, 2013 the Company completed a Qualifying Transaction as this term is defined in the policies of the Exchange when it acquired 100% of the issued and outstanding shares of ISIS Lab Inc. (“ILI”) under the terms of a reverse takeover transaction (the "RTO"). On November 13, 2013, the shares of the Company began trading on the Exchange under the symbol "LAB". On September 15, 2014, the Company changed its name to Imperus Technologies Corp. and on October 15, 2014 the Company was continued under the Ontario Business Corporation Act ("OBCA"). These annual consolidated financial statements are the consolidated financial statements of Imperus Technologies Corp. and its subsidiary companies:

• Imperus Inc. (formerly Isis Lab Inc.) (“ILI”), incorporated in Ontario on July 28, 2010 • Tech Channel Corporation (“Tech”), incorporated in Panama on December 25, 2010 • Vast Studios Inc. (“Vast”), incorporated in Ontario and purchased by Imperus on July 22, 2014 • Imperus Technologies (Israel) 2014 Ltd. (“Imperus Israel”), incorporated in Israel on December 17, 2014 • Diwip Inc. (“Diwip”), incorporated in Israel and purchased by Imperus on January 30, 2015 • Akamon Entertainment Millennium, S.L. (“Akamon”), incorporated in Spain and purchased by Imperus on November 16, 2015.

Diwip and Akamon both develop and sell social casino games. Vast develops hidden object computer games. Tech provides marketing and 24/7 telephone support services to the Company’s customers. The Company has decided to cease pursing the business lines of Vast and Tech and has consequently treated these operations as discontinued operations. The Company's head office is 65 Queen St. West, Toronto, Ontario, M5H 2M5. These annual consolidated financial statements were authorized for issuance by the Board of Directors on April 21, 2016. 2. Statement of Compliance and Basis of Presentation Statement of Compliance These annual consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), and interpretations of the IFRS Interpretations Committee (“IFRIC”), effective for the Company’s reporting for the year ended December 31, 2015. The accounting policies adopted are consistent with those of the previous financial year, unless otherwise noted. Basis of Measurement These annual consolidated financial statements are prepared on the historical cost basis except for certain financial instruments, which have been measured at fair value. Principles of Consolidation

These annual consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Imperus Inc., Imperus Technologies (Israel) 2014 Ltd., Diwip Ltd., Akamon Entertainment Millennium, S.L., Vast Studios Inc. and Tech Channel Corporation from their respective dates of acquisition. All inter-company balances and transactions have been eliminated. Discontinued operations Certain comparative amounts in the annual consolidated financial statements have been reclassified to conform to the current year’s presentation. In particular, the comparative statements of loss and comprehensive loss and the comparative statements of cash flows have been presented as if an operation discontinued during the current year has been discontinued from the start of the comparative year.


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2. Statement of Compliance and Basis of Presentation (continued) Accounting for Business Combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of acquisition-date fair values of the assets transferred and liabilities assumed by the Company, liabilities incurred by the Company to former owners of the acquiree in exchange for control of the acquiree. Acquisition-related costs are recognized in the statement of operations as incurred. At the acquisition date, the identifiable assets acquired, liabilities and contingent liabilities assumed are recognized at their fair values, except for deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements, which are recognized and measured in accordance with IAS 12 Income tax and IAS 19 Employee Benefits respectively. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after assessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized immediately in the statement of operations as a bargain purchase gain. Functional and Presentation Currency The presentation currency of the Company is the Canadian dollar. The functional currency of the Company and its subsidiaries, except for Diwip and Akamon, is the Canadian dollar. The functional currency of Diwip is the US dollar and the functional currency of Akamon is the Euro. For the purpose of presenting these annual consolidated financial statements, the assets and liabilities of Diwip and Akamon are translated to Canadian dollars using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. All resulting currency translation gains or losses from translating the financial statements from the functional currency to the presentation currency are recorded in other comprehensive loss in the consolidated statement of loss and comprehensive loss. In preparing the financial statements of the individual entity, transactions in currencies other than the entity's functional currency (foreign currencies) are translated to the functional currency of each entity at the exchange rate in existence at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are translated at the exchange rates at that date. Non-monetary items which are measured using historical cost in a foreign currency are retranslated using the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences on monetary items are recognized in profit or loss in the period in which they arise.


9

3. Significant Accounting Judgments, Estimates and Assumptions The preparation of annual consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. By their nature, these estimates are subject to measurement uncertainty. Actual results could differ from these estimates. The effect of changes in such estimates on the financial statements in future periods could be significant. Accounts specifically affected by estimates in these annual consolidated financial statements are: Useful lives and residual values of intangibles: Management estimates the useful lives and residual values to calculate amortization expense. Significant judgment is involved in the determination of useful life for the computation of amortization of intangible assets. No assurance can be given that the actual useful lives will not differ significantly from current assumptions. Estimated impairment of long term assets: Management reviews long term assets’ residual values and useful lives at the end of each reporting period and writes down the asset’s carrying amount to its estimated recoverable amount if the carrying amount is greater. If the carrying amount of an asset exceeds its recoverable amount, the asset is impaired and an impairment loss is recognized in the consolidated statement of loss and comprehensive loss. The assessment of fair value requires the use of estimates and assumptions related to future operating performance and discount rates. Business Combinations: In a business combination: substantially all identifiable assets, liabilities and contingent liabilities acquired are recorded at the date of acquisition at their respective fair values. One of the most significant areas of judgment and estimation relates to the determination of the fair value of these assets and liabilities, including the fair value of contingent consideration, if applicable. If any intangible assets are identified, depending on the type of intangible asset and the complexity of determining its fair value, an independent external valuation expert may develop the fair value, using appropriate valuation techniques, which are generally based on a forecast of the total expected future net cash flows. These valuations are linked closely to the assumptions made by management regarding the future performance of the assets concerned and any changes in the discount rate applied. In certain circumstances where estimates have been made, the companies may obtain third-party valuations of certain assets, which could result in further refinement of the fair-value allocation of certain purchase prices and accounting adjustments. Fair-value of long-term debt: The assessment of fair value requires the use of estimates and assumptions related to future operating performance and discount rates. Management estimates the value of the long-term earn-out payable using cash-flow models for the Diwip and Akamon operations, and discounts this estimate for the value of time. No assurance can be given that actual future cash flows will not differ significantly from current estimates. 4. Significant Accounting Policies The Company’s accounting policies set out below were consistently applied to all the periods presented unless otherwise noted below. (a) Financial instruments Loans and receivables: Cash and cash equivalents, accounts receivable and note receivable are classified as loans and receivables. Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are initially recognized at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Interest income is recognized by applying the effective interest rate, except for short-term receivables for which recognizing interest would be immaterial.


10

4. Significant Accounting Policies (continued) Other financial liabilities: Accounts payable and accrued liabilities, bank loans, debentures payable and loan payable are classified as other financial liabilities. Other financial liabilities are recognized initially at fair value net of any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial instrument and of allocating interest and any transaction costs over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial instrument to the net carrying amount on initial recognition. Other financial liabilities are derecognized when the obligations are discharged, cancelled or expired. Fair value through profit and loss (“FVTPL”): Long-term earn-out payable is classified as FVTPL. This liability is initially recognized at fair value and subsequently re-measured using cash-flow models at a discount rate of 20% with changes in fair value recorded to the statements of loss and comprehensive loss. Impairment of financial assets: Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the assets have been negatively impacted. Evidence of impairment could include: • significant financial difficulty of the issuer or counterparty; or • default or delinquency in interest or principal payments; or • it becoming probable that the borrower will enter bankruptcy or re-organization. The carrying amount of financial assets is reduced by any impairment loss directly for all financial assets with the exception of accounts receivable, where the carrying amount is reduced through the use of an allowance account. When an account receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in the consolidated statement of loss and comprehensive loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the consolidated statement of loss and comprehensive loss for the period to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. (b) Equipment Equipment is recorded at cost. The Company provides for depreciation using the following methods at rates designed to depreciate the cost of the equipment over their estimated useful lives. The annual depreciation rates and methods are as follows: Vehicle 30% declining balance Office equipment 20% declining balance Computer equipment 30% declining balance Leaseholds 30% declining balance


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4. Significant Accounting Policies (continued) (c) Development costs and intangible assets Certain costs incurred in connection with the development of the software platform are capitalized to intangible assets. Intangible assets are recorded at cost, which consists of directly attributable costs necessary to create such intangible assets, less accumulated amortization and accumulated impairment losses, if any. The costs mainly include the salaries paid to the software developers and consulting fees. These costs are recognized as intangible assets when the following criteria are met: • It is technically feasible to complete the software product so that it will be available for use; • Management intends to complete the software product; • It can be demonstrated how the software product will generate future economic benefits; • Adequate technical, financial, and other resources to complete the development and to use or sell the software products are available; and • The expenditure attributable to the software product during its development can be reliably measured. Other intangible assets include customer lists, technology and non-compete agreements acquired through the acquisitions of Diwip and Akamon. The Company provides for amortization using the following methods at rates designed to amortize the cost of the intangible assets over their estimated useful lives. The annual amortization rate and method is as follows: Software 20% - 25% declining balance Customer lists 10% declining balance Technology 20% declining balance Non-compete agreements 25% declining balance Assembled workforce unlimited useful life Brand unlimited useful life (d) Research costs Internally generated expenditure on research activities is recognized in the consolidated statement of loss and comprehensive loss as an expense in the period in which it is incurred since such costs do not meet the criteria for capitalization listed in Note 4(c) above. (e) Goodwill Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable assets acquired and liabilities assumed. Goodwill is measured at cost less accumulated impairment losses and is not amortized. Goodwill is tested for impairment on an annual basis or whenever facts or circumstances indicate that the carrying amount may exceed its recoverable amount. (f) Impairment of non-financial assets At the end of each reporting period, the Company reviews the carrying amounts of its non-financial assets with finite lives to determine whether there is any indication that those assets have suffered an impairment loss. Where such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. The recoverable amount is the higher of an asset’s fair value less cost to sell or its value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in consolidated statement of loss and comprehensive loss for the period.


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4. Significant Accounting Policies (continued) Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized immediately in income or loss for the period. (g) Income taxes Income tax on the net income (loss) for the periods presented comprises current and deferred tax. Income tax is recognized in the consolidated statement of loss and comprehensive loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, adjusted for amendments to tax payable with regards to previous years. Deferred tax is provided using the asset and liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting or taxable income; nor differences relating to investments to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the end of each financial reporting period. A deferred tax asset is recognized only to the extent that it is probable that future taxable income will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, it provides a valuation allowance. (h) Investment tax credits The Company is entitled to certain Canadian investment tax credits for qualifying research and development activities performed in Canada. The Company records investment tax credits when qualifying expenditures have been made provided there is reasonable assurance that the credits will be realized. The amount of investment tax credits recorded can vary, based on estimates of future taxable income. These credits can be applied against income tax liabilities and are subject to a 20-year carry-forward period or, in some cases, are refundable. Accrued investment tax credits are accounted for as a reduction of the related expenditures for items expensed in profit or loss or a reduction of the related asset’s cost for items capitalized in the consolidated statements of financial position. (i) Revenue recognition Revenue is recognized when the significant risks and rewards of ownership are transferred to the customer, which is at the time service has been rendered; the amount of revenue can be measured reliably; and the receipt of economic benefits is probable. Revenue arising from the development of games is recognized as the services are rendered. Any consideration received in advance of services being rendered is recorded as deferred revenue and subsequently recognized as it is earned. Interest revenue is recognized on a time proportionate basis. Royalty revenues are recognized based on revenue shares established in the contracts when the collectability is reasonably assured. (j) Loss per share Loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed, using the treasury stock method, to show the potential reduction in earnings per share that would occur if securities or other contracts to issue common shares were exercised or converted to common shares.


13

4. Significant Accounting Policies (continued) (k) Share-based payments The Company uses the fair value method whereby the Company recognizes compensation costs for the granting of all stock options and direct awards of stock based on their fair value over the period of vesting using the Black-Scholes option pricing model. Any consideration paid by the option holders to purchase shares is credited to capital stock. (l) Employee benefits Employees of the Company’s Israeli subsidiary, Diwip, are eligible to receive benefits under a termination benefit plan, subject to minimum participation requirements of Israeli law. The plan is funded through insurance policies and pension funds and classified as defined contribution plans where the entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Contributions to a defined contribution plan that are due more than twelve months after the end of the period in which the employees render the service are discounted to their present value. Actuarial gains and losses are immediately recognized in other comprehensive income. Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided or upon the actual absence of the employee when the benefit is not accumulated. A liability is recognized for the amount expected to be paid if the entity has a present legal or constructive obligation to pay this amount as a result of past service and the obligation can be estimated reliably. (m) Future accounting policies IFRS 9 was issued by the IASB on July 24, 2014 and will replace IAS 39 Financial instruments: recognition and measurement. IFRS 9 utilizes a single approach to determine whether a financial asset is measured at amortized cost or fair value and a new mixed measurement model for debt instruments having only two categories: amortized cost and fair value. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Final amendments released on July 24, 2014 also introduce a new expected loss impairment model and limited changes to the classification and measurement requirements for financial assets. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements. IFRS 15, as issued in May 2014, establishes a new five-step model that will apply to revenue earned from a contract with a customer, regardless of the type of revenue or industry. The principles in IFRS 15 provides a more structured approach to measuring and recognizing revenue and will be applied using the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. This new revenue standard, which has been jointly issued by the IASB and the US Financial Accounting Standards Board, is applicable to all entities and will supersede the current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after January 1, 2017, but early adoption is permitted under IFRS. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements. IFRS 16 replaces IAS 17, Leases was released in January 2016. This standard will bring most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and financing leases. Lessor accounting remains largely unchanged and the distinction between operating and finance leases is retained. Adoption of IFRS16 is mandatory and will be effective for annual periods beginning on or after January 1, 2019 with earlier adoption permitted. The Company is currently evaluating the impact the final standard is expected to have on its consolidated financial statements.


14

4. Significant Accounting Policies (continued)

IAS 1 was amended by the IASB on December 18, 2014. The amendments to existing IAS 1 requirements relate to materiality; order of the notes; subtotals; accounting policies; and disaggregation. The amendments are effective for annual periods beginning on or after January 1, 2016. The adoption of these amendments may reduce certain disclosures of the Company’s consolidated financial statements. IAS 16 and IAS 38 were amended by the IASB on May 12, 2014. The amendments clarify that the use of revenue-based methods to determine the depreciation of an asset is not appropriate. The amendments to IAS 38 specify that an amortization method based on revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. The amendments are effective for annual periods beginning on or after January 1, 2016. The adoption of these amendments is not expected to have a material impact on the Company’s consolidated financial statements.

5. Business Acquisitions Diwip Ltd. On January 30, 2015, the Company completed the purchase of the shares of Diwip Ltd. pursuant to the acquisition agreement dated October 14, 2014. Diwip, a private software company based in Tel Aviv, Israel, is a developer of social and mobile gaming for PC, Mac, iOS and Android platforms. Pursuant to the agreement, Imperus acquired, through a wholly-owned subsidiary, all of the issued and outstanding shares of Diwip (collectively, the "Purchased Shares"). As consideration for the Purchased Shares, Imperus paid the Diwip principals a closing purchase price of US$50,000,000 ($66,758,306) (the "Closing Purchase Price"). The Closing Purchase Price was subject to a working capital adjustment of US$423,479 ($527,273). Included in the purchase agreement were contingent earn-out payments up to US$50,000,000 (the "Earn-out Payments"), as further described below. The Closing Purchase Price paid on the closing of the acquisition, was paid as follows: (a) US$39,661,217 ($50,437,169) was paid in cash and (b) US$9,915,304 ($12,345,545) was satisfied by the issuance of 30,558,280 common shares of Imperus ("Common Shares"). These common shares were valued at $15,890,306 based on the closing share price of $0.52 on January 30, 2015. In addition to the Closing Purchase Price, as further consideration for the Purchased Shares, the Diwip principals are entitled to Earn-out Payments upon the achievement of certain financial milestones, as follows: (a) a payment of US$12,500,000, payable within 60 days after the first anniversary of the closing date, which amount may be increased to US$25,000,000 or decreased to US$0, should an agreed upon multiple of annualized revenue and annualized EBITDA of Diwip in the first year after closing be above or below a target milestone; and (b) a payment of US$12,500,000, payable within 60 days after the second anniversary of the closing date, which amount may be increased to US$25,000,000 or decreased to US$0, should an agreed upon multiple of annualized revenue and annualized EBITDA of Diwip in the second year after closing be above or below a target milestone. All Earn-out Payments were be paid in cash and Common Shares at a 4:1 ratio. The Common Shares issuable in respect of the Earn-out Payments are calculated at a price per Common Share that is equal to the greater of the 30 day VWAP ending on the third trading day prior to the applicable payment of the earn-out, and $0.53 (the "Minimum Issue Price") (or such higher price as may be required by the Exchange). In the event that Imperus does not pay all or any portion of the Earn-out Payments to a Diwip principal when due under the terms of the Agreement (the "Earn-out Due Date"), such unpaid amount will be deemed to be extended as a loan by such Diwip principal to Imperus. The outstanding amount under such loan will bear interest at the rate of 20% per annum until repaid, with a term expiring 60 days after the Earn-out Due Date (or earlier in certain circumstances). After such 60 day period (or in certain circumstances earlier), such Diwip principal may initiate collection proceedings of the amount that is due (plus accrued interest) and may, at its option, for a period of 18 months thereafter, convert any outstanding principal and interest under such loan into Common Shares at a conversion price equal to the greater of the 30 day VWAP ending three trading days prior to the conversion and the Minimum Issue Price (or such higher price as may be required by the Exchange).


15

5. Business Acquisitions (continued) The Company estimated the fair value of the Earn-out Payments to be $25,457,591 on the closing date using a probability-weighted average approach, and a discount rate of 24.3%. This value has been adjusted as at December 31, 2015 based on actual performance to December 31, 2015 as well as current estimates of future operations. As at December 31, 2015, an amount of $1,165,609 was recorded as a current liability and $nil as a long-term liability with respect to these Earn-out Payments (Note 13). In accordance with IFRS 3 Business Combinations, the acquisition was accounted for using the purchase method. The acquisition was financed through a combination of cash and shares issued from the treasury. The net assets of Diwip received were as follows:

Purchase price:

Cash consideration paid 50,437,169$

Share consideration paid 15,890,306

Contingent consideration 25,457,591

Total purchase price 91,785,066

Fair Value of assets acquired and liabilities assumed:

Cash and short-term investments 1,565,416

Accounts receivable 1,339,647

Tax assets receivable 224,479

Equipment 110,310

Long-term accounts receivable 1,280

Intangibles 55,165,740

Deferred tax assets 643,576

Accounts payable and accrued liabilities (2,490,868)

Employee benefits liability (90,605)

Deferred income tax liability (14,618,921)

Total net assets acquired 41,850,052

Goodwill 49,935,013$ The final allocation of the purchase price was completed at the end of 2015. Intangibles acquired through the acquisition of Diwip include customer lists, technology, assembled workforce and non-complete agreements. The excess of the cost of the acquisition over the fair value of the identifiable assets acquired and liabilities assumed is goodwill and was determined to be US$39,266,161 ($49,935,013). At December 31, 2015, the Company assessed for impairment the recoverable amount of goodwill and intangibles with respect to Diwip. As a result of the weaker than anticipated financial performance of Diwip, it was determined that the recoverable amount of goodwill and intangibles related to Diwip, which was determined using the discounted cash flow method, was approximately US$17,840,000 ($24,690,000) as at December 31, 2015, which was less than the carrying value. As a result, an amount of US$17,838,715 ($24,445,283) was recorded to the statements of loss and comprehensive loss as an impairment to goodwill. If the acquisition had occurred on January 1, 2015, management estimated that the Company's consolidated revenue and consolidated loss from continuing operations would be $25,863,808 and $1,333,165 respectively, for the year ended December 31, 2015. Management has determined these amounts based on internally prepared financial results obtained from the vendor. These pro-forma results reflect adjustments for depreciation and other costs associated with the Acquisition assuming the fair values used in the purchase price allocation occurred on January 1, 2015. These pro-forma results may not necessarily be indicative of actual results had the acquisition occurred on January 1, 2015.


16

5. Business Acquisitions (continued) Akamon Entertainment Millennium, S.L.

In November 2015, the Company exercised its option to acquire 100% of the issued and outstanding shares of Akamon, and the transaction closed on November 17, 2015. Akamon is a social gaming company that develops and distributes games within online social networks and mobile platforms. The total adjusted purchase price for the acquisition was US$23,949,970 ($31,924,298) after calculation of the final closing date purchase price adjustment, which was paid with a combination of cash and shares of the Company. The Company had advanced US$700,000 ($934,150) in September 2015, which was applied against the purchase price. On the closing date, the Company paid US$21,250,791 ($28,316,679) to the majority vendors, of which US$500,000 ($666,250) was placed in escrow subject to the final closing date working capital adjustment. Subsequent to the end of the year, these funds were released from escrow to the vendors as final settlement of the transaction. On the closing date, the Company issued 4,538,297 common shares of the Company with a fair market value of $771,510 to one of the vendors, and the Company accrued US$1,429,291 ($1,901,958) as the value of shares to be issued once the final closing date purchase price adjustment was finalized. Subsequent to the end of the year, the Company issued 11,382,150 common shares of the Company as final settlement of consideration owed to this vendor. In addition to this consideration, the Company has agreed to make certain earn-out payments calculated using specific formulas based on the EBITDA of Akamon. As at the date of acquisition, the estimated fair-value of the earn-out payments was $1,213,144. This value has been adjusted as at December 31, 2015 based on current estimates of future operations. As at December 31, 2015, an amount of $1,304,247 was recorded as long-term liability with respect to these earn-out payments (Note 13). In accordance with IFRS 3 Business Combinations, the acquisition was accounted for using the purchase method. The acquisition was financed through a combination of cash and shares issued from the treasury. The allocation of the purchase price to the estimated fair value of the net assets acquired is as follows:

Purchase price:

Cash consideration paid 29,250,829$

Share consideration paid, or to be paid 2,673,469

Contingent consideration 1,213,144

Total purchase price 33,137,442

Fair Value of assets acquired and liabilities assumed:

Cash and short-term investments 4,675,988

Accounts receivable 1,361,277

Other receivables and prepaids 517,324

Equipment 213,574

Intangibles 23,851,750

Accounts payable and accrued liabilities (8,832,955)

Bank debt (151,944)

Long term loans (1,082,763)

Deferred revenue (185,212)

Deferred income tax liability (5,762,811)

Total net assets acquired 14,604,228

Goodwill 18,533,214$ Intangibles acquired through the acquisition of Akamon include customer lists, technology and brand name. The excess of the cost of the acquisition over the fair value of the identifiable assets acquired and liabilities assumed is goodwill and was determined to be €12,963,244 ($18,533,214). The Company assessed for impairment the recoverable amount of goodwill and intangibles with respect to Akamon, and determined that no impairment adjustment was required.


17

5. Business Acquisitions (continued) If the acquisition had occurred on January 1, 2015, management estimated that the Company's consolidated revenue and consolidated income from continuing operations would be $40,667,305 and $1,800,550 respectively, for the year ended December 31, 2015. Management has determined these amounts based on internally prepared financial results obtained from the vendor. These pro-forma results reflect adjustments for depreciation and other costs associated with the Acquisition assuming the fair values used in the purchase price allocation occurred on January 1, 2015. These pro-forma results may not necessarily be indicative of actual results had the acquisition occurred on January 1, 2015. Vast Studios Inc. During 2014, the Company completed the purchase of the shares of Vast through the payment of $629,463 in cash, and the issuance of 1,279,290 common shares of the Company, which were valued at $511,716, on closing. As well, the Company made additional payments of $100,000 in cash and the issuance of 213,216 common shares of the Company, valued at $61,299, during 2015 as stipulated by the purchase agreement. The Company was also required to pay an earn-out payment of up to $300,000, which was subject to reduction if annualized revenue during the twelve month period after closing falls below a certain target. At the end of December 31, 2015, it was determined that no earn-out was payable as operations of Vast did not meet expectations. As of and during the year ended December 31, 2015, the Company recorded an impairment charge of $1,128,278 to the annual consolidated statements of loss and comprehensive loss, fully impairing the unallocated purchase price of Vast. 6. Prepaid Expenses and Other Receivables


Prepaid interest 4,048,601$ -$

Harmonized sales tax and VAT receivable 404,793 105,499

Prepaid expenses and other receivables 808,049 404,192

5,261,443$ 509,691$

Current portion 4,992,494$ 509,691$

Long-term portion 268,949 -

5,261,443$ 509,691$ 7. Note Receivable


Balance, beginning of year 707,870$ 485,269$

Reimbursement - 191,476

Service and license fees charged 90,000 135,000

Accrued interest 26,927 67,422

Unrealized foreign exchange 35,613 (16,297)

Included in accounts receivable (90,000) (105,000)

Repayments - (50,000)

Impairment charge (770,410) -

Balance, end of year -$ 707,870$


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7. Note Receivable (continued) During the year ended December 31, 2011, the Company agreed to lend funds to its customer Cladstone Limited (“Cladstone”) for an amount not exceeding an aggregate sum of 500,000 Great Britain Pounds in any 12 month period to support Cladstone’s daily operations. This agreement was subsequently terminated on September 12, 2013. The loan was to become due upon demand of the Company at such time that Cladstone is in a position of making sufficient revenues to support its daily operations. The interest was calculated and accrued at an annual rate of 12%. Since the balance was not expected to be repaid within 12 months, it was classified as a long term asset. The Company also signed a software license agreement and a service agreement with Cladstone. The software license agreement granted Cladstone a non exclusive, non transferable license for a term of five years, from April 1, 2011. The fee was to be calculated based on the number of users. The Company agreed to grant Cladstone a 24 month grace period on the fee. An amount of $30,000 was billed and recognized from the license agreement for the year ended December 31, 2015 (year ended December 31, 2014: $60,000). The service agreement charged Cladstone a $10,000 monthly fee for a term of five years from April 2011. During the year ended December 31, 2015, $60,000 was recognized from the service agreement (year ended December 31, 2014: $120,000). The Company assessed the amounts owing from Cladstone for impairment during the year ended December 31, 2015 and recognized an impairment charge of $240,000 related to the service and license fees accumulated in accounts receivable, as well as an impairment charge on the balance of the note receivable of $770,410. As such, a total amount of $1,010,410 has been recorded as an impairment charge on the annual consolidated statements of loss and comprehensive loss for the year ended December 31, 2015. Operations with respect to Cladstone have been presented as discontinued operations. 8. Equipment

Vehicles

Leaseholds

and Office

equipment

Computer

equipment Total

Cost

Balance, December 31, 2013 14,594$ 5,125$ 31,515$ 51,234$

Additions - 73,257 92,759 166,016

Balance, December 31, 2014 14,594 78,382 124,274 217,250

Additions - 4,254 24,571 28,825

Acquired through business combination - 158,416 165,520 323,936

Disposals (14,594) (52,480) (9,942) (77,016)

Foreign exchange impact - 9,448 11,252 20,700

Balance, December 31, 2015 -$ 198,020$ 315,675$ 513,695$

Accumulated depreciation


Additions 781 9,839 19,171 29,791

Balance, December 31, 2014 12,197 12,822 32,709 57,728

Additions 1,640 31,583 42,668 75,891

Disposals (14,594) (27,012) (6,012) (47,618)

Foreign exchange impact 757 2,073 5,377 8,207


Net book value




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8. Equipment (continued) Depreciation expense charged to the annual consolidated statements of loss and comprehensive loss for the year ended December 31, 2015 was $58,002 (year ended December 31, 2014: $24,266). As well, $17,889 was recorded as part of discontinued operations for the year ended December 31, 2015 (year ended December 31, 2014: $5,525). During the year ended December 31, 2015, the Company sold a vehicle, which was fully depreciated, for US$4,800 post ($5,964) and disposed of various other assets through its discontinued subsidiaries resulting in a net loss of $35,362 which is included in loss from discontinued operations. 9. Intangibles

Software Customer lists Technology Brand

Assembled

workforce

Non-compete

agreements Total

Cost

Balance, December 31, 2013 3,108,215$ -$ -$ -$ -$ -$ 3,108,215$

Additions 854,352 - - - - - 854,352

Balance, December 31, 2014 3,962,567 - - - - - 3,962,567

Additions 543,488 - - - - - 543,488

Acquired through business combination - 40,305,500 32,069,740 3,464,500 889,770 2,287,980 79,017,490

Foreign exchange translation changes - 3,262,018 2,406,315 178,554 79,030 203,220 6,129,137

Balance, December 31, 2015 4,506,055$ 43,567,518$ 34,476,055$ 3,643,054$ 968,800$ 2,491,200$ 89,652,682$

Accumulated depreciation

Balance, December 31, 2013 1,077,276$ -$ -$ -$ -$ -$ 1,077,276$

Additions 541,534 - - - - - 541,534

Balance, December 31, 2014 1,618,810 - - - - - 1,618,810

Additions 435,220 3,251,637 4,303,987 - - 565,269 8,556,113

Impairment 2,451,849 - - - - - 2,451,849

Foreign exchange translation changes - 32,124 42,135 - - 5,631 79,890

Balance, December 31, 2015 4,505,879$ 3,283,761$ 4,346,122$ -$ -$ 570,900$ 12,706,662$

Net book value

Balance, December 31, 2014 2,343,757$ -$ -$ -$ -$ 2,343,757$

Balance, December 31, 2015 176$ 40,283,757$ 30,129,933$ 3,643,054$ 968,800$ 1,920,300$ 76,946,020$

Intangibles consisted of the Company’s internally developed Internet bingo software with certain supporting features, where additions consisted mainly of the salaries paid to developers. With the acquisitions of Diwip and Akamon, intangibles increased as a result of the allocation of the purchase price to various components of intangibles, specifically customer lists, technology, brand, assembled workforce and non-compete agreements. As a result of new management and a change in the Company’s strategic plan, it was determined that the recoverability of the intangibles balance related to the bingo software was unlikely in light of the Company’s shift in focus on the Diwip and Akamon operations. As a result, the Company assessed this balance for impairment which resulted in an impairment charge of $2,451,849 for the year ended December 31, 2015 (year ended December 31, 2014: $nil). Amortization expense charged to net loss for the year ended December 31, 2015 was $7,086,616 which includes the amortization of intangibles allocated from the purchase price of Diwip and Akamon (year ended December 31, 2014: $nil). Amortization expense related to the Company’s bingo software was recorded as part of discontinued operations. For the year ended December 31, 2015, $435,220 was expensed to discontinued operations (December 31, 2014: $541,534).


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10. Accounts Payable and Accrued Liabilities


Operations 1,653,332$ 60,659$

Corporate liabilities 1,078,951 1,607,752

Value of acquisition shares to be issued 1,978,139 -

Payroll and other government liabilities 1,288,812 55,806

Acquisition liabilities 810,615 190,865

6,809,849$ 1,915,082$ 11. Bank Loans Through the acquisition of Akamon, the Company is carrying certain bank loans at interest rates of between 5.45% and 6.13% per annum. Monthly payments are required up to June 2019, when the facility will be paid in full. As at December 31, 2015, the current portion of these loans is €90,920 ($136,644). The long-term portion, which is included in long-term debt, is €236,105 ($354,842) (Note 13). On closing of the Vast Acquisition, Vast obtained an extension of its bank credit facilities in the aggregate principal amount of $500,000, comprised of a demand facility of $200,000 and a term facility of $300,000. As at December 31, 2015 the demand facility was $nil (December 31, 2014 - $78,250) and the term facility was $nil (December 31, 2014 - $nil). 12. Debentures Payable


Series 2014-A 12% Debenture -$ 1,020,468$

Series 2014-B 12% Debenture - 805,486

Series 2014-C 20% Debenture - 675,783

-$ 2,501,737$ Debentures are carried at amortized cost using an effective interest rate method with note discount and transaction costs netted against the principal. On June 24, 2014 the Company issued redeemable, non-convertible, unsecured Series 2014-A debentures in the amount of $1,000,000. Under the terms of the debentures, the Company paid 12% interest per annum calculated and payable on a quarterly basis except, if the debentures are repaid within four months of being issued, the Company will pay a minimum of four months interest. In addition, the Company agreed to issue 145,454 common shares that are 8% of the principal amount of the debenture with a fair market value of $80,000.These debentures had a maturity date of July 23, 2015 and were redeemable at any time at the discretion of the Company upon two days written notice. The full amount was repaid during the year ended December 31, 2015. On August 7, 2014 the Company issued redeemable, non-convertible, unsecured Series 2014-B debentures in the amount of $861,000. Under the terms of the debentures, the Company paid 12% interest per annum calculated and payable on a quarterly basis except. In addition, the Company agreed to issue 167,895 bonus common shares with a fair market value of $68,880, a cash commission of $51,660, and 51,660 broker warrants with a value of $7,236. The full amount was repaid during the year ended December 31, 2015. On October 31, 2014 the Company issued $700,000 principal amount of unsecured nonconvertible debenture (the "Series C Debenture") on a non-brokered, private placement basis. The debentures had a term expiring on the earlier of (i) January 31, 2015, (ii) the date upon which the Company completes the Diwip acquisition, and (iii) the date upon which the Company completes a debt and/or equity financing for minimum gross proceeds of $5,000,000. Under the terms of the debentures, the Company will pay 20% interest per annum, which was prepaid on the issuance of the Debenture assuming a January 31, 2015 maturity. The full amount was repaid during the year ended December 31, 2015.


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12. Debentures Payable (continued) The Company has recorded $177,721 of accretion and interest on the debentures during the year ended December 31, 2015 (year ended December 31, 2014: $230,810). 13. Long-term Debt Long-term debt is composed of earn-outs payable to former shareholders of Vast, Diwip and Akamon, as well as the long-term portion of bank loans and other loans.


Vast earn-out -$ 254,737$

Diwip earn-out (Note 5) 1,165,609 -

Akamon earn-out (Note 5) 1,304,247 -

Bank loans (Note 11) 354,842 -

Other loans 863,558 -

3,688,256$ 254,737$

Current portion 1,165,609$ -$

Long-term portion 2,522,647$ 254,737$ Diwip earn-out As additional consideration for the Diwip acquisition, the Company agreed to pay the Diwip Vendors earn-out payments over the first two years following the acquisition closing date of up to an aggregate of US$50,000,000 (the "Earnout Payments"). The amounts payable pursuant to the Earnout Payments will depend on whether the earnout result in each of the first two years following closing is at, above or below certain agreed-upon targets. All Earnout Payments will be paid in cash and common shares at a 4:1 ratio. The common shares issuable in respect of the Earnout Payments are issuable based on the number of common shares (rounded to the nearest whole share) as equal to the Canadian dollar equivalent of such amount preceding the date of the payment of the Earnout Payments divided by the greater of (a) the 30 day VWAP of the Common Shares on the TSXV ending on the third trading day prior to the applicable date of the payment of the earnout; and (b) C$0.53 (or such higher price as may be required by the TSXV). Management has assessed the likelihood of making the Earnout Payments and has adjusted the estimated amounts that the Company anticipates paying the vendors. This was determined to be $1,165,609 at December 31, 2015. This amount represents the Earnout Payment due on March 31, 2016 and is represented as current.


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13. Long-term Debt (continued) Akamon earn-out As additional consideration to a vendor of Akamon, the Company has agreed to certain earn-out payments. Providing that the vendor’s consulting agreement has not been terminated prior to the end of the earnout periods, the first earnout period being December 31, 2015 and the second earnout period being December 31, 2016, the Company will pay an amount that is calculated using a specific formula based on the EBITDA for the respective period. Management has assessed the likelihood of making the earnout payments and has adjusted the estimated amounts that the Company anticipates paying the vendors. A 20% annual interest rate was used to discount the future estimated cashflows to determine the carrying value of each liability. This was determined to be $1,304,247 at December 31, 2015, all of which was related to the second earnout, which is due March 31, 2017, and is classified as long-term. It has been determined that no amount is payable related to the first earnout payment, which would have been due March 31, 2016. During the year ended December 31, 2015, a gain of $25,424,689 was recorded as changes in fair value of long-term debt related to the earnout liabilities (year ended December 31, 2014: $nil). Other loans have been inherited through the acquisition of Akamon. These loans carry interest rates of 0.5% and approximately 3%, mature in December 2019 with principal repayments scheduled to start in 2017. The carrying value of these loans at December 31, 2015 is €574,594 ($863,558). 14. Loan Payable


Third Eye Capital 83,248,716$ -$

Less:

Current portion 27,680,000 -$

Long-term portion 55,568,716$ -$ On January 30, 2015, in conjunction with, and as a condition of completion of, the Diwip Acquisition, the Company completed a secured debt financing pursuant to a credit agreement dated January 30, 2015 (the "Credit Agreement") among the Company, as borrower, certain subsidiaries of the Company, as credit parties, a syndicate of lenders and the lenders' administrative agent, Third Eye Capital Corporation ("TEC"). In accordance with the Credit Agreement, the lenders advanced to the Company a senior secured Term Loan Facility in the principal amount of US$40,000,000 (the "Term Loan Facility"). The Company used the net amount advanced to it under the Term Loan Facility to pay a portion of the Closing Purchase Price (as hereafter defined) under the Diwip Acquisition (Note 5). The Term Loan Facility has a term of three years, subject to acceleration by TEC on certain events of default and subject to the Company's right to repay the Term Loan Facility after the first anniversary upon three months prior notice, and bears interest at 12% per annum, calculated and payable monthly in arrears. Interest for the first year of the term was pre-paid in advance at closing pursuant to the terms of the Credit Agreement. As a condition of the Term Loan Facility, starting April 30, 2016, the Company is required to repay US$1,500,000 per quarter of the principal outstanding under the Term Loan Facility. As well, the Company is required to make certain principal repayments in certain other circumstances prior to maturity. The Company paid to TEC, on behalf of the Lenders, a one-time placement fee of US$800,000 ($1,016,880), a one-time commitment fee of US$600,000 ($762,660) and a one-time closing fee of US$600,000 ($762,660). As well, the Company issued 20,000,000 warrants to the lenders, where each warrant entitles the holder to acquire one common share of the Company at a price of $0.385 per share, expiring three years from the date of issue. The Company also entered into a letter agreement with a third party company assisting with the arrangement of the Term Loan, and paid the third party a cash fee equal to 2% of the gross amount advanced under the Term Loan.


23

14. Loan Payable (continued) In November 2015, the Company completed a senior secured term loan financing in the principal amount of US$28,000,000 (the “Acquisition Facility”). The net proceeds from the Acquisition Facility were used by the Company to fund the closing cash portion of the Akamon Purchase Price and certain related expenses. The Acquisition Facility was effected by way of an amendment and restatement of the existing credit agreement dated January 30, 2015 (the “Credit Agreement”), as amended between the Company, as borrower, the subsidiaries of the Company, as credit parties, a syndicate of lenders, and the lenders’ administrative agent, TEC. The Acquisition Facility is coterminous with the existing senior secured term loan facility under the Credit Agreement, maturing on January 30, 2018, subject to acceleration by TEC on certain events of default and the Company’s right to repay the Acquisition Facility under certain circumstances and certain obligations of the Company to repay prior to such maturity date. The Acquisition Facility (like the existing facility) bears interest at a rate of 12% per annum, payable monthly. The Credit Agreement contains usual and customary terms and covenants and certain of the financial, operational and other covenants for the original Term Loan Facility were amended. A deposit of US$3,000,000 ($3,997,500) on account of prepaid interest has been prepaid by the Company from the proceeds of the Acquisition Facility. The term loan has been amended to require the Company to repay US$2,000,000 per quarter of the principal amount commencing April 1, 2016. The Company will also be required to make principal repayments in certain other circumstances prior to maturity. The Acquisition Facility was subject to a one-time placement fee of US$560,000 ($746,200), a one-time commitment fee of US$420,000 ($559,650), and a one-time closing fee of US$420,000 ($559,650). If TEC has not received principal repayments of at least US$14,000,000 from Imperus on or before the 90th day following the closing date for the Acquisition, the Company will be subject to a one-time carrying fee of US$1,000,000 payable to TEC. See Note 26. As well, a maintenance fee of US$1,000,000 is payable if the loan is outstanding as of January 30, 2017. As partial consideration for the Acquisition Facility, the Company issued to the lenders 15,000,000 non-transferrable warrants, each entitling the holder thereof to purchase one common share of the Company at a price of $0.195 per common share at any time until January 30, 2018, subject to early acceleration in accordance with the policies of the TSX Venture Exchange (the “TSXV”). These warrants are subject to a four month hold period which expires on March 17, 2016. Additionally, the Company amended the exercise price for the existing 20,000,000 non-transferrable warrants issued by the Company to the lenders on January 30, 2015 to $0.195 per common share and, in connection with this amendment, these warrants are now subject to early acceleration in accordance with the policies of the TSXV. The Term Loan Facility is secured by, among other things: (i) a first priority security agreement in favour of TEC, on behalf of the Lenders, on all of the present and future real and personal property of the Company and its subsidiaries; (ii) guarantees provided by certain subsidiaries of the Company; (iii) source code escrow arrangements for current and future Source Code of the Company and its subsidiaries; (iv) the assignment of certain third party licensing and revenue sharing agreements; (v) deposit account control agreements over certain bank accounts of the Company and its subsidiaries; and (vi) a pledge of the shares of each of the subsidiaries of the Company. The Term Loan is subject to various information, affirmative and financial covenants. During the year ended December 31, 2015, the lender waived certain breaches of certain covenants for waiver fees of US$300,000 ($389,130). The Company was in breach of a minimum cash covenant during the year ended December 31, 2015 and was charged US$580,822 ($766,066) in default interest with respect to this breach. As at December 31, 2015, the Company was in good standing with respect to the revised covenants. The loan payable was recognized initially at fair value net of direct attributable transactions costs. Subsequent to initial recognition, it is measured at amortized cost using an effective annual interest rate of 23%. During the year ended December 31, 2015, the Company recorded interest and accretion expense of $9,169,742 (December 31, 2014: $nil). 15. Employee Benefits Payable Under Israeli employment law, the Company is liable for severance pay when employees leave Diwip. At December 31, 2015 the Company determined an actuarial calculation of $63,968 as a liability under the terms of the employment law.


24

16. Share Capital Authorized Unlimited common shares without par value. Issued and outstanding shares

Number of shares Amount

Balance, December 31, 2013 53,689,860 11,526,654$

Exercise of options and warrants (v) 3,258,824 1,646,514

Warrants issued on exercise of broker options (vi) - (122,136)

Issuance of shares as part of debenture financing 313,349 148,880

Issuance of shares related to Vast acquisition (ii) 1,279,290 511,716

Issuance of shares in exchange for debt 315,000 129,150

Balance, December 31, 2014 58,856,323 13,840,778

Issuance of shares (i) 70,644,500 24,725,575

Cost of issue (i) - (2,722,277)

Issuance of warrants on financing (i) - (6,273,231)

Issuance of shares related to Vast acquisition (ii) 213,216 61,299

Issuance of shares related to Diwip acquisition (iii) 30,558,280 15,890,306

Issuance of shares related to Akamon acquisition (iv) 4,538,297 771,510

Exercise of warrants (v) 757,670 430,707

Warrants issued on exercise of broker options (vi) - (53,365)

Balance, December 31, 2015 165,568,286 46,671,302$ (i) On January 28, 2015, the Company completed a brokered private placement of 70,644,500 subscription receipts at $0.35 per subscription receipt for aggregate gross proceeds of $24,725,575. The subscription receipts were automatically converted into units of one common share and one-half of one common share purchase warrant. The warrants were valued at $6,273,231 (Note 17). Costs associated with the transaction were $1,643,535 in cash payments and 4,238,670 agent options valued at $1,078,742 issued as part of the transaction (Note 17). (ii) On July 21, 2014, the Company completed the purchase of the shares of Vast, pursuant to the acquisition agreement dated July 21, 2014. In accordance with the acquisition agreement, on January 21, 2015, the Company agreed to pay the Sellers an amount of $50,000 by the issuance of 106,608 common shares of the Company at a value of $0.37 per share which represents fair market value of $38,912 on that date. On July 21, 2015, the Company agreed to pay the Sellers an amount of $50,000 by the issuance of 106,608 common shares of the Company at a value of $0.21 per share which represents fair market value of $22,387 on that date. On July 21, 2014, on closing of the acquisition, the Company issued 1,279,290 common shares valued at $511,716. (iii) On January 30, 2015, the Company completed the purchase of the shares of Diwip, pursuant to the acquisition agreement dated October 14, 2014. In accordance with the acquisition agreement, the Company agreed to pay the sellers an amount of US$10,000,000 by the issuance of 30,558,280 common shares of the Company at a value of $0.52 per share which represents fair market value of $15,890,306 on the date. (iv) On November 16, 2015, the Company completed the purchase of the shares of Akamon. In accordance with the acquisition agreement, the Company issued 4,538,297 common shares of the Company to one of the vendors which were valued at $771,510, the fair market value on that date. (v) During the year ended December 31, 2015, 757,670 warrants were exercised for cash proceeds of $285,514. The fair value of $145,193 related to the warrants exercised was reclassified from warrants to share capital. During the year ended December 31, 2014, 175,000 options and 3,083,824 warrants and broker options were exercised for cash proceeds of $1,285,535, and the fair value of $360,979 related the options and warrants exercised was reclassified from options or warrants to share capital.


25

16. Share Capital (continued) (vi) During the year ended December 31, 2015, 211,460 warrants were issued upon the exercise of broker warrants recorded at a fair value of $53,365. During the year ended December 31, 2014, 563,615 warrants were issued upon the exercise of broker warrants recorded at a fair value of $122,136. During the period from incorporation on February 9, 2011 to March 31, 2011, WCI issued 2,000,000 common shares at $0.05 per share for gross proceeds of $100,000. The 2,000,000 common shares were to be held in escrow until completion of the Company's Qualifying Transaction (“QT”). Upon completion of the Company's QT on November 12, 2013, the shares were to be released on a staged basis, with 10% to be released on the issuance of a final exchange bulletin by the TSX-V, and 15% to be released every six months thereafter for a period of thirty-six months. On November 7, 2013, WCI completed a Concurrent Financing by the issuance of 23,000,000 units. Each unit, issued at a price of $0.30 per unit, consisted of one common share and one half common share purchase warrant. The 11,500,000 share purchase warrants issued were valued at $1,047,000. Under the terms of the offering 13,527,788 common shares and 30,000 warrants were placed into escrow. During the year ended December 31, 2015, 4,658,336 shares were released from escrow (year ended December 31, 2014: 4,658,336 released). Schedule of release of shares from escrow:

Shares

May 12, 2016 2,329,168

November 12, 2016 2,329,168

4,658,336 17. Warrants Warrant activity during the year ended December 31, 2015 is detailed as follows:

Number of

warrants Value

Weighted

Average

Exercise Price

December 31, 2013 13,621,000 1,305,513$ $0.430

Warrants issued to debenture holder (v) 51,660 7,236 $0.410

Warrants issued to agent (vi) 511,955 114,950 $0.450

Exercise of warrants (3,083,826) (316,586) $0.400

December 31, 2014 11,100,789 1,111,113 $0.440

Warrants issued related to equity financing (i) 35,322,250 6,273,231 $0.550

Warrants issued related to debt financing (ii) 35,000,000 6,081,000 $0.195

Warrants issued to agent (iii) 4,238,670 1,078,742 $0.350

Warrants issued on exercise of agent warrants (iv) 211,460 53,365 $0.455

Exercise of debenture warrants (80,000) (10,632) $0.300

Exercise of warrants (254,750) (29,721) $0.450

Exercise of agent warrants (422,920) (104,840) $0.347

Expiry of warrants (10,702,919) (1,063,848) $0.421

December 31, 2015 74,412,580 13,388,410$ $0.373


26

17. Warrants (continued) (i) During the year ended December 31, 2015, the Company issued 35,322,250 warrants as part of its equity

financing. These warrants are exercisable at a price of $0.55 per share for a period of 36 months. The warrants were valued at $6,273,231 using the Black-Scholes option pricing model with the following assumptions: expected life of one year, risk-free rate of 1.00%, expected dividend yield of 0% and expected volatility of 92.5%.

(ii) During the year ended December 31, 2015, the Company issued 35,000,000 warrants as part of its debt

financing. In connection to the Term Loan Financing entered into in January 2015 (Note 14), 20,000,000 warrants exercisable at a price of $0.385 per share were issued expiring 36 months from the date of issue. The warrants were initially valued at $4,764,000 using the Black-Scholes option pricing model with the following assumptions: expected life of one year, risk-free rate of 1.00%, expected dividend yield of 0% and expected volatility of 92.5%. In connection with the amended Credit Agreement entered into in November 2015, the Company issued 15,000,000 warrants exercisable at a price of $0.195 per share expiring on January 30, 2018. These warrants were valued at $1,317,000 using the Black-Scholes option pricing model with the following assumptions: expected life of 2.2 years, risk-free rate of 0.61%, expected dividend yield of 0% and expected volatility of 100.5%. As well, the exercise price of the 20,000,000 warrants issued in January 2015 was amended to $0.195.

(iii) During the year ended December 31, 2015, the Company issued 4,238,670 agent warrants as part of its equity

financing. These warrants are exercisable at a price of $0.35 per share for a period of 36 months. The warrants were valued at $1,078,742 using the Black-Scholes option-pricing model with the following assumptions: expected life of one year, risk-free rate of 1.00%, expected dividend yield of 0% and expected volatility of 92.5%.

(iv) During the year ended December 31, 2015, 422,920 agent warrants were exercised which resulted in the

issuance of 211,460 warrants. These warrants were valued at $53,365 using the Black-Scholes option pricing model with the following assumptions: expected life of less than one year, risk-free rate ranging from 0.48% to 0.66%, expected dividend yield of 0% and expected volatility ranging from 91% to 108%.

(v) During the year ended December 31, 2014, 51,660 warrants were issued in connection with the Series B Debenture with each warrant entitling the agent to purchase one common share of the Company at a price of $0.41 per share expiring 24 months from the date of issue. These warrants were valued at $7,236 using the Black-Scholes option pricing model with the following assumptions: expected life of two years, risk-free rate of 1.078%, expected dividend yield of 0% and expected volatility of 90%.

(vi) During the year ended December 31, 2014, 511,955 warrants were issued in through the exercise of broker warrants. These warrants were exercisable at a price of $0.45 per share expiring on November 7, 2015. These warrants were valued at $114,950 using the Black-Scholes option pricing model with the following assumptions: expected life of one year, risk-free rate of 1.077%, expected dividend yield of 0% and expected volatility of 90%.

As at December 31, 2015, the following warrants remain outstanding:

Number of

warrants Expiry date

Exercise

price Value

51,660 November 12, 2016 $0.410 7,236

35,322,250 January 28, 2018 $0.550 6,273,231

3,838,670 January 28, 2018 $0.350 976,943

200,000 January 28, 2018 $0.550 50,000

35,000,000 January 30, 2018 $0.195 6,081,000

74,412,580 $0.373 13,388,410$


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18. Stock Options The stock option plan (the "Plan") is administered by the Board of Directors of the Company which establishes the exercise prices, vesting conditions and expiry date of the options. The number of common shares reserved under the Plan at December 31, 2015 and December 31, 2014 is 16,556,829 and 5,885,632 respectively.

Number of

options Value

Weighted

Average

Exercise Price

December 31, 2013 3,926,747 756,188$ $0.45

Granted 1,750,000 595,196 $0.44

Exercised (175,000) (34,957) $0.44

Expired/cancelled (560,000) (157,947) $0.40

December 31, 2014 4,941,747 1,158,480$ $0.46

Granted 13,110,000 2,929,683 $0.36

Expired/cancelled (3,420,000) (771,835) $0.48

December 31, 2015 14,631,747 3,316,328$ $0.37 During the year ended December 31, 2015, the Company granted 13,110,000 stock options to directors, officers, consultants and employees of the Company. Of these options, 11,860,000 vested immediately upon grant, 750,000 were to vest one year from the date of grant, and 500,000 were to vest when the Company’s share price traded at a specified price. During the period, 250,000 options which were to have vested one year from the date of grant were relinquished, while 500,000 options vesting one year from date of grant and 500,000 options vesting when the share price trades at a specified price were subject to a termination agreement and vested on the date of that agreement. Other options granted in previous years also vested during the year ended December 31, 2015. Of the options granted during the year, 1,000,000 were granted by the Board of Directors on April 7, 2015 and finally agreed with the employees of the Company in February 2016. As a result, $2,929,683 in stock-based compensation expense was recorded to the annual consolidated statements of loss and comprehensive loss for the year ended December 31, 2015 (year ended December 31, 2014: $595,196 with respect to 1,750,000 options granted). The weighted average remaining contractual life of the outstanding options is 3.27 years (December 31, 2014: 3.69 years).


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18. Stock Options (continued) As at December 31, 2015, the following stock options remain outstanding:

Grant date

Number of

options

outstanding

Number of

options vested Expiry date

Exercise

price Value Expected life

Risk-free

interest

rate

Expected

dividend

yield

Expected

volatility

December 2, 2013 300,000 300,000 January 1, 2016 $0.40 67,680 5 years 1.76% 0% 100%

April 7, 2015 1,000,000 1,000,000 January 1, 2016 $0.38 264,300 5 years 0.54% 0% 118%

January 21, 2014 35,000 35,000 January 7, 2016 $0.40 10,595 5 years 1.69% 0% 89%

April 7, 2015 5,000 5,000 January 31, 2016 $0.38 1,322 5 years 0.54% 0% 118%

April 7, 2015 32,000 32,000 March 1, 2016 $0.38 3,964 5 years 0.54% 0% 118%


December 2, 2013 300,000 300,000 March 31, 2016 $0.40 67,680 5 years 1.76% 0% 100%


April 7, 2015 5,000 5,000 April 30, 2016 $0.38 1,322 5 years 0.54% 0% 118%

December 2, 2013 1,286,747 1,286,747 September 15, 2016 $0.40 290,290 5 years 1.76% 0% 100%

April 7, 2015 2,500,000 2,500,000 September 15, 2016 $0.38 636,175 5 years 0.54% 0% 118%

December 2, 2013 600,000 600,000 December 2, 2018 $0.40 135,360 5 years 1.76% 0% 100%

April 7, 2015 5,403,000 5,403,000 April 7, 2020 $0.38 1,207,851 5 years 0.54% 0% 118%

April 16, 2015 400,000 400,000 April 16, 2020 $0.48 132,000 5 years 0.80% 0% 90%

September 16, 2015 2,000,000 2,000,000 September 16, 2020 $0.23 295,600 5 years 0.87% 0% 83%

14,631,747 14,631,747 $0.37

BLACK-SCHOLES INPUTS

19. Segmented Information For the year ended December 31, 2015, the Company had three reporting segments, which were generated as a result of the acquisitions of Diwip and Akamon. The segments, Mobile, Facebook, and Portal, are the platforms for the games the Company produces. The Company has designated these components as reporting segments as management monitors its revenues according to these platforms. Expenses are not reported to management according to these platforms. The Company’s previous business activities, related to Vast, Tech and its Cladstone customer, were discontinued during the year ended December 31, 2015 (Note 20). As Diwip and Akamon were acquired during 2015, there was no segmented reporting for the comparative year ended December 31, 2014. All revenue and costs for 2014 were Corporate in nature.


29

19. Segmented Information (continued) Segmented net loss from continuing operations for the year ended December 31, 2015 is presented below:

Portal Facebook Mobile Total Corporate Total

Revenue 2,195,606$ 18,254,056$ 3,574,322$ 24,023,983$ 27,263$ 24,051,246$

Gaming commissions - - - (6,905,056) - (6,905,056)

Advertising and marketing - - - (4,092,999) (94,176) (4,187,175)

Salaries and benefits - - - (3,140,354) (976,108) (4,116,462)

Professional fees - - - (259,631) (605,957) (865,588)

Subcontractors - - - (43,083) (867,093) (910,176)

General and administration - - - (851,547) (398,245) (1,249,792)

Regulatory fees and investor relations - - - - (103,807) (103,807)

Travel and accommodation - - - (18,478) (396,657) (415,135)

Due diligence and transaction costs - - - - (3,987,124) (3,987,124)

Severance and restructure costs - - - - (1,042,700) (1,042,700)

Depreciation of equipment - - - (23,450) (34,552) (58,002)

Amortization of intangibles - - - (8,120,893) - (8,120,893)

Stock-based compensation - - - - (2,929,683) (2,929,683)

Interest and accretion - - - - (9,731,854) (9,731,854)

Changes in value of long-term debt - - - - 25,424,689 25,424,689

Foreign exchange loss/(gain) - - - - (6,405,637) (6,405,637)

Impairment of goodwill - - - - (24,445,283) (24,445,283)

Net income/(loss) from continuing

operations before taxes 2,195,606 18,254,056 3,574,322 568,492 (26,566,924) (25,998,432)

Current and deferred taxes - - - 276,900 - 276,900

Net income/(loss) from continuing

operations 2,195,606$ 18,254,056$ 3,574,322$ 845,392$ (26,566,924)$ (25,721,532)$

The Company’s revenues for the year ended December 31, 2015 by geographic region, as presented below, is based on the primary jurisdiction where the Company is licensed to offer its products or services, not the location of its customer.

Revenues Portal Facebook Mobile Total Corporate Total

Spain 2,172,915$ 461,122$ 77,577$ 2,711,614$ -$ 2,711,614$

Israel 22,690 17,792,934 3,496,745 21,312,369 27,263 21,339,632

Canada - - - - -

2,195,606$ 18,254,056$ 3,574,322$ 24,023,983$ 27,263$ 24,051,246$ The distribution of the Company’s non-current assets (namely, long-term prepaids, equipment, goodwill, intangibles and deferred income tax assets) by geographic region is as follows:

Non-current assets

As at

December 31,

2015

As at

December 31,

2014

Spain 44,415,857$ -$

Israel 82,742,121 -

Canada 299,789 4,339,427

127,457,767$ 4,339,427$


30

20. Discontinued Operations During the third quarter of 2015, the Company decided to no longer pursue its operations within its Vast and Tech subsidiaries. Tech provided support for the Company’s Cladstone customer. The Company is focusing on its Diwip and Akamon subsidiaries going forward as well as future potential acquisitions. The following table summarizes the operations of both Vast and Tech, as well as the Company’s operations related to Cladstone and the Company’s Bingo software, which were classified as discontinued operations.


Revenue 267,456$ 330,133$

Operating expenses (1,184,221) (1,036,311)

Depreciation expense (17,889) (5,525)

Amortization of intangibles (435,220) (541,534)

Interest expense (1,436) (12,138)

Restructure costs (50,920) -

Foreign exchange 72,301 (126,691)

(1,349,929) (1,392,066)

Impairment charge (4,590,538) -

Net loss from discontinued operations (5,940,467)$ (1,392,066)$

Years ended

This group had combined current assets of $696,509, non-current assets of $nil and current liabilities of $67,986 at December 31, 2015 (December 31, 2014: current assets of $763,744; non-current assets of $3,106,441 and current liabilities of $271,345). These amounts have been treated as a disposal group but have not been classified as held-for-sale because their carrying amount will be principally recovered through continuing use, being the collection of cash, receivables, tax credit receivables, and settlement of liabilities. The following table summarizes the net cash flows attributable to discontinued operations:


Cash flows from operating activities (867,422)$ (845,007)$

Cash flows from investing activities -$ -$

Cash flows from financing activities (78,250)$ (421,750)$

For the years ended

21. Economic Dependence The Company, through its Diwip subsidiary, uses Facebook as its primary distribution, marketing, promotion and payment platform for its products and expects to do so for the foreseeable future. Revenues generated through Facebook for the year ended December 31, 2015 accounted for approximately 84% of Diwip’s total revenues, and 83% of Diwip’s accounts receivable. With respect to Akamon, revenues generated through Facebook for the year ended December 31, 2015 accounted for approximately 12% of total Akamon revenue, and 18% of Akamon’s accounts receivable.


31

22. Financial Instruments Fair Value Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values. Financial Risk Factors The Company is exposed in varying degrees to a variety of financial instrument related risks: Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Financial instruments which are potentially subject to credit risk consist primarily of cash and accounts receivables. Credit risk associated with cash is minimized by ensuring cash is placed with financial institutions with high credit ratings. The carrying amount of trade accounts receivables are reduced through the use of an allowance for doubtful accounts. The allowance for doubtful accounts at December 31, 2015 is $218,170 (December 31, 2014: $nil). A significant portion of the Company’s accounts receivables are due from Facebook. Liquidity risk The Company manages its liquidity risk through the management of its capital which incorporates the continuous monitoring of actual and projected cash flows to ensure that it has sufficient liquidity to meet its operating commitments without incurring unacceptable losses or risking damage to the Company’s reputation. The Company has reported a working capital deficit of $20,755,207 as at December 31, 2015 (December 31, 2014: a working capital deficiency of $3,270,051). Foreign currency risk The Company's functional currency is the Canadian dollar. The Company’s Diwip subsidiary operates in both New Israeli Shekels (NIS) and US dollars, while the Company’s Akamon subsidiary operates in Euros. As well, the Company’s earn-out liability with respect to the Diwip acquisition and the Company’s debt facility are both denominated in US dollars, and the earn-out liability with respect to the Akamon acquisition is denominated in Euros. The Company does not hedge its foreign exchange risk. As at December 31, 2015 a plus or minus 10% change in foreign exchange rates applied to the financial instruments held at the end of the reporting period would affect net loss by approximately $7.5 million and other comprehensive loss by $10.0 million. 23. Related Party Transactions and Balances Related parties include the Board of Directors, key management personnel, close family members and enterprises which are controlled by these individuals as well as certain persons performing similar functions. Remuneration of key management personnel of the Company for the year ended December 31, 2015 and 2014 were as follows:


Capitalized development costs 65,100$ 111,600$

Salaries and related benefits 1,508,340 240,000

Directors fees 304,167 -

Subcontractor expense 905,120 300,000

Stock-based compensation 1,399,175 -

4,181,902$ 651,600$

Years ended

Salaries and related benefits includes severance payments made to or accrued for former officers of the Company. Included in accounts payable and accrued liabilities at December 31, 2015 is $382,021 (December 31, 2014 - $nil) owing to these related parties.


32

24. Commitments The Company is party to certain management contracts. These contracts require that additional payments of up to $4,290,000 be made upon the occurrence of certain events such as a change of control. As the likelihood of these events taking place is uncertain and it is not probable that there will be any outflow of resources to settle the commitment, the contingent payments have not been reflected in these annual consolidated financial statements. Minimum commitments remaining under these contracts were approximately $1,830,000 all due within one year. The Company has total future financial commitments under its office operating leases in the amount of $2,024,357 over the next five years.

Contractual obligation Total < 1 year 1 - 3 years 4 - 5 years > 5 years

Operating leases 2,024,357$ 566,937$ 909,189$ 548,231$ -$

Payments due by period

25. Income Tax The following table reconciles the expected income tax recovery at the combined Canadian federal and provincial statutory tax rate to the amount recognized in the consolidated statements of loss and comprehensive loss.


2015 2014

Loss before income taxes (25,998,432)$ (5,679,518)$

Statutory rate 26.50% 26.50%

Expected income tax recovery (6,889,580)$ (1,505,072)$

Adjustments to expected income tax benefit:

Difference in foreign tax rates 2,619,420 -

Tax rate changes and other adjustments 1,610,450 23,950

Non-deductible expenses 3,226,160 208,390

Effect of changes in value of long-term debt (6,995,090) -

Unrealized foreign exchange 1,250,260 -

Benefit of tax losses not recognized 4,901,480 1,272,732

Income tax (recovery)/expense (276,900)$ -$ The Company’s income tax recovery is allocated as follows:

Current tax (recovery) expense 1,403,751$ -$

Deferred tax (recovery) expense - discontinued operations - -

Deferred tax (recovery) expense - continuing operations (1,680,651) -

(276,900)$ -$


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25. Income Tax (continued) Deferred taxes are provided as a result of temporary differences that arise due to the differences between the income tax values and the carrying amount of assets and liabilities. The significant components of the Company’s deferred income tax assets are as follows:


2015 2014

Deferred income tax assets:

Severance Accrual 10,180$ -$

Vacation Accrual 13,770 -

Bad Debt 39,780 -

SRED Expenses 636,300 -

Non-capital losses carried forward 168,260 213,150

Tax Credits 12,900 -

Less deferred tax assets applied offset against liability (195,925) (213,150)

Deferred income tax assets 685,265$ -$

Deferred income tax liabilities:

Intangible assets (19,833,640)$ (158,090)$

Debenture - (55,060)

Term loan (168,265) -

Other comprehensive income ("OCI") (14,760) -

Add deferred tax assets applied offset against liability 195,925 213,150

Deferred income tax liability (19,820,740)$ -$ Deferred tax assets and liabilities have been offset where they relate to income taxes levied by the same taxation authority and the Company has the legal right and intent to offset.


2015 2014

Movement in net deferred tax assets and liabilities:

Deferred tax asset acquired in acquisition 643,880$ -$

Recognized in profit/loss 1,680,651 -

Recognized in OCI (1,078,274) -

Recognized in goodwill (20,381,732) -

Net deferred tax assets and liabilities at the end of the year (19,135,475)$ -$ Deferred tax assets have not been recognized in respect of the following deductible temporary differences:


2015 2014

Earn-outs payable 2,469,860$ -$

Intangible Assets 1,368,470 -

Note Receivable 602,870 -

Share issuance costs 5,255,050 763,870

Non-capital losses carried forward 25,499,890 14,011,220

Other temporary differences 51,150 124,110 The Canadian non-capital loss carry forwards expire between 2029 and 2035. The net capital loss carry forward may be carried forward indefinitely, but can only be used to reduce capital gains. Share issue and financing costs will be fully amortized in 2019. The remaining deductible temporary differences may be carried forward indefinitely. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the group can utilize the benefits therefrom.


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26. Subsequent Events In February 2016, the Company reached an agreement with its lenders to amend certain terms of its outstanding credit agreement (Note 14). This amending agreement defers the Company’s obligation to make principal repayments of at least US$14,000,000 until December 31, 2016. By not making a principal repayment of US$14,000,000 to the lenders on or before February 15, 2016, the Company paid TEC, on behalf of the lenders, a carrying fee of US$1,000,000. In addition, the Company’s obligations to repay outstanding principal in quarterly instalments of US$2,000,000 starting April 1, 2016 has been deferred until April 1, 2017. As consideration for these amendments, the Company agreed to pay to the lenders a fee of US$100,000. Additionally, the Company has agreed to amend the exercise price for 35,000,000 non-transferrable warrants issued by the Company to the lenders on November 16, 2015 to the market price (as determined in accordance with the policies of the TSX Venture Exchange) in connection with the announcement of the amendment. The Amendment is subject to certain conditions, including, but not limited to, approval by the TSX Venture Exchange of the amendment to the exercise price for the Warrants. Also in February 2016, the Company issued an additional 11,382,150 common shares of the Company to Vicenç Martí and a company controlled by Vicenç Martí (“Martí”) at a deemed issuance price of CAN$0.1671. The issuance of the common shares to Marti was the second scheduled share grant to be issued following the receipt by the Company of the closing date financial statements of Akamon. In February 2016, the Company has granted a total of 4,403,297 stock options under its stock option plan to various individuals including a director of the Company, the Company’s president, certain employees of Akamon and the Company’s CFO and internal legal counsel. The options will vest quarterly over two years, all subject to a four month regulatory hold period. All options are exercisable at a price of $0.075 per option for a period of five years from the date hereof.

Documents

Imperus Technologies Corp. ANNUAL CONSOLIDATED ......2015/12/31 · Mississauga, Ontario April 25, 2016 Imperus Technologies Corp. 3 See accompanying notes to these annual consolidated