Empire Industries Announces Closing of $3,000,000 Subscription Receipt Private Placement and First Tranche of the DEGL Private Placement

Co-venture attraction companies to be set up in North America and China

WINNIPEG, December 21, 2017 – With reference to its prior news releases this year dated August 28^th, August 31^st, October 12^th, November 29^th, and December 18^th, Empire Industries Ltd. (TSX-V: “EIL” or “Empire”) is pleased to announce that the proceeds of the previously announced Empire Subscription Receipt Private Placement (described below) have been released as the applicable escrow release conditions (the “Escrow Release Conditions”) have been satisfied and the first tranche of the DEGL Private Placement (described below) has successfully closed.

Highlights

• The first tranche of the common share equity investment in DEGL has been funded ($8.5 million of $17 million – See DEGL Private Placement below) as follows:
  • $6 million of Empire’s $12 million obligation
  • $2.5 million of Jolly Admire Limited’s $5 million obligation
• The second tranche of the DEGL Private Placement is anticipated to close in the first half of 2018, which is in sufficient time to fund DEGL’s anticipated cash outflows
• $18 million of common share equity investments in Dynamic Technology Shanghai Company (“DTSH”) (the “DTSH Private Placement” described in more detail below) are anticipated to close in the first quarter of 2018, which is in sufficient time to fund DTSH’s anticipated cash outflows:
  • $14 million from Jolly Admire Limited (to be funded in RMB)
  • $4 million from DEGL (flowed through from the DEGL Private Placement above)
• A nominal investment, with the same ownership structure of DTSH, of common share equity in Dynamic Technology Hong Kong Company (“DTHK”) (See DTHK Private Placement below) is anticipated to close in the first quarter of 2018.

DEGL’s mission will be to partner with North American tourist venues to co-own and operate Dynamic designed and themed attractions in local venues. DTSH intends to do the same with Chinese tourist venues. Each of DEGL and DTSH will be capitalized sufficiently to complete one such business co-venture once the anticipated transactions have closed.

“The co-venture business is a natural extension of Empire’s business model, from manufacturer of ride systems, to designer of turnkey media-based attractions, and now to co-own and operate some of its own world class attractions,” said Guy Nelson, Chief Executive Officer of Empire. “The co-venture strategy is designed to generate a recurring revenue component to our business model, augmenting the project-based business of manufacturing and selling ride systems and attractions. Empire will continue to serve its markets for ride systems and attractions. Once the anticipated transactions have closed, Empire will own 73.5% of DEGL, which will in turn own 30% of DTSH. DEGL will have an option to increase its ownership in DTSH to 51% at an incremental cost of $11.1 million. In addition, Empire will benefit by being the exclusive supplier of co-venture attractions to DEGL and DTSH.”

Empire Subscription Receipt Private Placement

On October 12, 2017, EIL closed a private placement (the “Empire Subscription Receipt Private Placement”) of 6,000,000 subscription receipts (“Subscription Receipts”) at a price of $0.50 per Subscription Receipt for gross aggregate proceeds of $3 million. The Subscription Receipts were subscribed for by Excellence Raise Overseas Limited (“EROL”) pursuant to the terms of a subscription receipt agreement dated October 12, 2017 (the “Subscription Agreement”) entered into by EROL, Empire, Dynamic Entertainment Group Ltd. (“DEGL”) and Carscallen LLP as escrow agent. The Escrow Release Conditions which have been satisfied included: (i) the prior closing of the Rights Offering which was completed by EIL on November 29, 2017; and (ii) EIL having invested at least $6 million of equity in Dynamic Entertainment Group Ltd. on or before January 31, 2018 (the “DEGL Private Placement”).

Pursuant to the terms of the Subscription Agreement, each Subscription Receipt was automatically exchanged for one (1) Common Share of Empire today. As a result, 6,000,000 Common Shares were issued to EROL upon the automatic exchange of the Subscription Receipts.

DEGL Private Placement

As previously announced, EIL agreed to subscribe for $12 million of common shares of DEGL and EROL, or its assign, agreed to subscribe for $5 million of common shares of DEGL. The investments in DEGL by each of EIL and EROL, or its assign, were take place in two equal tranches. The first tranche of the DEGL Private Placement closed today with Empire investing $6 million in equity and EROL’s assign, Jolly Admire Limited (“Jolly”), investing $2.5 million in equity resulting in EIL owning 73.5% and Jolly owning 26.5% of the issued and outstanding shares of DEGL.

The second tranche of the DEGL Private Placement is expected to close in the first half of 2018, which is in sufficient time to fund DEGL’s anticipated cash outflows. Empire has up to twelve months to close the second tranche. In the event EIL does not have sufficient funds to close all or any portion of the second tranche of the DEGL Private Placement, Jolly shall have the right (but not the obligation) to take up the balance of EIL’s portion of the second tranche.

The funds from the DEGL Private Placement will be used primarily to develop a co-venture attraction tourist venue in North America, but also to fund DEGL’s investment in the DTSH Private Placement (described below) and DTHK Private Placement (described below).

DTSH Private Placement and related matters

Pursuant to the Subscription Agreement, DEGL agreed to subscribe for $4 million of common shares of DTSH, while EROL’s assign, Jolly, agreed to subscribe for $14 million (payable in RMB) of common shares of DTSH (the “DTSH Private Placement”). The common shares issued pursuant to the DTSH Private Placement shall be issued at a price per common share such that DEGL shall own 30.0% and Jolly, or its assign, shall own 70.0% of the issued and outstanding shares of DEGL upon the closing of the DTSH Private Placement. The funds shall be used primarily to complete the development of one co-venture attraction tourist venue in China. The DTSH Private Placement shall close as soon as is practicable after the closing of the DEGL Private Placement.

DTHK Private Placement and related matters

Pursuant to the Subscription Agreement, DEGL has agreed to subscribe for $4 thousand of common shares of Dynamic Technology Hong Kong Company (“DTHK”) and Jolly, or its assign, has agreed to subscribe for $14 thousand (payable in RMB) of common shares of DTHK (the “DTHK Private Placement”). DTHK will hold the necessary intellectual property which will be licensed to DTSH to allow DTSH to operate Dynamic Flying Theatres and other attractions in China. The DTHK Private Placement shall close as soon as is practicable after the closing of the DEGL Private Placement.

Appointment of James Chui to EIL Board of Directors

EROL is controlled by James Chui. It was a condition of the Empire Subscription Receipt Private Placement that Mr. Chui be appointed to the EIL Board of Directors upon the issuance of the common shares underlying the Subscription Receipts. Accordingly, Mr. Chui will be appointed to the Empire Board of Directors effective today.

Mr. Chui has been Chairman and CEO of EROL since 2013. Mr. Chui was instrumental in arranging the private placement financing that led to the spinout of Tornado Global Hydrovacs Ltd. (TSXV:TGH) from Empire. Mr. Chui serves as a Director of HIP Energy Corp. and has been its COO since June 2010. Mr. Chui is a Director and Co-Founder of HIP Energy Resource Limited and HIP Technology Limited and serves as its CEO. He has been Chairman and President at Sino-Pacific Agency Partners (Hong Kong) Limited since 2010. He serves as Director of Beijing You Peng Technology Co., Ltd which is one of the largest OTV platform and service provider in China, and as Chief of Business Development of United Biomedical Group Inc, at same time to be supervisor, director of its subsidiary United BioPharma Inc which is public company in Taiwan and Shanghai Shen Lian Biomedical Corp. which will be listed in Shanghai Stock exchange in near future since 2014 . Mr. Chui served as the President and CEO of various successful international companies in the high-tech manufacturing and Resource sectors. Mr. Chui graduated from the Shanghai University of Science and Technology in 1985. He attended courses from 2004 to 2006 towards an EMBA from Beijing University and continues to attend numerous ongoing courses in “Continuing Education” from University of British Columbia in the areas of Law and Business.

About Jolly Admire Limited

Jolly is a privately held company incorporated and based in the British Virgin Islands. Mr. Chui is the President and Chief Executive Officer of Jolly.

About Empire Industries Ltd.

Empire focuses on designing, supplying, and installing premium theme park, media-based attractions and ride systems for the global entertainment industry. Empire also uses these same turn-key integration services for special projects such as large optical telescopes and enclosures. Through Empire’s execution of its strategy over the years, Empire owns several non-entertainment investments that it seeks to optimize and liquidate at the appropriate time. Empire’s common shares are listed on the TSX Venture Exchange under the symbol EIL.

For more information about the Company, visit www.empind.com or contact:

Reader Advisory

This news release contains forward-looking statements, within the meaning of applicable securities legislation, concerning Empire’s business and affairs. In certain cases, forward-looking statements can be identified by the use of words such as ‘‘plans’’, ‘‘expects’’ or ‘‘does not expect’’, ‘‘budget’’, ‘‘scheduled’’, ‘‘estimates’’, “forecasts’’, ‘‘intends’’, ‘‘anticipates’’ or variations of such words and phrases or state that certain actions, events or results ‘‘may’’, ‘‘could’’, ‘‘would’’, ‘‘might’’ or ‘‘will be taken’’, ‘‘occur’’ or ‘‘be achieved’’. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Although Empire believes these statements to be reasonable, no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. Such statements include statements with respect to: (i) the closing of second tranche of the DEGL Private Placement, the closing of the DTSH Private Placement, the closing of the DTHK Private Placement and that the conditions for completion of the of the same including regulatory approval will be met; and (ii) the execution of the co-ventures in North America and China and the results, if any, thereof, any increase in revenue and profitability of Empire and the success of any efforts in respect thereof. Actual results could differ materially from those anticipated in these forward-looking statements as a result of prevailing economic conditions, and other factors, many of which are beyond the control of Empire. The forward-looking statements contained in this news release represent Empire’s expectations as of the date hereof, and are subject to change after such date. Empire disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable securities regulations.

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