Dream Industries

Assets

For April, 2014:

• Zvooq is music service,
• Bookmate.com is the platform for electronic book publishing,
• Theories and practicians - service on knowledge sharing,
• Third place,
• DI Telegraph - multifunction space in the center of Moscow, integrating a conference room, meeting rooms and a co-working. Is located in the building of the Central telegraph (Tverskaya St., 7).,
• Exchang.es is the online service for the publication of announcements of events allowing the organizations and also all who are ready to share the knowledge and experience to bring together audience and to accept payment for tickets.

History

2009: Foundation of the company

Dream Industries was created in 2009 by three cofounders:

• Simon Dunlop,
• Alexey Ostroukhov and
• Victor Frumkin, the last acted also as the angel investor.

2011: Investments from Finns, Meyer and Kostygin

After emergence the company in the second half of 2011 carried out an investment round "And" within which it attracted $3 million from the institutional investor – the Finnish fund Essedel to Dream Industries of the first Zvooq and Bookmate.com projects.

At the end of 2011 Dream Industries began to plan an output of products to the world market. The round "In" in the amount of already $25 million was closed by the beginning of 2012. In December, 2011 in the company invested Augustus Meyer (the former deputy prosecutor of San Diego, the USA) and Dmitry Kostygin, both citizens Saint Kitts and Nevis.

At the same time the Essedel fund entered $2 million more. Money was attracted for development of projects of the company among which by that moment appeared still "Theories and practicians".

According to the letter of shareholders, in 2011 co-owners of the company became Kostygin who invested 25 million dollars, and Essedel Capital fund (5 million dollars). In exchange they received 22% and 6% of capital stock. On 22% belongs to Frumkin, Ostroukhov and the co-founder Simon Danlop.

2012: Ostroukhov's dismissal from a post of the CEO

• In September, 2012 Kostygin and Frumkin prepare the plan of raid, convince Novitsky to doubt effectiveness of company management and to support them in acceptance of the radical measures which are allegedly directed to business stabilization.

• In October, 2012 check from prosecutor's office according to the statement of one of former employees which, apparently, was in close contact with Frumkin throughout all history.

• In November, 2012 Frumkin, without approval of company management, using access to bank accounts, began to block financial flows, stopped salary payment to employees, payments to partners in contractual commitments.

• On December 6, 2012 there took place the presentation to investors (Kostygin, Frumkin, Novitsky) in which development plans for the company and products were described.

• December 10-11. To Simon threats from Frumkin about change of directors and criminal prosecution arrive. Frumkin also explained that resolute actions, preparation to which was led the last 2–3 months, approach.

• December 12-13. Without the consent of company management according to fabricated or invalid documents at Drim Industries LLC the CEO on Mikhail Ilyichev who is in advance selected by Kostygin changes (change of the CEO cannot be legally made without relevant resolution of Board of Directors which was not).

Versions of the event differ. Ostroukhov claims that one of financial investors of the company and its former chief financial officer Victor Frumkin, having integrated with the portfolio investor Dmitry Kostygin, captured DI, having illegally displaced him from a post of the CEO and having delivered to this position of the former CEO of RuTube Mikhail Ilyichev. The owner of 100% of Dream Industries — the Cyprian Dream Industries Ltd. (DIL), an ownership share in which Ostroukhov does not call, referring to the confidentiality agreement. However, according to him, during creation of the company protection against the unskilled investor as it usually becomes in the technology companies, and in voting shares at it control was provided. However, to displace the CEO, it is not required to convoke shareholder meeting is a question of Board of Directors, but it did not even gather, Ostroukhov assures.

Frumkin claims that he represents the investors having a majority of votes in the Cyprian DIL. He calls share capital structure "normal": founders have no privileges. Structure of shareholders in DI multistage, but control at group of shareholders which is represented by Frumkin, Ilyichev says. According to Frumkin, he was and remains the treasurer of DIL and in this quality has the existing general power of attorney on the basis of which the CEO of DI is replaced. Ostroukhov confirms that Frumkin's power of attorney was not withdrawn as he trusted him.

According to Frumkin, Ostroukhov violated the shareholders' agreement: under its management the company spent a half of $30 million selected with investors, but even close did not approach the objects set by shareholders. Instead of development of the existing projects Ostroukhov without approval of shareholders of the beginnings development of the new project, information on which did not share with partners, and support and development existing under which money was given threw, Ilyichev says. Shareholders poorly understand an essence of business of DI, Ostroukhov answers^[1].

On December 13, 9:30 a.m. Raid at Lubyanka Square entered into head office of the company: Frumkin, the new CEO Mikhail Ilyichev, two lawyers from the raider Paradigm law firm, six security guards from the same firm in sports pants, later and Kostygin; lawyers of the Paradigm assured that on their account it is already more than 40 raids.

On December 13 10 a.m. Raiders addressed the being present employees: "The working day began, sit down, work". Security guards interfere with attempts of employees to leave the building with working notebooks under the pretext of protection of property of the company. With Simon's intervention employees are released.

On December 13, 11:02 a.m. To Dream Industries the letter comes from department of cybercrimes of FSB in which it is said that "one of your projects, allegedly, has criminal character".

On December 13, 12 p.m. Dream Industries security service without the conflicts convinces lawyers of the Paradigm and security guards of sports pants to leave office.

• December 13-14. Creators (Ostroukhov and Simon) and investors of Dream Industries (Kostygin and Frumkin) conduct negotiations (there is a record).

On what basis change of the director? — A bias from the answer

On what basis stop of cash flows? — A bias from the answer ('because business does not make profit')

On what basis delay of salaries to employees? — 'Everything is paid to all for whom it is necessary' (at the same time more than a half of employees still did not get paid for November)

Why the director was appointed without approval of managing partners (Simon and Alexey)? Let's select the new director together — We already thought over everything, Ilyichev suits us, another to select do not agree, three months will leave.

Let's redeem us — I Can offer one dollar for everything, it is ready to raise a rate to two

Let's redeem you — Are ready to go beyond a half of initial investments, but we will block new buyers, convincing them to refuse the transaction, the redemption also should pass in conditions of raid of the company

Kostygin: If the company disappears, we will lose money, you will lose much more

• On December 18, 1:30 p.m. meeting Alexey-Kostygin, threats of personal punishment from Kostygin (there is a record).

Let's reach compromise — Gotov only on what I offered

Let's you redeem — It is ridiculous, show though letter of intent

Ok, when to show you LOI — You nobody

We will be protected — Almost direct threat of personal punishment, 'be protected'

• December 19. To most of employees salaries are still delayed, are officially sent on leave, work at practice out of office being self-organized and on own initiative.

At the same time the following Letter of Dream Industries was sent employees

Friends,

We hurry to tell you the latest news.

As many of you know, having in partners of people who do business in Russia since the beginning of the 90th, we did not manage to secure all of us against their criminal propensities properly.

Under their influence which is expressed by threats and psychological pressure also partly got, among other, representatives of the Finnish fund Essedel and potentially other our colleagues (be vigilant) who are also shareholders.

A few weeks ago illegal capture of our bank accounts was made, and last Thursday administration control over ours the Russian companies is taken, the office on Lubyanka is occupied. According to our data now there are armed security forces with representatives of raiders.

An initiator and the ideologist of capture is our main investor Dmitry Kostygin though the original scenario belongs to his old partner Augustus Meyer. Most loudly they "became famous" not for absolutely successful occupation of Lenta supermarket chain in 2010-2011, but similar schemes applied still more than once. Each of us without effort can find in the Internet the comprehensive information about these people. As the key tool also old acquaintance of Kostygin, our former CFO Victor Frumkin acted. Having abused our trust, it became one of key tools in hands of raiders.

For this year we managed to construct the company which completely belongs and is controlled you.

Under different pretexts several partners incapable to accept this idea, now try to break it in a root and to return certain hierarchies. We have all bases to believe that in process they broke and continue to break laws of several countries.

Now we and our friends fight to stop crime and to renew a company performance in the reached key. If among your friends, there are influential journalists for whom the our future, the future of civilized work in the country is not indifferent, you know what to do.

If to you different offers arrive, show special vigilance and do not trust by sight logical and favorable arguments. If threats come to your address if attempts of psychological pressure are performed, instantly tell the head of our security service Mikhail Katyshev. Any wrongful acts against you will be resolutely stopped.

With love,

your friends

• On December 21, 2012 Dream Industries sent the message:

Having got access to funds of the institutional investors which enclosed in the company of $30 million, Ostroukhov spent these means not to destination, paying attention minimum to development the company and to accomplishment of the tasks set by shareholders.

This event it was actively discussed in network. Discussion was initiated by the Alexey Ostroukhov who tried to accuse majority shareholders of the company of raiding and to connect a blogosphere and social networks to discussion of "raider capture of the business".

Majority shareholders of Dream Industries say that thus the former CEO of the company which attracted tens of millions of dollars from institutional investors under development of the projects tried to justify himself for the failures and inefficient waste of means somehow to save the reputation in the market.

Representatives of shareholders repeatedly told the press that they act legitimately, completely within the legal framework and conditions of the signed shareholders' agreements. Also it was stated that change of the CEO is the only corporate procedure which took place in the company and others are not planned. To provide complete transparency of change of top management shareholders gave the consent to providing to interested persons for acquaintance of any documents which can be useful.

The position of Chief R&D Officer in the company as shareholders expected to use further Alexey's skills in creation of products was offered Ostroukhov, but believed that it is better to charge business development to other manager. For this purpose Mikhail Ilyichev was invited to a position of SEO in Dream Industries.

"Other institutional investors of Dream Industries entrusted to represent the interests in communications with business community to me: Essedel and Dmitry fund Kostygin, – the co-founder of the company Victor Frumkin says. - I express the consolidated position of a majority part of shareholders of Dream Industries who besides completely provide the company with money".

We are forced to note that the former CEO of Dream Industries Alexey Ostroukhov timely did not satisfy a considerable part of conditions and obligations which he undertook, having signed the Shareholders' agreement along with other owners.

In this document main objectives of development of the company and the direction of expenditure of the involved investments were defined. Also shareholders' agreement provided commission of certain actions, as concerning product development, so in the direction business development based on data of a product.

Alexey Ostroukhov abused our trust for long term during which a part of the involved investments was spent not to destination personally by it or according to its instructions. Against the background of failure to follow the obligations management of the company by this moment spent more than a half of the funds raised from investors.

The first financial audit booked after Alexey Ostroukhov's discharge from a position of the CEO of the company elicited the facts of write-off by it from accounts of the company in own favor without any documentary bases of money in the amount of $200,000. Now auditors make detailed investigation of these transactions.

Simon Danlop having wide experience in business development takes a neutral position in the conflict.

2013: Office in the building of the Central telegraph

The office of Dream Industries company in the Central telegraph on Tverskoy St. in Moscow to which she moved in 2013 gradually becomes the best-known in the city — at the expense of the premises about two thousand square meters with the huge windows resting against a seven-meter ceiling. Directly under office with tables and computers only a third is used, other space is given for public actions. Projectors and cretaceous boards, furniture — a minimum hang on concrete walls, and in general everything looks extremely minimalist. Perhaps, this feeling develops because of the scale of the light premises — it so big that employees move on skateboards and scooters here (and in off-duty time ride in the stage set in the same place).

Considerable part of office is transferred under co-working DI Telegraph.

2014

Redemption of a share of Ostroukhov

On April 29, 2014 it became known that the joint-stock conflict in DreamIndustries group came to the end with signing of the settlement agreement between majority shareholders and one of co-founders of the company Alexey Ostroukhov. Within the reached agreements majority shareholders received full control over group, having redeemed Mr. Ostroukhov's share. Earlier it was reported that the size of its packet was 22%.

"Within the last two months we at last could come to the reasonable and acceptable agreement with Alexey Ostroukhov's representatives that will allow each of the parties to move further and to develop own projects", – the co-founder of the DreamIndustries group Victor Frumkin says.

"The shareholder agreement returns to our companies the due level of operational freedom, – the CEO of the DreamIndustries group Mikhail Ilyichev says. – Now became possible to implement all our plans in that type as it is conceived and it is necessary for the best implementation of huge market capacity of the companies entering into the DreamIndustries group: services Bookmate, Zvooq, Exchang.es this year have exclusively favorable perspectives in the segments, 'Theories and Practicians' will continue the development as the media resource devoted to new forms of education, development of knowledge and experience, and DI Telegraph is already demanded as a co-working and the platform for actions of any format in the center of Moscow".

Ulmart buys Dream Industries share block

In May, 2014 the Online retailer "Ulmart" became the owner of a large share block in the Dream Industries holding company. Investment volume was $6.5 million. Together with Dream Industries the online retailer will begin to work with virtual goods (digital goods). The transaction will also promote strengthening of positions of Ulmart as leading company in the field of Internet commerce.

As a result of two simultaneous transactions Ulmart received a considerable share block in the Dream Industries (DI) group having long-term experience of development of the content online services. For $6.5 million investments in DI retailers purchased a minority share in Internet holding. Ulmart received the second part of a share in exchange for the actions at Koshigi fund of the famous Russian entrepreneur Dmitry Kostygin who was earlier investing in DI. As a result of Koshigi completely left DI, and Ulmart became the owner of a packet which cost is from $35 million to $60 million depending on assessment model.

Questions of strategic development of the companies entering into group DI and operational solutions remain in competence of top management of DI and her co-founders Victor Frumkin and Simon Danlop. The IT holding is going to spend 80% of the raised funds for development of music service Zvooq.com and service of reading Bookmate.com e-books.

Partners found mutually advantageous innovation model of interaction between the retailer and the content services and expect synergy effect of integration, closing two verticals of physical and virtual goods. Organic overflowing of users from online retailer in ecosystems of the content services and back, batching of commodity offers on the scheme "gadget plus content" and also use of data bulk which are generated due to consumption of content, and their intersections with the interests of users in physical goods for recommendatory algorithms of both platforms will be the following steps.