FIVE J55 Capital Corporation

Enthusiast Gaming Holdings Inc. (TSXV: EGLX) (“Enthusiast Gaming” or the “Company”) is pleased to announce that it has entered into an arrangement agreement (the “Arrangement Agreement”) dated May 30, 2019 with J55 Capital Corp. (TSXV: FIVE) (“J55”) and Aquilini GameCo Inc. (“GameCo”), a private Canadian company to form the leading publicly traded esports and gaming media organization in North America.

Menashe Kestenbaum, CEO of Enthusiast Gaming commented, “Our vision has always been to build the largest, vertically integrated esports and gaming company in the world. The merger with Aquilini GameCo and Luminosity was a strategic decision that positions us as a dominant player in the gaming industry and unlocks access to Luminosity’s 50 million dedicated esports fans and one of the largest esports franchises. Through our successful monetization strategy, we will gain extremely valuable knowledge and information on the demographic that will revolutionize the advertising opportunities we can offer to brands and sponsors.” 

The Transaction

Under a court approved arrangement (the “Arrangement”), J55 will acquire all of the outstanding common shares of Enthusiast Gaming (the “Enthusiast Common Shares”) in exchange for common shares of J55 (the “J55 Common Shares”) on the basis of 4.22 (post consolidation) J55 Common Shares for each one Enthusiast Gaming Common Share (the “Exchange Ratio”). 

The Arrangement constitutes a merger of Enthusiast Gaming and J55 on a fully diluted basis, after giving effect to the transactions described below.

Immediately prior to the completion of the Arrangement, J55 will complete the acquisition of GameCo (the “GameCo Transaction”). The GameCo Transaction will be completed pursuant to the terms and conditions of an amalgamation agreement (the “Amalgamation Agreement”) between J55 and GameCo, pursuant to which immediately prior to the completion of the Arrangement, J55 will acquire all of the outstanding securities of GameCo which shall constitute J55’s Qualifying Transaction (as defined in the policies of the TSXV). On closing of the Qualifying Transaction, all of the issued and outstanding securities of GameCo will be exchanged for corresponding securities of J55 as follows:

• each of the common shares of GameCo (the “GameCo Shares”) will be cancelled and, in consideration therefor, each GameCo shareholder will receive one (post consolidation) J55 Share at a deemed price of $0.30 per J55 Share for each one GameCo Share held; 
• each of the warrants to purchase GameCo Shares (the “GameCo Warrants”) will be exchanged for warrants to purchase the corresponding number of (post consolidation) J55 Shares on the same terms as those contained in the GameCo Warrants, and each such GameCo Warrant shall be cancelled; and 
• each of the options to purchase GameCo Shares (the “GameCo Options”) will be exchanged for options to purchase the corresponding number of (post consolidation) J55 Shares on the same terms as those contained in the GameCo Options, and each such GameCo Option shall be cancelled.

In connection with closing of the GameCo Transaction, J55 intends to consolidate its outstanding J55 Common Shares on the basis of 1.25 pre-consolidation shares for every one post-consolidation share prior to the completion of the GameCo Transaction.

The aggregate of approximately 324,357,495 (post consolidation) J55 Shares is expected to be issued at a deemed price of $0.30 per share pursuant to the GameCo Transaction. Further, J55 has agreed that, to satisfy an obligation of GameCo under an existing media services agreement and as such J55 will issue that number of J55 Shares as is equal to $59,063 at a price per J55 Share to be determined at a later date in accordance with said agreement. J55 intends to rely on Section 2.11 of National Instrument 45-106 – Prospectus Exemptions for an exemption from the prospectus requirements under applicable securities laws in connection with the issuance of the aforementioned securities.

The GameCo Transaction will be a Non-Arm’s Length Qualifying Transaction under the policies of the TSXV and a related party transaction for the purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”) because J55 and GameCo have certain directors, officers and significant shareholders in common. As such, J55 is required to hold a shareholders’ meeting (the “J55 Meeting”) to obtain approval of the GameCo Transaction by the disinterested shareholders of J55. As of the date of this news release, the date for the J55 Meeting has not been established and the disinterested shareholder approval has not been obtained.

The directors, officers and significant shareholders which J55 and GameCo have in common are as follows: Francesco Aquilini is a director and significant shareholder of J55 and a director (and chairman of the board) and significant shareholder of GameCo; Adrian Montgomery is a director, officer and significant shareholder of both J55 and GameCo; and Roberto Aquilini is a significant shareholder of both J55 and GameCo. The interested directors, namely Francesco Aquilini and Adrian Montgomery, have abstained from voting on approval of the GameCo Transaction by the board of directors of J55, and the interested shareholders, namely Francesco Aquilini, Adrian Montgomery and Roberto Aquilini, will be excluded from voting on approval of the GameCo Transaction at the J55 Meeting. These interested shareholders collectively own approximately 63% of the issued and outstanding J55 Shares as follows: Francesco Aquilini – 4,001,000 shares (21.1%); Adrian Montgomery - 3,999,500 shares (21.1%); Roberto Aquilini – 3,999,500 shares (21.1%). The interested directors have also abstained from voting on approval of the GameCo Transaction by the board of directors of J55.

Pursuant to the Amalgamation Agreement, J55 and each of Francesco Aquilini, Adrian Montgomery, John Veltheer, Alexander Helmel, and Roberto Aquilini (the “Supporters”), have entered into support and voting agreements (the “Support Agreements”). The J55 Shares held by the Supporters collectively represent approximately 79% of the issued and outstanding J55 Shares. The Support Agreements provide that, among other things, the Supporters, in their capacity as J55 Shareholders, (i) will irrevocably support the GameCo Transaction, and, to the extent permitted by applicable laws, vote all of their J55 Shares in favour of the proposed J55 Shareholders’ resolution seeking approval of the GameCo Transaction (the “J55 QT Resolution”) and against any resolution submitted by any J55 Shareholder that is inconsistent with the J55 QT Resolution and (ii) will not sell, assign, transfer or otherwise convey any of the J55 Shares held by the Supporters other than pursuant to the GameCo Transaction.

Immediately prior to the closing of the GameCo Transaction, GameCo will complete its acquisition (the “Luminosity Acquisition”) of Luminosity Gaming Inc. (“Luminosity Canada”) and Luminosity Gaming (USA), LLC (“Luminosity USA”, which together with Luminosity Canada is herein referred to as “Luminosity Gaming” and together with J55 and GameCo, “Luminosity”). The Arrangement, the GameCo Transaction and the Luminosity Acquisition are collectively referred to in this press release as the “Transactions”.

Luminosity Gaming is a globally recognized esports organization operating in North America and based in Toronto, Canada. Luminosity Gaming provides management and support services to players involved in professional gaming and is also the manager of the Vancouver Titans franchise in the Overwatch League.  Upon closing of the GameCo Transaction, Luminosity Gaming intends to enter into a long-term management services agreement with the Vancouver Titans to continue management of the team, as well as a long term services support agreement with Vancouver Arena Limited Partnership (“VALP”) pursuant to which VALP will provide Luminosity Gaming with a broad range of marketing and business support services (as further described below).

Steve Maida, Founder and President of Luminosity Gaming commented, “We are incredibly excited about the merger with Enthusiast Gaming.  Pairing our collective following of over 50 million with their 150 million monthly visitors presents significant growth opportunities with respect to content, partnerships, advertising, events and more.”

The combined company that will result from the completion of the Transactions will be renamed “Enthusiast Gaming Holdings Inc.”. Subject to TSXV approval, the common shares of the combined company will trade on the TSXV, under the symbol “EGLX”.

The Arrangement is subject to receipt of various approvals including the approval of the Ontario Superior Court of Justice (Commercial List), the approval of the TSXV and Enthusiast Gaming and J55 shareholder approval, as well as the closing of the other Transactions and the satisfaction of certain other customary closing conditions. Closing of the Arrangement is expected to occur by the third quarter of 2019.

Transaction Highlights

The Arrangement is expected to provide significant strategic and financial benefits to Enthusiast Gaming including:

1. Creates Leading, Diversified Gaming and Esports Organization: Management believes that the pro forma combined company will boast one of the largest media reach amongst gaming and esports organizations at approximately 200 million, across seven esports teams (including management of the Vancouver Titans Overwatch League franchise), 40 esports influencers, 80+ gaming media websites, 900+ YouTube and Twitch channels. The combined business generated pro forma revenue of $22 million and estimated $36 million in cash on closing of the merger.
2. Strategically Positioned to Leverage Luminosity’s Robust esports brand: Through its monetization and ad tech platform, Enthusiast Gaming will utilize Luminosity and its significant reach in growing communities of like-minded fans, to produce engaging advertising experiences. Further, GameCo’s relationship with the NHL’s Vancouver Canucks and Rogers Arena, located in Vancouver Canada, will provide Enthusiast Gaming with access to new sponsors looking to reach the gaming and esports markets.  
3. Expected Margin Improvement: A combination of the net funds from the Private Placement (as discussed below) and cash-on-hand may be used to repay all or part of the Sims Resource Deferred Payment.  The Sims Resource Deferred Payment is approximately US$14.0 million and when fully repaid will add approximately US$2.5 million of EBITDA to the combined company, by reducing an expense allocation.
4. Enhanced Capital Market Profile: The closing of the Transactions will create a leading publicly listed esports and gaming organization, as measured by revenue and market capitalization.  

Arrangement Summary

The Arrangement will be effected by way of a statutory plan of arrangement pursuant to the Business Corporations Act (Ontario) and will require the approval of (i) 66⅔% of the Enthusiast Gaming Common Shares cast at the annual and special meeting of Enthusiast Gaming shareholders (the “Enthusiast Meeting”), (ii) if required, a majority of the votes cast at the Enthusiast Meeting by Enthusiast Gaming shareholders excluding votes attached to Enthusiast Gaming Common Shares held by persons described in items (a) through (d) of section 8.1(2) of MI 61-101, and (iii) 50% +1 of the J55 Common Shares cast at the J55 Meeting. The directors and officers of Enthusiast Gaming who, in the aggregate, hold 13% of the outstanding Enthusiast Gaming Common Shares, have entered into voting and support agreements pursuant to which they have agreed to vote their Enthusiast Gaming Common Shares in favor of the proposed Arrangement. The directors, officers and significant shareholders of J55 who, in the aggregate, hold approximately 79% of the outstanding J55 Common Shares, have entered into voting and support agreements pursuant to which they have agreed to vote their J55 Common Shares in favor of the proposed Arrangement at the J55 Meeting.

A management information circular setting out the terms of the Arrangement, as well as further information regarding the Arrangement and the combined company, will be circulated to all Enthusiast Gaming shareholders in connection with the Enthusiast Meeting as soon as possible.  A management information circular setting out the terms of the GameCo Transaction and the Arrangement, as well as further information regarding the Transactions and the combined company, will be circulated to all J55 shareholders in connection with the J55 Meeting as soon as possible. Further details regarding the dates and locations of the Enthusiast Meeting and the J55 Meeting will be provided once determined.

The board of directors of Enthusiast Gaming has determined that the proposed Arrangement is in the best interests of Enthusiast Gaming shareholders, having taken into account advice from its financial advisors, and has unanimously approved the Arrangement and recommended that Enthusiast Gaming shareholders vote in favor of the Arrangement. The board of directors of Enthusiast received a fairness opinion from Haywood Securities Inc. to the effect that the consideration to be paid to the Enthusiast Gaming shareholders pursuant to the Arrangement is fair, from a financial point of view, to the Enthusiast Gaming shareholders.

In addition to shareholder approvals, the Arrangement will be subject to the completion of the GameCo Transaction and the Luminosity Acquisition and the satisfaction of other customary conditions. The Arrangement Agreement includes customary provisions, including covenants from Enthusiast Gaming to J55 not to solicit other acquisition proposals and the right for J55 to match any superior proposals. A customary termination fee may be payable by Enthusiast Gaming to J55 in certain circumstances.

Under the terms of the Transaction, Enthusiast Gaming shareholders will exchange each of their Enthusiast Gaming Common Shares for 4.22 (post consolidation) J55 Common Shares. Following the completion of the Arrangement, J55 will change its name to “Enthusiast Gaming Holdings Inc.” and will maintain its listing on the TSXV while the Enthusiast Gaming Common Shares will be delisted from the TSXV.  Holders of Enthusiast Gaming options, warrants and convertible debentures will continue to be entitled to exercise such convertible securities pursuant to the terms and conditions of their original certificates. Upon exercise of any such convertible securities, holders will be entitled to receive that number of J55 Common Shares they would have received had they exercised such securities immediately prior to the completion of the Arrangement.

Additional Information Regarding GameCo and Luminosity Gaming

On February 14, 2019, GameCo entered into a share purchase agreement (the “Luminosity SPA”) pursuant to which GameCo agreed to acquire Luminosity Gaming from its sole shareholder, Steve Maida, for consideration, including the payment of $1.5 million by GameCo to Mr. Maida and the issuance of 60 million GameCo common shares (at a deemed issued price of $0.30 per share) and the issuance of a $2.0 million unsecured promissory note, which is repayable immediately upon completion of the GameCo Transaction. As noted above, the Luminosity Acquisition is expected to close immediately prior to the completion of the GameCo Transaction and the Arrangement.

Luminosity Gaming is currently the manager of the Vancouver Titans, which was founded in 2018 and recently commenced its first season of competition in the Overwatch League, an esports competition with 20 teams across six countries and three continents, all centered on the popular first-person shooter game Overwatch. Upon closing of the GameCo Transaction, Luminosity Gaming intends to enter into a long-term management services agreement with the Vancouver Titans to continue management of the team, as well as a long term services support agreement with VALP pursuant to which VALP will provide Luminosity Gaming with a broad range of marketing and business support services, including corporate partnership and selling support, retail support, brand association and marketing support (to be provided by Canucks Sports and Entertainment), esports planning and execution, digital and social media support and back office support.

The following table provides select financial information for GameCo and Luminosity:

	GameCoAug 29, 2018* –Dec 31, 2018(Audited)				LuminosityYear EndedDec 31, 2018(Unaudited)
Total revenue	$	-		$	3,879,608
Total assets	$	5,865,179		$	869,764
Total liabilities	$	421,538		$	381,009
Net income (loss)	$	(384,105	)	$	425,964

    *The date of incorporation of GameCo.

Management Team and Board of Directors

The senior management team and the board of directors of the combined company will draw from the extensive experience and expertise of both companies. The senior management will consist of:

Chief Executive Officer: Adrian Montgomery President: Menashe Kestenbaum President of Esports: Steve Maida President of EGLive: Corey Mandell Chief Operating Officer and SVP Finance: Eric Bernofsky Chief Financial Officer: Alex Macdonald Chief Information Officer: Meir Bulua

The board of directors of the combined company will initially consist of seven directors, including three nominees of Enthusiast including Menashe Kestenbaum and Alan Friedman and one to be named and three nominees of J55 including Francesco Aquilini, Adrian Montgomery and Steve Maida, and one independent nominee to be agreed upon by both Enthusiast and J55. Francesco Aquilini will serve as the Chair of the board.

Private Placement, Loan and Subscription Receipt Offering

Concurrent with the announcement of the Arrangement, GameCo has entered into a bought deal private placement agreement (the “Private Placement”) with a syndicate of underwriters (the “Underwriters”) led by Canaccord Genuity Corp. (“Canaccord”), whereby the Underwriters have agreed to purchase for resale to substituted purchasers $10.0 million of convertible debentures at par (the “Debentures”) of GameCo, which will effectively convert into J55 Common Shares at a (post consolidation) conversion price of $0.45 per J55 Common Share, for aggregate gross proceeds of $10.0 million (the “Private Placement”). The Debentures will have a maturity date of June 30, 2020 and will automatically convert into common shares of GameCo upon closing of the Arrangement. If the Debentures have not automatically converted to GameCo common shares by the maturity date, then the principal will be repayable on the maturity date as well as interest on the basis of 8.0% per annum. The net proceeds from the Private Placement will be used by GameCo to extend a $10.0 million bridge loan (the “Bridge Loan”) to Enthusiast Gaming which Enthusiast Gaming may use to repay all or part of certain amounts owed in connection with the acquisition of 100% of the assets of The Sims Resource (the “Sims Resource Deferred Payment”) and/or to fund working capital and/or other general corporate purposes. All principal and unpaid interest under the Bridge Loan will be due and payable by Enthusiast Gaming to GameCo on the earlier of (a) June 20, 2020, and (b) the closing of a change of control transaction (which includes the closing of the Arrangement).

On March 20, 2019, GameCo completed a $25,000,200 subscription receipt offering (the “Subscription Receipt Offering”) pursuant to which it issued an aggregate of 83,334,000 subscription receipts (each, a “Subscription Receipt”) at an issue price of $0.30 per Subscription Receipt. Canaccord served as the sole agent for the Subscription Receipt Offering. Each Subscription Receipt is automatically converted into one common share of GameCo for no additional consideration upon satisfaction of certain escrow release conditions (collectively, the “Escrow Release Conditions”), including: (a) the execution of a definitive agreement (the “GameCo Transaction Agreement”) between J55, a wholly-owned subsidiary of J55 and GameCo in connection with the GameCo Transaction; (b) the execution of the Luminosity SPA and the satisfaction or waiver of all the conditions precedent in the Luminosity SPA to the satisfaction of Canaccord; (c) the receipt of all regulatory, shareholder and third party approvals required in connection with the GameCo Transaction and the Luminosity Acquisition; and (d) GameCo not being in breach or default of any of its covenants or obligations under the agency agreement and the subscription receipt agreement entered into in connection with the Subscription Receipt Offering. Upon the closing of the GameCo Transaction, GameCo common shares issued on conversion of the Subscription Receipts will be exchanged for post-consolidation J55 Common Shares in accordance with the terms of the GameCo Transaction Agreement. 

Advisors

Haywood Securities Inc. is acting as Enthusiast Gaming’s financial advisor, and Stikeman Elliott LLP and Minden Gross LLP are acting as Enthusiast’s legal advisors in connection with the Arrangement. Clark Wilson LLP is acting as J55’s legal advisor in connection with the Transactions. Canaccord Genuity Corp. is acting as GameCo’s exclusive financial advisor, and Norton Rose Fulbright LLP is acting as GameCo’s legal advisor in connection with the Transactions.

Capitalization of the Combined Company

Upon completion of the Transactions, it is expected that there will be 557 million common shares of the combined company issued and outstanding as well as options and warrants to acquire a further aggregate of 109 million common shares. Furthermore, upon completion of the Arrangement the then outstanding common shares of the combined company will be held as follows:

• 15.2 million shares (2.7%) held by former shareholders of J55;
• 246.9 million shares (44.3%) held by former shareholders of GameCo (inclusive of the conversion of the Subscription Receipts);
• 60 million shares (10.8%) held by former shareholders of Luminosity;
• 213.1 million shares (38.2%) held by former shareholders of Enthusiast Gaming; and
• 22.2 million shares (4.0%) held by former holders of the Debentures assuming conversion at a price of $0.45.

In addition, it is expected that there will be outstanding combined company convertible securities which will be redeemable for, or convertible into, an aggregate of 25 million common shares of the combined company.

About Enthusiast Gaming

Founded in 2014, Enthusiast Gaming is the largest vertically integrated video game company and has the fastest-growing online community of video gamers. Through the Company’s organic and acquisition strategy, it has amassed a platform of over 150 million monthly visitors across its network of websites and YouTube channels. Enthusiast also owns and operates Canada’s largest gaming expo, Enthusiast Gaming Live Expo, EGLX, (eglx.ca) with approximately 55,000 people attending in 2018. For more information on the Company, visit www.enthusiastgaming.com.

CONTACT INFORMATION:Investor Relations:Julia BeckerHead of Investor Relations & Marketingjbecker@enthusiastgaming.com(604) 785.0850

Certain information in this news release constitutes forward-looking statements under applicable securities laws. Any statements that are contained in this news release that are not statements of historical fact are forward-looking statements. Forward looking statements are often identified by terms such as "may", "should", "anticipate", "expect", "potential", "believe", "intend", “estimate” or the negative of these terms and similar expressions. Forward-looking statements in this news release include, but are not limited to: statements with respect to the completion of the Transactions and the timing for its completion; the satisfaction of closing conditions which include, without limitation (i) required shareholder approval, (ii) necessary court approval in connection with the plan of arrangement, (iii) receipt of any required approvals, (iv) certain termination rights available to the parties under the Arrangement Agreement, (v) obtaining the necessary approvals from the TSXV, (vi) other closing conditions, including compliance by the parties with various covenants contained in the Arrangement Agreement, (vii) statements with respect to the effect of the Transaction on the parties; and (viii) statements with respect to the anticipated benefits associated with the Transactions.

Forward-looking statements are based on certain assumptions regarding Enthusiast, GameCo, J55 and Luminosity, including the completion of the Transactions, anticipated benefits from the Transactions, and expected growth, results of operations, performance, industry trends and growth opportunities. While Enthusiast, GameCo, J55 and Luminosity consider these assumptions to be reasonable, based on information currently available, they may prove to be incorrect. Readers are cautioned not to place undue reliance on forward-looking statements.

The assumptions of Enthusiast, GameCo, J55 and Luminosity, although considered reasonable by them at the time of preparation, may prove to be incorrect. In addition, forward-looking statements necessarily involve known and unknown risks, including, without limitation, risks associated with general economic conditions; adverse industry events; future legislative, tax and regulatory developments; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favourable terms; the inability to implement business strategies; competition; currency and interest rate fluctuations and other risks. Among other things, there can be no assurance that the Transactions will be completed or that the anticipated benefits from the Transactions will be achieved. Readers are cautioned that the foregoing list is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. For more information on the risk, uncertainties and assumptions that could cause anticipated opportunities and actual results to differ materially, please refer to the public filings of Enthusiast and J55 which are available on SEDAR at www.sedar.com. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement and reflect our expectations as of the date hereof, and thus are subject to change thereafter. Enthusiast, GameCo, J55 and Luminosity disclaim 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 required by law.

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. The securities of the Corporation have not been and will not be registered under the United States Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.