AGORACOM Small-cap Investor Relations Blog

• Further to the press release issued on May 31, 2019, J55 has received conditional approval from the TSX Venture Exchange for its proposed Qualifying Transaction with Aquilini GameCo Inc.
• Pursuant to which J55 has agreed to acquire all of the issued and outstanding securities of GameCo.

VANCOUVER, British Columbia, Aug. 07, 2019 — J55 Capital Corp. (“J55”) (TSX-V: FIVE.P) and Enthusiast Gaming Holdings Inc. (“Enthusiast”) (TSXV: EGLX)(OTCQB: EGHIF) are pleased to announce that further to the press release issued on May 31, 2019, J55 has received conditional approval from the TSX Venture Exchange (“Exchange”) for its proposed Qualifying Transaction (as defined in the policies of the Exchange) with Aquilini GameCo Inc. (“GameCo”) (the “Qualifying Transaction”), pursuant to which J55 has agreed to acquire all of the issued and outstanding securities of GameCo.

J55 and Enthusiast have also received conditional approval from the Exchange for their proposed merger by plan of arrangement pursuant to which J55 will acquire all outstanding common shares of Enthusiast (the “Arrangement”, and together with the Qualifying Transaction, the “Transactions”). Further, Enthusiast has obtained an interim order from the Ontario Superior Court of Justice (Commercial List) (the “Interim Order”) in connection with the Arrangement. The Interim Order authorizes Enthusiast to call, hold and conduct an annual and special meeting (the “Enthusiast Meeting”) of the holders of the common shares of Enthusiast (the “Enthusiast Shareholders”), pursuant to which the Enthusiast Shareholders will consider and, if determined advisable, approve the Arrangement. Enthusiast Shareholders will receive 4.22 post-First Consolidation (as defined below) common shares of J55 (“J55 Shares”) in exchange for each Enthusiast Share pursuant to the Arrangement. Following the consummation of the Transactions and the Second Consolidation (as defined below), Enthusiast Shareholders will hold 0.5275 J55 Shares for each Enthusiast common share previously held. No fractional shares will be issued pursuant to the Second Consolidation; in such case, a downward adjustment shall be made to the nearest whole J55 Share without consideration in respect thereof.

J55 Annual and Special Meeting

J55 will hold an annual and special meeting (the “J55 Meeting”) of the holders of the J55 Shares (the “J55 Shareholders”, and together with the Enthusiast Shareholders, the “Shareholders”) on August 26, 2019 at the offices of Clark Wilson LLP, Suite 900 – 855 West Georgia Street, Vancouver, British Columbia V6C 3H1 at 10:00 a.m. (Vancouver time). The record date for determining J55 Shareholders entitled to receive notice of and vote at the J55 Meeting was fixed as at the close of business on July 17, 2019.

At the J55 Meeting, the J55 Shareholders will consider, and if determined advisable, approve among other things, the Qualifying Transaction and the Arrangement. Pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions and Exchange Policy 5.9, because the Qualifying Transaction is a Related Party Transaction (as defined in the policies of the Exchange), the Qualifying Transaction must be approved by at least a majority of all votes cast by the disinterested J55 Shareholders at the J55 Meeting. Further, pursuant to Exchange Policy 2.4, the Qualifying Transaction must be approved by a majority of all votes cast by J55 Shareholders after excluding the votes of Non-Arm’s Length Parties (as defined in Exchange Policy 2.4) to J55 or the Qualifying Transaction, and persons acting jointly or in concert with such Non-Arm’s Length Parties. The Arrangement must be approved by at least a majority of all votes cast by the J55 Shareholders on the resolution in respect of the Arrangement at the J55 Meeting.

Enthusiast Annual and Special Meeting

In accordance with the Interim Order, Enthusiast will hold an annual and special meeting of the Enthusiast Shareholders (the “Enthusiast Meeting”, together with the J55 Meeting, the “Meetings”) on August 26, 2019 at the offices of Stikeman Elliott LLP, 5300 Commerce Court West, 199 Bay Street, Toronto, Ontario M5L 1B9 at 10:00 a.m. (Toronto time). The record date for determining Enthusiast Shareholders entitled to receive notice of and vote at the Enthusiast Meeting was fixed as at the close of business on July 19, 2019. The Arrangement must be approved by at least 66⅔% of all votes cast by the Enthusiast Shareholders on the resolution in respect of the Arrangement at the Enthusiast Meeting.

Information Circular and Meeting Materials

In connection with the Meetings, J55 and Enthusiast mailed a joint management information circular dated July 23, 2019 (the “Circular”), notices of meeting and forms of proxy and related meeting materials (collectively, the “Meeting Materials”) to their Shareholders on July 26, 2019 and August 5, 2019, respectively. Shareholders are urged to carefully review all Meeting Materials as they contain important information concerning the Transactions and the rights and entitlements of the Shareholders in relation thereto. The Meeting Materials are available on SEDAR under J55’s and Enthusiast Gaming’s respective profiles at www.sedar.com.

The terms of each of the Transactions are summarized in the press release issued on May 31, 2019 and the full details of each of the Transactions are contained in the Circular. The anticipated hearing date for the application for the final order of the court (the “Final Order”) has been scheduled to take place on August 29, 2019 at 9:30 a.m. (Toronto time) in Toronto, Ontario. Subject to obtaining the Final Order, the required approvals from the Shareholders at the Meetings, the final approval from the Exchange, and satisfying the conditions to implementing the Qualifying Transaction as set out in the amalgamation agreement entered into between J55, a wholly-owned subsidiary of J55 and GameCo on May 30, 2019, as amended (the “Amalgamation Agreement”), and the Arrangement as set out in the arrangement agreement entered into between J55, GameCo and Enthusiast on May 30, 2019 (the “Arrangement Agreement”), the Transactions are anticipated to be completed in early September 2019.

Summary Financial Information

GameCo Financial Statements

GameCo’s audited financial statements for the period from August 29, 2018 to December 31, 2018, and unaudited interim financial statements for the three months ended March 31, 2019 (collectively, the “GameCo Financial Statements”), which were prepared in accordance with IFRS, have been appended to the Circular.

A summary of financial information from the GameCo Financial Statements, disclosed in accordance with Exchange policies, is included in the table below:

Luminosity Gaming Financial Statements

As previously announced in the press release issued May 31, 2019, immediately prior to the closing of the Qualifying Transaction, GameCo will complete its 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”). Luminosity Gaming’s combined audited financial statements for the three years ended December 31, 2018, 2017 and 2016, and unaudited interim financial statements for the three months ended March 31, 2019 (collectively, the “Luminosity Financial Statements”), which were prepared in accordance with IFRS, have been appended to the Circular.

A summary of financial information from the Luminosity Financial Statements, disclosed in accordance with Exchange policies, is included in the table below:

(1) Calculation includes loss/gain from foreign exchange and provision for/recovery of income taxes.

Pro Forma Financial Statements of the QT Resulting Issuer and Resulting Issuer

J55 has prepared unaudited pro forma financial statements as at March 31, 2019 and for the year ended December 31, 2018 (the “Pro Forma Financial Statements”) that incorporate the completion of each of the Transactions. A summary of the Pro Forma Financial Statements of J55 following the completion of the Qualifying Transaction (the “QT Resulting Issuer”) and the completion of the Arrangement (the “Resulting Issuer”), disclosed in accordance with Exchange policies, is included in the table below, and a copy of the Prof Forma Financial Statements have been appended to the Circular:

(1) Calculation includes loss/gain from foreign exchange and provision for/recovery of income taxes.

(1) Calculation includes loss/gain from foreign exchange and provision for/recovery of income taxes.

Consolidations and Name Change

As previously announced in the press release dated May 31, 2019, in connection with the closing of the Qualifying Transaction, J55 intends to consolidate  (the “First Consolidation”) the issued and outstanding J55 Shares on the basis of 1.25 pre-First Consolidation J55 Shares for one post-First Consolidation J55 Share prior to the completion of the Qualifying Transaction. The First Consolidation will be completed using the push out method and letters of transmittal will not be sent to J55 Shareholders.

Following, and in connection with, the closing of the Arrangement, J55 intends to complete a second consolidation (the “Second Consolidation” and together with the First Consolidation, the “Consolidations”) of the issued and outstanding J55 Shares on the basis of 8 post-First Consolidation J55 Shares for one post-Second Consolidation J55 Share. The purpose of the Second Consolidation is to decrease the number of issued and outstanding J55 Shares. The J55 Shares issued in considerations for the common shares of GameCo pursuant to the Qualifying Transaction and the J55 Shares issued in consideration for the Enthusiast Shares pursuant to the Arrangement will be subject to the Second Consolidation. Immediately following the closing of the Transactions but prior to the Second Consolidation, it is expected that there will be 568,438,454 J55 Shares issued and outstanding. Following the Second Consolidation, it is expected that there will be approximately 71,054,803 J55 Shares issued and outstanding.

In connection with the Transactions, J55 also plans to change its name (the “Name Change”) from “J55 Capital Corp.” to “Enthusiast Gaming Holdings Inc.”, and to change its trading symbol to “EGLX” or such other symbol as approved by the Exchange. Enthusiast will change its name to “Enthusiast Gaming Properties Inc.” and the Enthusiast Shares will be delisted from the TSXV and the OTCQB, and Enthusiast will apply to cease to be a reporting issuer.

In accordance with J55’s Articles, the Consolidations and the Name Change do not require the approval of the J55 Shareholders and may be completed subject to board approval. The First Consolidation, Second Consolidation, Name Change and change in trading symbol are subject to the approval of the Exchange.

Directors and Officers

As announced in the May 31, 2019 press release, the board of directors of the Resulting Issuer is expected to consist of seven members, including three nominees of J55, being Francesco Aquilini, Adrian Montgomery and Stephen Maida, and two nominees of Enthusiast, being Menashe Kestenbaum and Alan Friedman. J55 and Enthusiast now wish to announce the remaining nominee of Enthusiast will be Ben Colabrese, and the independent nominee will be Michael Beckerman. Additional information regarding all proposed directors and officers of the Resulting Issuer is contained in the Circular.

Consulting Agreements

GameCo has entered into, and plans to enter into, certain consulting agreements prior to the closing of the Transactions. Under these consulting agreements, as compensation for consulting services to be rendered, it is expected that the consultants will be issued a certain number of J55 Shares on the Closing at a price of $0.45 per share, subject to the approval of the Exchange and the J55 Shareholders. J55 Shares issued pursuant to such consulting agreements will be subject to certain voluntary escrow or escrow required by the Exchange and will be released from escrow upon certain milestones being met and services being rendered. Further information concerning such consulting agreements is included in the Circular.

Trading Halt

As of the date of this release, trading of the J55 Shares is halted. J55 anticipates that trading will remain halted until all documentation in respect of the Transactions has been received and approved, as necessary, by the Exchange.

ON BEHALF OF THE BOARD OF J55

“John Veltheer”                                              
John Veltheer
Chief Financial Officer, Secretary and
Director

ON BEHALF OF THE BOARD OF ENTHUSIAST

“Menashe Kestenbaum”                      
John Veltheer
Chief Executive Officer  and Director

Completion of the Transactions is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the Transactions cannot close until the required shareholder approval is obtained. There can be no assurance that the Transactions will be completed as proposed or at all. Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Transactions, any information released or received with respect to the Transactions may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative. The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Disclaimer for Forward-Looking Information

Certain statements in this release are forward-looking statements, which reflect the expectations of management regarding the completion of the Qualifying Transaction, the Arrangement, and related transactions.  Forward looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future.  Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements, including risks related to factors beyond the control of J55 or Enthusiast.  The risks include the following: conditions not being satisfied for the Arrangement or Qualifying Transaction closing; and other risks that are customary to transactions of this nature.  No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits J55 or Enthusiast will obtain from them.

This press release does not constitute an offer to sell or solicitation of an offer to buy any of the securities in the United States.  The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws and may not be offered or sold within the United States or to a U.S. Person unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Neither 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.

For further information regarding J55, please contact:

John Veltheer
Chief Financial Officer, Secretary and Director
Telephone: 604-562-6915
Email: [email protected] 

For further information regarding Enthusiast, please contact:

Julia Becker
Head of Investor Relations & Marketing
Telephone: 604-785-0850
Email: [email protected]

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