J55 Capital Corp. (“J55” or the “Company”) (TSX-V: FIVE.P) is pleased to announce that Aquilini GameCo Inc. (the “Target”) has raised $25,000,200 pursuant to a private placement offering (the “Target Financing”). Canaccord Genuity Corp. (the “Agent”) acted as the sole agent for the Target Financing pursuant to an Agency Agreement dated March 20, 2019 among the Target, the Company and the Agent. The Target Financing was completed in connection with the proposed reverse takeover of the Company by the Target (the “Transaction”) pursuant to the Letter of Intent dated February 22, 2019 (the “LOI”) between the Company and the Target, which Transaction was announced in the Company’s news release dated February 25, 2019.
The Target raised gross proceeds of $25,000,200 pursuant to the Target Financing. The Target intends to use the proceeds of the Target Financing for the acquisition of Luminosity Gaming Inc. (“Luminosity Canada”) and Luminosity Gaming (USA), LLC (which together with Luminosity Canada, is herein referred to as “Luminosity”), for strategic growth initiatives, working capital and general corporate purposes. Luminosity is a globally recognized esports organization operating in North America and based in Toronto, Canada. Luminosity provides management and support services to players involved in professional gaming. Luminosity also manages and provides support services to the Vancouver Titans, which 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.
The Target issued an aggregate of 83,334,000 subscription receipts (each, a “Subscription Receipt”) pursuant to the Target Financing at an issue price of $0.30 per Subscription Receipt. The Subscription Receipts are governed by the terms and conditions of a Subscription Receipt Agreement dated March 20, 2019 between the Target, the Agent and Computershare Trust Company of Canada (the “Subscription Receipt Agent”). The net proceeds of the Target Financing are being held by the Subscription Receipt Agent pursuant to the Subscription Receipt Agreement and will only be released to the Target in accordance with the terms of the Subscription Receipt Agreement.
Each Subscription Receipt will be automatically converted into one common share of the Target (each, a “Target Share”) for no additional consideration upon satisfaction of the following escrow release conditions (collectively, the “Escrow Release Conditions”): (a) the execution of a definitive agreement (the “RTO Agreement”) between the Company, 11305751 Canada Inc., a wholly-owned subsidiary of the Company created for the purpose of the Transaction (“Newco”) and the Target to complete the Transaction, and the satisfaction or waiver of all conditions precedent in the RTO Agreement to the satisfaction of the Agent; (b) the execution of the share purchase agreement dated February 14, 2019 (the “Luminosity SPA”) between the Target and Luminosity for the acquisition of Luminosity by the Target, and the satisfaction or waiver of all the conditions precedent in the Luminosity SPA to the satisfaction of the Agent; (c) the receipt of all regulatory, shareholder and third party approvals required in connection with the Transaction and the acquisition of Luminosity; (d) the Target not being in breach or default of any of its covenants or obligations under the Agency Agreement and the Subscription Receipt Agreement; and (e) the delivery of a release notice by the Target and the Agent to the Subscription Receipt Agent in accordance with the terms of the Subscription Receipt Agreement.
Upon the closing of the Transaction (the “Closing”), the Target Shares issued on conversion of the Subscription Receipts will be exchanged for post-consolidation common shares of the Company in accordance with the terms of the RTO Agreement. If the Escrow Release Conditions are not satisfied by July 18, 2019, subject to that date being extended by the Agent in accordance with the terms of the Subscription Receipt Agreement, then the Subscription Receipts will be cancelled and the proceeds of the Target Financing, together with each subscriber’s pro rata share of interest thereon, will be returned to the subscribers by the Subscription Receipt Agent.
In connection with the Target Financing, the Target is required to pay the Agent a commission equal to 6% of the aggregate gross proceeds of the brokered portion of the Target Financing, other than proceeds from the sale of Subscription Receipts to subscribers on the Target’s president’s list for which the Agent is entitled to a commission of 3% (collectively, the “Agent’sFee”). The Agent’s Fee is payable in cash or Target Shares, in the Agent’s sole discretion, with 50% of the Agent’s Fee having been paid in cash on the closing date of the Target Financing, and the remaining 50% being payable on the satisfaction of the Escrow Release Conditions.
Capitalization of the Target
There are currently 159,011,600 Target Shares issued and outstanding as well as 2,181,690 broker warrants (collectively, the “Broker Warrants”) exercisable until October 10, 2020 for 2,181,690 Target Shares at an exercise price of $0.10 per Target Share. In addition, the Target has agreed to issue 60,000,000 Target Shares as partial consideration in respect of the acquisition of Luminosity. Pursuant to the Target Financing, an additional 83,334,000 Subscription Receipts were issued which are convertible into 83,334,000 Target Shares. Up to an additional 2,460,020 Target Shares may be issued on satisfaction of the Escrow Release Conditions assuming that the Agent elects to receive the entire balance of the Agent’s Fee payable in Target Shares and not cash.
Assuming the Subscription Receipts are converted and that the Agent elects to receive the balance of the Agent’s Fee in Target Shares on satisfaction of the Escrow Release Conditions, an additional 85,794,020 Target Shares will be issued prior to Closing, and assuming that the acquisition of Luminosity is completed and 60,000,000 Target Shares are issued pursuant to that transaction, there will be 304,805,620 Target Shares outstanding as at the Closing. Other than the Broker Warrants, the Subscription Receipts and the Agent’s entitlement to be issued Target Shares in satisfaction of the Agent’s Fee, there are no other options, warrants or other convertible securities to acquire Target Shares currently outstanding.
The Company continues to work with the Target towards entry into the RTO Agreement. The Transaction is subject to TSX Venture Exchange (“TSXV”) approval and is intended to constitute J55’s Qualifying Transaction (as defined in the policies of the TSXV). It is intended that the Transaction shall be completed by way of a three-cornered amalgamation among the Company, Newco and the Target. The Transaction is intended to result in a reverse takeover of J55 by the Target’s shareholders. The Transaction will be a Non Arm’s Length Qualifying Transaction, as defined in the policies of the TSXV and, as such, it is anticipated that the approval of the disinterested shareholders of J55 will be required. In connection with the Closing, the Company intends to consolidate its issued and outstanding common shares on the basis of 1.25 pre-consolidation shares for every one post-consolidation share (the “Consolidation”) and to change its name to “Luminosity Gaming Inc.” or to such other name as agreed to by the Company and the Target. It is expected that the resulting issuer will be listed on the TSXV as a Tier 2 Industrial issuer.
Please see the Company’s news release dated February 25, 2019 for further information regarding the Qualifying Transaction and the terms of the LOI.
The Company’s common shares are currently halted and the Company anticipates that they will remain halted until the documentation required by the TSXV for the proposed Transaction can be provided to the TSXV.
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