GameSquare Esports Inc. Closes the Acquisition of Reciprocity Corp. as the Company Builds a Leading International Esports Company

GameSquare Esports Inc. (CSE: GSQ; FRA: 29Q1) (" GameSquare ", " GameSquare Esports " or the " Company "), a Canadian gaming and esports company, is pleased to announce the closing of the previously announced acquisition of Reciprocity Corp. (" Reciprocity "), a privately held gaming and esports company headquartered in Toronto, Canada (the " Transaction ").

With the addition of Reciprocity, an established global gaming and esports brand, GameSquare now owns assets in the United States of America, Europe, Asia and Latin America, all large and rapidly growing global markets. The Transaction provides expanded access to important gaming and esports markets by complementing GameSquare's operations in Europe through the Company's subsidiary, Code Red Inc. (" Code Red "), The Authentic Esports Agency , with the Gaming Community Network (" GCN "), based in Los Angeles. As further described in a press release dated November 25, 2020, the combination of GameSquare and Reciprocity is expected to significantly increase the revenue profile of the combined entity and to result in a high growth company that generates positive EBITDA in the twelve months following the Effective Date (defined below). Please see the Company's press release dated January 4, 2021 for more information about the arrangement agreement dated December 31, 2020 that was entered into by GameSquare and Reciprocity in connection with the Transaction (the " Arrangement Agreement ") and the press releases dated January 12, 2021 and February 23, 2021 for more information about the Transaction, which are available on the Company's profiles at www.sedar.com and www.theCSE.com.

"The esports market offers tremendous opportunity for companies that have the right experience and access to capital, and GameSquare is extremely well-positioned for growth," said Justin Kenna, CEO of GameSquare. "We have been hard at work integrating Reciprocity and GameSquare in anticipation of the transaction closing so we are confident the team in Los Angeles can hit the ground running. They are experienced, hungry, and motivated to grow GCN as a full-service marketing and media group, and GCN has shown that it can bridge the gap between gaming communities and global brands seeking to reach the lucrative esports demographic. We strongly believe that agencies that authentically connect global brands to gaming and esports enthusiasts are well positioned for meaningful growth as the industry sees increasing marketing spend diverted towards this important new form of entertainment. GCN and Reciprocity's teams in Asia and Latin America are great additions to our platform as we build a leading international gaming and esports organization. We expect to be able to announce meaningful contracts in the immediate term as GCN deploys capital to accelerate the growth of its business while also ensuring profitability remains a priority."

"GameSquare and Reciprocity makes strategic sense for a number of reasons, including an immediate gain in scale and expansion of the organization's footprint to the largest and most important gaming and esports markets," added David Fawcett, CEO of Reciprocity. "I believe that we have an opportunity to accelerate organic growth while achieving positive EBITDA, which is unique within the gaming and esports industry. The sales pipeline at GCN is robust and gives me a high degree of confidence that Reciprocity can achieve its growth targets and become a business with meaningful market share in a multi-billion dollar industry. Further, I believe that the combination of the two businesses further enhances the Company's profile which helps to attract top tier clients and talent to GCN, Code Red and to GameSquare."

The Transaction rationale includes:

• High revenue growth. Code Red and Reciprocity have shown strong revenue growth as esports engagement and viewership has increased. Based on current performance and its strong sales pipeline, Reciprocity management expects to receive the full earn-out payments described below.
  
• Positive EBITDA generation. Management at GameSquare and Reciprocity are focused on generating positive EBITDA while rapidly growing sales. Management believes that this is a unique and differentiated strategy within the esports industry which can contribute to generating significant shareholder value.
  
• Access to the largest and fastest growing gaming and esports markets. GCN is headquartered in Los Angeles, providing access to the highly lucrative US market. Reciprocity and GCN have built relationships with household brands and Fortune 500 companies. Entry to the US market is expected to represent a positive milestone for GameSquare. Further, Reciprocity's ownership in esports organizations based in Asia and Latin America is anticipated to provide the Company with a foothold in two of the largest and fastest growing gaming and esports markets.
  
• Revenue synergies through cross-selling. Customer overlap between the two companies is estimated at less than 5%, presenting a significant opportunity for synergistic revenue growth. GameSquare will seek to strengthen relationships with global brands through its subsidiaries based in the US and UK. It is expected that Code Red and GCN will benefit from cross selling opportunities across the network.
  
• Outstanding platform for organic growth and future acquisitions. The combination of GameSquare and Reciprocity positions the Company to rapidly grow sales organically and to become a leading acquirer of choice within esports. The improved financial profile and enhanced public profile of the combined business should help to expand the sales and acquisition pipeline and attract attention from leading esports professionals. The Company believes that its assets form an outstanding platform for organic growth and for accretive M&A as management targets high growth and profitability which is unique within gaming and esports.
  
• Experienced management and alignment with shareholders. Reciprocity has a strong leadership team throughout its organization. GCN is led by experienced professionals with senior management experience at leading companies including Time Inc, Red Bull, Amazon / Twitch, Fox Sports, UFC, and Learfield Sports. With a post-Transaction ownership stake in GameSquare of approximately 40% on a fully diluted pro-forma basis, we believe that the interests of Reciprocity's former shareholders are now well aligned with those of the Company. The interests of Reciprocity's management, through the earn-out provisions described below, and compensation based upon financial performance, are also anticipated to be aligned with those of GameSquare's shareholders.

On March 16, 2021 (the " Effective Date "), Reciprocity filed articles of arrangement in accordance with the terms of the Arrangement Agreement, which resulted in GameSquare acquiring 100% of the issued and outstanding equity of Reciprocity. As consideration for the Transaction, GameSquare issued 43,749,996 common shares of the Company (" Common Shares ") at a deemed price of C$0.33 per share to certain securityholders of Reciprocity (the " Consideration Shares "). Pursuant to the Arrangement Agreement, certain Reciprocity securityholders also became entitled to receive (i) 5.255 million Common Shares if the Reciprocity business generates a minimum of US$5 million of revenue and US$1 million of EBITDA within 12 months of the Effective Date, and (ii) 9 million Common Shares if the Reciprocity business generates a minimum of US$7 million of revenue and US$1.4 million of EBITDA within 12 months of the Effective Date. The Consideration Shares are subject to a 12-month lock-up period, a third of which will be released every four months following the Effective Date. In addition, the Company has granted 3 million replacement options to certain Reciprocity option holders exercisable for 24 months to acquire an equal number of Common Shares at an exercise price of C$0.40 per option. Finally, the Company has agreed to grant or issue (i) up to 6,168,000 options to certain Reciprocity securityholders exercisable for 24 months to acquire an equal number of Common Shares at an exercise price of C$1.00 per option if certain performance targets of Reciprocity are achieved 12 months and 24 months following the Effective Date, and (ii) up to 3,725,000 Common Shares to certain Reciprocity securityholders if certain performance targets of Reciprocity are achieved 12 months and 24 months following the Effective Date.

The Transaction is an arm's length transaction for the purposes of the policies of the Canadian Securities Exchange (the " CSE ") and was structured as a plan of arrangement. GameSquare did not pay any finder's fees in connection with the Transaction. The Company is preparing and intends to make publicly available a business acquisition report (as that term is defined in National Instrument 51-102 – Continuous Disclosure Obligation (" NI 51-102 ")) for the Transaction in accordance with the timelines set out in NI 51-102.

With the completion of the Transaction, the Company has satisfied the escrow release conditions pertaining to its $7 million offering of subscription receipts that closed on March 4, 2021 (the " Offering "). The Company has designated March 18, 2021 to be the escrow release date for the Offering, on which: (i) each subscription receipt shall be automatically exercised, without payment of additional consideration on the part of the holder, into one unit of the Company comprised of one Common Share and one-half of one Common Share purchase warrant (each whole warrant, a " Warrant "), and (ii) the net proceeds of the offering shall be released to the Company by the escrow agent.

Each Warrant will be exercisable to purchase one Common Share at an exercise price of C$0.60 for a period of 36 months from the escrow release date, subject to a warrant acceleration right.

The Company plans to use the net proceeds from the Offering to advance business operations in North America and Europe and for general corporate purposes. Please see the Company's press release dated March 4, 2021 for more information about the Offering, which is also available on the Company's profiles at www.sedar.com and www.theCSE.com.

About GameSquare Esports Inc.

GameSquare Esports Inc. is an international gaming and esports company headquartered in Toronto, Canada. The Company is seeking to acquire additional assets and entities serving the gaming and esports markets and, more broadly, in sports and entertainment. GameSquare's acquisition of Code Red, an esports talent agency, provided an initial foothold in Europe through its UK operations. Code Red represents leading on-screen talent, players and influencers and works with leading global brands to develop influencer campaigns and esports marketing strategies.

About Reciprocity Corp.

Reciprocity is a gaming and esports company headquartered in Toronto, Canada and has been operating since 2017. Reciprocity owns three gaming and esports assets: a CrossFire franchise in China that it owns with its partner LGD Gaming, a 40% interest in a League of Legends team that competes in Latin America, and, its wholly owned subsidiary corporation, GCN, a digital media company focusing on the gaming and esports audience based in Los Angeles, USA.

Contact

For further information, please contact Kevin Wright, President of GameSquare Esports Inc.:

Email: kevin@gamesquare.com
Phone: (416) 861-2267

Forward-Looking Information

This news release contains "forward-looking information" and "forward-looking statements" (collectively, " forward-looking statements ") within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as "expects", or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes" or "intends" or variations of such words and phrases or stating that certain actions, events or results "may" or "could", "would", "might" or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate, among other things, to:   the Company's ability to integrate Reciprocity into its business, the preparation of the business acquisition report, the anticipated benefits of the Transaction, including the expected significant increase in the revenue profile of the combined entity, the projected growth of the esports industry, the ability of Reciprocity to achieve the earn-out targets set out in the Arrangement Agreement, the business and operations of the Company, the proposed synergies among GameSquare and Reciprocity, and the Company's ability to execute its business plan. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Except as required by law, GameSquare assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.

Neither the CSE nor its Market Regulator (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.