GameSquare Esports Provides Update on Proposed Acquisition of Reciprocity

GameSquare Esports Inc. (CSE: GSQ; FRA: 29Q1) (" GameSquare ", " GameSquare Esports " or the " Company "), an international esports company, is pleased to provide an update on its proposed acquisition of Reciprocity Corp. (" Reciprocity "), a privately held gaming and esports company (the " Transaction "). Please see the Company's press releases dated January 4, 2021 and January 12, 2021 for more information about the Transaction, which are available under the Company's profiles at www.sedar.com and www.theCSE.com .

On January 25, 2021, a special meeting of Reciprocity's securityholders was held to consider the Transaction (the " Reciprocity Meeting "). Holders of 28,029,503 Reciprocity shares, warrants and options, representing 100% of all votes cast, and 81.9% of Reciprocity's outstanding shares, warrants and options entitled to vote at the Reciprocity Meeting and holders of $1,533,697 principal amount of Reciprocity debentures, representing 100% of all votes cast, and 88.7% of Reciprocity's outstanding debentures entitled to vote at the Reciprocity Meeting approved the Transaction.

Closing of the Transaction (the " Closing ") is subject to the satisfaction of several conditions precedent, including the receipt by Reciprocity of a final court order of the Ontario Superior Court of Justice (Commercial List). In accordance with the policies of the Canadian Securities Exchange (the " CSE "), the Company must also secure the written consent of a majority of the holders of GameSquare's common shares (the " Common Shares ") to the Transaction (the " GameSquare Shareholder Consent "). GameSquare intends to reach out directly to certain of its shareholders in order to obtain the GameSquare Shareholder Consent. The Company is working diligently to complete the remaining closing conditions, which management expects will be satisfied in March 2021. On December 31, 2020, Reciprocity and GameSquare executed an arrangement agreement in respect of the Transaction (the " Arrangement Agreement "), pursuant to which the Company expects to acquire 100% of the issued and outstanding shares of Reciprocity. Under the terms of the Arrangement Agreement, GameSquare will issue 43,750,000 Common Shares at a deemed price of C$0.33 per share to certain securityholders of Reciprocity (the " Consideration Shares "). Certain Reciprocity securityholders will also be 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 ¹ within 12 months of closing of the Transaction (the " Earn-Out Payment "), 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 Closing. The Consideration Shares shall be subject to a 12-month lock-up period, a third of which will be released every four months following Closing. In addition, in connection with the Transaction, the Company has also agreed to grant or issue (i) 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, (ii) 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 Closing, and (iii) 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 Closing.

The Transaction is an arm's length transaction for the purposes of the policies of the CSE and is being structured as a plan of arrangement. GameSquare is not paying any finder's fees in connection with the Transaction. Following Closing, the Company will prepare and 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.

Narrative Description of Business of Reciprocity

Reciprocity is a Toronto-based global professional esports and entertainment company. Reciprocity is committed to creating cutting-edge content, investing in player development and building a generation of viewers and enthusiasts globally. Reciprocity's mission is to be one of the largest global professional esports team franchises and provide a global digital platform for both endemic and non-endemic sponsors. Reciprocity has the following subsidiaries, each of which is wholly-owned unless otherwise noted:

• GCN Inc. (" GCN ") (Nevada)
• Biblos Gaming, S.A. de C.V. (" Rainbow 7 ") (Mexico - 40% ownership interest)
• Hangzhou Liang Culture Creation Limited Company (" LGD Gaming ") (China – 49% ownership interest)
• Hangzhou Yunzizunge Technology Service Company (China)

Digital Media & Marketing Group – Gaming Community Network

GCN, a wholly-owned subsidiary of Reciprocity, offers bespoke multi-platform marketing solutions that enable brands to connect with the gaming and esports communities. GCN is building an aggregated large-scale network of gaming and esports media properties and content partners including websites, influencers, streaming platforms, professional esports teams, and tournament/event organizers. GCN's goal is to build an aggregated large-scale network to provide advertisers and sponsors the proper scale they require, since individual assets often do not have the critical mass on their own or relationships to be properly monetized.

In addition, GCN owns live streaming proprietary ad technology which enables it to serve live-streaming branded content across any digital platform. The technology could also be used in other industries like music, entertainment and sports.

GCN is run by two industry veterans – Jeff Griffith, former Head of U.S. Sales at Curse Media, owned by Amazon/Twitch; and Ceo Wimmer, former SVP Global Marketing Partnerships for UFC and VP Network Advertising Sales for Fox Sports. GCN partners with over seventy-five (75) gaming & esports community websites, pro teams and major esports organizations.

Ownership and Monetization of Esports Teams

Reciprocity currently owns or has ownership interest in the following teams:

• South America – League of Legends through its 40% ownership interest in the Rainbow 7 team.
• China – CrossFire through its 49% ownership interest in the franchise together with LGD Gaming.

Reciprocity owns two teams, R7 in the League of Legends LATAM league and LGD-Reciprocity in the Crossfire League in China; both teams won their respective championships last year. China is the largest esports market globally. CrossFire participates as a franchise (like North American professional sports) and therefore has a permanent spot in the league. Reciprocity is believed to be the only North American organization with a Chinese esports franchise..

Reciprocity's joint venture with LGD Games for the CrossFire team represents Reciprocity's first esports franchise. CrossFire is one of the most popular video games in Asia. The CrossFire world championship in 2018 drew an audience of 37.5 million viewers. CrossFire has 250 million registered users and 60 million monthly active users. Further, China is the world's largest esports market, and the franchise has potential for material equity appreciation. LGD Games is already a leading multigame esports organization which owns several highly-ranked esports teams in China and globally. Reciprocity expects the joint venture to greatly improve its ability to attract global brands as sponsors.

In addition to its gaming success, LGD Gaming has 32 million social media followers in China. Reciprocity expects that the partnership with LGD Gaming can serve as a gateway for sponsorships in China.

Further, Reciprocity owns a 40% interest in the Rainbow 7 team, based in Mexico City, which participates in the League of Legends LATAM pro-league. The LATAM league involves over 30 countries in South America. The league had 18 million unique viewers in 2018, and ESPN+ became the first channel to broadcast one of the finals. Rainbow 7 is the most successful organization in all of LATAM in terms of competitive results. Through its interest in Rainbow 7, Reciprocity is expected to be the first in line once the League of Legends LATAM pro-league switches to a franchise model.

Background to and Reasons for the Transaction

The provisions of the Arrangement Agreement are the result of arm's length negotiations conducted between representatives of the board of directors of Reciprocity (the " Reciprocity Board ") and the board of directors of GameSquare (the " GameSquare Board ") and their respective advisors. The following is a summary of the material meetings, negotiations, discussions and actions among the parties that preceded the execution and public announcement of the Arrangement Agreement.

Since February 2020, the Reciprocity Board and Reciprocity's management have been considering the possibility of a transaction whereby Reciprocity would become a publicly listed company. As a result of the uncertainty generated by the COVID-19 pandemic, this pursuit was temporarily delayed for much of the calendar year 2020.

Despite the delay caused by COVID-19, in mid 2020 management of GameSquare and the Reciprocity Board began discussions regarding a potential transaction. On November 24, 2020, Reciprocity and GameSquare executed a binding letter of intent setting out the general terms and conditions for the proposed acquisition by GameSquare of all the issued and outstanding equity of Reciprocity.

The GameSquare Board believes that the Transaction is desirable, as it would result in synergies between Reciprocity's existing brands and North American operations, with GameSquare's presence in the United Kingdom and European Union through its subsidiary, Code Red Esports Ltd. (" Code Red "). The GameSquare Board believes that completion of the Transaction will result in GameSquare having the potential to be a leader in the emerging esports field, and would enjoy the following advantages:

• 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 Payment.
• Positive EBITDA generation. Management at GameSquare and Reciprocity are focused on generating positive EBITDA while rapidly growing topline sales. Management believes that this is a unique and differentiated strategy within the esports industry which can contribute to generating significant shareholder value.
• Achieving meaningful scale. The Company is working to achieve meaningful financial growth in the near term and long term. Reciprocity management expects to receive its full Earn-Out Payment which positions the company favourably from a financial perspective. GameSquare's management believes that scale, rapid sales growth, profitability and growth through acquisitions are necessary for long-term success in the esports industry.
• 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 represents a positive milestone for GameSquare. Further, Reciprocity's ownership in esports organizations based in Asia and Latin America provide the Company with a foothold in two of the largest and fastest growing gaming and esports markets.
• Revenue synergies through cross-selling. Following Closing, GameSquare intends to work towards strengthening 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. Customer overlap between the two companies is estimated at less than 5%, presenting a significant opportunity for synergistic revenue growth.
• 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 is helping to expand the sales and acquisition pipeline and is attracting 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. Following Closing, Reciprocity shareholders will be well aligned with ownership of approximately 40% of Gamesquare on a fully diluted shares on a pro-forma basis. Management of Reciprocity, through the Earn-Out Payment provision and compensation based upon financial performance, will be aligned with shareholders of GameSquare.
  

Recommendation of the GameSquare Board

The GameSquare Board, based on its own investigations and acting with the advice and assistance of its financial and legal advisors and management, have unanimously approved the Transaction and unanimously recommends that shareholders of GameSquare approve the Transaction.

About GameSquare

GameSquare is an international esports company headquartered in Toronto, Canada. The Company is seeking to acquire additional assets and entities serving the esports market 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.

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

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 obtain regulatory approvals and the GameSquare Shareholder Consent and complete the Transaction, the expected timing of Closing, the preparation of the business acquisition report, and other matters related thereto; the business and operations of the Company and Reciprocity, the proposed synergies among GameSquare and Reciprocity, and the Company's and Reciprocity's ability to execute their business plans. 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 Canadian Securities Exchange 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.

¹ Non-GAAP measure. EBITDA, as used in this press release, represents net earnings before financing expenses, taxes, and amortization.