Magnolia Colombia Update to Proposed Reverse Takeover Transaction - Seite 2

Upon completion of the Amalgamation, the Company will be the parent and the sole shareholder of Amalco and thus will indirectly carry on the business of the Target under the name “Gamesquare Esports Inc.”  Further, it is proposed that the management and Board of Directors of the Company be changed to consist of persons that have experience in the new business to be undertaken. Biographical information regarding proposed management and directors of the combined company is provided below under the heading “Management Team and Board of Directors”.

As of the date hereof, the Target’s authorized capital consists of an unlimited number of Target Shares, of which 20,000,000 are issued and outstanding.  The Target also has stock options exercisable for 100,000 Target Shares at a price of $0.05 per share (the “Target Options”) outstanding.  The 20,000,000 Target Shares will be exchanged for 20,000,000 Magnolia Shares upon the closing of the Amalgamation (the “Closing”) at a deemed price of $0.25 per Target Share.  On Closing, the shareholders of Code Red shall also be issued an additional 9,300,000 Target Shares.  Pre-financing, there will be a total of 39,296,050 Magnolia Shares issued and outstanding on Closing.       

In connection with the Transaction, each Target Option will be exchanged for an option to buy Magnolia Shares on the same terms and conditions as the prior Target Options other than such option will now be exercisable to receive one Magnolia Share.

In connection with the Transaction, the Company will be seeking shareholder approval of the reverse take-over pursuant to the policies of the TSX Venture Exchange (“TSXV”), the election of the new directors, the change of name of the Company, and the consolidation of the Magnolia Shares. In addition, the proposed delisting of the Company from the TSXV in order to list on the Canadian Securities Exchange (“CSE”) will be subject to the approval of the majority of the minority shareholders of Magnolia, which excludes the votes of Non-Arm’s Length Parties (as such term is defined pursuant to the policies of the TSXV) of the Company. The Target will also be seeking shareholder approval with respect to the Amalgamation. The Transaction has been unanimously approved by the Boards of Directors of Magnolia and the Target and both boards of directors recommend that their respective shareholders vote in favor of the Transaction and related matters.