Mr. Paul Larkin reports

CAPSTREAM ANNOUNCES COMPLETION OF QUALIFYING TRANSACTION

Capstream Ventures Inc. has completed its qualifying transaction (as defined in Policy 2.4, capital pool companies, of the corporate finance manual of the TSX Venture Exchange), as previously described in its news releases dated May 12, 2015, Oct. 6, 2015, Dec. 23, 2015, and May 6, 2016, and more particularly set out in its filing statement dated April 25, 2016, which is available under the profile of the company on SEDAR. As a result of the completion of the qualifying transaction, the company will cease to be a capital pool company (as defined in the manual) and, following receipt of final exchange approval, the company will be listed as a Tier 2 investment issuer on the exchange. The company expects trading in its common shares to commence on the second business day following receipt by the company of the final exchange bulletin in respect of the qualifying transaction. The common shares will trade under the symbol CSP.

The company completed the qualifying transaction through the acquisition of:

• Shares of Axion Games Ltd., and Axion Entertainment Holdings Ltd. (AEH) and Axion Entertainment International Holdings Ltd. (AIEH), both formed for the sole purpose of holding Axion shares, pursuant to which Capstream acquired an interest of approximately 29.29 per cent of Axion;
• An unsecured one-year convertible promissory note of Innovega Inc. in the principal amount of $350,000 (U.S.), which bears interest at a rate of 8 per cent, and is convertible into shares of Innovega subject to a future eligible financing event and at a predetermined discount of 15 per cent to premoney value of such financing event (capped at $16.5-million (U.S.)).

With respect to the Axion investment, Capstream acquired the ownership interest of approximately 29.29 per cent of Axion through the acquisition by Capstream of:

• 153,133 shares (or an approximate 37.57-per-cent interest in AEIH) of the total 407,600 issued and outstanding shares of AEIH, which owns 39,917,691 Axion shares;
• 26,866 shares (or an approximate 53.73-per-cent interest in AEH) of the total 50,000 issued and outstanding shares of AEH, which owns 55 million Axion shares (five million of which are held in trust for other holders and are excluded for interest calculation purposes);
• 6,625,730 Axion shares, directly, giving Capstream a beneficial interest in 48,489,579 (or an 29.29-per-cent interest) of the total 165,553,290 issued and outstanding Axion shares.

In exchange for the foregoing interest in Axion, the company issued a total of 150,168,692 Capstream common shares to the respective selling shareholders.

In addition, in accordance with the policies of the exchange, the company issued one million non-transferable share purchase warrants, entitling the finder to acquire up to one million Capstream common shares at an exercise price of 25 cents per share exercisable within 24 months of the closing.

Private placement

Concurrently with closing the transactions, Capstream completed a private placement financing raising total gross proceeds of $1.15-million through the issuance of 5.75 million Capstream common shares at a price of 20 cents per share. Of the concurrent financing, $500,000 was completed by Canaccord Genuity Corp. on a commercially reasonable-efforts brokered basis. In connection with the concurrent financing, Canaccord received a cash commission of 6 per cent of the gross proceeds raised by Canaccord in the brokered portion of the concurrent financing and 2 per cent on the balance of the concurrent financing. Canaccord was also issued 150,000 non-transferable share purchase warrants, representing 6 per cent of the Capstream common shares sold by Canaccord under the concurrent financing. The agent's warrants are exercisable at 20 cents per Capstream common share for a period of 12 months following the closing. Capstream also paid a corporate finance fee to Canaccord in support of the qualifying transaction and the brokered portion of the concurrent financing due diligence process. A finder's fee of 4 per cent was also paid on a portion of the non-brokered concurrent financing. For the intended use of proceeds of the concurrent financing, please see the filing statement filed under Capstream's SEDAR profile on April 27, 2016.

Directors and officers

In connection with the qualifying transaction, certain directors and officers of the company resigned and were appointed, such that the directors and officers of the company are now as follows:

• Paul Larkin, president, chief executive officer and a director;
• Jonathan Younie, chief financial officer;
• Erin Walmesley, corporate secretary;
• John Todd Bonner, (non-executive) chairman of the board;
• Ravinder (Rob) Kang, independent director;
• Stephen Willey, independent director.

For further biographical information about the foregoing persons, see the filing statement.

Escrow shares

As disclosed in the filing statement, 95,319,550 of the 150,168,692 exchange shares have been deposited into an exchange escrow (either an exchange surplus escrow agreement or exchange value escrow agreement), pursuant to the policies of the exchange. In addition, 33 million of the 150,168,692 exchange shares have been deposited into performance escrow. For further information about the foregoing escrowed exchange shares, see the filing statement.

Stock option grants

In connection with the qualifying transaction, Capstream has granted a total of 700,000 stock options to its directors, officers, employees and consultants, with each stock option entitling the optionee to purchase one Capstream common share at a price of 25 cents per share for a period of five years.

Hold periods

The common shares and the agent warrants issued in connection with the concurrent financing, the exchange shares and the QT finder warrants are all subject to a four-month-and-one-day hold period under applicable Canadian securities laws or the policies of the exchange.

About the target companies

About Axion

Axion, a private Cayman Islands corporation with primary operations in Shanghai, China, is an on-line video games development and publishing company. Due to a high failure rate in video games, Axion specializes in and focuses on building high-production-value, on-line, multiplayer games, where Axion can capitalize on its competitive advantages. In making games of higher production value and complexity, Axion has a distinct advantage, versus studios in developed countries with respect to cost and versus studios in emerging markets with respect to skills. Axion traces its advantages to its joint venture roots with industry-renowned, United States-based Epic Games International Ltd., which was established in October, 2006.

About Innovega

Innovega, a private Delaware corporation with offices in San Diego, Calif., and Bellevue, Wash., is developing proprietary display technology based on eyewear and contact lenses that enhance human vision, allowing the wearer to simultaneously access digital media while remaining fully engaged in their normal activities. Specifically, Innovega's display technology aims to enhance the user's normal vision to make it possible to view virtual reality and augmented reality images in the same way the user views the real world.

We seek Safe Harbor.