Taos Capital Inc. Announces Proposed Qualifying Transaction with TransGaming Technologies Inc.

Taos Capital Inc. ("Taos") (TSX Venture : TNG.P) announces that it has signed on May 3rd, 2005 an arm's length Letter of Intent with TransGaming Technologies Inc. ("TG") for the potential acquisition of all the issued and outstanding securities of TG (the "Acquisition"). The Acquisition is expected to constitute the "Qualifying Transaction" of Taos as defined in Policy 2.4 ("Policy 2.4") of the TSX Venture Exchange Corporate Finance Manual.

About TransGaming Technologies Inc.

TG is a private company, engaged in the development of software portability technology and tools for the electronic entertainment sector since its incorporation in May 2000. TG's unique, proprietary technologies facilitate the migration of video game content from platform to platform, so that content developed for one gaming system, such as Microsoft's Xbox(R), can be deployed on alternate gaming systems such as Sony's PlayStation(R) 2 and others, including next generation consoles and devices. TG has also developed the product Cedega, a technology that allows games originally developed for Microsoft's Windows to run on Linux operating systems.

The electronic gaming industry is recognized as the fastest growing sector in the software space. Next-generation video game systems will feature increased computing power, allowing developers and publishers to continuously improve the gaming experience. However, increasing performance and providing better quality content will result in higher development costs and moreover, as is currently the case, the distinct architecture and development environment that characterize each system, will require expensive redevelopment of the content for each platform. TG's current and future portability products target the needs of developers and publishers to release multi-platform content to the market more rapidly and cost-effectively than what is currently available.

TG is a private company that was incorporated under the Business Corporations Act (Ontario) on May 9, 2000. TG's head office is located at 312, Adelaide Street West, Suite 301, Toronto, Ontario, M5V 1R2. TG also has a Research and Development Office located at 55 Byward Market, 2nd Floor, Ottawa, Ontario, K1N 9C3.

TG derives revenue through upfront development payments plus back-end licensing fees, on a per unit sold basis, for those titles that TG's portability technology is applied to. TG also generates a continually growing revenue stream through its Linux subscription revenue; this revenue stream is based on end-users paying a monthly user-fee to gain access to TG's Linux product, Cedega, allowing them to play hundreds of their favorite Windows games on Linux.

Current members of management of TG are: Mr. Vikas Gupta, President and Chief Executive Officer; Mr. Gavriel State, Chief Technology Officer and founder; Mr. Dennis Ensing, Chief Financial Officer and Mr. Eric Wills, Director of Business Development.

The following text provides a brief description of the antecedents of the members of management of TG, who will also be the members of management of the resulting issuer:

Vikas Gupta, 36, President and Chief Executive Officer, is an entrepreneur with a successful track record as an executive and creator of high-tech companies. Prior to TG, he was the founder and President of InterLogic Systems, a telephony consulting and systems integration firm dedicated to Fortune 1000 clients in the areas of Computer Telephony Integration, Interactive Voice Response systems, and fax processing systems. He was responsible for strategy, business and client development, and negotiating strategic alliances and partnerships for the company. In 1998, InterLogic Systems was acquired by Prima Telematic Inc., a Quebec based competitor, where Mr. Gupta acted as Executive Vice President of Prima Telematic and as President of Prima Canada. He is a graduate of one of Canada's premier technology institutions, the University of Waterloo.

Gavriel State, 32, Chief Technology Officer, is the founder of TG. He possesses hard-core technical background and engineering management experience. Prior to founding TG, he founded and led Corel's Linux Applications Development team, and later served as its Software Architect. Mr. State was responsible for Corel's use of the Open Source Wine project as a solution for moving Windows applications such as WordPerfect Office 2000 and CorelDRAW to Linux. Prior to his involvement with Linux, he led the CorelDRAW for Macintosh development team. In addition to portability technology and graphics, he has also worked on development tools at both Microsoft and Metrowerks, as well as on network distributed virtual reality systems at the University of Waterloo. He graduated from the University of Waterloo's Systems Design Engineering program and holds a Bachelor of Applied Science degree.

Dennis Ensing, 44, Chief Financial Officer, was an entrepreneurial executive in his own start-ups and a Chief Financial Officer for a number of emerging and high-growth private companies from 1989 to 1998. From 1998 to 2001, he was Vice President with the Corporate Finance practice of Ernst & Young and worked exclusively in the Technology Communications & Entertainment vertical. He possesses a unique blend of both operational and transactional experience. He has a Business degree from Wilfrid Laurier University. He is a Chartered Accountant and Chartered Business Valuator.

Eric Wills, 32, Director of Business Development. Prior to joining TG, he worked as a Director at TKO Software, a video game production company that develops games on consoles, PCs, hand-held and wireless-phone handsets. TKO is best known for their work with EA's Medal of Honor Franchise (Metal of Honor Allied Assault(TM) Breakthrough expansion pack and Medal of Honor Pacific Assault(TM), Wireless Phone development and Handheld development). At TKO, Eric spearheaded new business development including lead generation, developmental research, inside sales, contract negotiation, and also assisted with recruiting and staffing.

There are currently 11 shareholders of TG of which four hold more than 10% of the outstanding shares on a fully diluted basis, namely Mr. Gavriel State of Ottawa (Ontario) (32.85%), Mr.Vikas Gupta of Toronto (Ontario) (14.84%), Cotyledon Capital Inc., a corporation incorporated under the laws of the Province of Ontario (Ontario) and a Community-Sponsored Small Business Investment Fund ("CSBIF") managed by TD Capital (13.16%). William (Bill) Lambert is the President of Cotyledon and is Managing Director of TD Capital's Canadian Private Equity Partners. TD Capital is the independent private equity arm of TD Bank Financial Group. Innovations Foundation Internet Fund (I) Inc., a corporation incorporated under the laws of the Province of Ontario (Ontario) and a CSBIF held by New Millennium Venture Fund which is managed by Covington Capital Corporation (a venture capital investment firm) (10.36%). Grant Brown and Chip Vallis are the Managing Partners of Covington Capital and lead an 11- person investment team. Covington Capital also currently manages Covington Fund I, Covington Fund II, and Triax Growth Fund which, with New Millennium, have combined assets of approximately $465 million. (See www.covingtoncap.com ). On April 19, 2005, Affiliated Managers Group, Inc. (NYSE: AMG - News), an asset management company, announced that it had reached a definitive agreement to acquire Covington Capital. Upon the closing of the transaction, AMG will hold 100% of the equity in the firm, while Covington's senior management will have significant direct incentives in the business.

The share capital of TG consists of an unlimited number of common shares, of which 11,925,080 are currently issued and outstanding. TG also has outstanding debentures for an aggregate amount of $1,358,965 (the "TG Debentures") plus interest, which shall be converted into common shares of TG before the Acquisition on the basis of 4.4067 common shares for $1 of TG Debenture. Including accrued interest, these Debentures shall convert into an additional 6,749,971 common shares of TG. TG also has 947,318 outstanding TG warrants (the "TG Warrants") that were issued to the holders of TG Debentures, entitling them to acquire 4,305,990 common shares of TG at the price of $0.22, with an expiry date in 2014. However, the warrant holders have indicated that they will not exercise the warrants and that they agree to have them terminated in writing before the Acquisition.

On the basis of the unaudited financial statements for the six months ended November 30, 2004, TG had total assets of $738,694, liabilities of $2,052,256, a shareholders' equity of $(1,313,562), working capital of $462,200, net losses of $152,573 and had recorded revenue of $324,915. In its most recently completed fiscal year ended May 31, 2004 TG showed in its audited financial statements total assets of $723,028, liabilities of $1,886,967, a shareholders' equity of $(1,163,939), a working capital of $361,163, net losses of $718,606, and had recorded revenue of $834,426.

About the Proposed Transaction

On May 3, 2005, Taos and TG signed the Agreement pursuant to which Taos agreed to proceed with the Acquisition. The Acquisition is expected to constitute the "Qualifying Transaction" (the "QT") for Taos as defined in Policy 2.4 ("Policy 2.4") of the TSX Venture Exchange (the "Exchange") Corporate Finance Manual. The QT is subject to all required regulatory approval pursuant to laws, regulations and applicable policies.

The QT will be executed by way of a share purchase agreement to be entered into between Taos, TG and the TG Shareholders (the "Share Purchase Agreement"). The aggregate purchase price of the Acquisition will be $7,500,000 (after giving effect to the conversion of the TG Debentures), and will be paid by Taos by the issuance to the TG Shareholders of an aggregate of 30,000,000 common shares of Taos (the "Taos Shares"), at a deemed price per Taos Share of $0.25. Certain Taos Shares will be subject to the escrow requirements imposed by the Exchange (the "TSX-V Escrow Requirements").

The QT will not be subject to the approval of the shareholders of Taos but will be conditional upon the completion of a concurrent prospectus financing of Taos for minimum proceeds of $5,250,000 (the "Minimum Amount") and maximum proceeds of $6,000,000, at a price of no less than $0.25 per unit. Each unit will consist of one Taos Share and one half of a share purchase warrant. Two half warrants will entitle the holder to purchase one Taos Share from treasury at an exercise price of (i) $0.40 for the first 12 months following the closing date and (ii) $0.50 between the 13th and the 24th month following the closing date (the "Prospectus Financing"). The Minimum Amount may be reduced to compensate for any private placement that could be made prior or concurrent with the Prospectus Financing. In connection with the Prospectus Financing, Taos will file with the regulatory authorities a prospectus containing all the required disclosure information concerning Taos and TG.

Following the QT and the completion of the Prospectus Financing (and not taking into account the exercise of any issued and outstanding options or warrants to acquire Taos Shares) and assuming the Minimum Amount is raised through the Prospectus Financing, there will be an aggregate of 59,821,985 Taos Shares issued and outstanding. The current shareholders of Taos will hold approximately 12.12% of the Taos Shares, the TG Shareholders will hold approximately 50.15% of the Taos Shares and the shareholders from the Prospectus Financing will hold approximately 35.10% of the Taos Shares. The aggregate amount of Taos Shares and the percentages mentioned above may change in the event of any prior or concurrent private placement with the qualifying transaction.

After giving effect to the Acquisition, all of the current directors of Taos will resign, except Damian Cristiani and Anthony DeCristofaro. Vikas Gupta, Gavriel State, Jim Laird, and Sean Wise of TG, being currently directors of TG and all of which are Canadian residents, will be appointed to the board of directors of Taos. All directors of Taos will hold office until the next annual general meeting of the Company unless they resign prior thereto or are removed by the Company Shareholders by special resolution.

The following text provides a brief description of the antecedents of the proposed directors after giving effect to the Acquisition:

Vikas Gupta, President and CEO of TG and current director.

Gavriel State, CTO and founder of TG and current director.

Jim Laird, Director, is TG's Investor Representative on behalf of Covington Capital. Mr. Laird joined Covington in November 2002 after Covington's assumption of the management of the New Millennium Venture Fund. In his role as Vice President Investments, his responsibilities include analysis of new investment opportunities for the Fund and assisting in the management and monitoring of the Fund's existing investments. Prior to Covington, he was a managing partner with New Millennium Venture Partners, managing a high-tech focused labor-sponsored venture fund. He was also responsible for the investment activities of three CSBIF funds with University of Toronto, University of Western Ontario and Queen's University - a role he continues today. Prior to New Millennium, he was an institutional equity analyst with HSBC Securities and Gordon Capital. He is a Chartered Financial Analyst and a member of the Toronto Society of Financial Analysts. He holds a Bachelor of Business Administration degree and a Bachelor of Laws degree.
Sean Wise, Director, specializes in emerging growth companies. He sits on the Boards of several young technology companies, as well as the Toronto Venture Group. He was the Chair of the 2005 Canadian Venture Forum selection committee and is a member of the Canadian Venture Capital Association and the Law Society of Upper Canada. He studied Engineering and Economics at Carleton University before going on to get his Law and MBA degrees from the University of Ottawa. He helped found Ernst & Young's Venture Capital Advisory Group in Canada and now undertakes selective engagements from young tech companies, looking for strategic guidance on capital raising and growth, through his consulting firm Wise Mentor Capital. He has been working closely with TG for the last 36 months and has been a Director and Chairman of the Board since September 2004.

Damian Cristiani, Director, was one of the founding partners of Triad Distributors established in 1993, which became a software distribution company selling to all the major retailers in Canada. (Triad Distributors is now currently known as Jack of all Games Canada). In 1995, Mr. Cristiani founded Global Star Software, a company specialized in publishing software. In 1999, both companies were sold to Take Two Interactive Software, Inc. and Mr. Cristiani continued to oversee the growth of both companies within Take Two Interactive Software, Inc. in Canada, up to 2004, in his capacity as President.

Anthony DeCristofaro, Director, is President and Chief Executive Officer of iseemedia inc., a company specialized in digital image content management for the Internet. He is a 25-year veteran in the computer industry. Prior to establishing iseemedia in 2002, he was President and Chief Executive Officer of MGI Software, since December 1995. From 1991 to 1995, Mr. DeCristofaro was Vice President and General Manager of AST Canada, a computer hardware company. He was also a founding Board member of Delrina Corp., a public company which was subsequently purchased by Symantec. From 1987 to 1991, Mr. DeCristofaro worked as General Manager at NEC Canada. Mr. DeCristofaro holds an Advanced Business Administration degree from York University.

After giving effect to the Acquisition, Taos will carry on business under the name "TransGaming Inc." (or such other name as may be acceptable to applicable regulatory authorities) and the Common Shares are expected to continue to be listed on the Exchange under the trading symbol "TNG".

A finder's fee composed of $110,155 in cash and 1,321,885 Taos Shares at the market value on the date of execution of the Letter of Intent, namely 0.20 per Share (having a value of $264,377), will be paid on the Closing Date of the QT to Dresden Capital Inc., a third party advisor which provided services in connection with the transaction and for measurable benefit received. Canaccord Capital Corporation will also receive 250,000 Taos Shares at 0.25 per Share (having a value of $62,500), upon closing of the Prospectus Financing as a corporate finance fee, in addition to a cash remuneration representing 8% of the proceeds of the Prospectus Financing as well as Broker's Warrants entitling it to purchase additional Units representing 8% of the Units sold pursuant to the Prospectus Financing.

Taos and TG have both agreed that trading of the Taos Shares will remain halted until the completion of the transaction.

Completion of the QT is subject to a number of conditions, including but not limited to, approval of the QT by the shareholders of TG, a satisfactory due diligence investigation, regulatory approvals, the completion of a definitive purchase agreement and the completion of the Prospectus Financing. Also, no adverse change in the affairs of TG must occur until the closing of the proposed QT. The QT cannot close until the required regulatory approvals are obtained and the Prospectus Financing is completed. There can be no assurance that the QT will be completed as proposed or at all. Investors are cautioned that, except as disclosed in the prospectus to be prepared in connection with the Prospectus Financing, any information released or received with respect to the QT may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the
proposed QT and has neither approved nor disapproved the contents of this
press release.

Canaccord Capital Corporation, subject to completion of satisfactory due diligence, has agreed to act as agent for the proposed public offering. An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.
%SEDAR: 00021568E

http://www.newswire.ca/en/releases/orgDisplay.cgi?okey=13442
http://www.newswire.ca/en/releases/orgDisplay.cgi?okey=95466

For further information

Mr. Louis G. Plourde, President, Taos Capital Inc., (514) 277-5984
Mr. Vikas Gupta, President and CEO, TransGaming Technologies Inc., (416) 979-9900 ext. 320
Mr. Francois Carrier, Vice President, Investment Banking, Canaccord Capital Corporation, (514) 844-3970

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