SportsHub President Explains Sale To RSports Interactive

[Greg Ambrosius]

From our SportsHub President:

Some of you have been asking about various aspects of our business, including the recent transaction that was in the news last week, in which SportsHub was acquired by RSports Interactive, LLC from SharpLink Gaming, Ltd. In the transaction, all of the fantasy sports divisions owned by SportsHub – including the National Fantasy Championships (NFC) and other familiar properties like BestBall10s, Fanball, and SafeLeagues – were subsequently taken private and are no longer part of the publicly-traded SharpLink entity. The transaction was completed on January 18, 2024.

RSports Interactive is led by owner Randy Eccker, who is one of the leading digital media and technology figures in the sports industry, having founded, led, managed or advised over 30 different organizations across the industry. His vast experience has provided him with a powerful view of the industry and extensive relationships with many of the key leaders in the space.

Since being first acquired by SportsHub in 2016, the NFC has grown consistently over the years, with Company management resisting the urge to chase million-dollar prize payouts in favor of responsible growth focused on providing the best experience possible for its loyal users. Commenting about the sale and future plans for the Company, Mr. Eccker stated, “I’m fully committed to the long-term vision for SportsHub and the NFC. Because of our passionate users, our experienced leadership, and a renewed commitment to transparency, integrity, and trust, we will endure whatever hardships may face us in the near-term and come out stronger on the other side of this challenging time for the NFC.”

As required by law, SportsHub always maintains its fantasy contest prize funds in segregated accounts under the name of SportsHub Player Reserve, LLC – an entity set up specifically to provide the protections for customer funds required by various state regulations. The NFC began in 2004, and since then has paid out over $93 million in prizes. SportsHub has never failed to meet a payout obligation; your funds are safe with us.

With respect to state licensing, we are in constant contact with state regulators and have disclosed the recent events to the states we are licensed in. We will continue to work closely with the various state regulatory agencies to ensure we remain compliant with all of their requirements.

As we continue to investigate the events of the past week and work through our third-party audit being performed by U.S. Integrity, we ask for your patience until we can reveal the audit findings and enhance both our systems and our processes. Our goal is to regain your trust and to become the safest place to play fantasy sports in the industry.

Sincerely,

Christian Peterson
President
SportsHub Holdings, LLC

[Greg Ambrosius]

Since we went from a publicly traded company to a private company, this transaction was actually months in the making and as stated above it was officially consummated on January 18th. Here is the press release that went out from the company on Tuesday, January 23rd:

SharpLink Gaming Sells Fantasy Sports and Sports Game Development Business Units to RSports Interactive
MINNEAPOLIS, Jan. 23, 2024 — SharpLink Gaming Ltd. (Nasdaq: SBET) (“SharpLink” or the “Company”) today announced that on January 18, 2024, the Company entered into an agreement to sell all of the issued and outstanding shares of common stock or membership interests, as applicable, in its SportsHub/fantasy sports and free to play sports game development business units to RSports Interactive, Inc. (“RSports”) for $22.5 million in an all-cash transaction. Nearly all employees of these acquired business units will also move to RSports to help ensure a seamless transition.

SharpLink further reported that it used approximately $14.9 million of the proceeds from the sale to repay in full all outstanding term loans and lines of credit with its lender; in addition, SharpLink paid approximately $4.5 million to redeem an 8% Interest, 10% Original Issue Discount Senior Convertible Debenture issued to an existing shareholder in connection with a Securities Purchase Agreement signed in February 2023. As a result, the Company is now free of interest bearing debt.

As further detailed in a Current Report on Form 8-K to be filed by the Company with the U.S. Securities and Exchange Commission later today, SharpLink’s Board of Directors considered the following factors, among others, in reaching their decision to approve the sale:

With the sale consummated, SharpLink expects to significantly reduce its operating expenses, primarily due to a significant reduction in headcount, lower office lease costs, greatly diminished state licensing requirements, elimination of interest bearing debt service and other resulting cost savings, thereby positioning the Company with the ability to achieve positive cash flow from its remaining performance marketing business on an accelerated basis;
The sale significantly strengthens the Company’s working cash position and total shareholders’ equity and provides the capital necessary to extinguish nearly $19.4 million in interest bearing debt – all without having to rely on dilutive equity financings to support the Company’s future growth;
The improvement in the Company’s total shareholders’ equity position is expected to enable SharpLink to regain compliance with Nasdaq’s minimum continued listing requirements; and
The sale of the Company’s fantasy sports and free-to-play games development businesses positions SharpLink as a pure-play, performance marketing company serving the global sports betting and iGaming industries.
In connection with the sale, Chris Nicholas, the Company’s Chief Operating Officer and a member of the Board of Directors, resigned as an officer and director of the Company, effective immediately.

Commenting on the sale, Rob Phythian, SharpLink’s Chief Executive Officer, stated, “This sale represents a pivotal milestone for SharpLink, allowing us to unlock significant value in our fantasy sports and game development businesses and achieve multiple critical objectives without having to turn to a potentially dilutive equity financing to strengthen our financial footing, regain compliance with Nasdaq, and support our efforts to ultimately create sustainable long-term value for our shareholders. Moreover, we are confident that our fantasy sports and sports game development businesses will continue to thrive and prosper in the great hands of RSports, which has exciting plans to elevate the combined businesses to new heights.”

Continuing, Phythian said, “Our remaining sports betting and iGaming performance marketing business will be more focused and simplified, allowing us to prioritize innovation and organic growth, while empowering us to look for strategic opportunities to strengthen SharpLink’s position as a trusted solutions provider to both current and future business partners.”

About RSports Interactive, Inc.
RSports was founded by Randy Eccker, one of the leading digital media and technology figures in the sports industry. He has founded, led, managed or advised over 30 properties or groups across the industry and has participated in over $400 million in corporate transactions over the past 30 years. His experience as a Founder, CEO, Chairman, Board Member or Advisor has been instrumental in the success of many of these companies and has provided him with a powerful view of the industry and extensive relationships with many of its leaders.

About SharpLink Gaming Ltd.
Founded in 2019, SharpLink is an online performance marketing company that delivers unique fan activation solutions to its sportsbook and casino partners. Through its iGaming and affiliate marketing network, known as PAS.net, SharpLink focuses on driving qualified traffic and player acquisitions, retention and conversions to U.S. regulated and global iGaming operator partners worldwide. In fact, PAS.net won industry recognition as the European online gambling industry’s Top Affiliate Website and Top Affiliate Program for four consecutive years by both igamingbusiness.com and igamingaffiliate.com. For more information, please visit www.sharplink.com.

Forward-Looking Statements

This release contains forward-looking statements that are subject to various risks and uncertainties. Such statements include statements regarding the future growth of the fantasy sports and game development businesses sold to RSports Interactive, the Company’s ability to grow its business, the potential benefits of the Company’s products, services and technologies and other statements that are not historical facts, including statements which may be accompanied by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. Actual results could differ materially from those described in these forward-looking statements due to certain factors, including without limitation, the Company’s ability to achieve profitable operations, government regulation of online betting, customer acceptance of new products and services, the demand for its products and its customers’ economic condition, the impact of competitive products and pricing, the lengthy sales cycle, proprietary rights of the Company and its competitors, general economic conditions and other risk factors detailed in the Company’s annual report and other filings with the United States Securities and Exchange Commission. The Company does not undertake any responsibility to update the forward-looking statements in this release.

[Greg Ambrosius]

Our new owner, Randy Eccker, is in the Creighton Hall of Fame for basketball, so I LIKE HIM ALREADY!!

I would just like to add some facts to our President's statement because I understand why the talk of our sale caught fire last week:

1. The timing of the announcement coincided immediately with the news of what happened with the illegal moves. Again, one had nothing to do with the other. We went from a publicly traded company to a privately owned company and as you can imagine that doesn't happen overnight.

2. Our division is one division in a much bigger company. We aren't even the division that generates the most revenue!! Our prize funds have ALWAYS been secured and because of state regulations those prize funds HAVE to be secured separately from the company's operations. We are a strong company financially.

3. Since I started the NFBC/NFFC in 2004, our contests have ALWAYS been part of a bigger company. Krause Publications was our first owner, then we went to Liberty Media, then to STATS, Inc., and then to SportsHub Technologies. Our contests have always been backed by huge, successful companies and this is no different. We're actually unique in that regard in this space and we've been this way for 20+ years.

4. As noted in the President's statement, our division is part of a company that includes many other fantasy sports websites and services, including Fanball, BestBall10s, and the National Fantasy Championships, and a division that builds free-to-play fantasy games for a variety of clients. The NFBC/NFFC is not alone in bringing in profits to this company, the same as it always has been with Krause's, Liberty and STATS. I cant' emphasize that enough.

I understand the trepidation in us for what happened last week. If I were a player, I'd have questions too. But financially, we are as strong as ever in my 20+ years running pay-to-play contests and I couldn't be happier with the management team and owner I'm working for. Nothing has changed in upper management as those guys who first acquired us in the Fall of 2016 are still in place. As most of you know, I've been friends with those guys for decades. There's a reason why we went from privately owned to a publicly traded company and now back to privately owned. Each move made perfect sense. This latest move is good for our pay-to-play community and I PROMISE there should be no concerns there.

Thanks all and sorry for this past week, but we will move forward and be better for it. I PROMISE you that.