Simplicity Esports announced Friday that it has entered into an exchange agreement with noteholders (i.e debt holders) that will convert some of them into common stock that represents approximately 5% of all of its common stock. The company is in the midst of being combined with Diverted River Technology.
Under the terms of this agreement, “convertible promissory note holders” will “convert certain of their notes into common stock that totals 5% of the issued and outstanding shares after the closing of the Diverted River exchange agreement,” according to a release. The deal will convert $6.1M USD in Simplicity debt into 5% of stock of the new combined company.
This is part of an exchange agreement between Simplicity and Diverted River that was announced at the end of 2022. Under the now amended terms, Simplicity agrees to acquire “100% of the membership interests of Diverted River in exchange for 75% of the issued and outstanding shares of Simplicity Esports’ common stock.” All involved have agreed that the transaction will be completed by July 14, excluding any regulatory approvals.
Simplicity trades on the OTCQB, a middle tier of the over-the-counter (OTC) market for U.S. stocks, under the “WINR” stock ticker. The company currently operates a franchisor business for 12 esports gaming centers throughout the U.S.
Diverted River owns a proprietary cloud-based user platform called Takoha serving the location-based entertainment industry. It was co-founded by Zack Johnson (who serves as its CEO), who may be best known for being part of the team that developed esports tournament software ggCircuit, which was sold to Esports Entertainment Group in 2021 for $26M.
When the transaction is complete, the two entities will become one, operating under the Diverted River name, and will eba publicly traded company under the “WINR” stock ticker. Johnson will take on the role of cEO at the new entity.
At one time, Simplicity held the license to operate Brazilian esports organization Flamengo Esports, the esports division of football team CR Flamengo. Following a partial acquisition by Los Grandes the team was renamed to Flamengo Los Grandes.