According to a new SEC filing, the Sports.com domain name is to be acquired for USD $6 million.
The deal terms appear on page 80 of the filing by Trident Acquisitions Corp., a SPAC which is in the process of acquiring Lottery.com (an active business), after which Trident intends to rename itself to Lottery.com. Here are the terms:
On March 29, 2021, Lottery.com notified TDAC of its intent to acquire domain Sports.com prior to its public announcement of this acquisition on April 5, 2021; this intended acquisition is in line with its plans to enter the sports betting industry. Lottery.com made a public announcement of the Sports.com acquisition on April 5, 2021. The total purchase price was $6,000,000 with $3,000,000 to be paid within six months of the close of the Business Combination or December 31, 2021 at the latest. The initial $3,000,000 of the purchase price was funded through the issuance of Series B Convertible Notes.
As you can see, the deal has not yet been completed. While it mentions that the purchase was financed through the issuance of Series B Convertible Notes, it appears to me that the seller is receiving cash for the transaction, thus the deal (once it closes) should be able to be charted by sites such as DNJournal and NameBio (which normally don’t chart transactions which have a non-cash component). This is apparent from page 152 of the filing, which states:
Net cash used in investing activities during the three months ended March 31, 2021 were $3.1 million, compared to $14,000 for the prior year. The increase was primarily the result of the acquisition of a domain name.
In other words, they issued the Series B Convertible Notes (over $45 million worth from November 2019 through March 31, 2021 according to page 151), received cash from those notes, and used $3 million of that cash for the first payment for Sports.com (with $3 million remaining to be paid).
Furthermore, on page F-62, it’s revealed that the Lottery.com domain name itself was acquired in March 2017 for USD $935,000, however in that deal the seller explicitly received convertible notes:
As part of the Lottery.com domain purchase, the Company issued a secured convertible promissory note with the fair value of $935,000, zero percent interest and matures March 2021. The note has an automatic conversion at the time of maturity or if 50% of the note is prepaid in cash. The prepayment feature is only at the determination of the Company and not of the holder. The full value of the note is convertible into 465,170 shares of the Company’s common stock.
Given the non-cash nature of that Lottery.com domain name deal, it likely would not be charted by DNJournal and NameBio. No such explicit disclosure is made for the Sports.com domain name deal, which thus appears to reinforce the conclusion that it will be an all-cash deal.
Update: April 2, 2022
Based on a new SEC filing, which notes on page 1 that the acquisition of the sports.com domain name was finalized in December 2021, we can take a deeper look at this transaction. Upon re-examination, it no longer appears certain that it was an all-cash deal (and thus shouldn’t be charted). While $3 million was in cash, it appears that the $3 million convertible note may have been taken by the seller (rather than a third party), as the financial statements don’t show a clear separate 2nd $3 million payment in the later filing. Instead, on pages F-21 and F-22, it appears that the Series B convertible notes were all converted to equity (before October 29, 2021).
If we look at the price history of the LTRY stock before October 29, 2021, that equity which maybe have been received by the seller of the domain name could well have been worth more than $3 million at the time of conversion! (which would be in addition to the $3 million previously received in cash) We don’t know if any shares were sold immediately upon conversion, or held into the future. Held until today, they would have not done very well, given that LTRY is trading near 52-week lows, at $2.86/share (whereas it was trading as high as $17.50/share in 2021).
Perhaps a future SEC filing will change the analysis, but for now, out of an abundance of caution, it’s best to not chart the transaction as it’s possible it was ultimately a mixture of cash and equity, rather than 100% cash.