A company with a balance sheet with a net worth that can represent more than 10x its MC. With the possibility of a second return of capital.

The “shell” company is listed on the OTC market (expert market). It is no longer in business, but at a price of 0.30x cash. With an option on a long-term investment that can represent +10x MC

Some amounts are expressed in thousands of Canadian dollars or USD.

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The adventures of an value investor in Pink sheets

Reading financial reports and small business news can uncover some very good opportunities.

The “shell” company is listed on the OTCPK (Expert Market). It is no longer in business, but has a balance sheet of over C$5 million dollars value on C$150-500k market cap. And a shareholder who has accumulated over 23% of the shares & Warrants in recent months. With the possibility of a second return of capital in the coming years. Return of capital can vary from 3x to 20x depending on capitalization and the scenario that may unfold in the coming months/years.

I'm likely to lose several readers after reading that the company's capitalization is less than $500,000. I'm confident you'll enjoy the story, and for some brave souls, try to grab the remaining value.

How did it all start

The story begins one morning in June 2024. As usual, I settle into my favorite armchair in the living room for my morning reading. My reading consists of the latest documents filed on Sedarplus 🇨🇦 and Edgar 🇺🇸. Then I'll read news & Press release about companies (micro-cap) I own or would like to buy. After that, I read all the press releases from public Canadian companies to find good opportunities. The Newswire service is great for this.

There's something very interesting on a nano-cap that says this: “FansUnite Enters into Definitive Agreement to Sell Its Betting Hero Business to the Betting Hero Co-Founders and GeoComply”¹. I quickly notice that he will have a return of capital of “proximately C$0.065 to C$0.075 per Company Share”. I check the current price and it's only C$0.050. Then it takes several days to analyze and understand the reasons for the sale, before finally starting to buy millions of shares between $0.050 and $0.065. It took me almost 3 months to make my purchases.

Because of the low volume, I only manage to buy a small percentage of the family portfolio. In less than 3 months, I receive a return of capital, resulting in an exceptional return of +400% IRR for +33% gain.

But the story isn't over yet. Shareholders are still shareholders in the company, which is hiding an investment that may be worth 4 million or more in the coming years(2026-2027). And 1.7 million cash.

Upon completion of the Sale Transaction, the Company will no longer have any material property or assets other than certain intellectual property rights, warrants and a contingent milestone payment from Betr Holdings Inc., …²

Let's explore this value.

Situation summary

FansUnite was incorporated on March 26, 2020 under the laws of the province of British Columbia with its head office in Vancouver, British Columbia. The Company is a sports and entertainment company, focusing on services related to regulated and lawful online sports betting, casino and other related products.

On June 27, 2024, FANS entered into a stock purchase agreement with its wholly owned subsidiary, FansUnite US Inc., GeoComply Solutions Inc., and Hero Group Corp. as the purchaser, which set out, among other things, the terms and conditions upon which FANS proposed to sell 100% of the equity interest in FansUS and its wholly-owned subsidiary, American Affiliate Co. LLC, which holds the Betting Hero assets, to the Purchaser for total cash consideration of US$37,500. The Sale Transaction marked FansUnite’s exit from the sports betting affiliate market and constituted the disposition of all or substantially all of FANS.

Upon completion of the Sale Transaction, FANS no longer met the listing requirements of the Toronto Stock Exchange (the “TSX”) and voluntarily delisted its Common Shares from the TSX and withdrew its OTCQB quotation on August 21, 2024. The Company has retained approximately $500 in net cash to explore new business opportunities for the economic benefit of its Shareholders.

Following completion of the Sale Transaction, the Company made a distribution to the Shareholders by way of a return of capital on the Common Shares, of $0.0725 per common share on August 29, 2024.

Analyzing past transcripts, financial reports, news and document, I notice that FansUnite was destined to go bankrupt or have to sell its assets. It seems they wanted to go too fast and too big with their very limited budget. Especially in an ultra-competitive sector, with companies already well established, with lots of money.

And now (2025)

Now what? As you may have noticed, the company is no longer listed on the TSX-V, but only on the OTC Market, in the “Expert Market” category. This restricts buying by many American investors.

According to the latest reports, management has kept around C$500,000 from the sale to continue exploring new opportunities. But what are these opportunities?

If we take the time to read all the reports, we'll find some interesting information.

On May 8, 2023, the Company signed the definitive asset purchase agreement (the "betr Purchase Agreement") pursuant to which the Company sold the source code related to the Company's Chameleon Gaming Platform to Betr Holdings Inc. ("betr"). FansUnite retained the use of the Chameleon Gaming Platform and source code to further develop and maintain the Chameleon Gaming Platform, and the ability to sell such use to another buyer. Future code sales by FansUnite will not include any future enhancements made by betr post close. The Transaction allowed the Company to further focus on growing its most profitable business units. In addition, betr engaged 28 employees and contractors from the Company to continue work on the Chameleon Gaming Platform. Pursuant to the terms of the Definitive Agreement, betr acquired the property and assets used in the Chameleon Gaming Platform for total consideration of approximately $10.0 million. The $10.0 million was comprised of: (i) $3.0 million in cash paid at closing; (ii) $2.0 million in Series A2 Preferred Shares of betr, to be settled through warrants to purchase the Series A2 Preferred Shares at a price of US$0.01 per Preferred Share; and iii) milestone payments of up to $5.0 million payable over 12 months following closing. As of the year ended December 31, 2023 the Company collected $500 thousand in milestone payments with the remaining balance not due until fiscal year 2024.³

To keep it simple, I'll pull out the numbers and excerpts from the 2024-Q3 report.

FORWARD-LOOKING STATEMENTS⁴

receipt of remaining milestone payments (if any) in connection with the sale of the Chameleon Gaming Platform Source Code (“Chameleon Gaming Platform”).

OFF-BALANCE SHEET ARRANGEMENTS⁵

During the year ended December 31, 2023 the Company entered into an agreement to sell source code related to the Chameleon Gaming Platform to betr while retaining the ability to sell a copy of the code to prospective buyers in the future. The total consideration was $10,000, comprised of $5,000 cash and share purchase warrants at closing and payments of up to $5,000 cash and purchase warrants over 12 months following the closing of the transaction upon achievement of certain milestones. As at September 30, 2024 the Company has collected milestone payments of $2,250 in cash and $1,500 in purchase warrants. There was significant uncertainty over valuation and timing of the remaining consideration to be received and as a result there has been no further receivable recorded as at September 30, 2024. On October 31, 2024 the Company received $750 in cash and $500 in purchase warrants. There are no further payments of any kind due from betr.

The first thing we can quickly see is that the Balance sheet of September 2024 is missing C$7500,000 in cash and C$500,000 in long-term investment. These will be included in the next Q4-2024 financial report.

Note 14 confirms this⁶

On October 31, 2024 the Company received C$750 in cash and C$500 in purchase warrants from betr. There are no further payments of any kind due from betr.

Does the code have any value for the coming months?

Question:
Do you have any additional prospects for selling your Chameleon source code in 2024 or beyond?

Scott Burton :
Yes, we do. We've had a couple of approaches, and we are in discussions. So the -- I guess the answer is yes. There are prospects that we're working with right now to see if we can get to a deal on selling a copy of the code again.

It's already been over 12 months since Scott Burton said that, and we haven't seen any other sales. In my opinion, it would be wise to give a value of 0 to estimate the value of the assets.

Doing a quick calculation, we currently have C$2869 in cash, C$494 others, C$1577 in liabilities taxes due in 2 months from September 2024, and an investment worth C$4058. We have a net worth of C$5786 for a capitalization of less than USD$500.

That sounds extremely interesting. The upside is around 10x. What is the real value of this investment in Betr.

Betr

Website of betr

Betr is the micro-betting specialist sportsbook co-founded by Jake Paul, currently operating in Ohio with plans to expand throughout the U.S.

Betr seems to target a very young clientele. Their marketing strategy seems to focus on the use of several fashionable influencers and celebrities. Betr faces enormous competition. It's obvious that the market is controlled by big companies like Bet365, Fanatics, BetMGM, DraftKings, etc..

Who is Jake Paul?

I don't know Jake Paul, but he seems to be very popular on social networks and as a boxer. Betr seems to exploit his popularity as a marketing tool. I'd be surprised if he plays a major role in the company.

In August 2022, Paul founded Betr, a sports-media and mobile-betting company alongside Simplebet founder Joey Levy. Paul claims to have received $50 million in series-A funding for this venture. In March 2024, Betr raised $15 million at a $375 million valuation, led by Harmony Partners and 10X Capital, with its total funding reaching $100 million as it aims to expand its sports betting operations, including real-money fantasy sports product in 24 states and plans for a nationwide sportsbook brand.⁷

Jake Paul's promotional video is available here.

Betr Funding Round

Source: forgeglobal.com/betr_ipo/

Our C$4 million warrants enable us to buy preferred shares in the Series-A2 at USD $0.01 per share.

After the third round, the value increased by around 25%. So, is our 4 million a real value of more than 5 million? This is very far from my circle of competence, and I know nothing about this world of fundraising and IPOs. I'm a young investor who's learning, and you can write to me in comments or privately to correct any errors on my part.

We can continue to use a value of C$4 million for our calculations and keep C$1 million as a safety margin.

I tried to contact the management to get more details about the warrants.

• Specific criteria or milestones required to exercise these warrants.

• Any restrictions on the resale or transfer of shares acquired through the warrant exercise.

• Expiration and Potential Dilution.

However, I haven't heard back. If anyone manages to obtain the information, please do not hesitate to contact me.

Question on Betr:
When do you anticipate that are going public? And when do you expect to capitalize on your share ownership?

Scott Burton:
No idea, to be honest on their public plans. I think they know probably that there's 2 potential paths to liquidity, which would be going public or an acquisition. Obviously, we would recognize the benefit of that, if either of those happen. I think they're very much in execution in growth mode right now. There's always secondary markets for private company stock, especially if they're an exciting and growing business.

We have right now no comments on what their plans are around being public.⁸

From what I've read, most initial public offerings (IPOs) take place 5 to 7 years after an initial fundraising. This gives us an IPO planned for 2027-2029.

That all sounds fine to me, but is

• Betr profitable?

  • At present, I'm not convinced that their income is sufficient to cover their operating expenses. Software developers salaries must be high.

• Will we get shares in return for the capital (spin-out)?

• Will they sell the warrants to get the money back?

• Can we trust management to restore value quickly?

There are many risks and unanswered questions.

After careful consideration of the sports betting market, I have decided to place the value of Warrants in the speculative category. There is no certainty that it will have any short-term value.

The real value of our Warrants seems to be uncertain. There's a good chance that the real value is 0. Even so, we have C$1,700,000 in net cash liabilities on our balance sheet, and a MC between USD$250,000 to USD$500,000.

It is important to remember that the company must comply with Canadian law and the British Columbia Business Corporations Act (BCBCA). They are obliged to continue publishing quarterly reports, and shareholders have several ways of asserting their rights. This is not the case for many companies listed on the OTC (Expert Market), which do not have this obligation.

Who are Tekkorp Holdings LLC?

Tekkorp Capital Advisors advises companies in the global gambling sector on M&A, JVs, strategic partnerships, disposals, carve-outs, and private capital fundraisings..⁹

Tekkorp Holdings currently controls around 21% of outstanding shares.

Tekkorp Capital invested 2 million in 2023 in FansUnite for 13,750,000 shares at a cost of C$0.08 and warrant at C$0.12.¹⁰

This is clearly private capital that seems to manage several million. They are certainly interested in recovering the C$5 million value, but it seems too little for them to spend much time on it. With their 21%, they'll be an important player in unlocking value quickly.

Major shareholders

This is the major shareholders from May 2024.¹¹

Jai Maw and Jeremy Jakary are Betting Hero Co-Founders.

Cash burn rate

With over C$1.3 million in cash, invested at a rate of 4%, we should be able to cover the costs of running FansUnite. Nevertheless, there are risks that management will burn through money quickly, such as paying themselves salaries. I doubt very much that it would take more than C$60,000 to run a shell company.

Why does the opportunity exist?

As you may have noticed, the opportunity exists for a number of reasons. A group of retail shareholders who don't consult financial reports. Delisted from the TSX to be listed only on the OTC (Expert Market), which has been blocked to the majority of US investors since 2020-2022. A market capitalization of less than $500,000 and a very limited volume of transactions per week. We're talking about a few hundred dollars a week. We'll need several months, if not years, to acquire a majority stake in the company.

Then there are the fees to pay, and finally, the C$4 million value of the Warrants (Betr Series-A2) is not guaranteed. It could be worth $0 in a few months or years.

For my part, I got my shares for free, if we take into account the first return of capital received in 2024. For some time now, I've been buying more shares on OTCPK at a very low price. However, there is still an opportunity, especially for a group of shareholders motivated to extract value quickly.

Quick Valuation

The next few years looks promising for IPOs, with the euphoria in the stock markets. I wouldn't be surprised to see Betr IPO take place in 2025 or 2026. It seems that the Betr managements want an IPO with a valuation of 1 billion. This would give our Preferred Shares a value of 8-10 million? (Please correct me if I'm wrong.)

This is not an investment recommendation, and I'm concentrating on what's essential, making your calculations and due diligence. Nevertheless, here's a look at three possible scenarios.

It's obvious that management doesn't have much stock to push them to realize a return of capital quickly on the 1 million cash balance sheet. They are probably hoping to sell the Warrants, or wait for an IPO, to generate a potential return of capital in the years to come.

This group controls around 44% of outstanding shares, excluding warrants and options. It's possible that we'll be bought out at a discount by Tekkorp, which seems to have links with the current management. There's a long-term risk, but in the short term, it could make us a quick gain.

Catalyst

Tekkorp Holdings can force a return of capital of the cash in the next 12 months. This could represent more than C$360,000 with the 21% of shares it controls. Two people who could be motivated to receive a return quickly would be Jeremy Jakary and Jai Maw, with their shares they could receive C$163,779 and C$138,391.

But if we sell the Warrants for C$4,000,000 then that will be a very big catalyst representing for Tekkorp: C$1,204,470, Jeremy Jakary: C$549,142 and Jai Maw: C$464,018.

Conclusion

This kind of investment is very different from my usual style. I always concentrate on types of investment where I can't lose anything and which offer a very good return. For example, heads I lose nothing and tails I win a lot.

In my opinion, the risk-reward ratio is good, especially if it only represents 0.50% of the portfolio. Some investors have sometimes adopted the investment style of planting seeds of this style and waiting. In a few years, this seed can grow into a colossal tree. 🌲

For those of you brave enough to take on this challenge, take the time to read it all. After that, it will take you 6 months or more to buy shares.

The investments of Warren Buffett early years (Buffett Partnership, Ltd) were a source of inspiration and motivation for me, driving me to seek out hidden values on the Pink sheets. In my opinion, with a portfolio of few millions, this Expert Market/Dark Market offers very good opportunities. Nevertheless, I'm confident that my advantage will remain on the TSX-V, which gets very little attention from American investors. This gives me a better chance of discovering good stocks.

What is the reason behind writing this story/analysis?

My aim with this Substack is to share some good ideas, but above all to get to know other value investors in micro-cap. I've had the opportunity to share with a few good investors privately, and I hope to make more acquaintances in the future.

Don't hesitate to contact me privately for a chat.

-Max

DISCLOSURE: THIS IS NOT INVESTMENT ADVICE. I MAY OWN THESE SECURITIES. I MAY BUY OR SELL THESE OR ANY OTHER SECURITIES AT ANY TIME.

1. https://www.newsfilecorp.com/release/214572/FansUnite-Enters-into-Definitive-Agreement-to-Sell-Its-Betting-Hero-Business-to-the-Betting-Hero-CoFounders-and-GeoComply

2. From Special Meeting Circular document

3. from Annuel Information form 2023

4. 2024-Q3 MDA, page 4

5. 2024-Q3 MDA, page 10

6. 2024-Q3 Financial Statements, page 19

7. https://en.wikipedia.org/wiki/Jake_Paul

8. from earning call 2023-Q2

9. https://www.tekkorp.com

10. https://fansunite.com/fansunite-announces-private-placement-led-by-strategic-investor-tekkorp-capital/

11. From OTCQB Certification 2024