Dear ProSmart Shareholders:

Happy New Year to all!  As 2019 gets underway we wanted to take a moment to recap some significant events that occurred in late 2018.  Through December 2018, there have been three significant press releases from ProSmart, as well as a trading halt of its shares, which we wanted to provide further context and clarification.

Overall, 2018 has been a challenging year for the Company, which has affected our share price. Each of us, as shareholders, board members, management and staff have felt the effect of the current share price.  Our weakened share price has limited our ability to raise capital and made it challenging to generate momentum even on the back of positive corporate developments and key milestones, such as our US Club Soccer Partnership and the launch of our new brand Sportgo.

During this period, ProSmart has worked with multiple capital market advisory groups in an effort to explore strategic solutions, generate further interest in the Company and exploring potential financing options. We remain, as always, committed to driving the growth of the Company and to explore all available options and opportunities in the continued effort to maximize value for our shareholders.

A recap of our recent news releases:

On December 10, 2018 the Company announced the resignations of three key individuals. Each had their unique reasons for leaving their positions with the Company, and naturally, the collective news felt heavier than was the underlying reality.  We were very pleased to have both Jim Mutter and Alex Rothwell continue to provide services to the Company as unpaid advisors.

On December 14, 2018 the Company announced it received a non-binding letter of intent (“LOI”) to sell all or substantially all of the assets of the Company.  ProSmart received this unsolicited offer from a US based private entity and, upon review, the board of directors determined that it was in the best interests of the shareholders to proceed with negotiating the LOI through to the next stage.

The Company could have waited to announce this potential transaction until a definitive agreement had been reached, however, due to the Company’s intention to immediately raise funds (see press release dated December 19, 2018) the board of directors decided to announce the offer at the LOI stage.  The Company will issue further press releases if it progresses to a definitive agreement stage and will provide the information prescribed by applicable securities laws and the policies of the TSX Venture Exchange (the “TSXV”) and seek a shareholder approval if necessary.  However, there can be no assurances that the proposed transaction will be completed as proposed or at all.

The proposed transaction would represent a “Reviewable Disposition” as defined in Policy 5.3 of the TSXV, and as such, a trading halt was initiated by the TSXV after markets opened on December 17, 2018.  We continue to have discussions with the TSXV with respect to a potential resumption of trading.

Lastly, on December 19, 2018 the Company announced a non-brokered offering of discounted secured convertible debentures to raise up to $620,000.  We have been working for some time to secure bridge financing that was not connected to the deflated share price of the Company.  The debentures will not bear interest and will be repayable in full on the earlier of: i) six months after the closing of the offering; and ii) the date the lender elects to convert the principal amount of the debenture into common shares of the Company at a price of $0.15 per share. Although we had successfully secured expressions of interest for other equity related financings, with input from various advisors, we decided against proceeding and concluded the above convertible debenture offer was the best for the Company’s shareholders.

As previously mentioned, 2018 was a year of opportunities and challenges. As a pre-revenue company, the deflated share price has made re-financing challenging even in the light of entering into a number of agreements that were creating a foundation for success in the future. Unfortunately, without appropriate funding, the success of the Sportgo brand and platform is in jeopardy, but is still a valuable asset in the right hands with the right resources. Management and the board of directors are focused on securing resources and establishing options in order to maximize as much shareholder value as possible as it navigates through 2019.

Hopefully this letter has provided more context and clarity to the Company’s recent news.  We will continue to provide periodic updates and generate news releases as and when necessary.

Again, Happy New Year to all.

Regards,

Alan

 

On behalf of ProSmart Enterprises Inc.

Alan Schuler

Co-Founder & Chief Executive Officer

 

About ProSmart Enterprises Inc.

ProSmart Enterprises Inc. (TSX-V:PROS) is the parent company of SportgoTM, a global online network connecting sports fans, teams and brands and is an emerging leader in sports content marketing through online tools and mobile apps. SportgoTM works with over 1,500 governing bodies in more than 100 countries and provides unprecedented access to the $1.3 trillion sports market1 through its proprietary Marketplace Engine. SportgoTM is also the first-and-only online network to provide educational content created exclusively by hall-of-fame and professional athletes, which has been a key driver in user growth.

 

1 Source:  Plunkett Research. Ltd.

 

For more information on ProSmart and SportgoTM, please visit the following links:

ProSmart Enterprises Inc. — http://prosmartinc.com

SportgoTMhttps://www.sportgo.com/

 

For further information please contact:

t: 1-844-927-6278

e: investment@prosmartsports.com

 

The shares of ProSmart Enterprises Inc. trade publicly on the TSX Venture Exchange under the symbol TSXV:PROS.

 

“Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.”

 

 Forward-looking Statements: Certain statements in this press release are “forward-looking statements” which reflect the Company’s current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs. In some cases, these forward-looking statements can be identified by words or phrases such as “may”, “might”, “will”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “indicate”, “seek”, “believe”, “estimates”, “predicts” or “likely”, or the negative of these terms, or other similar expressions intended to identify forward-looking statements. Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including without limitation, those risks and uncertainties discussed elsewhere on the website at www.prosmartinc.com and in the Company’s filings on SEDAR. Investors should not place undue reliance on forward-looking information. The forward-looking information contained herein is made as of the date hereof and is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.