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Hashchain shareholders to vote on Digihost RTO Jan. 14

2019-11-30 03:14 ET - News Release

Mr. Paul Ciullo reports

HASHCHAIN TECHNOLOGY INC. ANNOUNCES EXTENSION TO DEFINITIVE AGREEMENT AND PROVIDES UPDATE ON PROPOSED REVERSE TAKEOVER TRANSACTION WITH DIGIHOST INTERNATIONAL, INC.

Hashchain Technology Inc. has provided an update with respect to its previously announced reverse takeover transaction with Digihost International Inc., previously disclosed in the company's press releases of March 28, 2019, April 26, 2019, June 7, 2019, July 29, 2019, Sept. 11, 2019, and Sept. 17, 2019. Upon completion of the proposed transaction, the issuer resulting from the proposed transaction will carry on the business previously carried on by Hashchain. It is anticipated that upon completion of the proposed transaction, the resulting issuer will be listed as a Tier 2 technology issuer under the policies of the TSX Venture Exchange.

Conditional approval and submission to shareholders for approval

The company has received conditional approval from the exchange for the proposed transaction, subject to satisfying certain conditions, including obtaining shareholders' approval for certain matters related to the reverse takeover transaction.

As a condition of receiving conditional approval, the proposed transaction and matters related thereon will be submitted to shareholders at an annual general and special meeting of its shareholders to be held at Suite 902, 18 King St. East, Toronto, Ont., on Jan. 14, 2020, at 10 a.m. Toronto time. The record date for the meeting has been fixed at Dec. 9, 2019. The company will mail to shareholders a notice of meeting, management information circular containing information regarding both the company and Digihost, and a form of proxy.

Extension to definitive agreement

As last disclosed in the press release of the company dated March 28, 2019, the company has entered into an agreement dated March 28, 2019, with shareholders of Digihost, pursuant to which the assets of Hashchain and Digihost will be combined by way of a share exchange between Hashchain and shareholders of Digihost. The proposed transaction will constitute a reverse takeover of Hashchain by Digihost under the policies of the exchange. On Aug. 30, 2019, the company entered into an extension agreement with the shareholders of Digihost, extending the date before which the proposed transaction must close under the terms of the definitive agreement from Aug. 31, 2019, to Oct. 31, 2019. On Nov. 28, 2019, the company entered into a second extension agreement with the shareholders of Digihost, extending the date before which the proposed transaction must close under the terms of the definitive agreement, as amended by the first extension, from Oct. 31, 2019, to Feb. 29, 2020.

Update to Digihost financing

Digihost has updated the terms of its non-brokered private placement previously disclosed in the company's press releases of June 11, 2019, and Sept. 11, 2019. The updated private placement will be for gross proceeds of up to $5.4-million through the issuance of securities of Digihost composed of subscription receipts at a price of 96 cents per subscription receipt, with each subscription receipt exchangeable for one common share of Digihost, and unit subscription receipts at a price of $1.20 per unit subscription receipt, with each unit subscription receipt exchangeable for one unit. Each unit will consist of one common share and one common share purchase warrant of Digihost. Each warrant shall entitle the holder thereof to acquire one common share at a price of $1.75 for a period of 18 months following the closing.

Each subscription receipt and unit subscription receipt will be automatically converted, without payment of additional consideration, into one common share or one unit, as applicable, upon completion of the proposed transaction and subject to other conditions precedent. Subsequent to the conversion of the subscription receipts and unit subscription receipts, it is anticipated that the common shares and warrants issued pursuant to the financing will be exchanged for equivalent subordinate voting shares of the resulting issuer and resulting issuer SV share purchase warrants, respectively, on a one-for-one basis, with the exception of two million common shares, which will be exchanged on the basis of 200 common shares for one proportionate voting shares of the resulting issuer. The net proceeds of the financing will be held in escrow pending satisfaction of the escrow release conditions, which include TSX Venture Exchange approval for the proposed transaction.

The closing date of the financing has been extended to close on or about Dec. 31, 2019. If the financing does not close by Dec. 31, 2019, the closing will be extended to a later date to be determined by Digihost. The net proceeds of the financing will be returned to subscribers if the escrow release conditions are not satisfied, unless the subscribers elect to waive the escrow release conditions.

Update on management team, board of directors and other insiders of the resulting issuer

As of the date of this press release, it is anticipated that no person will own or exercise control, directly or indirectly, of more than 10 per cent of the voting rights attached to the resulting issuer shares other than Michel Amar, NYAM LLC (a corporation controlled by Michel Amar and existing under the laws of the State of California) and Bit.Management. The persons comprising the NYAM group are non-arm's-length parties to Digihost and the target assets as such terms are defined in TSX-V Policy 5.2 (Changes of Business and Reverse Takeovers).

It is anticipated the NYAM group will hold resulting issuer shares, representing 37 per cent of the resulting issuer shares outstanding, immediately following completion of the proposed transaction.

Upon completion of the proposed transaction, it is anticipated that the board of the resulting issuer will be increased to nine members and that all of the directors and officers of Hashchain will resign and be replaced by nominees of Digihost. Details regarding the anticipated directors and officers of the resulting issuer are set forth herein.

Michel Amar, Los Angeles, Calif., chief executive officer and chairman

Michel Amar is a French-American businessman and entrepreneur known for his success in innovative technology, such as blockchain and electronics, as well as developing branded fashion. With a bachelor's degree in accounting and business management, he has worked and consulted with some of the most famous international brands, playing a vital role in their profitability and continued relevance. In 2019, he partnered with Brookstone, a novelty retailer, in developing exclusive, technologically advanced products for its consumer electronics market.

Alec Amar, Los Angeles, Calif., president and director

Alec Amar is an entrepreneur who has achieved success in both product development and licensing, as well as blockchain solutions. After graduating from the University of Southern California, with a degree in economics and digital entrepreneurship, Alec Amar devised and headed a blockchain operation, building out highly efficient and productive mining facilities. He also holds a certificate from MIT Sloan Executive Education: blockchain technologies: business innovation and application (2019). In addition to blockchain success, his product licensing company, MAT, a versatile research and development incubator, has partnered with notable brands, such as Brookstone, in developing innovative electronics. As one of the sole licensees of Brookstone, he is actively curating a collection of intelligent, proprietary consumer electronics.

Cindy Davis, Pickering, Ont., chief financial officer

Since June, 2008, Ms. Davis has provided accounting and financial reporting services for publicly listed companies through Marrelli Support Services Inc. She is currently a director and audit committee chair for OutdoorPartner Media Corp. and chief financial officer for each of Cobalt 27 Capital Corp., Char Technologies Ltd. and NSR Resources Inc. Ms. Davis is a Canadian chartered professional accountant, and holds a bachelor of science degree, specializing in accounting and economics, from the University of West Indies.

Jon M. Williams, Buffalo, N.Y., director

Mr. Williams is an entrepreneur who founded OSC Holding Inc. in 1997 as a comprehensive specialty contracting provider. Today, OSC operates across North America with corporate offices in Buffalo, N.Y., and a divisional office in Toronto, Ont., Canada. OSC works mostly for private chemical and industrial manufacturing firms with contracting requirements in the areas of environmental remediation and brownfield redevelopment. He developed the first brownfield redevelopment in upstate New York, which resulted in the construction of a new manufacturing plant nearly 25 years ago. Since then, he purchased, remediated and put back into sustainable and productive use over 1,000 acres of former industrial and mostly inactive brownfield properties.

Adam S. Rossman, Los Angeles, Calif., director

Mr. Rossman is a business and real estate attorney. He is a member of the California bar since 1995. Mr. Rossman has handled transactions throughout the United States relating to commercial real estate and trademark licensing. Mr. Rossman maintains offices in Beverly Hills, Calif. Mr. Rossman received his JD from Loyola law school, Los Angeles, in 1994, an MA in rhetoric in 1990 and a BA in rhetoric in 1988, both from University of California at Berkeley.

Manish Kshatriya, Toronto, Ont., director

Mr. Kshatriya is a chartered professional accountant (chartered accountant) and currently serves as the managing director of MZK Advisors Inc., a private business advisory firm providing executive management, governance and compliance oversight, and capital market advisory services to small and mid-market private and publicly listed companies. He has over 20 years of experience obtained in diverse sectors, including mining, merchant banking, financial services, technology and energy. His various roles in both private and publicly listed companies have included board director, chief executive officer, chief financial officer, director of finance and secretary. Mr. Kshatriya earned his bachelor of commerce degree, with honours in accounting and finance, from York University in Toronto, Canada. He is a graduate of the director's education program at the Institute of Corporate Directors at the Rotman School of Management, University of Toronto, and is an institute certified director (ICDD). He is a chartered professional accountant (chartered accountant) and a member of the Institute of Chartered Professional Accountants of Ontario. He is also a certified public accountant in the United States and a member of the Colorado State Board of Accountancy.

Gerry Rotonda, New York, N.Y., director

Mr. Rotonda was the chief financial officer and executive committee member for Deutsche Bank Wealth, Management Americas, from 2011 through 2018. Mr. Rotonda has over 30 years of experience in business development and financial analysis, most recently as co-founder and partner at MMR Development, a real estate company which develops or repositions office, residential and hotel properties. Mr. Rotonda has also been senior business leader and director, strategy and planning, at MasterCard Inc., director, strategic planning, at Credit Suisse Group, and vice-president, investment finance and structured lending, at Citigroup. Mr. Rotonda holds a BSBA in accounting and an MBA from Boston University.

Gerard Guez, Beverly Hills, Calif., director

Mr. Guez is an entrepreneur and businessman, and currently serves as chairman and founder of Sunrise Brands, which was originally founded as Tarrant Apparel Group in 1988 with iconic brands Sasson jeans and JAG. Over the past 30 years, Mr. Guez has been involved in building many recognizable brands that are known today, including American Eagle, House of Dereon, Isaac Mizrahi, The Limited, Lane Bryant, ReRock and Superdry. For more than 20 years, Mr. Guez has also been a partner and board member of the hospitality venture Buddha-Bar, which currently has 25 franchises worldwide.

Donald Christie, Toronto, Ont., director

Mr. Christie had 25 years of experience in the Canadian financial service industry prior to becoming involved in the resource sector in 2008, working in investment banking with TD Securities Inc. and Newcourt Capital Inc. Mr. Christie served as chief financial officer of Continental Gold Ltd. from early 2008 to December, 2010, at which time Continental had achieved a market capitalization in excess of $1-billion. During that period, Mr. Christie also served as chairman of the audit committee of Toronto Stock Exchange-listed San Anton Resource Corp. Mr. Christie is chairman of the audit committee of TSX Venture Exchange-listed Northern Graphite Corp., a director of the corporation, and was the former chief financial officer of Toronto Stock Exchange-listed Calvista Gold Corp., which was sold in December, 2012. Mr. Christie is chief executive officer and a director of Norvista Capital Corp., an investment company focused on the resource industry. Mr. Christie is also chief financial officer and a director of TSX-V-listed Nevada Zinc Corp. Mr. Christie holds a bachelor of commerce honours degree from Queen's University and received his chartered accountant designation while working for PricewaterhouseCoopers LLP.

Geoffrey Browne, Toronto, Ont., director

Mr. Browne has over 30 years of experience in the financial service industry in Canada, the United States and London, England. He was head of private equity for Merrill Lynch Canada, and he is a founder and managing partner of MWI & Partners, a private equity firm. Prior to founding MWI, Mr. Browne was a senior executive with Canadian Imperial Bank of Commerce and CIBC Wood Gundy Inc. for over 20 years. The last position he held at CIBC was chief of staff for CIBC World Markets. Mr. Browne is active on numerous other corporate and not-for-profit boards. Mr. Browne holds a BA in economics from the University of Western Ontario.

Escrow matters

Certain principal securities will be subject to escrow requirements in accordance with TSX-V Policy 5.4 (Escrow, Vendor Consideration and Resale Restrictions). Further details regarding the escrow of resulting issuer shares issued to shareholders of Digihost will be disclosed in a subsequent news release.

Sponsorship

The exchange has waived the requirement for a sponsor.

Trading halt

The Hashchain shares are currently halted from trading and are not expected to resume trading until the exchange completes its review of the proposed transaction and a management information circular describing the proposed transaction is filed on SEDAR for consideration by Hashchain's shareholders.

The proposed transaction cannot close until the required shareholder approval is obtained, and there can be no assurance that the proposed transaction will be completed as proposed or at all.

Conditions to completion of the proposed transaction and regulatory matters

The parties to the proposed transaction are at arm's length, and therefore it is anticipated that the proposed transaction will not be a non-arm's-length transaction for the purposes of TSX-V Policy 5.2 as none of the directors, officers or insiders of Hashchain, or any of their respective associates or affiliates, own any securities of Digihost.

Completion of the proposed transaction is subject to a number of conditions, including, but not limited to:

  1. Hashchain shareholders approving the proposed transaction and the Hashchain share consolidation;
  2. The resignation of all directors and officers of Hashchain and appointment of new officers and director to be determined by Digihost;
  3. The completion of certain asset purchases and assignments by Digihost from Bit.Management, Bit Mining International LLC and NYAM on or before the date of closing of the proposed transaction;
  4. Approvals of all regulatory bodies having jurisdiction in connection with the proposed transaction, including TSX-V acceptance;
  5. Closing conditions customary in a transaction of this nature.

Completion of the transaction is subject to a number of conditions, including, but not limited to, exchange acceptance and, if applicable, disinterested shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Hashchain should be considered highly speculative.

We seek Safe Harbor.

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