Hashchain Technology Inc. Announces Extension to Defintive Agreement and Provides Update on Proposed Reverse Takeover Transaction with Digihost International, Inc.

Tickers: XTSX:KASH, XOTC:HSSHF
Tags: #Technology, #Blockchain

Vancouver, BC - TheNewswire - September 11, 2019 - HashChain Technology Inc. ("HashChain" or the "Company") (TSXV:KASH) (OTCQB:HSSHF) provides an update with respect to its previously announced reverse takeover transaction (the "Proposed Transaction") with Digihost International, Inc. ("Digihost"), previously disclosed in the Company's press releases of March 28, 2019, April 26, 2019, June 7, 2019 and July 29, 2019. Upon completion of the Proposed Transaction, the issuer resulting from the Proposed Transaction (the "Resulting Issuer") 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 Tier 2 Technology Issuer under the policies of the TSX Venture Exchange (the "TSXV" or the "Exchange").

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 (the "Definitive Agreement") 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 August 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 August 31, 2019 to October 31, 2019. The terms of the Definitive Agreement remain otherwise unchanged.

General Information about Digihost

Digihost is a private company focused on identifying and evaluating opportunities to develop cryptocurrency mining operations. Digihost has its registered office in Wilmington, Delaware and was incorporated under the laws of the State of Delaware on October 9, 2018. Since incorporation, Digihost has entered into agreements to purchase equipment for the purposes of providing cryptocurrency hosting services. Concurrent with the closing of the Proposed Transaction, it is anticipated Digihost will complete acquisitions pursuant to asset purchase and assignment agreements with Bit.Management, LLC ("Bit.Management"), Bit Mining International LLC and NYAM LLC, to acquire hosting infrastructure and equipment, assume a lease agreement for a single facility divided into two separate warehouses and a 115,000 KVA outdoor substation used for cryptocurrency mining operations located in Buffalo, NY, and assume a power contract for the supply of electricity for cryptocurrency operations at the Buffalo warehouses (collectively, the "Assets"). The fair market value of the Assets is approximately USD$6,792,020.

A summary of financial information respecting Digihost and its assets is below:

The Proposed Transaction

HashChain's cryptocurrency mining center is hosted in the warehouse located in Buffalo, NY, for which it pays Bit.Management rent for the physical space of its rigs and for the electricity used in its cryptocurrency operations, pursuant to colocation facilities agreements dated May 20, 2018 (the "Colocation Agreements") between the Company and Bit.Management. Due to increasing costs of cryptocurrency mining and the sharp decline in the valuation of mined-cryptocurrencies, during the period of October 2018 to May 2019, the hosting expenses paid pursuant to the Colocation Agreements by HashChain to Bit.Management, LLC per coin mined by HashChain were greater than the value of the coins mined. After completion of the Proposed Transaction, the Colocation Agreements between HashChain and Bit.Management, will be terminated and be of no force and effect. Additionally, HashChain shall be released of any and all past liabilities or accrued payments owing to Bit.Management pursuant to the Colocation Agreements after completion of the Proposed Transaction, which as of August 31, 2019 was approximately US$450,000. Completion of the Proposed RTO will vertically integrate the hosting assets of Bit.Management, LLC, to be acquired by Digihost, with the mining operations of HashChain, such that the cost of mining is significantly reduced, allowing the Resulting Issuer to better weather future volatility in cryptocurrency prices and increased mining competition leading up to and following the halving of block rewards to Bitcoin miners in May 2020.

The Proposed Transaction is anticipated to be completed by way of share exchange. HashChain currently has 261,222,157 common shares issued and outstanding. All existing stock options of HashChain will be cancelled and will not be exchanged for corresponding securities of the Resulting Issuer. Assuming completion of the Proposed Transaction and the HashChain Share Consolidation (as defined hereinafter), existing HashChain shareholders will hold approximately 6,530,553 of the then issued and outstanding common shares in the capital of the Resulting Issuer (the "Resulting Issuer Shares"), representing approximately 18% of the total Resulting Issuer Shares (subject to dilution resulting from the issuance of Resulting Issuer Shares pursuant to the proposed Financing, as discussed below). Holders of existing common share purchase warrants in the capital of HashChain shall receive common share purchase warrants in the capital of the Resulting Issuer on equivalent terms and conditions, after adjustment with respect to the HashChain Share Consolidation (as defined hereinafter).

Pursuant to the terms of the Definitive Agreement, shareholders of Digihost will receive approximately 181.83 Resulting Issuer Shares for every one (1) Digihost common share held. Assuming completion of the Proposed Transaction, a total 29,820,000 Resulting Issuer Shares, representing approximately 82% of the total Resulting Issuer Shares (subject to the Financing) will be issued to Digihost shareholders, and Digihost will become a wholly owned subsidiary of HashChain.

Each Resulting Issuer Share issued to the holders of Digihost common shares is currently expected to be issued at a deemed price of approximately $0.96 per Resulting Issuer Share for aggregate deemed consideration of $28,627,200. On a pre-HashChain Share Consolidation basis, the Resulting Issuer Shares issued to the holders of Digihost common shares will be equivalent to 1,192,800,000 pre-HashChain Share Consolidation common shares issued at a deemed price of approximately $0.024 per pre-HashChain Share Consolidation common share.

Assuming completion of the Proposed Transaction and HashChain Share Consolidation (as defined hereinafter), but excluding the effect of the Financing (as defined hereinafter), the Resulting Issuer will have 30,473,533 Resulting Issuer Shares outstanding.

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 10, 2019 and June 11, 2019. The updated private placement will be for gross proceeds of up to $5,000,000 through the issuance of securities of Digihost (the "Financing") comprised of subscription receipts (the "Subscription Receipts") at a price of $0.96 per Subscription Receipt, with each Subscription Receipt exchangeable for one common share (each, a "Common Share") of Digihost, and unit subscription receipts (the "Unit Subscription Receipts") at a price of $1.20 per Unit Subscription Receipt, with each Unit Subscription Receipt exchangeable for one unit (each, a "Unit"). Each Unit will consist of one Common Share and one common share purchase warrant (each, a "Warrant") of Digihost. Each Warrant shall entitle the holder thereof to acquire one Common Share at a price of C$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 Resulting Issuer Shares and common share purchase warrants of the Resulting Issuer, respectively, on a 1:1 basis. The net proceeds of the Financing will be held in escrow pending satisfaction of the escrow release conditions (the "Escrow Release Conditions"), which includes TSXV approval for the Proposed Transaction.

Digihost will allow subscribers of the Financing to waive the Escrow Release Conditions upon written notice to Digihost and the subscription receipt agent to convert the Subscription Receipts or Unit Subscription Receipts into Common Shares and Warrants, as applicable, and release the applicable net proceeds to Digihost prior to completion of the Proposed Transaction.

Digihost intends to use the net proceeds of any Subscription Receipts or Unit Subscription Receipts exercised prior to the completion of the Proposed Transaction to purchase cryptocurrency mining equipment (up to a total amount of $1,500,000) to be used to carry on the business of HashChain after completion of the Proposed Transaction. The net proceeds received after satisfaction of the Escrow Release Conditions will be used to carry on the business and operations of HashChain, in addition to general corporate purposes.

The Financing is intended to close on or about September 27, 2019. If the Financing does not close by September 27, 2019, 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.

HashChain Shareholder Meeting

It is anticipated that HashChain will hold a special meeting of its shareholders (the "HashChain Meeting") to pass resolutions to: (i) approve the Proposed Transaction and issuance of the Resulting Issuer Shares; (ii) consolidate the issued and outstanding common shares of HashChain (the "HashChain Shares") on the basis of forty (40) pre-consolidation HashChain Shares for each one (1) post consolidation HashChain Share (the "HashChain Share Consolidation"); and (iii) approve the new equity incentive plan of the Company to take effect after completion of the Proposed Transaction.

It is not anticipated that the Proposed Transaction will be subject to approval of the Digihost shareholders at this time. The shareholders of HashChain will be required to approve the Proposed Transaction in accordance with the provisions of the Business Corporations Act (British Columbia).

Management Team, Board of Directors and Other Insiders

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% 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 (collectively, the "NYAM Group"). The Persons comprising the NYAM Group are Non-Arm's Length Parties to Digihost and the Target Assets as such terms are defined in TSXV Policy 5.2 - Changes of Business and Reverse Takeovers ("Policy 5.2").

It is anticipated the NYAM Group will hold Resulting Issuer Shares representing 37% of the Resulting Issuer Shares outstanding immediately following completion of the Proposed Transaction.

Upon completion of the Proposed Transaction, it is anticipated 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 below. Additional directors or officers may be added to the board of directors or management of the Resulting Issuer in the normal course and once identified, information with respect to the proposed additional directors or officers will be included in a subsequent news release.

Michel Amar - Los Angeles, California - 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, Michel has worked and consulted with some of the most famous international brands, playing a vital role in their profitability and continued relevance. In 2019, Michel partnered with Brookstone, a novelty retailer, in developing exclusive, technologically advanced products for their consumer electronics market.

Alec Amar - Los Angeles, California - President & 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 devised and headed a blockchain operation, building out highly efficient and productive mining facilities. Alec also holds a certificate from MIT Sloan Executive Education; Blockchain Technologies: Business Innovation and Application (2019). In addition to blockchain success, Alec's product licensing company, MAT, a versatile R&D incubator, has partnered with notable brands such as Brookstone, in developing innovative electronics. As one of the sole licensees of Brookstone, Alec is actively curating a collection of intelligent, proprietary consumer electronics.

Cindy Davis - Pickering, Ontario - 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 Corporation; and CFO 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 Williams - Buffalo, New York - Director

Jon M. 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, New York and a divisional office in Toronto, Ontario, 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 Rossman - Los Angeles, California - Director

Adam S. 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, CA. Mr. Rossman received his JD from Loyola Law School, Los Angeles in 1994, a MA in Rhetoric in 1990 and a BA in Rhetoric in 1988 both from University of California at Berkeley.

Manish Kshatriya - Toronto, Ontario - 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 markets 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, CA. 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 (ICD.D). 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.

Escrow Matters

Certain "Principal Securities" will be subject to escrow requirements in accordance with TSXV 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

Sponsorship of the Proposed Transaction may be required by the TSXV unless an exemption or waiver from this requirement can be obtained in accordance with the policies of the TSXV. There is no assurance that a waiver from this requirement can or will be obtained.

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 TSXV 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. i)HashChain shareholders approving the Proposed Transaction and the HashChain Share Consolidation;

2. ii)the resignation of all directors and officers of HashChain and appointment of new officers and director to be determined by Digihost;

3. iii)the completion of certain asset purchases and assignments by Digihost from Bit.Management, Bit Mining International LLC and NYAM LLC on or before the date of closing of the Proposed Transaction;

4. iv)approvals of all regulatory bodies having jurisdiction in connection with the Proposed Transaction, including TSXV acceptance; and

5. v)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.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this news release.

Additional Information

For further information, please contact:

HashChain Technology Inc.
Paul Ciullo, Chief Financial Officer
T: 607-760-7870

Digihost International, Inc.
Angie Ihler, Media Inquiries
T: 917-242-6549

Cautionary Statements:

This news release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking statements") within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as "expects", or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes" or "intends" or variations of such words and phrases or stating that certain actions, events or results "may" or "could", "would", "might" or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate, among other things, to: the review and approval of future investor presentations, the completion and terms and conditions of the Proposed Transaction, the HashChain Meeting, the go-forward management of the resulting issuer and the trading of the resulting issuer shares and the development of the resulting issuer's business and operations. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; and the delay or failure to receive board, shareholder, court or regulatory approvals. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Except as required by law, HashChain and Digihost assume no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) has in any way passed upon the merits of the Proposed Transaction and associated transactions and neither of the foregoing entities has in any way approved or disapproved of the contents of this press release.

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this press release.

Copyright (c) 2019 TheNewswire - All rights reserved.