CryptoGlobal (TSXV: CPTO) Trading to
Resume June 7, 2018
Merger to Create Diversified North American Leader Complete
Crypto Ecosystem
TORONTO, June 5, 2018 /CNW/ - As the proposed merger
of CryptoGlobal (TSXV: CPTO) with HyperBlock Technologies Corp.
("HyperBlock") moves ahead, both companies are pleased to provide
an operational update.
On May 31, CryptoGlobal and
HyperBlock mailed a Joint Management Information Circular (the
"Circular") to shareholders. As described in the Circular, both
companies are holding special shareholder meetings on June 22, 2018 where shareholders of both
HyperBlock and CryptoGlobal will vote on a resolution in support of
the HyperBlock's proposed merger with CryptoGlobal by way of plan
of arrangement under the Business Corporations Act
(Ontario), (the "Plan of
Arrangement"). As part of the Plan of Arrangement, the resulting
combined company will also acquire Project Northwest from Project
Spokane, LLC (a third-party vendor). The Circular contains
important instructions on how shareholders may cast their vote in
person or by proxy. As the Circular has been distributed to
CryptoGlobal shareholders, the TSXV is expected to resume trading
of CryptoGlobal's shares on June 7,
2018.
Under the proposed merger, CryptoGlobal shareholders will
receive 0.4229 of a common share of HyperBlock for each
CryptoGlobal common share, valuing each CryptoGlobal common share
at $0.74. HyperBlock has secured
irrevocable hard lock-up agreements to vote in favour of the merger
from CryptoGlobal shareholders representing approximately 58% of
the currently issued and outstanding CryptoGlobal common shares.
CryptoGlobal has secured irrevocable hard lock-up agreements to
vote in favour of the Transaction from HyperBlock shareholders
representing approximately 50% of the currently issued outstanding
HyperBlock common shares.
Following the acquisition, the newly combined company is
expected to have approximately CDN$9
million of cash and cryptocurrency on-hand. HyperBlock has
generated significant positive annual EBITDA (US$20.8 million on a historical run-rate basis),
which the company believes will fuel outsized growth and strategic
expansion going forward. See additional details below.
Operational Updates at HyperBlock and CryptoGlobal
According to HyperBlock CEO Sean
Walsh: "CryptoGlobal and HyperBlock have been making
important operational updates to further diversify, expand and
strengthen the company while instituting a cost structure that
positions the combined company to be one of the most competitive
crypto businesses in North
America." Walsh says the operational changes reflect the
newly combined company's mission to build a complete "crypto"
ecosystem to create, safeguard, manage and grow crypto — and
promote consumer adoption and usage.
CryptoGlobal Scales and Streamlines Operations / Closes
Hamilton Mine / Discontinues BitCity
To take advantage of combined synergies offered by merging the
two companies, CryptoGlobal has decommissioned its Hamilton, Ontario mine and relocated 3,787
mining servers to strategic partner locations in Eastern Canada. CryptoGlobal continues to
operate 2,847 servers at its Quebec mine — and, as a first step in
combining the two companies, plans to move 770 mining servers to
HyperBlock's 13,000 server crypocurrency datacenter in the
USA.
Due to new globally-competitive power opportunities in
Quebec and Alberta (representing a potential 200MW+ power
capacity) and expanded power capacity at Project NorthWest —
CryptoGlobal has announced it will not complete the proposed
acquisition of BitCity Group.
Hash Rate Sales
Despite difficult market conditions, HyperBlock continues to
successfully sell hash rate throughout 2018. As of
April 2018 (2018 sales are not
included in the financial results described below under "Financial
Highlights"), HyperBlock (including Project Northwest) received
over US$9 million in up-front fees
from hash rate sales through a strategic partner. In addition to
the up-front fees, these hash rate sales are expected to deliver
approximately US$5.5 million of
annual recurring revenue in the form of hosting fees.
Project Northwest Power Capacity Expands – From 20MW to
60MW
In addition to new Canadian power opportunities in Alberta and Quebec (representing up to 200 MW in potential
power capacity), power authority approval has been granted
to expand capacity at the Project Northwest
cryptocurrency datacenter in the Pacific Northwest of the
USA – from 20 MW to 60 MW.
Upgrades are already underway to build out the first incremental 20
MW of power. These upgrades are fully-funded, based on existing
cash-on-hand and expected internally generated free cash flow.
Custodial Vault and Trading
Following its successful acquisition of Blockchain Dynamics,
CryptoGlobal is continuing to develop a proprietary crypto
custodial storage vault offering – and expects to launch
a proprietary crypto trading desk later in the year.
CryptoGlobal CEO Rob Segal and
Blockchain Dynamics CEO Chris
McGarrigle confirm that beta testing of its
custodial vault product is advancing and more details
will be shared post-acquisition.
The combined company at a glance:
Diversified business model and vision for an integrated
crypto ecosystem that includes:
- Mining-as-a-Service hash rate sales
- Server hosting
- Self-mining
- Server sales
- Crypto custodial storage, and trading
- AI-based crypto Insights platform
- Experienced management team with significant vested
interest
- 21,000+ combined operational mining servers
- 28 MW of existing utilization with ability to grow to over 200
MW due to new power opportunities in Canada and the USA
Financial Highlights
As described in the Circular, for the FY2017 period, Project
Northwest reported revenue of US$22.8
million and EBITDA of US$10.4
million. Adjusted EBITDA for the quarter ending
Dec 31, 2017 was US$3.5 million, or US$13.9
million on an annualized run-rate basis.
HyperBlock Technologies Corp. reported US$1.4 million of revenue and US$0.8 million of EBITDA for the period from
October 10, 2017 (date of
incorporation) to February 28, 2018
(period in which does not include any hash rate sales as described
above). Adjusted EBITDA for the corresponding period was
US$1.0 million, excluding hosting
fees paid to Project Northwest, which will not be paid following
completion of the transaction. 723 of HyperBlock's servers
came online on December 19, 2017,
with an additional 723 servers coming online February 2nd, 2018. On a run-rate basis, monthly
EBITDA with all machines running, would have generated
approximately US$0.6 million, or
US$6.9 million — on an annualized
historical basis.
For the year ended December 2017,
CryptoGlobal did not generate material results, as it was still in
the process of building-out the required infrastructure for its
crypto mining operations. More details are available in the
Circular.
Figures in US$
millions
|
|
|
Figures in US$
millions
|
|
|
|
|
|
|
Project
Northwest
|
FY2017
|
|
HyperBlock
Technologies Corp.
|
Reported
Period
|
Operating
Income
|
8.3
|
|
Operating
Income
|
0.3
|
|
Add:
Depreciation
|
2.1
|
|
|
Add:
Depreciation
|
0.5
|
|
EBITDA
|
10.4
|
|
|
EBITDA
|
0.8
|
|
Less: Gain on
Hardware Sold to HyperBlock
|
(4.7)
|
|
|
Add: Hosting Fees
Paid to Spokane
|
0.2
|
Adjusted
EBITDA
|
5.7
|
|
Adjusted
EBITDA
|
1.0
|
|
Less: 9 Months Ended
Sept 30, 2017 EBITDA
|
(2.3)
|
|
Monthly EBITDA Run
Rate - Adjusted For Machine Installation Timing
|
0.6
|
Q4 FY2017
EBITDA
|
3.5
|
|
|
|
|
|
|
|
|
Annualized Historical
EBITDA
|
13.9
|
|
Annualized Historical
EBITDA
|
6.9
|
|
|
|
|
|
Combined Historical
EBITDA
|
20.8
|
|
|
|
HyperCharged for Strategic and Organic Growth
"The new HyperBlock is one of North
America's largest and most efficient cryptocurrency mining
businesses, which means we have the scale and flexibility to pursue
strategic acquisitions and continue building our innovative
Mining-as-Service offerings," explains HyperBlock CEO Sean Walsh.
"What's even more exciting is that the new HyperBlock will offer
a complete crypto product suite, including direct-to-consumer
offerings and multiple revenue streams. In addition to hash rate
sales, server hosting, custodial vault services and AI-based crypto
insights and trading, the company plans to incorporate mobile
applications and invest in crypto adoption initiatives," says
Walsh. "This approach helps insulate shareholders from market
volatility — facilitates our desired rapid acquisition of
complementary businesses — and will act as a catalyst to encourage
crypto adoption by making it easier for consumers and businesses to
manage and grow their crypto assets," he says.
Proposed Merger Background
On April 3, 2018, HyperBlock and
CryptoGlobal jointly announced that they entered into an
arrangement agreement for the acquisition of CryptoGlobal by
HyperBlock (the "Arrangement Agreement").
Under the Arrangement Agreement, HyperBlock will acquire all the
issued and outstanding shares of CryptoGlobal and the two companies
will amalgamate to form a new corporation under the Plan of
Arrangement, pending shareholder, court and regulatory
approval.
CryptoGlobal obtained an interim order on May 17, 2018 from the Ontario Superior Court of
Justice (Commercial List) in respect of the merger of CryptoGlobal
by HyperBlock under the Plan of Arrangement (the "Interim
Order"). The Interim Order authorizes CryptoGlobal to call
and hold a special shareholders meeting on June 22, 2018 to approve the proposed merger and
the Plan of Arrangement.
Shareholder Circular
The Circular containing information about the merger, the Plan
of Arrangement, CryptoGlobal, HyperBlock, Project Northwest and the
combined company formed as a result of the transactions set out in
the Plan of Arrangement, was mailed to HyperBlock and CryptoGlobal
shareholders on May 31, 2018 (21 days
prior to the June 22, 2018 meetings).
The Circular also contains information on the annual matters for
consideration by CryptoGlobal shareholders. The Circular is also
available on CryptoGlobal's issuer profile on SEDAR at
www.sedar.com and at www.cryptoglobal.io and
www.hyperblock.co. A copy of the Arrangement Agreement and
the Plan of Arrangement can be viewed on CryptoGlobal's issuer
profile on SEDAR at www.sedar.com.
Financial Measures
There are measures included in this news release that do not
have a standardized meaning under generally accepted accounting
principles ("GAAP") and therefore may not be comparable to
similarly titled measures and metrics presented by other publicly
traded companies. The company includes these measures because it
believes certain investors use these measures and metrics as a
means of assessing financial performance. EBITDA (earnings before
interest, taxes, depreciation and amortization is calculated as net
earnings before finance costs (net of finance income), income tax
expense, and depreciation and amortization of intangibles) is a
non-GAAP financial measure that does not have any standardized
meaning prescribed by IFRS and may not be comparable to similar
measures presented by other companies.
About HyperBlock Technologies Corp. and CryptoGlobal
HyperBlock is a leading North American diversified crypto-asset
company which operates one of North
America's largest and most efficient cryptocurrency
datacenters. HyperBlock operates four profit centers
including Mining-as-a Service (MAAS), self-mining, server hosting,
and server hardware sales. Learn more at
www.hyperblock.co
CryptoGlobal is a leading Canadian blockchain and financial
technology company built on a strong core of diversified
cryptocurrency mining. Currently, CryptoGlobal focuses on mining
Bitcoin, DASH, Ether and Litecoin — using a mix of custom-tuned
mining technologies. Learn more at www.cryptoglobal.io
Cautionary Note Regarding Forward Looking
Information
Certain information in this news release constitutes
forward-looking statements under applicable securities laws. Any
statements that are contained in this news release that are not
statements of historical fact may be deemed to be forward-looking
statements. Forward looking statements are often identified by
terms such as "may", "should", "anticipate", "expect", "potential",
"believe", "intend" or the negative of these terms and similar
expressions. Forward-looking statements in this news release
include, but are not limited to, statements with respect to
accretive earnings, anticipated revenue and costs synergies
associated with the merger of CryptoGlobal with HyperBlock,
statements with respect to internal expectations, estimated
margins, expectations for future capacity, costs and opportunities,
the effect of the transaction on the resulting combined company and
its strategy going forward, the completion of any capital project
or expansions, the timing for the completion of the Transaction and
expectations with respect to future mining or production costs, the
anticipated timing for the special meetings of CryptoGlobal and
HyperBlock shareholders and closing of the transaction; the
consideration to be received by shareholders of CryptoGlobal, which
may fluctuate in value due to HyperBlock common shares forming the
consideration; the satisfaction of closing conditions including,
without limitation: (i) required CryptoGlobal and HyperBlock
shareholder approvals; (ii) necessary court approval in connection
with the Plan of Arrangement; (iii) certain termination rights
available to the parties under the Arrangement Agreement; (iv)
HyperBlock obtaining the necessary approvals from the Canadian
Securities Exchange for the listing of its common shares in
connection with the Transaction; and (vi) other closing conditions,
including, without limitation, the operation and performance of the
CryptoGlobal business in the ordinary course until closing of the
Transaction and compliance by CryptoGlobal and HyperBlock with
various covenants contained in the Arrangement Agreement. In
particular, there can be no assurance that the Transaction will be
completed. Forward looking statements are based on certain
assumptions regarding CryptoGlobal, HyperBlock and the resulting
combined company, including expected growth, results of operations,
performance, industry trends and growth opportunities. While
CryptoGlobal considers these assumptions to be reasonable, based on
information currently available, they may prove to be incorrect.
Readers are cautioned not to place undue reliance on
forward-looking statements. Forward-looking statements also
necessarily involve known and unknown risks, including, without
limitation, risks associated with general economic conditions;
adverse industry events; future legislative and regulatory
developments involving cryptocurrency; inability to access
sufficient capital from internal and external sources, and/or
inability to access sufficient capital on favourable terms; the
cryptocurrency industry in Canada
generally, income tax and regulatory matters; the ability of
HyperBlock to implement its business strategies; competition;
currency and interest rate fluctuations and other risks. Any
forward-looking statements or facts (including financial
information) related to CryptoGlobal discussed or disclosed herein
are derived from information obtained directly from CryptoGlobal
and publicly available sources and has not been independently
verified by CryptoGlobal.
Readers are cautioned that the foregoing list is not
exhaustive. Readers are further cautioned not to place undue
reliance on forward-looking statements as there can be no assurance
that the plans, intentions or expectations upon which they are
placed will occur. Such information, although considered reasonable
by management at the time of preparation, may prove to be incorrect
and actual results may differ materially from those
anticipated.
Forward-looking statements contained in this news release are
expressly qualified by this cautionary statement and reflect our
expectations as of the date hereof, and thus are subject to change
thereafter.
CryptoGlobal and HyperBlock disclaim any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law. This news release has been approved by
the Board of Directors of each of HyperBlock and CryptoGlobal.
Factors that could cause anticipated opportunities and actual
results to differ materially include, but are not limited to,
matters referred to above and elsewhere in CryptoGlobal's fiscal
2017 annual MD&A, the Circular and the material change report
filed that will be filed in respect of this Transaction, which are,
or will be, available on CryptoGlobal's profile on
www.sedar.com.
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 news
release.
No stock exchange, securities commission or other regulatory
authority has approved or disapproved of the information contained
herein. This news release is not an offer to sell or the
solicitation of an offer to buy any securities in any jurisdiction,
nor shall there be any sale of securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful.
SOURCE CryptoGlobal Corp.