Squire Mining Ltd. (
CSE:SQR |
FWB:9SQ |
OTCQB:SQRMF)
(“
Squire”) is pleased to announce that on May 29,
2019 it entered into a letter agreement (the
"
Agreement") with Calvin Ayre, Cunning Hams
Limited (“
Cunning Hams”) and Tansley Equipment
Limited (“
Tansley”) to directly or indirectly
purchase all of the issued and outstanding shares of four
corporations (consisting of Cunning Hams, Tansley, Woodland
Technology Group Inc. (“
Woodland”) and Laser
Lollipop Limited (collectively, the “
Companies”))
which own and operate a fleet of cloud computing assets in Canada,
the United States and China, representing approximately 2,985
petahash (the “
Transaction”).
As consideration for the Transaction, Squire
will issue to Calvin Ayre (i) 80,000,000 common shares (the
“Common Shares”) in the capital of Squire and
827,000,000 non-voting participating shares
(“NVPS”, and together with the Common Shares, the
“Shares”), a new class of shares to be created,
subject to shareholder approval. The aggregate consideration
payable to Calvin Ayre in respect of the Transaction will further
be subject to adjustments for pre-payments and payments under an
income-sharing agreement to be entered into on closing (the
“Closing”) of the Transaction. Squire expects to
provide further information as to Transaction valuation following
receipt of a fairness opinion in respect of the Transaction.
Transaction Highlights:
• Creates Leading Blockchain Business, with
one of the Largest Public Portfolios of Mining
Rigs:
- Pro forma the Transaction, Squire will own and operate
approximately 217,000 mining rigs, representing approximately 3,300
petahash.
• Diversified Operations:
- The Transaction will diversify Squire’s mining rigs across
geography as the Transaction assets are located in the United
States, Canada and China. Squire’s current fleet is currently
operating out of Kazakhstan.
- The Transaction will also diversify Squire’s hosting partners
from one group to six groups.
• Highly Accretive:
- Management believes the Transaction is over 20.0% accretive to
Squire’s expected next twelve month cash flow as measured by
EBITDA.
• Attractive Transaction
Structure:
- The Transaction is being financed 100.0% through share
consideration, preserving Squire’s robust cash balance of over
CAD$19,000,000.
“We are proud of what the team has accomplished
to date. Squire has diversified away from a single business purpose
to inject a revenue generating cloud computing operation and
established a solid foundation for sustainable growth and returns,
and has become a dominant force in the blockchain industry,” Stefan
Matthews, Chairman of Squire.
The Transaction signifies Squire’s commitment to
ensuring that the crypto mining industry, that is supporting and
securing the Bitcoin network, continues to scale and remain
profitable in the long term after Bitcoin’s block reward halves in
2020 and every several years after that. For each block they mine,
Bitcoin miners earn a fixed block reward amount (currently 12.5
coins, but halving to 6.25 coins next year), as well as fees for
each individual transaction mined in the block. When the reward
halving event takes place, to remain profitable, miners will need
to generate more revenue from higher volumes of transaction fees
(for example, from new applications that are processing large
amounts of data on the blockchain).
This is why Squire supports the BSV roadmap, as
it aims to enable massive on‐chain scaling by significantly
increasing the block size such that blocks can fit much more
transactions and data, and outlines for the crypto mining sector
why such scaling is important for the entire interrelated Bitcoin
ecosystem.
“We need to focus on massive scaling of the
Bitcoin blockchain to accommodate the throughput needed for
enterprises to make use of this technology. By vending my mining
assets into Squire, I am doubling‐down on my commitment to
Bitcoin’s success. These assets will enable Squire Mining Ltd. to
compete at a global level to pave a path for enterprise usage of
blockchain technology to flourish,” Calvin Ayre.
Closing is subject to customary conditions,
including: (i) approval of the Canadian Securities Exchange (the
"CSE") Canadian Securities Exchange (the
"CSE") and CSE acceptance of a revised Form
2A Listing Statement from Squire; and (ii) shareholder approval by
at least 66 2/3% of the votes cast by the shareholders of Squire in
respect of an amendment to the articles and notice of articles of
Squire to create the NVPS and by a simple majority of the votes
cast by the shareholders of Squire in respect of a change of
business to provide for the Transaction (the “Shareholder
Approvals”) in each case at a shareholders meeting (the
“Shareholders Meeting”) expected to be held on or
about July 31, 2019. Further details regarding the Transaction will
be provided to shareholders by way of a management information
circular to be distributed prior to the Shareholders Meeting in
accordance with applicable corporate and securities laws.
The Companies
The Companies, each of which is incorporated
under the laws of Antigua and Barbuda, except for Woodland which is
incorporated under the laws of the Province of British Columbia,
own and operate 203,121 ASIC mining rigs, representing
approximately 2,985 petahash, or approximately 285 MW of power
consumption, which, upon Closing, would make Squire one of the
largest publicly traded crypto mining companies globally, as
measured by terahash/s. The rigs are all operated by leading
hosting providers and are allocated across the United States,
Canada, and China. Together with the fleet operated by Squire's
subsidiary Freschette Limited in Kazakhstan, the Transaction will
result in one of the largest publicly traded blockchain mining
operations in the world.
The Consideration
As noted above, Calvin Ayre would receive
approximately 80,000,000 Common Shares and 827,000,000 NVPS of
Squire at Closing. The NVPS, the creation of which is subject to
the Shareholder Approvals, would be identical in all respects to
the Common Shares other than that they will not be entitled to a
vote at meetings of the shareholders of Squire unless required by
law. Squire and Calvin Ayre would enter into a comprehensive
coattail agreement on or prior to Closing to provide for the Common
Shares and NVPS to be treated equally in a take-over bid and other
fundamental transaction situations.
The Transaction would result in Mr. Ayre having
45% of the voting control of Squire and would effectively
constitute a reverse take-over and fundamental change of business.
Under the terms of the Transaction, at any time the percentage of
Common Shares held by Calvin Ayre falls below 40% of the issued and
outstanding Common Shares at that time, a number of NVPS shall be
converted into an equal number of Common Shares until the
percentage is 45% or there are no further NVPS outstanding. The
parties have further agreed to amend the unsecured convertible
debenture note issued in connection with Squire’s acquisition of
Freschette Limited (the “First Step Transaction”)
on Closing to provide for the shares issuable upon conversion of
the debenture to be NVPS.
Mr. Ayre has agreed to a one (1) year lock-up of
the Shares issued to him in connection with the Transaction to be
released in equal quarterly tranches, subject to exceptions for
private or over-the-counter trades outside of the facilities of the
CSE or pledging arrangements to secure debt.
The consideration payable to Calvin Ayre in
respect of the Transaction is subject to adjustment based on a
pre-closing audit of the Companies to be completed by an
independent auditor acceptable to Squire and Calvin Ayre, a
post-closing reconciliation of operational units in excess of an
agreed margin for wear and tear, breakdowns or damage and payment
by Squire to Calvin Ayre of all pre-payment balances or advances
for hosting services advanced by the Companies and existing as of
the Closing and the terms of an income sharing agreement to be
entered into on Closing.
Pursuant to the income sharing agreement profits
and operating expenses from the operation of approximately 100,000
units will be shared as to approximately 42% with Calvin Ayre,
subject to terms agreed to in respect of their continued
operation.
Additional Details about the
Transaction
The parties will enter into definitive
agreements in respect of the Transaction on the terms agreed to in
the Agreement and otherwise substantially on the same terms as the
First Step Transaction, including a definitive purchase agreement,
income-sharing agreement, coattail agreement and a cost-plus based
services agreement in respect to the ongoing management and
operation of any remaining cloud computing assets owned by Calvin
Ayre or his affiliates. The parties expect Closing to occur as soon
as possible after the Shareholders Meeting.
Under the terms of the Agreement, either party
may terminate the Agreement if the Closing does not occur by August
31, 2019 or the approval of the CSE or the Shareholder Approvals
have not been obtained by or the Shareholders Meeting has not been
held by August 31, 2019 or it becomes reasonably apparent that such
approval will not be obtained by August 31, 2019. In such
circumstances, Squire would be obligated to pay to Calvin Ayre
liquidated damages equal to USD$1,000,000 and shall have no
obligation thereafter.
Prior to Closing, at Squire’s request and
subject to certain expense sharing between the Parties and
indemnification from Squire in respect of any extended period of
non-operation of such units, the Companies will cause certain of
the units to be relocated from their current location for strategic
reasons.
Further information regarding the Transaction
will be included in the information circular that Squire will
prepare, file, and mail in due course to its shareholders in
connection with the Shareholders Meeting. The Agreement will be
filed on the SEDAR profile of Squire on the SEDAR website
at www.sedar.com.
CSE Stock Halt
As the Transaction would constitute a
“fundamental change” for Squire as defined in CSE policies,
pursuant to CSE policies, Squire’s stock has been halted and will
remain halted at least until the meeting materials to be sent to
Squire shareholders for approval of the Fundamental Change have
been reviewed and accepted by the CSE and posted to the CSE
website. The halt is considered a Regulatory Halt as defined
in National Instrument 23-101-Trading Rules.
Advisors to the Parties
Canaccord Genuity Corp. is acting as exclusive
financial advisor to Squire in respect of the Transaction. Norton
Rose Fulbright Canada LLP is acting as legal counsel to Squire.
Fasken Martineau DuMoulin LLP is acting as legal counsel to Calvin
Ayre, Cunning Hams and Tansley.
Cannacord Genuity Corp. will be paid a success
fee in connection with the Transaction further details of which
will be disclosed in the information circular in respect of the
Shareholder Meeting.
About Squire Mining Ltd.
Squire is a Canadian based technology company
engaged, through its subsidiaries, in the business of developing
and operating cloud computing data infrastructure and system
technology to support global blockchain applications related to
Bitcoin SV, Bitcoin Core and other associated SHA‐256 derived
digital assets.
COINGEEK TORONTO CONFERENCE – May 30,
2019 – Toronto, Canada
Come meet the Squire Mining Ltd. team in person
and also learn about the latest massive scaling developments on the
BSV blockchain at the CoinGeek Toronto conference on May
30, 2019 at The Carlu in Toronto. Pay with Bitcoin SV and you will
receive a discount via CoinGate.
For further information contact:
Angela Holowaychuk Interim Chief Executive Officer (Office
Telephone: +1 800‐371‐2809)
The CSE accepts no responsibility for the
adequacy or accuracy of this release.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION:
This news release includes “forward‐looking
information” as defined under applicable Canadian securities
legislation. Forward-looking information and statements include,
but are not limited to, disclosure regarding possible events, that
are based on assumptions about future economic conditions and
courses of action. Forward‐looking information is 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 information. Such factors include, but are not
limited to: general business, economic, competitive, political and
social uncertainties, uncertain and volatile equity and capital
markets, lack of available capital, future demand for Bitcoin SV,
Bitcoin Core and other cryptocurrencies and risks related to the
mining thereof, when and if halving of Bitcoin will take place and
the impact such halving will have on profitability, the ability to
increase block size and the effects of such increases, integration
issues, the timing for release of the halt of trading of the Common
Shares on the CSE, personnel and staffing requirements and
technological change and obsolescence and risks that the
transaction will not be completed or will not be completed on the
same terms or in the time provided or that conditions to closing in
respect of the transaction will not be satisfied including without
limitation: required Squire shareholder approval; certain
termination rights available to the parties under the Agreement;
Squire obtaining the necessary approvals from the CSE for the
listing of the Common Shares in connection with the Transaction and
acceptance of the Form 2A Listing Statement by the CSE; and other
closing conditions, including compliance by the parties with
various covenants contained in the Agreement, statements with
respect to the effect of the Transaction on Squire and its strategy
going forward, statements with respect to the anticipated benefits
associated with the Transaction, the timing and completion of the
acquisition of the Transaction (on the terms presently contemplated
or otherwise), or the negotiation, entering into and completion of
any definitive agreements (on the terms presently contemplated or
at otherwise). Actual results and future events could differ
materially from those anticipated in such forward looking
information. Accordingly, readers should not place undue reliance
on forward‐looking information. All forward looking information in
this news release is made as of the date hereof and qualified by
these cautionary statements and those in our continuous disclosure
filings available on SEDAR at www.sedar.com. Squire disclaims any
intention or obligation to update or revise such forward‐looking
information, whether as a result of new information, future events
or otherwise, except as required by law.
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