Mr. Jason Ewart reports

HANK PAYMENTS PROVIDES ADDITIONAL INFORMATION ABOUT NON-BINDING LOI TO ACQUIRE A TECHNOLOGY PLATFORM COMPANY

Hank Payments Corp. has entered into a non-binding letter of intent dated Aug. 19, 2024 (LOI), for the acquisition of 100 per cent of the shares of a private technology company (the target).

Transaction terms

As previously announced, the material terms and conditions outlined in the LOI are non-binding on the parties and the LOI is, among other things, conditional on the execution of a definitive share purchase agreement to be negotiated between the parties.

The target is prerevenue with meaningful investment in intellectual property that affords consumers and brands, like lenders, to be matched based on time-based needs that enable consumers to receive offers that may improve their financial lives. The target has spent $250,000 in R&D (research and development) expenses in the past year and owes $1.0-million in liabilities to its parent. As is common with technology companies, the target has not capitalized any material assets as it has developed its platform, while creating valuable intellectual property which aligns with typical SaaS (software-as-a-service) companies being light on assets but high on technology value given the recurring cash streams they generate. The target has preferred pricing, service levels and long-term licensing agreements that will transfer with the sale that affords Hank and consumers the ability to securely store and access key personal documents related to their financial lives, including agreements with Hank, investment statements, loan documents and any other important documents that need to be easily accessible, searchable and actionable by the consumer. These licences, underpinned by best-in-class content search and data correlation and bank level data encryption and security, have material value and the company will, as part of the conclusion of the transaction, confirm its estimates of value through an independent valuation.

In connection with the proposed transaction, it is currently contemplated that all the issued and outstanding shares of the target will be acquired by the company. Key terms of the transaction are as follows:

1. As consideration for the shares purchased, Hank will issue to the shareholders of the target, that number of common shares of Hank which equates to a total equity value for the target of approximately $7.2-million, not to exceed 49.9 per cent of Hank shares outstanding at the closing of the transaction.
2. The majority of the consideration shares of Hank will be issued to or immediately distributed or transferred to the shareholders of the target such that no one new shareholder or related entity will own directly or indirectly 10 per cent of Hank post completion of the transaction.
3. The consideration shares will have a contractually imposed escrow and release schedule currently being finalized and subject to regulatory approval prior to closing.
4. The company will accelerate the redemption date of 4.47 million of its currently issued and outstanding restricted share units subject to guidelines the TSX Venture Exchange.
5. A minimum of $3.94-million of Hank's liabilities, excluding working capital, is to be settled prior to the closing of the transaction, which the company expects to settle through issuance of common shares.
6. The target will provide a non-interest-bearing loan in the amount of $250,000 to the company in the form of an unsecured promissory note that is repayable on the earlier of six months from the advance date or the closing of the transaction, in which the loan will settle into the consolidated company.
7. Hank will assume the target's sole liability of $1-million owed to its parent, which will be repaid over five years at $16,667 per month without accruing any interest. At any time up to 12 months following closing, Hank can prepay $750,000 on top of what will have been paid monthly to date to retire this obligation.
8. Advisory fees up to $1,425,000 will be paid in shares of Hank expected to be 28.5 million shares issued to the adviser.
9. Post the settlement of liabilities at current share price of five cents, and assuming trading at current prices (five cents to six cents per share), Hank expects to have a market capitalization in the range of $7.1-million and $7.6-million and will be issuing shares worth up to $7.2-million for the acquisition.

Completion of the transaction is subject to a number of conditions, including, but not limited to, receipt of applicable regulatory approvals, completion of satisfactory due diligence including independent valuation, and the execution of the definitive agreement and related commercial agreements. The potential transaction is not expected to be a fundamental transaction under the policies of the TSX Venture Exchange.

About Hank Payments Corp.

Hank is a North American leader in consumer fintech (financial technology) software-as-a-service (SaaS) and banking-as-a-service (BaaS) platforms that manages consumer cash flow and budgets on an automated basis using proprietary algorithms that collect, store and disburse cash as required to discharge obligations in a timely fashion. The Hank stack provides for several vertical market applications of the technology, with features specific to channels and enterprise accounts that allow those partners to operate new lines of business and revenue streams, using Hank. The partners benefit from new revenue streams and powerful insights that open up additional opportunities for partners to grow assets using Hank. The company operates exclusively across the United States, with certain leadership and technology functions in Toronto. Hank houses the complex technology, banking, treasury, customer service, sales and operations teams that acquire and service consumers. Hank currently charges upfront enrolment/set-up fees and recurring monthly fees based on the types and quantity of payments that Hank Payments administers for the consumer. The company acquires users through various channels including: (i) small- to medium-sized enterprises (SME partners); and (ii) large enterprise businesses. The company's BaaS model is emerging, which is expected to add additional fees, including software licensing and usage fees.

We seek Safe Harbor.