HUT Hut 8 Mining Corporation

Apolo II Acquisition Corp. (the “Corporation”), a “capital pool company” pursuant to the policies of the TSX Venture Exchange (the “Exchange”), is pleased to announce that it has entered into a definitive business combination agreement (the “Definitive Agreement”) dated July 17, 2019 with Terrace Inc. (“Terrace”) and Terrance Acquisition Corp. (a wholly-owned subsidiary of the Corporation) (“Subco”) in furtherance of the Corporation’s previously announced proposed Qualifying Transaction (as such term is defined in Policy 2.4 – Capital Pool Companies of the Exchange’s Corporate Finance Manual (the “Manual”)) (the “Proposed Transaction”).

Terrace was incorporated pursuant to the provisions of the Business Corporations Act (Ontario) (the “OBCA”) on August 28, 2018. Terrace is a multi-country operator (MCO) focused on the development and acquisition of international cannabis assets. Terrace has two wholly-owned subsidiaries, Terra Nova Business Holdings Inc. (“Terra Nova”) and Pharmabinoide S.L. (“Pharmabinoide”).  Terrace has an option to acquire 100% of the shares of Oransur, S.A., a Uruguayan corporation holding a hemp production license (“Oransur”), and 33.75% of the shares of Faises, S.A., a Uruguayan corporation holding a recreational cannabis production license (“Faises”), upon receipt of the approval of the applicable Uruguayan regulatory authorities, including the Instituto de Regulación y Control del Cannabis (“IRCCA”) and the Uruguayan executive Power and Ministry of Agriculture (the “MoA”).

Faises holds one of two licences in Uruguay to produce and distribute recreational cannabis through approved pharmacies. Its current production capacity is two tonnes per year.  The Faises land is owned by Uruguayan State and leased by Faises. Its producing greenhouse is located in San José, one hour from Carrasco International Airport.

Oransur is the holder of a hemp licence in Uruguay. It leases farms across Uruguay to cultivate various crops with proprietary and imported genetics. Its current operation is 60 hectares and located in Florida, Uruguay, with the ability to expand its production area to 500 hectares.

Pharmabinoide is a Spanish company that cultivates hemp for industrial use, pursuant to a hemp production licence, in Spain and is in the process of obtaining a licence to cultivate cannabis for medicinal use.

Terra Nova, a British Virgin Islands corporation, owns all of the quotas of Terra Nova Produção e Comercialização de Produtos Naturais e Farmacêuticos, LDA (“Terra Nova Portugal”). On July 19, 2018, Terra Nova Portugal submitted an application (the “Application”) to the Autoridade Nacional do Medicamento e Produtos Saúde, I.P. (“INFARMED”), the governing regulatory body in Portugal, to cultivate, import and export medical cannabis at its site in Portugal from a 32,368 m2 (approximately 350,000 sq. ft.) greenhouse facility and the cultivation of Cannabis Sativa L. outdoors over an area of 4,046 m2 also located at this premises. On December 5, 2018, INFARMED issued a declaration to Terra Nova Portugal attesting that the Application was compliant with the applicable law in connection with the authorization to cultivate, import and export medical cannabis. The licensing process is in its final stage whereby after the construction of the site facilities, INFARMED shall inspect the site after which the final authorization is expected to be issued.  

THE PROPOSED TRANSACTION

On July 17, 2019, the Corporation entered into the Definitive Agreement with Terrace and Subco, pursuant to which the Corporation has agreed to acquire all of the issued and outstanding Terrace common shares (the “Terrace Shares”) by way of a three-cornered amalgamation (the “Amalgamation”).  In connection with the Amalgamation, holders of Terrace Shares will ultimately receive one post-Consolidation (as hereafter defined) Apolo Share for each Terrace Share held (the “Exchange Ratio”) and all convertible securities of Terrace will be exchanged for convertible securities of the Resulting Issuer, or adjusted on their terms, as applicable, based on the Exchange Ratio.  It is intended that the Proposed Transaction will constitute a reverse take-over of the Corporation by Terrace inasmuch as the former shareholders of Terrace will own, assuming completion of the Concurrent Financing (as hereafter defined) up to 97.1% of the outstanding common shares in the capital of the Corporation (the “Apolo Shares”), following the Consolidation (as hereafter defined) upon completion of the Proposed Transaction. The Corporation following the completion of the Proposed Transaction is herein referred to as the “Resulting Issuer”.

On or immediately prior to the completion of the Proposed Transaction, it is anticipated that the Corporation will effect a name change to “Terrace Inc.” or such other name as may be determined by Apolo and Terrace (the “Name Change”). Further details with respect to the Proposed Transaction are contained in the Corporation’s news release dated November 13, 2018.

On or immediately prior to the closing of the Proposed Transaction, it is anticipated that the Corporation will consolidate its outstanding share capital (the “Consolidation”) on the basis of 1 post-Consolidation Apolo Share for each 2.5 pre-Consolidation Apolo Shares. There are currently 11,900,000 Apolo Shares outstanding which will result in approximately 4,760,000 post-Consolidation Apolo Shares issued and outstanding.  The Consolidation will also affect the holders of the Corporation’s outstanding warrants and options, as described below, on the same basis. 

Following the completion of the Proposed Transaction, the Consolidation and the Concurrent Financing (collectively, the “Transactions”), there will be approximately 163,340,956 common shares of the Resulting Issuer (“Resulting Issuer Shares”) outstanding, and approximately 2,776,000 Resulting Issuer Shares will be reserved for issuance pursuant to convertible securities of the Resulting Issuer.

To the knowledge of the directors and executive officers of the Corporation, the only persons who will beneficially own, directly or indirectly, or exercise control or direction over more than 10% of the Resulting Issuer Shares are Francisco Ortiz von Bismarck, the CEO and a director of Terrace and Michael Galego, a director of Terrace, assuming completion of the Concurrent Financing.

The following table summarizes the proposed pro forma capitalization of the Resulting Issuer following completion of the Proposed Transaction, the Consolidation and the Concurrent Financing.

Resulting Issuer Shares	Securities Outstanding After Giving Effect to the Proposed Transaction (% of fully diluted)
Issued to Terrace shareholders pursuant to the Proposed Transaction	128,580,956	78.7%
Existing Apolo shareholders	4,760,000	2.91%
Issued to investors on the Concurrent Financing	30,000,000*	18.4%
Total Resulting Issuer Shares (basic)	163,340,956	100%
Reserved for issuance upon the exercise of Broker Warrants and Advisor Warrants to be issued on the Concurrent Financing	2,100,000*	1.3%
Reserved for issuance upon exercise of outstanding Apolo stock options and warrants (post-Consolidation)	676,000	0.4%
Total Resulting Issuer Shares (diluted)	166,116,956	100%

*assuming the maximum size of the Concurrent Financing.

TERRACE PRIVATE PLACEMENTS

In conjunction with the Proposed Transaction, Terrace anticipates completing (i) a brokered private placement (the “Concurrent Brokered Financing”) of subscription receipts (the “Subscription Receipts”); and (ii) a non-brokered private placement of Subscription Receipts (the “Concurrent Non-Brokered Financing” and together with the Concurrent Brokered Financing, the “Concurrent Financing”) at a price of $0.50 per Subscription Receipt for aggregate gross proceeds of up to $15,000,000. Each Subscription Receipt will, following the completion of the Proposed Transaction and the satisfaction of certain escrow release conditions, entitle the holder to receive, without the payment of additional consideration or taking of further action, one Terrace Share which will immediately be cancelled and a Resulting Issuer Share will be issued as consideration in accordance with the terms of the Proposed Transaction.

In connection with the Brokered Concurrent Financing, the Agents (as hereafter defined) will be entitled to a cash commission equal to 7% of the aggregate gross proceeds raised in connection with the Concurrent Brokered Financing and will be issued broker warrants (each, a “Broker Warrant”) exercisable for that number of Terrace Shares equal to 7% of the number of Subscription Receipts issued under the Concurrent Brokered Financing. In connection with the Concurrent Non-Brokered Financing, advisors will be entitled to a cash commission equal to 2.5% of the aggregate gross proceeds raised and will be issued advisor warrants (each, an “Advisor Warrant”) exercisable for that number of Terrace Shares equal to 1% of the number of Subscription Receipts issued under the Concurrent Non-Brokered Financing. The Broker Warrants and Advisor Warrants have an exercise price of $0.50 per Terrace Share and are exercisable until 24 months from the closing of the Concurrent Financing. In connection with the closing of the Proposed Transaction the Broker Warrants and Advisor Warrants will be exchanged for like securities of the Resulting Issuer.  PI Financial Corp., as lead agent, together with Sprott Capital Partners LP have been engaged to serve as agents for the Concurrent Brokered Financing (collectively, the “Agents”). These same parties are acting as advisors under the Concurrent Non-Brokered Financing.

The following table sets out the proposed principal uses of funds by the Resulting Issuer, after giving effect to the Proposed Transaction and assuming completion of the Concurrent Financing:

	Maximum Private Placement
Faises Acquisition and Greenhouse Improvements	$3,000,000
Ethanol Extraction Plant (Uruguay)	$1,500,000
Terra Nova Greenhouse (Portugal)	$4,500,000
M&A Opportunities	$3,500,000
G&A (18 Months)	$2,500,000
Total	$15,000,0000

SELECTED FINANCIAL STATEMENT INFORMATION

The following table presents selected financial statement information on the financial condition and results of operations for the Corporation and Terrace. Such information is derived from the unaudited financial statements of Terrace for the period ended March 31, 2019 and the unaudited financial statements of the Corporation for the period ended March 31, 2019. The information provided herein should be read in conjunction the Terrace’s audited financial statements, will be contained in the Corporation’s non-offering prospectus to be filed on SEDAR in connection with the Proposed Transaction. The Corporation’s financial statements have previously been filed on SEDAR.

	Terrace*March 31, 2019(unaudited)	ApoloMarch 31, 2019 (unaudited)
Balance Sheet
Current Assets	$1,502,337	$818,017
Other assets	$2,241,248	-
Total Assets	$3,743,585	$818,017
Current Liabilities	$2,438,698	$36,077
Non-Current Liabilities	$118,330	-
Total Liabilities	$2,557,028	$36,077
Share capital	$3,342,174	$889,208
Contributed Surplus	-	$115,739
Additional paid in capital	-	-
Earnings / Deficit	($2,155,617)	($223,007)
Shareholders’ Equity	$1,186,557	$781,940
Total Liabilities and Shareholders’ Equity	$3,743,585	$818,017

*Includes operations of Terra Nova, Pharmabinoide and Oransur.

PROPOSED DIRECTORS AND OFFICERS OF THE RESULTING ISSUER

It is the intention of the Corporation and Terrace to establish and maintain a board of directors of the Resulting Issuer with a combination of appropriate skill sets that is compliant with all regulatory and corporate governance requirements, including any applicable independence requirements. Upon completion of the Proposed Transaction, the board of directors of the Resulting Issuer is expected to be comprised of five individuals. The following are brief descriptions of the proposed directors and the officers of the Resulting Issuer:

Francisco Ortiz von Bismarck: Interim Chief Executive Officer and Director. Francisco Ortiz von Bismarck is an international entrepreneur and founder of Terrace, who brings extensive investment experience across Europe and South America. Mr. Ortiz von Bismarck has been an entrepreneur and investor since he finished university. In 2006, he co-founded and was the first investor in the “Spanish Facebook”, called “Tuenti”, sold to Telefonica in 2010. From 2009 until 2018, Mr. Ortiz von Bismarck was the Business Development Manager of GT Group, a multi-family wealth management firm based in Zürich, Switzerland. In 2011, Mr. Ortiz von Bismarck co-founded Inception Capital S.L., a venture capital fund focused in seed Internet investments in Spain. Over the years, Mr. Ortiz von Bismarck created and invested in several other tech start-ups such as Youzee Entertainment in Spain (2011), Dupli Limited in Malta (2014), and Y Experiment in Poland (2015). Mr. Ortiz von Bismarck is also an advisor (2016) and director (2017) in Easy Payment Gateway in Gibraltar. Until recently, he was a director (2016-2018) in Agriculture Investment Group Corp. with assets in Uruguay. Mr. Ortiz von Bismarck holds a Bachelor Degree in Economics from Harvard University and is a resident of Nassau, Bahamas.

Michael Galego: Director. Michael Galego is an executive and lawyer with M&A and corporate finance experience. Mr. Galego is currently CEO of Apolo Capital Advisory Corp. and sits on the board of directors of several public and private companies.  Mr. Galego was a co-founder and director of ICC Labs (TSXV: ICC) until its sale to Aurora Cannabis Inc. (TSX:ACB) in November 2018. Mr. Galego served as CEO at the Stronach Group, Agricultural Division. He has also previously served as a director or officer to several public companies, including as a director of Western Atlas Resources Inc. (TSXV:WA), General Counsel, Secretary & Managing Director of Acasta Enterprises Inc. (TSXV:AEF), Deputy General Counsel and Secretary of Frontera Energy Corp. (formerly Pacific Rubiales Energy Corp.) (TSX: FEC) and General Counsel, Secretary and Director of CGX Energy Inc. (TSXV: OYL), and as a director of Woulfe Mining Corp. (CSE: WOF). Mr. Galego began his legal career as an associate in the business law department of Osler, Hoskin & Harcourt LLP. Mr. Galego is a graduate of York University (Hons. B.A.) and the University of Windsor (LL.B).  Mr. Galego was also on the Board of Directors of the Trillium Gift of Life Network and the Board of Directors of the Canadian Liver Foundation. 

Vincent Gasparro: Director. Vincent Gasparro has over eleven years of private equity experience. Mr. Gasparro has completed acquisitions in the manufacturing and retail sectors. From June 2010 to April 2017, Mr. Gasparro served as Managing Director at The Green Tomorrow Fund, which invested in and financing renewable energy projects as well as revenue generating green businesses. Prior to that, Mr. Gasparro was a Senior Associate at Succession Capital Corp. Mr. Gasparro has a B.A. (Honours) from York University and an MBA from Villanova University.

Stephen Arbib: Director. In 2013, Stephen Arbib founded MedReleaf (TSX: LEAF), the first and only ISO 9001 certified cannabis producer in North America and one of the global leaders in the production and research of medicinal cannabis which recently sold to Aurora Cannabis Inc. for $3.2 billion. Having founded the company, Mr. Arbib was involved with every facet of the business since inception up until MedReleaf went public, at which point he stepped off the board but continued in an advisory capacity until the sale to Aurora. In 2013, Mr. Arbib also founded Momentum Solutions, one of the world’s leading logistics and life support service providers, specializing in humanitarian and emergency operations, and currently serves as CEO. Stephen is also the co-founder of Cycura Inc., an offensive cyber security firm which provides advanced, customized, and confidential cyber security services to governments, companies, and organizations with particularly high intellectual property (IP) value as well as critical data protection needs such as infrastructure.  Mr. Arbib was born in Tel Aviv, Israel in 1977, and moved to Toronto at the age of ten. He attended Ryerson University for Business and following his second year, enrolled in a joint entrepreneurship program in Vancouver, with Harvard University, where he founded his first company, Simso Online Inc. He successfully divested Simso after two years. Mr. Arbib is an active member of the Toronto Jewish community, having founded Shalom Life Media Inc., Canada’s largest online Jewish media outlet, the vice-Chairman of the Canadian Friends of Tel Aviv University and a member of the Board of Six Points Jewish Philanthropy Fund.

Dennis Mills: Director. Mr. Mills was a director of Pacific Rubiales Energy Corp. and was Vice Chairman and Chief Executive Officer of MI Developments Inc. from 2004 to 2011, and a Vice President at Magna International from 1984 to 1987. Mr. Mills served as a Member of Parliament in Canada’s federal parliament from 1988 to 2004. His positions in the federal parliament included Parliamentary Secretary to the Minister of Industry (1993 to 1996). He is currently on the boards of Hut 8 Mining Corp. (TSXV : HUT) and CGX Energy Inc. (TSX : OYL).

Leon Dadoun: Chief Financial Officer. Leon Dadoun is a debt capital markets expert with more than 30 years of experience in the Canadian, U.S. and European financial markets with a particular emphasis on Banking and Structured Finance. Among various senior roles he has been Managing Director for Global Securitization at CIBC World Markets. Mr. Dadoun was responsible for developing and issuing the first Credit Card Securitizations by CIBC, Canadian Tire and MBNA in Canada. Mr. Dadoun successfully grew the securitization business from $3 billion in outstandings to $15 billion in outstandings. He went on to be the Founder and CEO of a structured credit boutique which formed as a joint-venture with Desjardins. He has co-founded NHA MBS Issuers Association, American Securitization Forum and helped structure the Canadian Mortgage and Housing Corporation’s Canada Mortgage Bonds Program (which today has over $200 billion in outstandings). Mr. Dadoun has significant experience with bank regulators and has collaborated with the Basel Committee on Global Banking Regulation in drafting the Basel II and Basel III Accord on capital adequacy reforms for the global banking system. In addition, he has provided expert testimony in proceedings related large Capital Markets litigation and led a group that successfully obtained Letters Patent to form a Schedule A Canadian Bank. Mr. Dadoun has previous public company experience as an Advisor to Highvista (a TSXV listed Mining and Real Estate public company). Mr. Dadoun holds a B. Comm from the University of Toronto as well as being a C.A, C.P.A.

SIGNIFICANT CONDITIONS TO CLOSING

The completion of the Proposed Transaction is subject to a number of conditions, including but not limited to completion of the Concurrent Financing, satisfactory due diligence reviews, approval by the boards of directors of both Terrace and the Corporation, approval of Terrace’s shareholders, obtaining necessary governmental and third-party approvals and Exchange acceptance. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the non-offering prospectus prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

SPONSORSHIP

The Corporation intends to retain a sponsor in connection with the Proposed Transaction, unless a waiver from the sponsorship requirement is obtained from the Exchange. There is no guarantee that such waiver can be obtained. An agreement to sponsor should not be construed as any assurance with respect to the merits of the Proposed Transaction or the likelihood of completion. The Corporation also intends to apply for an exemption to have a completely independent audit committee pursuant to section 4.2(e)(ii) of Exchange policy 2.10 – Listing of Emerging Market Issuers.

INTERESTS OF INSIDERS AND ARM’S LENGTH QUALIFYING TRANSACTION

Mr. Gasparro serves as a director of the Corporation and of Terrace, positions that he has disclosed to the Corporation and to Terrace.  No other party to the Proposed Transaction or its respective associates or affiliates, is a Control Person (as defined in the Manual) of both the Corporation and Terrace and as such the Proposed Transaction will not be a Non-Arm’s Length Party Transaction (as defined in the Manual). As such, the shareholders of the Corporation will not be required to approve the Proposed Transaction.

INSIDERS OF THE RESULTING ISSUER

Other than has been previously referred to in this press release, and to the knowledge of the directors and senior officers of the Corporation or Terrace, no person will become an insider of the Resulting Issuer as a result or upon completion of the Proposed Transaction.

FORWARD-LOOKING STATEMENTS

This press release contains statements which constitute “forward-looking information” within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of Apolo and Terrace with respect to future business activities and operating performance. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions and includes information regarding: (i) expectations regarding whether the Proposed Transaction will be consummated, including whether conditions to the consummation of the Proposed Transaction will be satisfied including, but not limited to, the necessary regulatory approvals and the timing associated with obtaining such approvals, if at all; (ii) the timing for completing the Proposed Transaction, if at all; (iii)  the completion of the Concurrent Financing; (iv) the business plans and expectations of the Resulting Issuer; (vi) expectations for other economic, business, and/or competitive factors; and (vii) approvals of regulatory bodies, including but not limited to IRCCA, MoA and INFARMED.

Investors are cautioned that forward-looking information is not based on historical facts but instead reflect Apolo and Terrace’s respective management's expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although Apolo and Terrace believe that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the Resulting Issuer. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the ability to consummate the Proposed Transaction; the ability to obtain requisite regulatory and shareholder approvals and the satisfaction of other conditions to the consummation of the Proposed Transaction on the proposed terms and schedule; the approvals of IRCCA, MoA and INFARMED; changes in general economic, business and political conditions, including changes in the financial markets; changes in the perception and demand for cannabis in both local and export markets; changes in applicable laws and regulations both locally and in foreign jurisdictions; compliance with extensive government regulation and the costs associated with compliance; costs of building and developing projects and product opportunities; the risks and uncertainties associated with foreign markets; and the diversion of management time on the Proposed Transaction. This forward-looking information may be affected by risks and uncertainties in the business of Apolo and Terrace and market conditions.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although Apolo and Terrace have attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended and such changes could be material. Apolo and Terrace do not intend, and do not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.

This press release does not constitute an offer to sell or a solicitation of an offer to buy the Subscription Receipts or Resulting Issuer Shares in any jurisdiction, nor will there be any offer or sale of the Units in any jurisdiction in which such offer, solicitation or sale would be unlawful. The Subscription Receipts and Resulting Issuer Shares have not and will not be registered under the U.S. Securities Act or any U.S. state securities laws, and therefore will not be offered or sold within the United States except pursuant to exemptions from the registration requirements of the U.S. Securities Act and applicable state securities laws.

For further information please contact:

Apolo II Acquisition Corp. Jeff Hergott, Corporate Secretary Telephone: 416.361.4783 The Exchange has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved the contents of this press release.