MineHub (TSX-V: MHUB)(OTC: MHUBF) Executive Chairman Vince Sorace on Entering Scrap Metals Market with Strategic Acquisition

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the executive chairman of MineHub Technologies (TSX-V: MHUB)(OTC: MHUBF), Mr. Vince Sorace. Vince, how are you sir?

Vince Sorace: I am doing great, Gerardo, and nice to be back on.

Gerardo Del Real: Great to have you back on. You just had some news that we chatted off-air a bit, I mentioned to you, I don't think the retail market understands the implications or the significance of the news. But listen, congratulations, you now are entering the scrap metals market with a strategic acquisition, and as the headline reads, you're creating a comprehensive end-to-end digital platform for primary and recycled metals. This is a trillion-dollar sector, with a T. You still maintain a huge moat and a tiny market cap of just $63 million Canadian. Can you go over the details and provide the context of the transaction that you just announced?

Vince Sorace: Yes. I guess, as you mentioned, this brings a different TAM into play for us around this trillion-dollar market opportunity, and the recycling and scrap metals market is a very, very unique market. We've been looking at it for some time, but again, it's very unique to address. The founders who built this platform have spent their lives in this market segment, and that institutional knowledge allowed them to build a platform to address the needs of this market, which is key and critical.

We feel that Jules is just at the beginning of their growth trajectory. They've spent the years building this platform. Where they were lacking was the comprehensive teams, management teams, sales teams, customer service teams, to drive it to the next level. But they've kicked off with some pretty incredible international partners. I won't get into the details, but this is coming with revenue. Very importantly, they are very close to operating themselves at breakeven, so the financial burden on MineHub is not anticipated to be a great one. Yet, we think we're on the cusp of turning them into a profitable segment themselves, which obviously lends itself and feeds back into MineHub's bottom line. So together with our teams and their teams, we think we're about to launch their revenue growth into a very, very good trajectory in the near future. So yes, you mentioned this expands our digital offering now basically from mine to recycling.

Also, I think what the market needs to understand here is the accretiveness of this deal. It positions us in the market to expand that offering digitally across the spectrum, but this also comes with a three-year earnout. So how that works is we pay an upfront payment, and that's $1.9 million US, mostly in stock, based on evaluation of about 3.6 times revenue. After that, every year for three years, there's a revenue earnout period. So we assess the revenue, it's capped at $5 million US over the next couple of years, and they will get the next part of that valuation depending on their revenue trajectory and growth. That's when we pay the next segment. So only if this platform performs will they get paid again, about 3.6 times revenue capped at $5 million. And I say capped at $5 million because obviously any revenue above $5 million US, which we're hoping we'll exceed that immensely, we don't pay for. That multiple is exciting, because if everything comes together and we do well in the future, typically the market values you at much higher than that.

The other interesting part about this transaction is we've got a floor price set at 74 cents, so that's what the first payment's based on. That's the lowest price to any future dilution and risk from that perspective. We've structured this that over the years, when the next payments or valuations are ascertained around those payments will be based on a 10-day VWAP. So if we succeed and continue to perform as a company and our share price performs, dilution will lessen at a higher share price when we make... It's a dollar value payment at those higher share prices, again, with a floor at 74 cents. So again, if everything comes together and our share price does much better in the future, it lessens the dilution that we take in against this deal.

And then, the founders of Jules AI are extremely committed to this transaction, as noted by the share lockups. Essentially, there's almost nothing that gets released until year three and four. So these guys are committed as shareholders for three and four years at minimum, and even at that point, they've got resale restrictions on the market based on volumetric trading. So there's a commitment on all levels here, the deal's extremely accretive from a financial perspective, it's accretive from a dilution perspective, a multiple perspective, and bringing all this together, I think that's what will come to be known or learned, as you said, on the street here over the next period.

Gerardo Del Real: No, listen, you touched on my two favorite parts of the way this transaction is structured and structured beautifully, because if everyone does what they're supposed to do, everyone wins, shareholders on Jules and obviously MineHub. But I love the way the earnout portion is structured. I absolutely love the resale restrictions, that says, "We're confident that we'll be able to show you the money," and I absolutely commend you and Jules for structuring the deal that way, in a way where shareholders like myself can look at it and not worry about an immediate resale of shares or an upfront commitment that doesn't deliver later on. So kudos to you and the team. I suspect, judging by my conversations with you and Andrea recently, that you're looking at more accretive acquisitions and/or mergers or transactions, given the network and given the commodity space and the way things are picking up right now.

Vince Sorace: Yes, this is a good example of opportunities that we're looking at for MineHub in the market now. There are a number of these unique digital platforms, and again, very unique markets and unique spaces that have big addressable markets that we don't need to go build, and again, it requires very specific expertise in these markets, and there's a lot of these guys out there that on their own need help to move forward. MineHub is basically the foundation, and that's how we're seen as, call it the foundation for this potential roll-up strategy in this market, and the more and more I hear, we're being viewed as that. So yes, we're going to continue to explore opportunities like this, I think there are more out there, and we'll see what other exciting endeavors we can bring to the table.

Gerardo Del Real: I am looking forward to seeing you and the team continue to execute. Happy shareholder over here. I'm biased, as I always am, or I wouldn't be speaking to anyone in a public domain. Thank you so much for your time, Vince. Appreciate it as always, sir.

Vince Sorace: Thank you for having me.

Gerardo Del Real: All right, Vince, I'll let you go. Keep at it. Thank you.