OFFERING MEMORANDUM

INTERCOIN, INC.
Digital ITR Tokens

$15,000,000

March 1st, 2020

OFFERING MEMORANDUM
INTERCOIN, INC.

Digital ITR Tokens
$15,000,000

 

This memorandum describes the offering (the "Offering”) of up to 350,000,000 digital tokens on the Ethereum protocol ("ITR Tokens”) to be issued by Intercoin, Inc., a Delaware corporation (the "Company”). The Company has previously issued 150,000,000 ITR Tokens to the Company’s founders and certain investors. The Company will issue a maximum of 350,000,000 ITR Tokens for the current offering and reserves the right to issue a maximum of 1 billion ITR Tokens in totality in the future.

The consummation of the Offering is not subject to the sale of any minimum number of ITR Tokens. The maximum number of ITR Tokens that may be sold in the Offering is 350,000,000 ITR Tokens.

The Company has established a "base price” of $0.09 per ITR Token. The Offering will proceed in several "rounds", and the price of ITR Tokens sold in the earlier rounds will reflect an effective discount from this base price. The following table sets forth the rounds, the price per ITR Token and maximum gross proceeds based on the amount of accepted subscriptions for the Offering:

Dates Effective Price per ITR Token Maximum Gross Proceeds
March 1, 2020 - April 30, 2020 $0.03 $4,000,000
May 1, 2020 - July 31, 2020 $0.06 $5,000,000
August 1, 2020 - September 30, 2020 $0.09 $6,000,000

The Company also offers additional bonus tokens for bulk purchases of ITR tokens, both individually and as a group. Each investor who buys less than $50,000 of ITR tokens can request a Tracking Code from the Company, which they can use to invite other investors to the Offering. If those other investors present the code when purchasing ITR Tokens in the Offering, this counts towards the total Dollar Amount for that code, and the Bonus ITR Tokens are paid out to everyone with that code — including both the original investor and those they invited — as part of a "bulk group discount".

Any potential investor who is not part of a pre-existing group of investors and who seeks to establish such a group in order to take advantage of these discounts should seek legal advice with respect to compliance with US securities laws regarding broker-dealer registration and disclosure under Section 17(b) of the Securities Act of 1933 before contacting other potential investors.

Dollar Amount Bonus Tokens
$10,000 0% Bonus
$20,000 5% Bonus
$30,000 10% Bonus
$40,000 15% Bonus
$50,000+ 20% Bonus

The Company is in the early stages of developing the ITR Token Platform on which it will issue the ITR Tokens. The ITR Token Platform and the ITR Tokens are intended to serve as a bridge among decentralized payment networks of communities that will utilize platforms to be developed by the Company and managed by the respective communities (the "Community Platforms”). The Company is also seeking to develop technology that will allow any community to customize, issue and manage its own currency in the form of digital community coins (the "Community Coins”) by downloading and deploying the Community Platform on a number of community-based computers. The technology is intended to allow communities to create "private label” digital currencies on dedicated distributed ledgers with a limited initial investment of financial and human resources, and to use such digital currencies in furtherance of their communities’ goals (whether such goals may be driven by monetary, social, commercial, or other considerations).

The Company plans to use the proceeds from the Offering to meet the current working capital requirements of the Company, including legal, accounting and administrative expenses related to the establishment of the Company’s business, to pay the costs of the Offering, to develop the Intercoin Platform, to develop the Community Platforms, to pay for the cost of subsequent offerings and for other marketing, development and administrative expenses. A portion of the proceeds will be paid to the Company’s affiliates. See "Use of Proceeds.”

No portion of the proceeds from the Offering will be held in escrow. The Company will receive the net proceeds from the sale of ITR Tokens upon the completion of each sale and will have broad discretion with respect to the application of such proceeds subject to the limits described in this memorandum. See "Risk Factors - Risks Related to Offering.”

In the event that the Company does not complete and launch the Intercoin Platform by July 31, 2027, then the Company will be dissolved, provided that the Company may postpone this date until July 31, 2030 with the approval of the holders of a majority of the ITR Tokens. In the event of the dissolution of the Company prior to the launch of the Intercoin Platform, the Company shall, after making provision for the payment of the Company’s liabilities, distribute the Company’s remaining assets to the holders of the ITR Tokens (other than the Company’s founders and their affiliates) based on the number of Intercoins each of them is entitled to receive. There can be no assurance that the Company will have sufficient funds to pay any amount to the holders of the ITR Tokens upon the dissolution of the Company. See "Risk FactorsRisks Related to ITR Tokens.”

In order to subscribe to purchase the ITR Tokens, an investor would take the steps outlined in the Subscription Procedure below.

The Offering will expire on the earlier of the sale of all of the ITR Tokens available in the Offering or September 30, 2020.

The ITR Tokens are securities for purposes of U.S. federal and state securities laws.

The Company is offering the ITR Tokens to U.S. investors in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act”), set forth in Rule 506(c) of Regulation D under the Securities Act. Under Rule 506(c), the Company can only sell the ITR Tokens to U.S. investors who are "accredited investors” as defined in Rule 501 of Regulation D. The Company is required to verify the status of each U.S. investor as an "accredited investor.” As a result, each U.S. investor who subscribes for ITR Tokens will be required to provide the Company with additional documentation that establishes that the investor is an accredited investor. See "Terms of Offering – Purchase of ITR Tokens by U.S. Persons.”

The Company is offering the Rights to certain non-U.S. investors in offshore transactions in reliance on Regulation S under the Securities Act. Each non-U.S. investor will be required to confirm that such investor is a not a "U.S. person” for purposes of Regulation S and that such investor was offered the Rights outside of the United States and submitted its subscription documents to the Principal Placement Agent from outside the United States. See "Terms of Offering - Purchasing Restriction".

The ITR Tokens will be "restricted securities” for purposes of the Securities Act. As a result, the ITR Tokens may not be resold or otherwise transferred except in a transaction that is either registered under the Securities Act or exempt from the registration requirements of the Securities Act. The ITR Tokens will also be subject to restrictions on transfer set forth in the Subscription Agreement. As a prospective purchaser, you should be aware that you may be required to bear the financial risks of an investment in the ITR Tokens for an indefinite period of time. For a description of certain restrictions on transfers of the ITR Tokens, see "Risk Factors – Risks Related to the Offering” and "Transfer Restrictions.”

An investment in the ITR Tokens is highly speculative and involves substantial risks. An investment in the ITR Tokens is not suitable for any investor who is not able to understand the nature of the risks of an investment in the ITR Tokens or who is unable to bear the loss of their entire investment in the ITR Tokens. See "Risk Factors

Neither the U.S. Securities and Exchange Commission, any state securities commission nor any other regulatory authority, has approved or disapproved of an investment in the ITR Tokens, nor have any of the foregoing authorities passed upon or endorsed the merits of this Offering or the accuracy or adequacy of this memorandum. Any representation to the contrary is a criminal offense.

The date of this memorandum is November 21, 2020.


 

This memorandum has been prepared solely for use in connection with the Offering of the ITR Tokens described in this memorandum.

No person is authorized in connection with the Offering to give any information or to make any representation not contained in this memorandum, and, if given or made, such other information or representation must not be relied upon as having been authorized by the Company or any of its officers, representatives or agents. While such information is believed to be reliable for the purpose used in this memorandum, neither the Company nor any of its officers, representatives or agents assumes any responsibility for the accuracy of such information. The delivery of this memorandum does not imply that the information in this memorandum is correct as of any time after the date of this memorandum.

In making an investment decision regarding the ITR Tokens, you must rely on your own examination of the Company, the proposed features of the Intercoin network, the ITR Tokens, and the terms of the Offering, including the merits and risks involved. Neither the Company nor any of its representatives is making any representation to any offeree or purchaser of the ITR Tokens regarding the advisability or legality of an investment in the ITR Tokens by such offeree or purchaser under any applicable legal investment or similar laws or regulations.

You should not construe the contents of this memorandum as legal, business, tax, accounting, investment, financial or other advice, and you should consult your own counsel, accountants and other advisors as to the legal, business, tax, regulatory, accounting, financial and related aspects of a purchase of the ITR Tokens.

This memorandum is not a prospectus and does not purport to contain all information a subscriber may require to form an investment decision. This memorandum contains a summary of certain documents described in this memorandum. These summaries do not purport to be complete and they are subject to and qualified in their entirety by reference to the applicable documents. Copies of the such documents will be provided to any prospective subscriber upon request and should be reviewed for complete information concerning the rights, privileges and obligations of subscribers of the ITR Tokens. In the event that descriptions in or terms of this memorandum are inconsistent with or contrary to the description in or terms of such other documents, such other documents shall control.

The Company reserves the right to modify or withdraw the Offering at any time prior to its completion, and to reject any subscription for the ITR Tokens, in whole or in part.

Each prospective investor must comply with all applicable laws and regulations in force in any jurisdiction in which the investor purchases, offers or sells the ITR Tokens or possesses or distributes this memorandum and must obtain any consent, approval or permission required by it for the purchase, offer or sale by it of the ITR Tokens under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers or sales, and neither the Company nor any of its affiliates or representatives shall have any responsibility therefor.

The Company will respond to any questions that investors or their advisors may have concerning the Offering and will make available for examination by any investor or its advisors such records and files in its possession as may be pertinent to an investor’s decision whether to invest in the ITR Tokens.

Prospective subscribers outside the United States should inform themselves as to the legal requirements and tax consequences within the countries of their citizenship, residence, domicile and place of business with respect to the acquisition, holding or disposal of the ITR Tokens, and any foreign exchange restrictions that may be relevant thereto. The distribution of this memorandum and the offer and sale of the ITR Tokens in certain jurisdictions may be restricted by law.

The terms and conditions of the Offering and the ITR Tokens are governed by the Subscription Agreement, a copy of which is Exhibit A to this memorandum (the "Subscription Agreement”). Any description of this document in the text of this memorandum is subject to and qualified in its entirety by reference to such exhibit. This memorandum and the exhibit should be reviewed carefully by each investor and each investor’s legal, accounting and tax advisers prior to making any decision concerning an investment in the ITR Tokens.

This memorandum does not constitute an offer to sell any of the ITR Tokens to any person in any jurisdiction where it is unlawful to make such an offer.


 

FORWARD-LOOKING STATEMENTS

This memorandum contains statements which constitute forward-looking statements. You should not place undue reliance on these statements. Forward-looking statements include information concerning possible or assumed future actions and developments, including descriptions of the Company’s expectations regarding the completion, development and functionality of the ITR Token Platform and the Community Platforms, the future sale of Intercoins or ITR Tokens by the Company, and the future uses or performance of the ITR Tokens or Intercoin Platform, among other things. These statements are typically identified by words such as "may,” "will,” "could,” "should,” "would,” "believe,” "anticipate,” "expect,” "plan,” "intend,” "estimate” and words or expressions of similar meaning. The Company based these statements on assumptions made by the Company regarding future actions and developments and other factors that the Company believes are appropriate under the circumstances. As you read and consider the information in this memorandum, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions.

Although the Company believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect future actions and developments, including the actual completion, development and functionality of the Intercoin Platform, the Community Platforms, the future sale of ITR Tokens or Intercoins by the Company and future uses or performance of the Intercoin Platform, and could cause actual results to differ materially from those expressed in the forward-looking statements. These factors include, among other things:

  • the Company’s ability to complete and launch the Intercoin Platform with the functionality envisioned by the Company;
  • the Company’s ability to complete and launch the Community Platforms with the functionality envisioned by the Company;
  • the Company’s ability to obtain additional financing for completing the development and launch of the Intercoin Platform and the Community Platforms;
  • the Company’s ability to manage and operate the Intercoin Platform and Community Platforms successfully;
  • the Company’s ability to complete the planned offerings of the ITR Tokens;
  • the interest of communities in adopting the Community Platforms and the Community Coins;
  • the Company’s ability to list the ITR Tokens on an exchange or alternative trading system;
  • the application of federal, state and foreign laws and regulations to the Company, and the use of the ITR Tokens and the Community Coins, in light of the absence of clear guidance on how these laws and regulations will be applied;
  • the adoption of new federal, state and foreign laws and regulations that may regulate or restrict the business of the Company, and the use of the ITR Tokens, Intercoins and the Community Coins, including adoption of restrictions on the offer, sale and trading of cryptocurrencies and related coins;
  • the demand for cryptocurrencies and related coins generally and the Intercoins in particular; and
  • general economic conditions.

In light of these risks and uncertainties, there can be no assurance that the results and developments contemplated by the forward-looking statements contained in this memorandum will in fact transpire, and you should not regard the inclusion of a forward-looking statement in this memorandum as a representation by the Company that its plans and objectives will be achieved, nor should you place undue reliance on such forward-looking statements. The Company does not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


 

TABLE OF CONTENTS

  1. SUMMARY
  2. THE OFFERING
  3. RISK FACTORS
  4. USE OF PROCEEDS
  5. DESCRIPTION OF RIGHTS
  6. DESCRIPTION OF INTERCOINS
  7. BUSINESS OF THE COMPANY
  8. GOVERNMENTAL REGULATION
  9. MANAGEMENT
  10. COMPENSATION OF MANAGEMENT AND AFFILIATES
  11. FEDERAL INCOME TAX CONSIDERATIONS
  12. TERMS OF OFFERING
  13. TRANSFER RESTRICTIONS
  14. ADDITIONAL INFORMATION

EXHIBITS

Exhibit A      Subscription Agreement



the SUMMARY



This summary highlights certain key information contained elsewhere in this memorandum. This summary is not complete and does not contain all of the information that you should consider before investing in the ITR Tokens. You should read this entire memorandum, including the risk factors, before investing in the ITR Tokens. Any capitalized terms used, but not defined, in this memorandum have the meanings given to them in the Subscription Agreement.

The Company

Intercoin, Inc. (the "Company”) is a Delaware corporation organized on November 15, 2017. The address of the Company is 425 Neptune Avenue #15G, BROOKLYN NY 11224, and its telephone number is (833) 724-9462.

Management

The two founders of the Company (the "Founders”) are Gregory Magarshak and Jason Page, who are the Company’s current directors, executive officers and holders of all of the Company’s outstanding common stock. See "Management

The Intercoins

The Intercoins are being designed to be a digital asset based on a decentralized, open source protocol of the peer-to-peer computer network that will host the decentralized public transaction ledger, on which all Intercoins are recorded. The Intercoin Platform software source code will include the protocols that govern the original issuance of the Intercoins and the cryptographic system that secures and verifies Intercoin transactions. The distributed ledger will be a canonical record of every Intercoin, every Intercoin transaction (including the original issuance of the Intercoins) and every Intercoin address associated with a quantity of the Intercoins. The Intercoin Platform and network software programs can interpret the distributed ledger to determine the exact Intercoin balance, if any, of any public Intercoin address listed in the distributed ledger which has taken part in a transaction on the Intercoin Platform. The Intercoin Platform will utilize the distributed ledger to evidence the existence of the Intercoins in any public Intercoin address. An Intercoin private key controls the transfer or "spending” of the Intercoins from its associated public Intercoin address. An Intercoin "wallet” is a collection of private keys and their associated public Intercoin addresses.

The Platforms

The Company is in the early stages of developing a decentralized payment platform (the "Intercoin Platform”) that is intended to serve as a bridge among decentralized payment networks of various affinity groups, organizations, and other communities to be developed by the Company and managed by the respective communities (the "Community Platforms”). The Company is also seeking to develop technology that will allow any community (for example, a cruise line, casino, resort operator, club, university, city or town) to customize, issue and manage its own currency in the form of digital community coins (i.e., the Community Coins), by simply downloading and deploying the software on a number of community-based computers. In essence, this technology will allow communities to create "private label” digital currencies on dedicated distributed ledgers with relatively little upfront investment of financial or human resources.

Subject to community-adopted rules and privacy considerations, the Community Platforms will be designed to allow communities to track and analyze a wide range of precisely detailed metrics in regard to how currency flows in the community. Access to such extensive financial data can help communities work toward their individualized goals, which could span a spectrum from simple commercial objectives (e.g., helping a casino better understand gambling patterns) to complex social objectives (e.g., helping a metropolitan area better define "basic income” thresholds or strategize regarding more effective deployment of financial services in under-served communities).

Each participating community will have an account on the Intercoin Platform. The Company Intercoins will serve as "digital reserves” backing each community’s local, Community Coin economy and enabling payments to be made seamlessly across communities. See "Business of the Company.”

Acquisition, Use, Transfer, and Exchange of Company Intercoins following Platform Launch

When the Intercoin Platform is launched, the holders of the Company Intercoins will be able to hold Company Intercoins in an Intercoin wallet and transfer Company Intercoins to and from that wallet.

Persons who wish to obtain Community Coins will be able to acquire the Company Intercoins in the secondary market and deposit them with a community in exchange for the community’s Community Coins. This will be accomplished by a digital transaction ("Cash In”) in which the Company Intercoins will be sent to the community’s account on the Intercoin Platform and locked there, while the Community Platform will issue a corresponding amount of Community Coins to the person’s account on the Community Platform. An opposite type of digital transaction ("Cash Out”) will allow holders of Community Coins to elect to have them taken out of circulation on the Community Platform, and, in exchange, unlock the corresponding amount of the Company Intercoins from the community’s account.

During each Cash In and Cash Out transaction, the exchange rate of Community Coins to Company Intercoins will be simply the amount of Company Intercoins the community has on reserve divided by the total number of Community Coins in circulation at the time of the transaction. Each Cash In and Cash Out transaction may be subject to additional rules clearly published by the community in a simple computer language processed by the Intercoin Platform. Different sets of rules may be useful for various purposes, such as raising money for a project, or making sure that money donated to a community circulates within the community’s economy enough times before it may be cashed out. Thus, any restrictions a community places on Cash Ins and Cash Outs will be known publicly by anyone who chooses to transact with that community.

Cross-community payments will be made by withdrawing Company Intercoins from one Community Platform and depositing the Company Intercoins into another Community Platform. The exchange rate between communities will be determined simply by comparing the respective exchange rates of the two Community Coins to Company Intercoins. These transactions can occur on a digital basis, making Company Intercoins not just a digital unit of value, but a "bridge currency” between different Community Coins. A member of a given community transacting on a cross-community basis may view prices in his or her preferred currency, while payments are seamlessly implemented with cross-community payments behind the scenes.

The Company anticipates that the Company Intercoins will be able to be traded for a variety of other currencies, either on an over-the-counter basis or other trading platforms.


 

Development Plans and Status

The Intercoin Platform, which will host all of the Company Intercoins, is in the initial stages of being developed by the Company. The Intercoin Platform development process will include development of the Intercoin Platform proof of concept, a testing version of the Intercoin Platform, and the final Intercoin Platform. None of these processes has been completed by the Company, and there is no guarantee that the Company will be successful in its development plans.

The Company must also develop the technology to facilitate the Community Coins and the Community Platforms, which are "side chains” from the main Intercoin distributed ledger. To accomplish this development, the Company intends to expand its development team and partner with experts in decentralized identity, data integrity, cryptography, distributed systems, byzantine consensus and other relevant areas. The Company also intends to develop the community kit (the "Community Kit”), which will be provided by the Company to communities. As conceived, the Community Kit will allow communities to issue their own Community Coins and integrate the Community Coins into their local community mobile applications. The Company is in the early stages of developing the Community Platform, and there is no guarantee that the Company will be successful in its development plans.

In addition to the development plans above, the Company also intends to engage in significant marketing efforts to target various types of communities – e.g., companies, universities, townships, etc. – to issue Community Coins and join the Intercoin Platform. The successful adoption by multiple communities is an essential component to the success of the Company’s business model and the adoption and usage of the Intercoins.

The Company intends to move expeditiously toward expanding its development team and ramping up its development activities once it begins to receive funding through the Offering. The Company currently expects that development of the initial versions of the Intercoin Platform and the Community Platforms will be completed over a period of 12 to 36 months, depending on the timing and amount of funding obtained by the Company, the Company’s ability to identity and retain experienced individuals to complete the platforms, and the Company’s ability to resolve issues with the design and functionality of the platforms. However, as with any new technology in the beginning stages of development, the Company may encounter unanticipated issues (as well as significant known challenges referenced in this memorandum) during the development process, and it has very substantial work to do in order to demonstrate the viability and security of the Intercoin Platform design concept, to develop and deploy a test platform, to build out and deploy a functional Intercoin Platform and Community Platforms, and to promote adoption of the Intercoin Platform and the Community Platforms.

Prospective investors are cautioned to consider carefully the significant development and adoption challenges the Company faces, and the material possibility that one or more of these challenges will prove insurmountable. See "Risk Factors – Risks Related to the Business.”

Potential Benefits of Intercoin Platform

Many of the existing cryptocurrencies transact on global, monolithic networks, with a "one-size-fits-all” approach. They do not adapt to the needs of local communities, but instead treat all participants in the same manner. The Company will focus on developing platforms that facilitate the creation of digital currencies that meet the needs of each community. The intention is that a local currency would be customized by and for the community and would trade only within that community, but would be seamlessly "bridged” for use in other communities via the Intercoin Platform. By adopting a Community Coin, a community could gain access (subject to community-adopted rules and privacy considerations) to extensive data regarding how the currency is used within the community. That data, in turn, would enhance a community’s ability to further the community’s own objectives, whether they are commercial, social, or some combination.

For example, a community might consist of a metropolitan area with a diverse population spread over a relatively large geographic area. That community might use data generated by Community Coins to better understand net capital inflows and outflows in specific sub-communities. Such understanding then could be used, by way of example, in the creation of special development zones or other incentives intended to enable less affluent sub-communities to retain a greater percentage of sub-community capital locally, or to attract investment from more affluent sub-communities. In terms of a "real world” example, that might lead to the availability of banking services in a community historically lacking them, which in turn might lead to a greater tendency of sub-community residents to deposit their paychecks locally, and a greater tendency of the banking system to lend within that sub-community in support of homeownership, creation of new businesses, etc. Likewise, a community that has adopted a social program (e.g., a cost-of-living subsidy for persons below the poverty line) might use data generated by Community Coins to evaluate the results and effectiveness of the program with much greater precision than is currently possible, and to tweak the program as appropriate in view of lessons learned.

In a very different but equally feasible example, a community might consist of a chain of resorts or theme parks. That community might use data generated by Community Coins to develop a more nuanced view of spending habits at its resorts or parks for the simple commercial purpose of driving increased profits.

The potential uses for the Company Intercoins and Community Coins are many, including fundraising (e.g., selling currency to fund a new project), micropayments (e.g., content creators being paid as people engage with the content), donations, etc. The intention is to provide communities a platform and set of functionalities that will enable and encourage them to conceive of novel and productive uses for the Company Intercoins.

Development of Other Operations

The Company will seek to make the Intercoins compatible with native apps (such as iOS and Android, Windows, Mac and Linux), and to develop the following features of the Intercoin and Community Platforms: reporting (including local consumer price index of the communities), governance (including provably random polling), basic income, user experience, visual design, payment widgets for apps (such as PayPal), third-party development platform and videos and guides.

Use of Proceeds

The Company plans to use the proceeds from the Offering to meet the current working capital requirements of the Company, including legal, accounting and administrative expenses related to the establishment of the Company’s business, to pay the costs of the Offering, to develop the Intercoin Platform, to develop the Community Platforms, to pay for the cost of subsequent offerings and for other marketing, development and administrative expenses. A portion of the proceeds will be paid to the Company’s affiliates. See "Use of Proceeds.”

No portion of the proceeds from this Offering will be held in escrow. The Company will receive the net proceeds from the sale of each ITR Token upon the completion of each sale and will have broad discretion with respect to the application of such proceeds subject to the limits described in this memorandum. See "Risk Factors – Risks Related to Offering.”

The Company is authorized to hold the proceeds of the Offering in any type of currency it deems appropriate, and will have full discretion to determine if and when such proceeds should be converted to U.S. Dollars or another type of currency.

Prior to the use of the proceeds, the Company will hold substantially all of the proceeds in the form of "Permitted Temporary Investments” consisting of (i) securities that are obligations of or guaranteed by the U.S. government or an instrumentality thereof; (ii) certificates of deposit, money market accounts, savings accounts, checking accounts or any combination thereof in banks insured by the Federal Deposit Insurance Corporation (the "FDIC”), and (iii) Bitcoin or Ether.

No portion of the proceeds will be used to repurchase any ITR Tokens or Intercoins from any Founder or their affiliates.

A limited number of Intercoins issued by the Company to employees or other service providers (but not the Founders or their affiliates) to preserve the Company’s limited cash resources pending its receipt of sufficient proceeds from this Offering may be subject to repurchase by the Company, but any such repurchases would be limited in the aggregate to the lesser of $1,000,000 or 10% of the proceeds of the Offering. See "Description of Business – Office and Staff”.

Certain Payments to the Founders and their Affiliates

The Company’s Founders and their affiliates will not receive any portion of the proceeds of the offering of the Intercoins, except as follows:

A portion of the proceeds (but in no event more than 6% of the Company’s annual operating budget) may be used to pay accrued and ongoing salaries owed to the Executive Team. The total accrued founder salaries from working without salary being paid out for a year were approximately $100,000 as of the date of this memorandum. See "Compensation of Management and Affiliates.”

A portion of the proceeds may be used to reimburse the Founders and their affiliates for amounts expended by them on behalf of the Company. The accrued amount of such expenses as of July 31, 2018, is less than $50,000.

Working Capital Requirements

The Company currently has a very limited amount of working capital.

The Company will require a substantial amount of working capital to develop, launch, promote, and support its Platforms. The Company is currently developing a budget of these items, but preliminarily estimates that its costs will be approximately $11 million per year for a period of five years or more.

The Company will also need a substantial amount of working capital to pay legal, accounting and administrative expenses related to the establishment of the Company’s business and other marketing, development and administrative expenses.

The Company is obligated to pay up to $1,665,000 to prior investors in the Company upon the launch of the Intercoin Platform. See "Business – Prior Rights Offering” and "Risk Factors – Risks Related to the Offering.”

Anticipated Allocation of Intercoins at Time of Launch of Intercoin Platform

The Company will be authorized to issue a maximum of 1.0 billion Intercoins.

The Company currently expects that 750,000,000 Intercoins will be issued and outstanding at the time of the launch of the Intercoin Platform, allocated as follows:

Anticipated Allocation of Intercoins at Time of Platform Launch

Holders Number of Intercoins Percentage (Outstanding Intercoins at time of launch) Percentage (Authorized Intercoins)
Founders (1) 100,000,000 13.3% 10.0%
Investors in prior offering (2) 27,500,000 3.7% 2.8%
Investors in subsequent offerings including this Offering (3) 622,500,000 83.0% 62.2%
Subtotal 750,000,000 100.0% 75.0%
Reserved for issuance to charities or otherwise for charitable purposes 50,000,000 - 5.0%
Reserved for future issuance by the Company 200,000,000 - 20.0%
Total 1,000,000,000 100%

(1)      The Founders have received 100,000,000 ITR Tokens.

(2)      The Company has previously raised $555,000 from certain investors in a prior offering. These investors have received 55,500,000 ITR Tokens. See "Description of Business – Prior Offering.”

(3)      The table assumes that the Company will issue 750,000,000 Intercoins at the time of launch of the Intercoin Platform based on additional ITR Tokens to be sold by the Company and ITR Tokens to be issued in the Company’s security token offerings. There can be no assurance that such offerings will be undertaken or completed. See "Risk Factors – Risk Related to Business” and "Description of Business – Planned Offerings.”

The Company’s Founders and their affiliates have agreed to not sell more than 2% ITR Tokens held by them for a period of at least eighteen (18) months after the completion of the Offering.

Outside Advisors

The Company has informal relationships with a number of industry experts who have provided the Company with advice concerning the Company’s planned platforms and business. The Company is seeking to enter into formal arrangements with one or more of these individuals to serve as formal advisors to the Company, although none of them is currently engaged.

Resale of the ITR Tokens

Under Rule 144 of the Securities Act, investors in the Offering who are not affiliates of the Company may resell the ITR Tokens or Intercoins without restriction in the United States after they have held the ITR Tokens or Intercoins for a combined period of one year (commencing on the date that the investor originally purchased the ITR Token or Intercoins). After 40 days, non-U.S. persons may issue a written (or electronically emailed) request to Company to remove restrictions on transferring ITR Tokens, accompanied with a legal opinion that it such transfers are permitted within the respective local jurisdictions of the sender and receiver. Company in its sole discretion may honor such requests, allowing non-U.S. persons to transfer some or all of their ITR Tokens to other persons, including U.S. persons.

Investors may also be able to resell the ITR Tokens to non-U.S. persons outside the United States immediately after the investors purchase the ITR Tokens in reliance on Rule 904 of Regulation S under the Securities Act.

There may be additional restrictions on the resale of the ITR Tokens and Intercoins under applicable law. See "Transfer Restrictions.”

The ability of investors to resell the ITR Tokens is complex and each investor should consult with its advisors regarding the applicable restrictions prior to investing in the ITR Tokens or seeking to resell any ITR Tokens. See "Transfer Restrictions – Resale of the ITR Tokens.”

Secondary Market for ITR Tokens

The Company does not necessarily intend to seek the listing of the ITR Tokens on any securities exchange or the trading of the ITR Tokens on any alternative trading system. As a result, the Company can provide no assurance that any secondary market for the ITR Tokens will be developed or sustained, even after the Intercoins become tradable under Rule 144. See "Risk Factors – Risks Related to the Offering.”

Secondary Market for Intercoins

After the launch of the Intercoin Platform, the Company may seek to list the Intercoins on a securities exchange or arrange for trading of the Intercoins on an alternative trading system that accepts cryptocurrencies. Unless the Securities and Exchange Commission (the "Commission”) adopts regulations that permit trading of cryptocurrencies like Intercoins on unregistered trading platforms, the Intercoins may not be sold on any trading platform in the United States that is not registered with the Commission as a securities exchange or alternative trading system. There can be no assurance that the Commission will adopt such regulations. It is possible that Intercoin could be traded on certain foreign exchanges.

Additionally, in order for the ITR Token or Intercoins to be listed on a US registered securities exchange, the Company would need to become a reporting company under the Exchange Act. The Company has not yet determined whether it will elect to file a registration statement with the SEC to become a reporting company.

The Commission may also require the Company to register as a securities broker-dealer under the Exchange Act and to register the Intercoin Platform as an alternative trading system, in order to exchange Intercoins and Community Coins on the Intercoin Platform. If such registrations are required and the Company is unable to obtain such registrations, the Intercoin Platform may not be able to function as planned by the Company. See "Risk Factors - Risks Related to the Offering.”

The Company has not received any commitment from any securities exchange or alternative trading system to accept the ITR Token or Intercoins for trading and there can be no assurance that the ITR Token or Intercoins would be accepted. As a result, the Company can provide no assurance that any secondary market for the ITR Token or Intercoins will be developed or sustained, even after the ITR Tokens become tradable under Rule 144. See "Risk Factors – Risks Related to the Offering.”

Subsequent Offerings

The Company expects to offer additional ITR Tokens in one or more subsequent offerings prior to the launch of the Intercoin Platform, to offer equity interests in the Company and to conduct an initial offering of Intercoins in conjunction with the launch of the Intercoin Platform. The Company may seek to register one or more of these offerings with the Commission under the Securities Act. There can be no assurance that the Company will undertake a registered offering or that any such offering would be declared effective by the Commission. After the launch of the Intercoin Platform, the Company may also sell any remaining authorized but unissued Intercoins. See "Risk Factors – Risks Related to the Offering.”


 


THE OFFERING

Company:

Intercoin, Inc., a Delaware corporation.

Offering:

The Company is offering up to 15,000,000 Digital ITR Tokens (the "ITR Token”) to be issued by the Company. Each ITR Token will entitle the holder to receive one Intercoin upon the launch of a decentralized payment platform (the "Intercoin Platform”) on which it will issue the Intercoins.

Outstanding Rights:

The Company has previously issued Rights to acquire 155,500,000 ITR Tokens to the Company’s founders and certain investors.

Maximum Number of Intercoins:

The Company will issue a maximum of 1 billion Intercoins. It will issue at most 1 billion ITR tokens.

Price of the Intercoins:

The Company has established a "base price” of $0.09 per ITR Token. The Offering will proceed in several "rounds", and the price of ITR Tokens sold in the earlier rounds will reflect an effective discount from this base price. The price of the ITR Token based on the amount of accepted subscriptions is set forth on the table included on the cover page to this memorandum.

Availability of Prices:

The Company will post the price for the ITR Tokens for any particular day on its website (https://intercoin.org) as of 6:00 p.m. (Eastern Time) of the prior day (e.g., at 6:00 p.m. on Monday, the Company will post the price for Tuesday on the Company’s website).

Adjustment of Prices:

The price of the ITR Tokens will be adjusted daily based on subscriptions received and accepted through 5:00 p.m. (Eastern Time) of the prior day.

If a subscriber completes and submits his or her Subscription Agreement before 5:00 p.m. (Eastern Time) of any particular day, and complies with the other subscription requirements in a timely manner, then the subscriber will receive the price applicable to such day, even if the Company receives subscriptions that would otherwise cause the price of the ITR Tokens to move to the next pricing level.

Accepted Forms of Payment:

Each subscriber may pay the subscription price for the ITR Tokens in United States dollars, Bitcoin or Ether. If the subscriber remits the subscription price in Bitcoin or Ether, then the amount remitted must be equal to the U.S. dollar amount of the subscription price as of the time that the Company receives the subscription price. The actual subscription price paid by the subscriber, if paid in Bitcoin or Ether shall be the weighted average price of the currency between 9 a.m. and 10 a.m. (Eastern Time) on the day of receipt of the subscription price by the Company as set forth on www.Bitcoinaverage.com, as reasonably determined by the Company. In the event that the amount of Bitcoin or Ether is less than the required amount, then the Company will be entitled to reject the subscription or to accept the amount remitted and adjust the number of ITR Tokens acquired accordingly.

Maximum Offering:

The maximum number of ITR Tokens that may be sold in the Offering is 350,000,000 ITR Tokens, and the maximum gross proceeds is $15,000,000 (the "Maximum Offering”).

The consummation of the Offering is not subject to the sale of any minimum number of ITR Tokens. See "Risk Factors – Risks Related to Offering” and "Terms of Offering.”

Use of Proceeds:

The Company plans to use the proceeds from the Offering to meet the current working capital requirements of the Company, including legal, accounting and administrative expenses related to the establishment of the Company’s business, to pay the costs of the Offering, to develop the Intercoin Platform, to develop the Community Platforms, to pay for the cost of subsequent offerings and for other marketing, development and administrative expenses. A portion of the proceeds will be paid to the Company’s affiliates. See "Use of Proceeds.”

No portion of the proceeds from this Offering will be held in escrow. The Company will receive the net proceeds from the sale of each ITR Token upon the completion of each sale and will have broad discretion with respect to the application of such proceeds subject to the limits described in this memorandum. See "Risk Factors – Risks Related to Offering.”

The Company is authorized to hold the proceeds of the Offering in any type of currency it deems appropriate, and will have full discretion to determine if and when such proceeds should be converted to U.S. Dollars or another type of currency.

Prior to the use of the proceeds, the Company will hold substantially all of the proceeds in form of "Permitted Temporary Investments” consisting of (i) securities that are obligations of or guaranteed by the U.S. government or an instrumentality thereof; (ii) certificates of deposit, money market accounts, savings accounts, checking accounts or any combination thereof in banks insured by the Federal Deposit Insurance Corporation (the "FDIC”), and (iii) Bitcoin or Ether.

No portion of the proceeds will be used to repurchase any ITR Tokens or Intercoins from any Founder or their affiliates, or to purchase any ITR Tokens or Intercoins in any secondary market that may develop.

A limited number of ITR Tokens issued by the Company to employees or other service providers (but not the Founders or their affiliates) to preserve the Company’s limited cash resources pending its receipt of sufficient proceeds from this Offering may be subject to repurchase by the Company, but any such repurchases would be limited in the aggregate to the lesser of $1,000,000 or 10% of the proceeds of the Offering. See "Description of Business – Office and Staff.”

See "Use of Proceeds.”

Liquidation of Company due to Failure to Launch Intercoin Platform:

In the event that the Company does not complete and launch the Intercoin Platform by July 31, 2027, then the Company will be dissolved, provided that the Company may postpone this date until July 31, 2030 with the approval of the holders of a majority of the ITR Tokens. In the event of the dissolution of the Company prior to the launch of the Intercoin Platform, the Company shall, after making provision for the payment of the Company’s liabilities, distribute the Company’s remaining assets to the holders of the ITR Tokens (other than the Company’s Founders and their affiliates) based on the number of Intercoins each of them is entitled to receive. There can be no assurance that the Company will have sufficient funds to pay any amount to the holders of the ITR Tokens upon the dissolution of the Company. See "Risk Factors – Risks Related to ITR Tokens and Intercoins.”

Lockup of Intercoins held by Founders and their Affiliates:

The Company has previously issued ITR Tokens to receive 100,000,000 Intercoins to the Company’s Founders. The Founders have agreed to not sell the ITR Tokens and any Intercoins held by them for a period of at least eighteen (18) months after the date of the completion of the Offering. See "Business of the Company – Issuance of Intercoins to Founders.”

Nature of Intercoins:

The Intercoins are a digital representation of value. The Intercoins are intended to be the "digital reserves” of the Community Coins and to be utilized to provide liquidity for the Community Coins. They do not represent an equity interest in the Company or entitle the holders to any rights of shareholders in the Company. See "Description of Intercoins.”

Distributions to Shareholders:

The Company will not make any distributions to its shareholders prior to the launch of the Intercoin Platform, and the initial issuance of the Intercoins.

After the launch of the Intercoin Platform and the initial issuance of the Intercoins, the Company will have the right to make dividend distributions to its shareholders, provided that no distributions will be made from the proceeds of the Offering or prior to the launch of the Intercoin Platform.

Plan of Distribution:

The ITR Tokens will only be offered and sold in jurisdictions in which such offers and sales are not prohibited. See "Terms of Offering.”

Purchase of ITR Tokens by U.S. Persons:

The Company is offering the ITR Tokens to U.S. investors in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act”), set forth in Rule 506(c) of Regulation D under the Securities Act. Under Rule 506(c), the Company can only sell the Intercoins to U.S. investors who are "accredited investors” as defined in Rule 501 of Regulation D. The Company is required to verify the status of each U.S. investor as an "accredited investor.” As a result, each U.S. investor who subscribes for ITR Tokens will be required to provide the Company with additional documentation that establishes that the investor is an accredited investor. See "Terms of Offering – Purchase of ITR Tokens by U.S. Persons.”

Purchase of Rights by Non-U.S. Persons:

The Company is offering the Rights to certain non-U.S. investors in offshore transactions in reliance on Regulation S under the Securities Act. Each non-U.S. investor will be required to confirm that such investor is a not a "U.S. person” for purposes of Regulation S and that such investor was offered the Rights outside of the United States and submitted its subscription documents to the Principal Placement Agent from outside the United States. See "Terms of Offering – Purchase of Rights by Non-U.S. Persons.”

Subscription Procedure:

In order to subscribe to purchase the ITR Tokens, an investor is required to take the following steps:

  1. Fill out the investor interest form on the Company's website
  2. Successfully pass KYC / AML and investor accreditation checks provided by Company and its partners.
  3. Indicate the address of an Ethereum Wallet owned by the investor, (e.g. generated by Trust Wallet or MetaMask)
  4. Send an amount of ETH, BTC or a wire transfer to the account indicated by Company.

Upon successful completion of the above steps, and subject to the additional stipulations listed below Company will send the ITR tokens to the Ethereum Wallet address indicated by investor, and put it on a greylist. For US investors, it will remain on the greylist for a 12-month period, after which it will be put on a whitelist and restrictions on transfer will be lifted. Under Rule 144 of the Securities and Exchange Act, US investors who have held ITR tokens for at least a 12-month period should subsquently be able to transfer and sell ITR tokens to others without registing a securities transaction with the SEC, as long as they comply with all requirements of their respective jurisditions, including State and Federal laws. The Company may attempt to take steps to facilitate transactions by designating an Exchange or Mechanism by which investors will be able to buy and sell ITR tokens after the 12-month period. However, there is no guarantee the Company will be successful in achieving this. For more information, see TRANSFER RESTRICTIONS.

Each investor must purchase a minimum of $10,000 in ITR Tokens, provided that the Company may, in its discretion, accept subscriptions for smaller amounts.

The Company reserves the right to accept or reject any subscription to purchase the ITR Tokens in its discretion.

Each subscriber may pay the subscription price for the Intercoins in United States dollars, Bitcoin or Ether. If the subscriber remits the subscription price in Bitcoin or Ether, then the amount remitted must be equal to the U.S. dollar amount of the subscription price as of the time that the Company receives the subscription price. The actual subscription price paid by the subscriber, if paid in Bitcoin or Ether shall be the weighted average price of the currency between 9 a.m. and 10 a.m. (Eastern Time) on the day of receipt of the subscription price by the Company as set forth on www.Bitcoinaverage.com, as reasonably determined by the Company. In the event that the amount of Bitcoin or Ether is less than the required amount, then the Company may, in its discretion, reject the subscription or to accept the amount remitted and adjust the number of ITR Tokens to be issued to the subscriber accordingly.

Upon the receipt of payment for the ITR Tokens, the Company will complete the sale of the ITR Tokens to the subscriber by delivering notice of issuance of the ITR Tokens to the subscriber.

In the event that any subscriber fails to pay the subscription price within the seven (7) day period described above, the Company may, at its option, reject the subscription or may provide the subscriber with the opportunity to complete the purchase at the then current price per ITR Token. See "Terms of Offering.”

Expiration of Offering:

The Offering will expire on the earlier of the sale of all of the ITR Tokens available in the Offering or September 30, 2020.

Transfer Restrictions:

The ITR Tokens have not been registered under the Securities Act or any state securities laws and may not be resold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.

The ITR Tokens and the Intercoins will be "restricted securities” for purposes of the Securities Act. As a result, the ITR Tokens and the Intercoins may not be resold or otherwise transferred except in a transaction that is either registered under the Securities Act or exempt from the registration requirements of the Securities Act. The ITR Tokens and the Intercoins will also be subject to restrictions on transferability set forth in the Subscription Agreement.

As a prospective purchaser, you should be aware that you may be required to bear the financial risks of an investment in the ITR Tokens for an indefinite period of time. For a description of certain restrictions on transfers of the ITR Tokens and Intercoins, see "Risk Factors – Risks Related to the Offering” and "Transfer Restrictions.”

Resale of the Intercoins:

Under Rule 144 under the Securities Act, investors in the Offering who are not affiliates of the Company may resell the ITR Tokens and any Intercoins issued under the ITR Tokens without restriction in the United States after they have held the ITR Tokens and the Intercoins for a combined period of one year (commencing on the date that the investor originally purchased the ITR Tokens). After 40 days, non-U.S. persons may issue a written (or electronically emailed) request to Company to remove restrictions on transferring ITR Tokens, accompanied with a legal opinion that it such transfers are permitted within the respective local jurisdictions of the sender and receiver. Company in its sole discretion may honor such requests, allowing non-U.S. persons to transfer some or all of their ITR Tokens to other persons, including U.S. persons.

Investors may also be able to resell the ITR Tokens outside the United States immediately after they purchase the ITR Tokens in reliance on Rule 904 of Regulation S under the Securities Act.

There may be additional restrictions on the resale of the ITR Tokens and Intercoins.

The ability of investors to resell the ITR Tokens and the Intercoins is complex and should be confirmed with each investor’s advisors. See "Transfer Restrictions – Resale of the ITR Tokens and Intercoins.”

Secondary Market for ITR Tokens:

The Company does not intend to seek the listing of the ITR Tokens on any securities exchange or the trading of the ITR Tokens on any alternative trading system. As a result, the Company can provide no assurance that any secondary market for the ITR Tokens will be developed or sustained, even after the ITR Tokens become tradable under Rule 144. See "Risk Factors – Risks Related to the Offering.”

Secondary Market for Intercoins:

After the launch of the Intercoins, the Company may seek to list Intercoins on a securities exchange or arrange for trading of Intercoins on an alternative trading system that accepts cryptocurrencies. Unless the Securities and Exchange Commission (the "Commission”) adopts regulations that permit trading of cryptocurrencies like the Intercoins on unregistered trading platforms, the Intercoins may not be sold on any trading platform in the United States that is not registered with the Securities and Exchange Commission (the "Commission”) as a securities exchange or alternative trading system. There can be no assurance that the Commission will adopt such regulations. It is possible that Intercoins may be listed on a foreign exchange.

The Company has not received any commitment from any securities exchange or alternative trading system to accept the Intercoins for trading and there can be no assurance that the Intercoins would be accepted. As a result, the Company can provide no assurance that any secondary market for the Intercoins will be developed or sustained, even after the Intercoins become tradable under Rule 144. See "Risk Factors – Risks Related to the Offering.”

Subsequent Offerings:

The Company expects to offer additional ITR Tokens in one or more subsequent offerings prior to the launch of the Intercoin Platform, to offer equity interests in the Company and to conduct an initial offering of Intercoins in conjunction with the launch of the Intercoin Platform. The Company may seek to register one or more of these offerings with the Commission under the Securities Act. There can be no assurance that the Company will undertake a registered offering or that any such offering would be declared effective by the Commission. After the launch of the Intercoin Platform, the Company may also sell any remaining authorized but unissued Intercoins. See "Risk Factors – Risks Related to the Offering.”

Governing Law:

The Intercoins will be governed by the laws of the State of Delaware.

Risk Factors:

An investment in the ITR Tokens is highly speculative and involves substantial risks. See "Risk Factors” beginning on page 27.




 

RISK FACTORS

An investment in the ITR Tokens and the Intercoins is highly speculative and involves substantial risks, including the risks described below. You should carefully consider the following risks. These risks could materially affect the Company’s ability to launch the Intercoin Platform, issue the Intercoins and implement its business plan. You could lose all or part of your investment.

The risk factors described below are not a complete list of all the risks that you may face when investing in the ITR Tokens, and you should use them only as guidance. Additional risks and uncertainties regarding the ITR Tokens, the Platforms and the Intercoins that are currently unknown to the Company, or that it currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Company’s ability to launch the Intercoin Platform, issue the Intercoins and implement its business plan.

Risks Relating to the Offering

Investors in the ITR Tokens will only receive Intercoins when and if the Company completes the Intercoin Platform and the Intercoins are issued by the Company. The launch of the Intercoin Platform is subject to substantial uncertainty.

An investor in the ITR Tokens will only receive the Intercoins when and if the Company launches the Intercoin Platform and issues the Intercoins. As discussed in this section of the memorandum, the Company’s ability to complete the Intercoin Platform and issue the Intercoins is subject to wide variety of material risks, many of which are outside of the control of the Company. As a result, it is possible that the Company may never issue the Intercoins. The Company’s failure to complete the Intercoin Platform and issue the Intercoins could result in the loss of an investor’s entire investment in the ITR Tokens.

The holders of the ITR Tokens may not receive any distributions from the Company in the event of the liquidation of the Company due to its failure to launch the Intercoin Platform.

In the event that the Company does not complete and launch the Intercoin Platform by July 31, 2027, then the Company will be dissolved, provided that the Company may postpone this date until July 31, 2030 with the approval of the holders of a majority of the ITR Tokens.

In the event of the dissolution of the Company prior to the launch of the Intercoin Platform, the Company will, after making provision for the payment of the Company’s liabilities, distribute the Company’s remaining assets to the holders of the ITR Tokens (other than the Company’s Founders and their affiliates) based on the number of Intercoins each of them is entitled to receive.

The amount of funds held by the Company at that time will depend on the amount of funds raised by the Company in the Offering and future offerings and the amount of expenses incurred by the Company. As discussed elsewhere in this memorandum, the Company expects to incur very significant expenses to develop its Platforms and implement its business plan. In light of the foregoing, there can be no assurance that the Company will have sufficient funds to pay any amount to the holders of the ITR Tokens upon the dissolution of the Company.

The offering of the ITR Tokens is not subject to the sale of any minimum amount of ITR Tokens. As a result, the amount received by the Company may not be sufficient to meet the Company’s current working capital requirements.

The Company is offering up to $15,000,000 in ITR Tokens to eligible investors. However, the sale of the ITR Tokens is not contingent upon the sale of any minimum amount of the ITR Tokens. Accordingly, the amount of funds which the Company may receive from the sale of ITR Tokens is uncertain and the Company may not receive sufficient funds from the offering to be able to meet its current working capital requirements. The Company currently estimates that it may need to spend approximately $11 million per year for five years or more in order to develop and launch the Intercoin Platform and Community Platforms and to implement its business plan.

In the event that the Company does not sell all of the available ITR Tokens in the Offering, the Company will need to seek additional funds from the future sale of Intercoins. The Company has not received any commitments from third parties to provide such funds and there can be no assurance the Company would be able to obtain funds from third parties. The Company’s failure to raise such funds could result in the loss of an investor’s entire investment in the ITR Tokens.

The Company’s Founders will have broad discretion regarding the application of the proceeds of the Offering.

The Company’s Founders, as the Company’s only directors and officers, have complete control of the Company, including the manner in which the Company will utilize the proceeds of the Offering of the ITR Tokens.

The Company plans to use the proceeds from the Offering to meet the current working capital requirements of the Company, including legal, accounting and administrative expenses related to the establishment of the Company’s business, to pay the costs of the Offering, to develop the Intercoin Platform, to develop the Community Platforms, to pay for the cost of subsequent offerings and for other marketing, development and administrative expenses. A portion of the proceeds will be paid to the Company’s affiliates. The Founders will control the manner in which the funds are utilized for these purposes. See "Use of Proceeds.”

A portion of the proceeds of the Offering may be used to repurchase ITR Tokens issued by the Company to employees or other service providers (but not the Founders or their affiliates) in exchange for their services, subject to an aggregate limit on such repurchases equal to the lesser of $1,000,000 or 10% of the proceeds of the Offering. See "Description of Business – Office and Staff”.

No portion of the proceeds from this Offering will be held in escrow. The Company will receive the net proceeds from the sale of each ITR Token upon the completion of each sale and will have broad discretion with respect to the application of such proceeds subject to the limits described in this memorandum.

The Company is authorized to hold the proceeds of the Offering in any type of currency it deems appropriate, and will have full discretion to determine if and when such proceeds should be converted to U.S. dollars or another type of currency.

The use of proceeds is subject to limits described in this memorandum. In this regard, the Company will hold substantially all of the proceeds in the form of "Permitted Temporary Investments” consisting of (i) securities that are obligations of or guaranteed by the U.S. government or an instrumentality thereof; (ii) certificates of deposit, money market accounts, savings accounts, checking accounts or any combination thereof in banks insured by the Federal Deposit Insurance Corporation (the "FDIC”), and (iii) Bitcoin or Ether. Additionally, no portion of the proceeds will be used to repurchase any ITR Tokens or Intercoins from the Founders or their affiliates, or to purchase any ITR Tokens or Intercoins in any secondary market that may develop.

Investors should be aware that the Company may use the proceeds in a manner that is not approved by the investors.

A portion of the proceeds of the Offering will be used by the Company to make payments to the Founders and their Affiliates

The Company’s Founders and their affiliates will not receive any portion of the proceeds of the offering of the ITR Tokens, except as follows:

•      A portion of the proceeds (but in no event more than 6% of the Company’s annual operating budget) may be used to pay accrued and ongoing salaries owed to the Executive Team. The total accrued salaries from working without salary being paid for a year were approximately $100,000 as of the date of this memorandum. See "Compensation of Management and Affiliates.”

•      A portion of the proceeds may be used to reimburse the company'd directors and their affiliates for amounts expended by them on behalf of the Company. The accrued amount of such expenses as of November 31, 2019 is less than $150,000.

The Company may sell ITR Tokens in subsequent offerings at a price less than the prices under the Offering. Additionally, the value of the Intercoins at the time they are issued may be less than the price investors pay for the ITR Tokens.

The Company is planning to sell additional ITR Tokens in subsequent offerings. The Company currently plans to sell such ITR Tokens at a price that exceeds the prices in the Offering, although the Company has the right to sell such ITR Tokens at a price less than the prices under the Offering.

Additionally, value of the Intercoins at the time they are issued will depend on the demand for the Intercoins at that time, which will reflect a variety of factors outside of the control of the Company.

In light of the foregoing, there can be no assurance that the Intercoins will have a value that exceeds the amounts paid by investors.

An investment in the ITR Tokens is not suitable for any investor who is not able to understand the nature of the virtual currency industry, the functions and limits of the Intercoins and nature of the risks faced by the Company. An investment is not suitable for any investor who is unable to bear the loss of their entire investment in the ITR Tokens.

In light of the complexity of the Company’s business and the virtual currency industry, as well as the significant risks associated with an investment in the Company, an investment in the ITR Tokens should only be made by investors who have sufficient knowledge and experience to understand the nature of these risks and the industry. Investors should understand the nature of virtual currencies and how they are issued, managed and traded. An investor’s status as an accredited investor is not a guarantee that the investor possesses the required knowledge and skills to manage an investment in the ITR Tokens and the Intercoins.

Additionally, due to the risks associated with an investment in the Company, potential investors should be able to bear the risk of the loss of their entire investment in the ITR Tokens and the Intercoins.

The rights may only be purchased by certain eligible investors.

To invest in the ITR Tokens, an investor will be required to represent that the investor is either an "accredited investor” or a non-U.S. person located outside the United States under applicable securities laws and that the investor is acquiring the ITR Tokens for investment purposes only and not with a view toward reselling or distributing them. See "Terms of Offering”.

The Company may impose other requirements and may request information from each investor that the Company deems necessary before accepting any investment. Even if an investor qualifies to invest in the ITR Tokens, and even if the investor has provided all information required by the Company, the Company may still reject any subscription.

The transfer of the ITR Tokens and the Intercoins will be subject to restrictions under federal, state and foreign securities laws. Additionally, the transfer of the ITR Tokens will require the prior consent of the Company.

The ITR Tokens have not been registered under the Securities Act or any state securities laws and may not be resold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.

The ITR Tokens and the Intercoins will be "restricted securities” for purposes of the Securities Act. As a result, the ITR Tokens and the Intercoins may not be resold or otherwise transferred except in a transaction that is either registered under the Securities Act or exempt from the registration requirements of the Securities Act. The ITR Tokens will also be subject to restrictions on transferability set forth in the Subscription Agreement.

As a prospective purchaser, you should be aware that you may be required to bear the financial risks of an investment in the ITR Tokens for an indefinite period of time. For a description of certain restrictions on transfers of the ITR Tokens and Intercoins, see "Transfer Restrictions.”

Even if the Company launches the Intercoin Platform and issues the Intercoins, there can be no assurance that an active trading market for the Intercoins will develop or be maintained.

After the launch of the Intercoins, the Company may seek to list the Intercoins on a securities exchange or arrange for the trading of the Intercoins on an alternative trading system that accepts cryptocurrencies. Unless the Commission adopts regulations that permit trading of cryptocurrencies like the Intercoins on unregistered trading platforms, the Intercoins may not be sold on any trading platform in the United States that is not registered with the Commission as a securities exchange or alternative trading system. There can be no assurance that the Commission will adopt such regulations. It is possible that Intercoins may be listed on a foreign exchange.

Additionally, in order for the Intercoins to be listed on a registered securities exchange, the Company would need to become a reporting company under the Exchange Act. The Company has not yet determined whether it will elect to file a registration statement with the SEC to become a reporting company.

The Commission may also require the Company to register as a securities broker-dealer under the Exchange Act and to register the Intercoin Platform as an alternative trading system, in order to exchange Intercoins or Community Coins on the Intercoin Platform. If such registrations are required and the Company is unable to obtain such registrations, the Intercoin Platform may not be able to function as planned by the Company.

The Company has not received any commitment from any securities exchange or alternative trading system to accept the Intercoins for trading and there can be no assurance that the Intercoins would be accepted. As a result, the Company can provide no assurance that any secondary market for the Intercoins will be developed or sustained, even after the Intercoins become tradable under Rule 144.

In the event that no trading market develops for the Intercoins, the value of the Intercoins would be materially adversely affected.

Trading in the Intercoins is likely to involve substantial participation by speculators, which will lead to price volatility for the Intercoins. To the extent any secondary market develops for the ITR Tokens, there is likely to be similar price volatility.

The Company expects that a significant portion of the demand for the Intercoins will be generated by speculators and investors seeking to profit from the short or long-term holding of Intercoins.

Price volatility will undermine Intercoin’s role as a medium of exchange in communities, as community retailers are much less likely to accept a highly volatile asset as a form of payment. Market capitalization for the Intercoins as a medium of exchange and payment method may always be low. A low level of acceptance of the Intercoins at the community level, or a contraction of Intercoin use, may result in increased volatility or a reduction in the Intercoin value. The Company believes that the Intercoins will fluctuate in value, but over time will gain a level of acceptance as a store of value, similar to certain precious metals; however, there is no guarantee that such growth in acceptance will occur, and a significant possibility that it will not.

The Company strongly cautions prospective investors against making investments in the Intercoins in hopes of short-term profits without carefully evaluating the likelihood that the Intercoins and the Community Platforms will gain widespread acceptance. Excessive speculation by investors may lead to volatility, which in turn may delay or prevent such acceptance. The Company believes that, in the absence of widespread acceptance of the Intercoins and the Community Platforms, the Intercoins will lose all or a substantial portion of their value, resulting in significant losses to investors.

Political or economic crises may motivate large-scale sales of Intercoins, which could result in a reduction in the Intercoin price.

As an alternative to fiat currencies that are backed by central governments, digital assets like the Intercoins, which are relatively new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of Intercoins either globally or locally. Large-scale sales of Intercoins would result in a reduction in Intercoin price.

The ability of investors to transfer the Intercoins could be subject to future restrictions that may be adopted by federal, state and foreign governmental authorities.

As discussed in the "Transfer Restrictions” section of this memorandum, the transfer of the ITR Tokens and the Intercoins is subject to current restrictions imposed on securities and virtual currencies by federal, state and foreign governmental authorities. The regulation of virtual currencies is rapidly evolving and highly unpredictable. There is a substantial risk that these governmental authorities may adopt additional restrictions on the offer, sale and trading of virtual currencies such as the Intercoins, including a possible ban of all trading. For example, in the spring of 2018, the People’s Republic of China banned the trading of cryptocurrencies.

The Company is unable to provide assurance that further restrictions on the offer, sale and trading of virtual currencies will not be adopted by other governmental authorities and the effect of such restrictions on the value of the ITR Tokens and the Intercoins.

The future value of the Intercoins may be adversely affected by sales of Intercoins by the Company and the Company’s Founders.

The Company will be authorized to issue a maximum of 1.0 billion Intercoins.

The Company currently expects that 750,000,000 Intercoins will be issued and outstanding at the time of the launch of the Intercoin Platform, allocated as follows:

100,000,000 Intercoins will be held by the Founders or persons to whom the Founders may transfer their ITR Tokens to such Intercoins prior to the launch (subject to the Founders’ agreement not to dispose of the Intercoins for a period of at least 18 months following the completion of the Offering).

27,500,000 Intercoins will be held by investors in the Company’s prior offering.

350,000,000 Intercoins will be held by the investors in the Offering (assuming the sale of ITR Tokens available in the Offering).

332,952,070 will be held by investors and others to whom the Company will issue ITR Tokens prior to the launch.

Assuming that the Company has issued 750,000,000 Intercoins at the time of the launch, the Company will have the ability to issue up to 250,000,000 additional Intercoins in the future. These Intercoins may be issued by the Company at the direction of the Founders. The Company has designated 50,000,000 of these Intercoins to be allocated to charities and other non-profit entities. The remainder will be sold by the Company to fund operations and, at the election of the Company, to make dividend distributions to the shareholders of the Company, which would include the Founders and other persons who may acquire equity interests in the Company.

The ability of the Company to issue additional Intercoins in the future and the ability of the Founders to sell their Intercoins could have material adverse effect on the price of the Intercoins following their launch. Additionally, any significant level of sales of the Intercoins by the Founders and the Company could cause a material decrease in the price of the Intercoins.

Risks Related to Business

The Company is a development stage company with a small staff that has not established its financial, accounting and administrative systems.

The Company is a development stage company with a staff consisting of its two Founders and three other full time staff members. To date, the Company has been focused on finalizing the design and features of the Intercoin Platform and the Community Platforms as well as arranging the financial, accounting and legal support needed to implement the Company’s business plan. The Company has not yet established the formal financial accounting or administrative systems that will be utilized to operate its business. The Company expects to establish these systems in the future utilizing the proceeds in the Offering.

As a development stage company, the Company is also subject to all the risks typically faced by other development stage companies, including the need to obtain required financing to implement its business plan, the need to develop appropriate management systems, the need to market its products and services, and the need to hire employees required for the Company’s business plan. In the event that the Company is not successful in completing these tasks, the Company’s ability to implement its business plan and to launch the Intercoin Platform is subject to significant uncertainty.

The Company is in the early stages of developing the Intercoin Platform and the Community Platforms. The Company will need to expend substantial time and funds, and engage a variety of third parties, to complete such development. There can no assurance that the Company will successfully complete the development of the Platforms.

The Company is in the early stages of developing the Intercoin Platform and the Community Platform. The completion of the development of these Platforms will require the Company to obtain a significant amount of funding, to employ programmers and other technology consultants to work on the development and launch of the Platforms, and to test the functionality and security of the Platforms, and to make required modifications to the Platforms. None of these steps have been completed.

The technology behind the Platforms and the Intercoins is novel and untested. It is critical that the technology that the Company builds be extremely secure. As with any newly developed technology, there may be unanticipated issues encountered during the development process, and the Company may not be able to address these issues effectively.

In light of the foregoing, there can no assurance when and if the Company will successfully complete the development of the Platforms.

The Company does not currently have the funds required to complete the development of the Intercoin Platform, the Community Platforms and to launch the Intercoins.

The Company will require a substantial amount of funds in order to complete the development of the Intercoin Platform, the Community Platform and to launch the Intercoins. In this regard, the Company has estimated, on a preliminary basis, that the cost of development will be $3,000,000 per year and may be substantially more depending on the issues encountered by the Company in the development process.

The Company currently intends to finance the development of the Intercoin Platform, Community Platforms and the launch of the Intercoins through proceeds of the Offering, subsequent offerings of ITR Tokens and the offering of other equity interest by the Company, and the planned initial offering of the Intercoins. As noted above, the Company has not received any commitments from any investors to provide any of these funds and there can be no assurance that such funds will be available.

In the event the Company does not successfully obtain such financing, the Company will not have sufficient funds to complete the development of the Platforms.

The Company does not currently have the personnel required to complete the development of the Intercoin Platform and the Community Platforms.

Although several of the Company’s staff members and independent contractors have experience in software programming and the virtual currency industry, none of them have previously developed or launched a virtual currency. As a result, the Company will need to retain a number of programmers and other technology experts to complete the development of the Platforms and to maintain them on an ongoing basis.

While the Company expects to recruit and retain the required experts, there is a general scarcity of management, technical, scientific, research and marketing personnel with appropriate training to develop and maintain the Platforms and the Intercoins. If the Company is not successful in obtaining the required experts, the Company may not be able to complete the development of the Platforms.

There can be no assurance that the Intercoin Platform, the Community Platforms or the Intercoins will have the security and functionality envisioned by the Company.

The Company intends to incorporate features in the Intercoin Platform and the Community Platforms that are designed to deliver a high degree of security and functionality for users of Intercoins, the communities adopting the Community Platforms and members of those communities. Many of these features have not been previously adopted by other virtual currencies. Although the Company believes its will be able to incorporate these features into the Platforms, the Company may encounter unexpected issues with the development, implementation and functionality of these features.

As a result, there can be no assurance that the Intercoin Platform and Community Platforms will have all of the features contemplated by the Company, which may undermine of the use and value of the Intercoins.

There can be no assurance that communities will adopt the Community Platforms.

The Company’s business plan contemplates that the Community Platform will be adopted by multiple communities. The Company believes that the Community Platforms, assuming they have the functionality and security contemplated by the Company, will provide an attractive solution for communities seeking to have a closed platform for members of their communities. The Company also believes that such communities will seek to purchase Intercoins in order to maintain the financial stability of the Community Platform.

The Company has not held any discussions with any communities regarding the possible adoption of the Community Platform, and has not yet received any commitments from any communities to adopt the Community Platforms.

The Company expects that it will encounter a variety of issues in marketing the Community Platforms, including the following:

the possible availability of alternative platform solutions that may be more attractive than the Company’s Community Platforms;

regulatory issues associated with operating the Community Platforms that the communities are not prepared to address;

tax treatment of transactions involving Community Coins; and

maintenance and management of the Community Platforms that the communities are not prepared to handle.

The Company plans to address these issues as part of the development and marketing of the Community Platforms. Nevertheless, it is possible that the Company’s solutions to these issues may be viewed as inadequate by the communities. Additionally, the Company may encounter difficulties in marketing the Community Platforms to communities for reasons that have not been anticipated by the Company.

In light of the foregoing, there can be no assurance that any communities will adopt the Community Platforms. If the Community Platforms are not adopted by multiple communities, the value of the Intercoins could be materially impaired.

The Company has a very limited amount of working capital and does not expect to generate any revenues from its operations for the foreseeable future. As a result, the Company’s ability to develop the Intercoin Platform, issue the Intercoins and implement its business plan is entirely dependent on the Company’s ability to raise additional funds from investors in the future.

The Company has previously raised the amount of $550,000 from investors. These funds have been utilized to support the development of the Company’s business, including legal, accounting, marketing and administrative expenses. As a result, the Company currently has a very limited amount of working capital.

The Company currently plans to raise a significant amount of additional funds in the future from investors through the Offering, the offering of additional ITR Tokens in future offerings, the sale of Intercoins and the sale of equity securities of the Company. The Company has no commitments from any investors to provide such funds and there can be no assurance that such funds will be raised by the Company. The Company’s ability to raise funds from investors will depend on investors’ assessment of the Company’s business and state of development at the time that the Company seeks to raise funds, as well as the demand for virtual currencies generally.

In the event that the Offering is not successful, and the Company is not otherwise able to raise additional funds from investors, the Company would be unable to complete the development and launch the Platforms or to issue the Intercoins.

Intellectual property rights claims may adversely affect the operation of the Intercoin Platform.

Third parties may assert intellectual property claims relating to the holding and transfer of the Intercoins, the Intercoin Platform and its source code. Regardless of the merit of any intellectual property or other legal action, any threatened action may reduce confidence in the Intercoin Platform’s long-term viability, thus adversely affecting the value and overall appeal of the Intercoins. Additionally, a meritorious intellectual property claim could prevent you from accessing the Intercoin Platform or holding or transferring your Intercoins, which could force the termination of the Intercoin Platform. As a result, an intellectual property claim against the Company and/or the Intercoin Platform could adversely affect the value of the Intercoins. Even intellectual property claims against digital assets similar to the Intercoins could directly affect the Intercoins’ value, because such claims may imply that a similar claim may be filed against the Company and/or Intercoin Platform.

Intercoin may be forced to cease operations or take actions that result in a dissolution event.

It is possible that, due to any number of reasons, including, but not limited to, the lack of funding necessary to develop and launch the Intercoin Platform, an unfavorable fluctuation in the value of cryptographic and fiat currencies, the inability by the Company to establish the Intercoin Platform or the Intercoins’ utility, the failure of commercial relationships, changes in the regulatory environment or intellectual property ownership challenges, the Company may no longer be viable to operate, and the Company may dissolve or take actions that result in its dissolution. Any such eventuality could result in the loss of a substantial portion of your investment.

The open source nature of the Intercoin Platform will make it vulnerable to detrimental developments or malicious attacks.

The Intercoin Platform will operate based on an open-source protocol maintained by the Company and other contributors. The open-source structure of the Intercoin Platform protocol means that the Intercoin Platform may be susceptible to developments by users or contributors that could damage the Intercoin Platform and the Company’s reputation and could affect the utilization of the Intercoin Platform and the Intercoins. Because of this less centralized model, the Company has limited control over the Intercoins and the Intercoin Platform once launched.

The open-source nature of the protocol means it may be difficult for the Company or contributors to maintain or develop the Intercoin Platform, and the Company may not have adequate resources to address emerging issues or malicious programs that develop to affect the Intercoin Platform adequately or in a timely manner. Third parties not affiliated with the Company may introduce weaknesses or bugs into the core infrastructure elements of the Intercoin Platform and open-source code which may negatively impact the Intercoin Platform. Such events may result in a loss of trust in the security and operation of the Intercoin Platform and a decline in user activity and could negatively impact the market price of the Intercoins.

The Intercoin Platform may be the target of malicious cyberattacks or may contain exploitable flaws in its underlying code, which may result in security breaches and the loss or theft of Intercoins. If the Intercoin Platform’s security is compromised, or if the Intercoin Platform is subjected to attacks that frustrate or thwart users’ ability to access the Intercoin Platform, their Intercoins or the Intercoin Platform products and services, users may cut back on or stop using the Intercoin Platform, which could seriously curtail the utilization of the Intercoins and cause a decline in the market price of the Intercoins.

The Intercoin Platform’s structural foundation, the open-source protocol, the software application and other interfaces or applications built upon the Intercoin Platform are still in an early development stage and are unproven, and there can be no assurances that the Intercoin Platform and the creating, transfer or storage of the Intercoins will be uninterrupted or fully secure, and any interruption, failure of security or similar event could result in a complete loss of users’ Intercoins or an unwillingness of users to access, adopt and utilize the Intercoin Platform. Further, the Intercoin Platform may be the target of malicious attacks seeking to identify and exploit weaknesses in the software or the Intercoin Platform which may result in the loss or theft of Intercoins. For example, if the Intercoins and the Intercoin Platform are subject to unknown and known security attacks (such as double-spend attacks, 51% attacks, or other malicious attacks), this may materially and adversely affect the Intercoin Platform. Any such event could delay or prevent the launch of the Intercoin Platform or could hinder widespread adoption of it, thereby causing Investors to lose all or a substantial portion of their investments.

The open-source structure of the Intercoin Platform protocol means that the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing it. A failure to properly monitor and upgrade such protocol could damage the Intercoin Platform and the Intercoins.

As an open source project, the Intercoin Platform is not represented by an official organization or authority. As the Intercoin Platform protocol is not sold, and its use does not generate revenues for contributors, contributors are generally not compensated for maintaining and updating the Intercoin Platform protocol. The lack of guaranteed financial incentive for contributors to maintain or develop the Intercoin Platform protocol and the lack of guaranteed resources to adequately address emerging issues with the Intercoin Platform may reduce incentives to address issues adequately or in a timely manner. This may adversely affect the value of the Intercoins and the value of your investment.

The acceptance of Intercoin Platform software patches or upgrades by a significant, but not overwhelming, percentage of the users in the Intercoin Platform could result in a "fork” in the p, resulting in the operation of two separate networks until the forked platforms are merged.

The Intercoin Platform will be an open source project, meaning that there will not be an official developer or group of developers that formally controls the Intercoin Platform. Any individual can download the Intercoin Platform software and make any desired modifications, which are proposed to users of the platform through software downloads and upgrades. A substantial majority of users must consent to those software modifications by downloading the altered software or upgrade that implements the changes; otherwise, the changes do not become a part of the Intercoin Platform. A developer or group of developers could potentially propose a modification to the Intercoin Platform that is not accepted by a vast majority of users, but that is nonetheless accepted by a substantial population of participants in the Intercoin Platform. In such a case, and if the modification is material or not backwards compatible with the prior version of Intercoin Platform software, a fork in the platform could develop, and two separate networks could result, one running the pre-modification software program and the other running the modified version. Such fork in the platform typically would be addressed by efforts to merge the forked platforms. This kind of split in the Intercoin Platform could adversely affect the value of the Intercoins and harm the sustainability of the Intercoin Platform’s economy, and even a successful merging of the platforms thereafter may be ineffective in preventing or reversing damage to the market appeal of the Intercoin Platform and the Intercoins.

Acceptance of the Intercoin Platform and the Intercoins is subject to a variety of factors that are difficult to ascertain. Delays or obstacles in the development or acceptance of the Intercoin Platform may adversely affect the value of the Intercoins.

Digital asset platforms such as the Intercoin Platform are a part of new and rapidly evolving industry. The growth of the digital asset industry and the Intercoin Platform is subject to great uncertainty. The following are just a few of the factors affecting the further development of this industry and the Intercoin Platform:

continued worldwide growth in the adoption and use of the Intercoins, especially by communities interested in issuing Community Coins;

regulatory framework involving the Intercoin Platform and the Intercoins;

tax treatment of transactions involving Intercoins and Community Coins;

maintenance and development of the Intercoin Platform, avoidance of platform interruption and security issues;

changes in consumer demographics and public tastes and preferences; and

availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies.

Development of the Intercoin Platform and growth of its popularity will involve many factors outside of the Company’s control. A lack of growth or a decline in the popularity or acceptance of the Intercoin Platform may harm the price of the Intercoins. There is no assurance that the Intercoin Platform, or the service providers necessary to accommodate it, will continue in existence or grow. There is no assurance that the availability of and access to digital asset service providers will not be negatively affected by government regulation or supply and demand of the Intercoins.

If the Intercoin Platform is unable to satisfy data protection, security, privacy, and other government- and industry-specific requirements, its growth could be harmed.

There are a number of data protection, security, privacy and other government and industry-specific requirements, including those that require companies to notify individuals of data security incidents involving certain types of personal data. Security compromises could harm the Intercoin Platform’s reputation, erode user confidence in the effectiveness of its security measures, negatively impact its ability to attract new users, or cause existing users to stop using the Intercoin Platform.

Additionally, a material security breach on any platform relating to or dealing with digital assets could negatively impact the viability of the Intercoin Platform and the Intercoins if information regarding such breach becomes publicly known, even if the breach does not directly involve the Intercoin Platform, the Intercoins or the Company. In such event, public and/or investor confidence in digital assets could be eroded, thereby harming the appeal of the Intercoin Platform and the Intercoins and causing a loss of all or part of your investment.

Risks Related to Intercoins

The ITR Tokens and the Intercoins are not equity interests in the Company and the holders of the Intercoins will have no right to vote in the election of directors or other matters affecting the Company or to participate in any dividend distributions that may be made by the Company.

The ITR Token and the Intercoins will not represent an equity interest in the Company or entitle the holders to any rights of shareholders in the Company. As a result, the holders of the ITR Tokens and the Intercoins will have no voting rights and will generally have no ability to influence the decisions of the Company. Additionally, the holders of the Intercoins have no right to participate in any dividend distributions that may be made by the Company.

The holders of the Intercoins will not have the right to receive financial and other information from the Company. As a result, investors may lack information for monitoring their investments.

The ITR Tokens and the Intercoins do not have any special information rights attached to them, and investors may not be able to obtain information regarding the Company and the development of the Intercoin Platform and the Intercoins. In particular, investors may not be able to receive detailed information regarding the financial performance of Company, and even if they do obtain such information, the performance of the Intercoins may run independently from the Company’s performance, especially as the new Community Coins are created and the Intercoin Platform is further developed by non-Company contributors.

It is possible that you may not be aware on a timely basis of material adverse changes that have occurred with respect to your investment. While the Company has made efforts to use open-source development for Intercoins, this information may be highly technical by nature. As a result of these difficulties, as well as other uncertainties, you may not have accurate or accessible information about the Intercoin Platform or the Intercoins.

The loss or destruction of the private key required to transfer the Intercoins may be irreversible. Loss of access to private keys, or any other data loss concerning the Intercoin Platform, could have a material adverse effect on the Platforms and the Intercoins.

The Intercoins can only be transferred with the private key associated with the Intercoin address in which the Intercoin is held. The private keys will be stored in the Intercoin wallet software. To the extent a private key is lost, destroyed or otherwise compromised, and no backup of the private key is accessible, you will be unable to transfer the affected Intercoins. Consequently, such Intercoins will effectively be lost, along with your investment in them.

Risk Associated with Management

The Founders are the Company’s only directors and executive officers. The loss of the services of either of the Founders would have a material adverse effect on the Company’s business.

The Founders are the Company’s only directors and executive officers. As a result, the Company is highly dependent on their services. The loss of the services of either Founder for any reason could have an adverse effect on the Company’s ability to implement its business plan.

The Founders own all of the Company’s common stock and serve as its only directors and officers. As a result, they control all aspects the Company’s business.

The Founders, as owners of all of the Company’s common stock, will the ability to appoint a majority of the Company's directors and to approve all actions by the Company. As a result, they will effectively control the Company following the completion of the offering.

The Founders may be subject to significant conflicts of interest in the management of the Company’s business.

The Founders may encounter significant conflicts of interest in the management of the Company due to their control of the Company, their ownership of all of the common stock of the Company and there ownership of ITR Tokens to a significant number of Intercoins.

These potential conflicts include the following:

The Founders will control the manner in which the Company will utilize the proceeds of the Offering of the ITR Tokens, including the payment of amounts due to the Founders. See "Use of Proceeds.”

The Founders own ITR Tokens, later exchangeable for 100,000,000 Intercoins. Subject to an 18 month restriction commencing on the date of the completion of the Offering, the Founders may sell the ITR Tokens and any Intercoins issued under the ITR Tokens into any existing market. The timing and amount of such sales could adversely affect the market value of Intercoins and the Company’s ability to implement its business plan.

The Founders will control when and if the Company elects to sell any authorized but unissued Intercoins. The timing and amount of such sales could materially impact the market value of Intercoins. As a result, the Founders may have a conflict in deciding whether to undertake such sales, particularly given the effect such sales may have on the Founder’s own holdings of Intercoins.

The Founders will control decisions regarding their performance as directors and officers of the Company, including any future transactions with affiliates of the Founders.

The Founders currently receive annual salaries of $75,000 each. See "Compensation of Management and Affiliates.”

After the launch of the Intercoin Platform and the initial issuance of the Intercoins, the Founders will have the right to receive dividend distributions from the Company in their capacity as holders of the Company’s common stock. In this regard, if the Founders determine that the Company has an excess level of working capital relative to its requirements, the Founders could approve dividend distributions to the Company’s shareholders. The Founders would have a conflict of interest in making such a determination in light of their participation in such dividends.

Investors should be aware that the Company does not have any independent directors and the Company currently has no plans for electing any independent directors in the future.

Risks Related to Tax Matters

The business of the Company is subject to substantial tax issues, including the risk that the Intercoins will be treated as property by the Internal Revenue Service, which could result in substantial tax liability for the Company and will impact the tax consequences for holders of the Intercoins.

The tax characterization of the ITR Tokens and the Intercoins is uncertain, and each investor must seek its own tax advice in connection with an investment in the ITR Tokens. An investment in the ITR Tokens and the acquisition of Intercoins pursuant to the ITR Tokens may result in adverse tax consequences to the Company and the investor, including withholding taxes, income taxes and tax reporting requirements. Each investor should consult with and rely upon the advice of the investor’s own professional tax advisors with respect to the United States and non-U.S. tax treatment of an investment in the ITR Tokens and the Intercoins.

In Notice 2014-21, the Internal Revenue Service ("IRS”) provided that digital assets like the Intercoins should be treated and taxed as property, and that transactions involving the payment of digital assets like the Intercoins for goods and services should be treated as a barter transaction (i.e., a potentially taxable exchange for both parties) and not as a purchase of goods and services using foreign currency. This treatment means that each sale of a Intercoin (and the ITR Tokens) by the Company would result in the recognition of taxable income by the Company, which could result in substantial tax liability for the Company. This treatment would also mean that any sale of a ITR Token or Intercoin by a holder or the use of a Intercoin to purchase goods or services, could result in the recognition of taxable income by the holder.

This treatment also creates a potential tax recordkeeping, reporting and payment requirement for both the Company and the holders of the Intercoins in any circumstance where the ownership of any such digital asset passes from one person to another. This could be a significant impediment to use of the Intercoins as a medium of exchange, thus hampering the ability of the Company to achieve its objectives and potentially having a material and adverse impact on the value of the Intercoins.

Foreign jurisdictions may also elect to treat digital assets like the Intercoins differently for tax purposes than the IRS. To the extent a foreign jurisdiction where the Intercoins are traded or used imposes onerous tax burdens on them, or imposes sales or value added tax on purchases and sales of Intercoins for fiat currency, such actions could result in decreased demand for the Intercoins in such jurisdiction, which could impact the price of the Intercoins.

A number of states have issued their own guidance regarding the tax treatment of digital assets like the Intercoins for state income or sales tax purposes. The New York State Department of Taxation and Finance ("NYSDTF”), for example, has issued guidance regarding the application of state tax law to digital assets like the Intercoins. The agency determined that New York State would follow IRS guidance with respect to the treatment of digital assets like the Intercoins for state income tax purposes. Furthermore, the NYSDTF concluded that while digital assets like the Intercoins are a form of "intangible property” and that the receipt of Intercoins would not be subject to sales tax, transactions using Intercoins to purchase goods or services may potentially be subject to state sales tax under barter transaction treatment. If a state adopts a different treatment, such as applying sales tax on the receipt of Intercoins, such treatment may have negative consequences for you, including the potential imposition of a greater tax burden on you or the potential imposition of greater costs on the acquisition and disposition of your Intercoins. In either case, such different tax treatment may potentially have a negative effect on the price and utility of the Intercoins.

Risks Related to Government Regulation

The business of the Company and the use and operation of the Intercoin Platform, the Community Platforms and the Intercoins will be subject to substantial banking, securities and other material regulatory requirements. The application of many of these requirements to virtual currencies in general and to the Intercoins in particular is unclear and subject to change. The inability of the Company and users to comply with these requirements could make the planned operation of the Intercoin Platform, the Community Platforms and the Intercoins impractical or illegal.

The business of the Company, including the operation and maintenance of the Intercoin Platform and the Community Platforms, as well as the issuance, offer and sale of the Intercoins is subject to substantial banking ,securities and other government regulation. The application of these regulatory requirements to the Company and its business is subject to substantial uncertainty because government authorities are still in the process of deciding how to apply these regulations to virtual currencies.

Accordingly, the Company and others in the virtual currency space are uncertain whether their proposed activities comply with all applicable regulatory requirements and what steps if any may be required in order to obtain compliance. Furthermore the Company and other companies in this space are not in a position to know what cost if any will be imposed on them and the users of its platforms and coins under applicable government regulations.

In light of the foregoing, these governmental regulatory requirements may make it impractical to complete the development of the Platforms, to launch the Intercoins or to operate the Platforms and the Intercoins in the future. In the event that such government regulations are interpreted in a manner which makes it impossible for the Company or its users to comply with such regulations or imposes extraordinary costs or other impediments to the use of the platform, the Company’s business may fail.

The Company’s business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, technology, data protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to the Company’s business practices, increased cost of operations or otherwise harm the Company’s business.

The Company is subject to a variety of laws and regulations in the United States and abroad that involve matters central to its business, including user privacy, distributed ledger technology, broker dealer, data protection and intellectual property, among others. Foreign data protection, privacy, broker dealer and other laws and regulations are often more restrictive than those in the United States. These U.S. federal and state and foreign laws and regulations are constantly evolving and can be subject to significant change.

In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which the Company operates.

The growth of its business and its expansion outside of the United States may increase the potential of violating these laws or its internal policies and procedures. The risk of the Company being found in violation of these or other laws and regulations is further increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and are open to a variety of interpretations. Any action brought against the Company for violation of these or other laws or regulations, even if the Company successfully defends against it, could cause the Company to incur significant legal expenses and divert its management’s attention from the operation of its business. If the Company’s operations are found to be in violation of any of these laws and regulations, the Company may be subject to any applicable penalty associated with the violation, including civil and criminal penalties, damages and fines, and the Company could be required to refund payments received by it or curtail or cease its operations. Any of the foregoing consequences could seriously harm its business and its financial results. These existing and proposed laws and regulations can be costly to comply with and can delay or impede the development of new products, result in negative publicity, increase its operating costs, require significant management time and attention, and subject the Company to claims or other remedies, including fines or demands that the Company modify or cease its then existing business practices.

Regulatory changes may fundamentally change the nature of the Intercoin Platform and of the Intercoins or restrict the use of the Intercoins or the operation of the Intercoin Platform.

As digital assets like the Intercoins grow in popularity and market size, the Federal Reserve Board, U.S. Congress and certain U.S. agencies (e.g., the Commodities Futures Trading Commission ("CFTC), Financial Crimes Enforcement Network ("FinCEN”) and the Federal Bureau of Investigation) have begun to examine the operations of the issuers of such assets’ platforms, their users and their markets.

The SEC has taken various actions against persons or entities misusing digital assets like the Intercoins in connection with fraudulent operations, inaccurate and inadequate publicly disseminated information, and the offering of unregistered securities.1 The CFTC has determined that digital assets like the Intercoins and other virtual currencies are properly defined as commodities under the Commodities Exchange Act ("CEA”). The CFTC has defined digital assets like the Intercoins and other "virtual currencies” as a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value, but does not have legal tender status in any jurisdiction. To the extent the Intercoins are determined to be a security, commodity future or other regulated asset, or to the extent that a U.S. or foreign government or quasi-governmental agency exerts regulatory authority over the Intercoin Platform or the Intercoins, trading or ownership of the Intercoins may be adversely affected.

Local state regulators such as the New York State Department of Financial Services ("NYSDFS”) have also initiated examinations of digital assets like the Intercoins. In July 2014, the NYSDFS proposed the first U.S. regulatory framework for licensing participants in "virtual currency business activity.” The proposed regulations, known as the "BitLicense” regulate the conduct of businesses that are involved in "virtual currencies” in New York or with New York customers and prohibit any person or entity involved in such activity to conduct activities without a license. Additionally, while a U.S. federal magistrate judge in the U.S. District Court for the Eastern District of Texas has ruled that a digital asset like the Intercoins "is a currency or form of money”, a Florida circuit court judge determined that digital assets like the Intercoins do not qualify as money or "tangible wealth.” An opinion from the U.S. District Court for the Northern District of Illinois identified a digital asset like the Intercoins as "virtual currency.”

To the extent that future regulatory actions or policies limit the ability to exchange the Intercoins or utilize them for payments, the demand for the Intercoins will be reduced and its price will be negatively impacted. Furthermore, regulatory actions may limit your ability to convert Intercoins into fiat currency or use Intercoins to pay for goods and services. Such regulatory actions or policies would result in a reduction of the price of the Intercoins.

Digital assets like the Intercoins still face an uncertain regulatory landscape not only in the United States but also in many foreign jurisdictions, such as the European Union, China and Russia. While certain governments have issued guidance as to how to treat digital assets like the Intercoins, most regulatory bodies have not yet issued official statements regarding their intentions in regard to regulation of digital assets like the Intercoins.

Among those jurisdictions that have issued preliminary guidance in some form, Canada and Taiwan have labeled digital assets like the Intercoins as a digital or virtual currency, distinct from fiat currency, while Sweden and Norway are among those to categorize digital assets like the Intercoins as a form of virtual asset or commodity. The United Kingdom determined that the VAT will not apply to sales of Bitcoin. China, Iceland, Vietnam and Russia have taken a more restrictive stance toward digital assets and, thereby, have reduced the rate of expansion of virtual currency use within their borders. The Central Bank of Bolivia banned the use of digital assets like the Intercoins as a means of payment. Ecuador passed legislation that prohibits the use of digital assets like the Intercoins. On the contrary, Venezuela has issued its own virtual currency named the "Petro,” backed by the oil production of its state-owned oil industry.

Various foreign jurisdictions may, in the near future, adopt laws, regulations or directives that affect the Intercoin Platform and its users, particularly exchanges and service providers that fall within such jurisdictions’ regulatory scope. Such laws, regulations or directives may conflict with those of the United States and may negatively impact the acceptance of the Intercoins by users, merchants and service providers outside of the United States and may therefore impede the growth of the Intercoin Platform and the Intercoins, thus affecting its price. Such laws, regulations or directives may also impose substantial additional compliance costs and burdens on the Company and/or on persons participating on the Intercoin Platform.

The Company may be subject to regulation as a money services business ("MSB”) under the regulations promulgated by FinCEN and as a money transmitter (or equivalent designation) under laws of the states in which the Company operates. The Company may incur significant costs and operational issues in complying with such laws and regulations.

If the activities of the Company cause the Company to be deemed an MSB under the regulations promulgated by FinCEN under the U.S. Bank Secrecy Act, the Company may be required to comply with FinCEN regulations, including those that would require the Company to implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records. These regulations may also apply to the communities adopting the Community Platforms.

If the activities of the Company cause the Company to be deemed a "money transmitter” (or equivalent designation) under state law in any state in which it operates, the Company may be required to seek a license or otherwise register with a state regulator and comply with state regulations, which may include the implementation of anti-money laundering programs, maintenance of certain records and other operational requirements. In February 2018, a FinCEN officer issued a letter that indicated that an issuer of a convertible virtual currency in the form of an initial coin offered-coin or token in exchange for another type of value is a money transmitter requiring licensure by FinCEN as an MSB.

Some state regulators, including those from California, Idaho, Virginia, Kansas, Texas, South Dakota and Washington, have made public statements indicating that virtual currency businesses may be required to seek licenses as money transmitters. North Carolina law does not require miners or software providers to obtain a license for multi-signature software, smart contract platforms, smart property, colored coins and non-hosted, non-custodial wallets. New Hampshire requires anyone that exchanges a digital currency for another currency to become a licensed and bonded money transmitter.

Any such additional federal or state regulatory obligations may cause the Company to incur extraordinary expenses, possibly to the point of extinguishing their interest in developing and using the Intercoin Platform and the Intercoins. Furthermore, key service providers may not be capable of complying with certain federal or state regulatory obligations applicable to MSBs and money transmitters. In any such case, the Company may be unable to achieve its objectives, and your investment may be lost in whole or in part.

If regulatory changes or interpretations require the regulation of the Intercoins under the CEA by the CFTC, the Company may be required to register as a commodity pool operator or commodity pool and comply with such regulations.

Under the CEA, the CFTC has responsibility for regulating certain "commodity futures.” The Company believes that the Intercoins will not be treated as commodity futures by the CFTC. To the extent the Intercoins are deemed to fall within the definition of a commodity future, the Company could be required to register and comply with additional regulation under the CEA, including additional periodic report and disclosure standards and requirements. Moreover, the Company could be required to register as a commodity pool operator or commodity pool with the CFTC. Such additional registrations may result in extraordinary, nonrecurring expenses that may materially and adversely impact their interest in the Intercoin Platform and the Intercoins.

The Company is subject to the risk of becoming an investment company under the Investment Company Act.

The Investment Company Act regulates certain companies that invest in, hold or trade securities. As a result of a portion of the Company’s assets consisting of minority investment positions, it runs the risk of inadvertently becoming an investment company, which would require the Company to register under the Investment Company Act. Registered investment companies are subject to extensive, restrictive and potentially adverse regulations relating to, among other things, operating methods, leverage, management, capital structure, dividends and transactions with affiliates. Registered investment companies are not permitted to operate their business in the manner in which the Company operates its business, nor are registered investment companies permitted to have many of the relationships that the Company has with its affiliated companies.

To avoid becoming and registering as an investment company under the Investment Company Act, the Company intends to monitor the value of its investments and structure transactions accordingly. As a result, the Company may structure transactions in a less advantageous manner than if it was not subject to such Investment Company Act risks, or the Company may avoid otherwise economically desirable transactions due to this risk. In addition, events beyond the Company’s control, including significant appreciation or depreciation in the market value of certain of its publicly traded holdings or adverse developments with respect to its ownership of certain of its subsidiaries, could result in the Company inadvertently becoming an investment company. If it were established that the Company were an investment company, there would be a risk, among other material adverse consequences, that it could become subject to monetary penalties or injunctive relief, or both, in an action brought by the Commission, that the Company would be unable to enforce contracts with third parties or that third parties could seek to obtain rescission of transactions with the Company undertaken during the period it was established that the Company was an unregistered investment company. If it were established that the Company were an investment company, this would have a material adverse effect on its business and financial operations and its ability to continue as a going concern.

Risks Associated with the Blockchain and Distributed Ledger Technology Industry

The further development and acceptance of blockchain and distributed ledger technology networks, which are part of a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate.

The growth of the blockchain and distributed ledger technology industry in general, as well as the blockchain and distributed ledger technology networks on which the Company will rely, is subject to a high degree of uncertainty. The factors affecting the further development of the cryptocurrency industry, as well as blockchain and distributed ledger technology networks, include, without limitation:

• Worldwide growth in the adoption and use of Bitcoin, Ether and other blockchain and other distributed ledger technologies;

• Government and quasi-government regulation of Bitcoin, Ether and other blockchain assets and their use, or restrictions on or regulation of access to and operation of blockchain networks or similar systems;

• The maintenance and development of the open source software protocols for blockchain and distributed ledger technology networks;

• Changes in consumer demographics and public tastes and preferences;

• The availability and popularity of other forms or methods of buying and selling goods and services, or trading assets including new means of using fiat currencies or existing networks;

• General economic conditions and the regulatory environment relating to cryptocurrencies; or

• A decline in the popularity or acceptance of the blockchain networks.

Unfavorable developments in any of the above factors could adversely affect the Company’s business or the functionality or value of the Intercoins.

The prices of digital assets are extremely volatile. Fluctuations in the price of digital assets could materially and adversely affect the Company’s business, and the Intercoins may also be subject to significant price volatility.

The prices of cryptocurrencies, such as Bitcoin and Ether, and other digital assets have historically been subject to dramatic fluctuations and are highly volatile, and the market price of the Intercoins may also be highly volatile. Several factors may influence the market price, if any, of the Intercoins, including, but not limited to:

the ability of the Intercoins to trade in a secondary market, if at all;

the availability of trading platform for digital assets;

global digital asset and security token supply;

global digital asset and security token demand, which can be influenced by the growth of retail merchants' and commercial businesses' acceptance of digital assets like cryptocurrencies as payment for goods and services, the security of online digital asset exchanges and digital wallets that hold digital assets, the perception that the use and holding of digital assets is safe and secure, and the regulatory restrictions on their use;

purchasers’ expectations with respect to the rate of inflation;

changes in the software, software requirements or hardware requirements underlying the Intercoins;

changes in the rights, obligations, incentives, or rewards for the various holders of the Intercoins;

interest rates;

currency exchange rates, including the rates at which digital assets may be exchanged for fiat currencies;

government-backed currency withdrawal and deposit policies of digital asset exchanges;

interruptions in service from or failures of major digital asset and security token exchange on which digital assets and security tokens are traded;

investment and trading activities of large purchasers, including private and registered funds, that may directly or indirectly invest in securities tokens or other digital assets;

monetary policies of governments, trade restrictions, currency devaluations and revaluations;

regulatory measures, if any, that affect the use of digital assets and security tokens such as the Intercoins;

global or regional political, economic or financial events and situations; and

expectations among digital assets participants that the value of security tokens or other digital assets will soon change.

A decrease in the price of a single digital asset may cause volatility in the entire digital asset and security token industry and may affect other digital assets including the Intercoins. For example, a security breach that affects purchaser or user confidence in Bitcoin or Ether may affect the industry as a whole and may also cause the price of the Intercoins and other digital assets to fluctuate. Such volatility in the price of the Intercoins may result in significant loss over a short period of time.


 

USE OF PROCEEDS

Proceeds from the Offering

If the Company sells all of the ITR Tokens available in the Offering, the Company will receive gross proceeds of $15,000,000. The actual amount of proceeds from the Offering will vary depending on the number of ITR Tokens that are sold. The Offering is not contingent upon the sale of any minimum number of ITR Tokens.

The Company may engage securities brokers to participate in the offering of the ITR Tokens and to compensate foreign intermediaries for introducing investors to the Company. The compensation payable to these parties may be deducted from the placement fees will not exceed a total of 8.0% of the gross proceeds of the Offering. The scope of the services to be provided by these brokers and intermediaries and their fees will be determined from time to time by the Company.

The Company will pay other offering related expenses of approximately $500,000, consisting of legal fees, accounting fees and other out-of-pocket costs related to the Offering.

Anticipated Use of Proceeds

The Company plans to use the proceeds from the Offering to meet the current working capital requirements of the Company, including legal, accounting and administrative expenses related to the establishment of the Company’s business, to pay the costs of the Offering, to develop the Intercoin Platform, to develop the Community Platforms, to pay for the cost of subsequent offerings and for other marketing, development and administrative expenses. A portion of the proceeds will be paid to the Company’s affiliates. The Company currently estimates that it will expend approximately $11 million per year to develop the Platforms and to implement the Company’s business plan. See "Description of Business – Estimated Annual Budget.”

The proceeds of the Offering may not be sufficient to meet all of the expected costs of developing and launching the Intercoin Platform and the Community Platforms, even if the Company sells all available ITR Tokens in the Offering. Accordingly, the Company may conduct one or more additional offerings of the Intercoins. See "Business – Development and Operating Budget” and "Business – Subsequent Offerings.”

Certain Payments to the Founders and their Affiliates

The Company’s Founders and their affiliates will not receive any portion of the proceeds of the Offering of the ITR Tokens, except as follows:

A portion of the proceeds (but in no event more than 6% of the Company’s annual operating budget) may be used to pay accrued and ongoing salaries owed to the Executive Team. The total accrued salaries to Founders from working without being paid for a year were approximately $100,000 as of the date of this memorandum. See "Compensation of Management and Affiliates.”

A portion of the proceeds may be used to reimburse the company's directors and their affiliates for amounts expended by them on behalf of the Company. The accrued amount of such expenses as of November 31, 2019 is less than $150,000.

Limits on Use of Proceeds

The Company will receive the proceeds from the sale of each ITR Token upon the completion of each sale and will have broad discretion with respect to the application of such proceeds subject to the limits described in this memorandum. See "Risk Factors – Risks Related to Offering.”

The Company is authorized to hold the proceeds of the Offering in any type of currency it deems appropriate, and will have full discretion to determine if and when such proceeds should be converted to U.S. Dollars or another type of currency.

Prior to the use of the proceeds, the Company will hold substantially all of the proceeds in the form of "Permitted Temporary Investments” consisting of (i) securities that are obligations of or guaranteed by the U.S. government or an instrumentality thereof; (ii) certificates of deposit, money market accounts, savings accounts, checking accounts or any combination thereof in banks insured by the Federal Deposit Insurance Corporation (the "FDIC”), and (iii) Bitcoin or Ether.

No portion of the proceeds will be used to repurchase any ITR Tokens or Intercoins from any Founder or their affiliates, or to purchase any ITR Tokens or Intercoins in any secondary market that may develop.

A limited number of ITR Tokens issued by the Company to employees or other service providers (but not the Founders or their affiliates) to preserve the Company’s limited cash resources pending its receipt of sufficient proceeds from this Offering may be subject to repurchase by the Company, but any such repurchases would be limited in the aggregate to the lesser of $1,000,000 or 10% of the proceeds of the Offering. See "Description of Business – Office and Staff”.


 

DESCRIPTION OF THE ITR TOKENS

The ITR Tokens

The Company is offering ITR Tokens to acquire up to 350,000,000 Intercoins. Each Right will entitle the holder to receive one Intercoin upon the launch of the Intercoin Platform.

The ITR Tokens do not represent an equity interest in the Company or entitle the holders to any rights of shareholders in the Company.

Documentation

The ITR Tokens will be evidenced by a balance in an Ethereum Wallet, which will be exchangeable in a one-to-one manner with Intercoins on the Intercoin Platform, if and when it officially launches.

Liquidation Rights upon Failure to Launch Intercoin Platform

In the event that the Company does not complete and launch the Intercoin Platform by July 31, 2027, then the Company will be dissolved, provided that the Company may postpone this date until July 31, 2030 with the approval of the holders of a majority of the ITR Tokens. In the event of the dissolution of the Company prior to the launch of the Intercoin Platform, the Company shall, after making provision for the payment of the Company’s liabilities, distribute the Company’s remaining assets to the holders of the ITR Tokens (other than the Company’s founders and their affiliates) based on the number of Intercoins each of them is entitled to receive. There can be no assurance that the Company will have sufficient funds to pay any amount to the holders of the ITR Tokens upon the dissolution of the Company. See "Risk Factors – Risks Related to Intercoins.”

The holders of the Intercoins will have no right to participate in any dividends or distribution that may be made by the Company after the launch of the Intercoin Platform. See "Risk Factors – Risks Related to Intercoins.”

Transfer of ITR Tokens

The ITR Tokens may only be transferred in a manner that complies with applicable securities laws and certain restrictions set forth in the Subscription Agreements. See "Transfer Restrictions.”

Secondary Market for ITR Tokens

The Company does not necessarily intend to seek the listing of the ITR Tokens on any securities exchange or the trading of the ITR Tokens on any alternative trading system. As a result, the Company can provide no assurance that any secondary market for the ITR Tokens will be developed or sustained, even after the ITR Tokens become tradable under SEC Rule 144. See "Risk Factors – Risks Related to the Offering.”

Subsequent Offerings of ITR Tokens

The Company may plan to offer additional ITR Tokens in one or more subsequent offerings at prices to be determined by the Company at the time of such offerings. There can be no assurance that the Company will not sell such ITR Tokens at prices below the prices set forth in the Offering. "Risk Factors – Risks Related to Offering” and "Terms of Offering.”


 

Previously Issued ITR Tokens

The Company has previously issued ITR Tokens exchangeable for 155,500,000 Intercoins to the Company’s Founders and certain early investors.

Lockup of ITR Tokens held by Founders and their Affiliates

The Founders have agreed to not sell more than 2% of any ITR Tokens held by them for a period of at least eighteen (18) months after the date of the completion of the Offering.
 

DESCRIPTION OF THE INTERCOINS

The Intercoins

The Intercoins are digital representations of value. The Intercoins are expected to be used in part as "digital reserves” of the Community Coins and to provide liquidity for the Community Coins.

The Intercoins will be a digital asset based on a decentralized, open source protocol of the peer-to-peer computer network that will host the decentralized public transaction ledger, on which all Intercoins are recorded. The Intercoin Platform software source code will include the protocols that govern the original issuance of the Intercoins and the cryptographic system that secures and verifies Intercoin transactions. The distributed ledger will be a canonical record of every Intercoin, every Intercoin transaction (including the original issuance of the Intercoins) and every Intercoin address associated with a quantity of the Intercoins. The Intercoin Platform and network software programs can interpret the distributed ledger to determine the exact Intercoin balance, if any, of any public Intercoin address listed in the distributed ledger which has taken part in a transaction on the Intercoin Platform. The Intercoin Platform will utilize the distributed ledger to evidence the existence of the Intercoins in any public Intercoin address. An Intercoin private key controls the transfer or "spending” of the Intercoins from its associated public Intercoin address. An Intercoin "wallet” is a collection of private keys and their associated public Intercoin addresses.

The Intercoins will not represent an equity interest in the Company or entitle the holders to any rights of shareholders in the Company.

Maximum Number of Intercoins

The Company will issue a maximum of 1 billion Intercoins.

Transfer of Intercoins

The ITR Tokens may only be transferred in a manner that complies with applicable securities laws and certain restrictions set forth in the Subscription Agreements. See "Transfer Restrictions.”

Secondary Market for Intercoins

After the launch of the Intercoins, the Company will seek to list the Intercoins on a securities exchange or arrange for the trading of the Intercoins on an alternative trading system that accepts cryptocurrencies. Unless the Commission adopts regulations that permit trading of cryptocurrencies like the Intercoins on unregistered trading platforms, the Intercoins may not be sold on any trading platform in the United States that is not registered with the Commission as a securities exchange or alternative trading system. There can be no assurance that the Commission will adopt such regulations.

Additionally, in order for the Intercoins to be listed on a registered securities exchange, the Company would need to become a reporting company under the Exchange Act. The Company has not yet determined whether it will elect to file a registration statement with the SEC to become a reporting company.

The Commission may also require the Company to register as a securities broker-dealer under the Exchange Act and to register the Intercoin Platform as an alternative trading system, in order to exchange Intercoins or Community Coins on the Intercoin Platform. If such registrations are required and the Company is unable to obtain such registrations, the Intercoin Platform may not be able to function as planned by the Company. See "Risk Factors – Risks Related to the Offering.”

The Company has not received any commitment from any securities exchange or alternative trading system to accept the Intercoins for trading and there can be no assurance that the Intercoins would be accepted. As a result, the Company can provide no assurance that any secondary market for the Intercoins will be developed or sustained, even after the Intercoins become tradable under Rule 144. See "Risk Factors – Risks Related to the Offering.”

Issuance of Intercoins

The Company will issue the Intercoins to the holders of the ITR Tokens upon the launch of the Intercoin Platform.

At the time of the launch, the Company will issue the Intercoins to holders of the ITR Tokens in a transaction exempted from the registration requirements of the Securities Act pursuant to Section 3(a)(9) of the Securities Act or another available exemption. Upon consummation of the Intercoin issuance pursuant to such exemption, each applicable Right will immediately terminate. While the Company will use its commercially reasonable efforts to issue the Intercoins, no assurance can be given that they will ever be issued or that the Intercoin Platform will be developed. See "Risk Factors.”

At the time of the launch, the Intercoins will be delivered to an Intercoin wallet address provided by the ITR Tokens holder.

Offerings of Intercoins

In addition to the issuance of Intercoins to the holders of the ITR Tokens, the Company may issue Intercoins in an initial offering to be conducted in conjunction with the launch of the Intercoin Platform.

The Company expects to issue any remaining authorized but unissued Intercoins in one or more subsequent offerings after the launch of the Intercoin Platform.

Lockup of Intercoins held by Founders and their Affiliates

The Founders have agreed to not sell any Intercoins held by them for a period of at least eighteen (18) months after the date of the completion of the Offering.


 

DESCRIPTION OF BUSINESS

The Company

Intercoin, Inc. is a Delaware corporation organized on November 15, 2017.

The Company’s address is 561 Clinton Street, Brooklyn, New York 11231, and its telephone number is (833) 724-9462.

The Platforms and the Intercoins

The Company is in the early stages of developing a decentralized payment platform (the "Intercoin Platform”) that is intended to serve as a bridge among decentralized payment networks of various affinity groups, organizations, and other communities to be developed by the Company and managed by the respective communities (the "Community Platforms”). The Company is also seeking to develop technology that will allow any community (for example, a cruise line, casino, resort operator, club, university, city or town) to customize, issue and manage its own currency in the form of digital community coins (i.e., the Community Coins), by simply downloading and deploying the software on a number of community-based computers. In essence, this technology will allow communities to create "private label” digital currencies on dedicated distributed ledgers with relatively little upfront investment of financial or human resources.

Subject to community-adopted rules and privacy considerations, the Community Platforms will be designed to allow communities to track and analyze a wide range of precisely detailed metrics in regard to how currency flows in the community. Access to such extensive financial data can help communities work toward their individualized goals, which could span a spectrum from simple commercial objectives (e.g., helping a casino better understand gambling patterns) to complex social objectives (e.g., helping a metropolitan area better define "basic income” thresholds or strategize regarding more effective deployment of financial services in under-served communities).

Each participating community will have an account on the Intercoin Platform. The Intercoins will serve as "digital reserves” backing each community’s local, Community Coin economy and enabling payments to be made seamlessly across communities. See "Business of the Company.”

Acquisition, Use, Transfer, and Exchange of Intercoins following Platform Launch

When the Intercoin Platform is launched, the holders of the Intercoins will be able to hold Intercoins in an Intercoin wallet and transfer Intercoins to and from that wallet.

Persons who wish to obtain Community Coins will be able to acquire the Intercoins in the secondary market and deposit them with a community in exchange for the community’s Community Coins. This will be accomplished by a digital transaction ("Cash In”) in which the Intercoins will be sent to the community’s account on the Intercoin Platform and locked there, while the Community Platform will issue a corresponding amount of Community Coins to the person’s account on the Community Platform. An opposite type of digital transaction ("Cash Out”) will allow holders of Community Coins to elect to have them taken out of circulation on the Community Platform, and, in exchange, unlock the corresponding amount of the Intercoins from the community’s account.

During each Cash In and Cash Out transaction, the exchange rate of Community Coins to Intercoins will be simply the amount of Intercoins the community has on reserve divided by the total number of Community Coins in circulation at the time of the transaction. Each Cash In and Cash Out transaction may be subject to additional rules clearly published by the community in a simple computer language processed by the Intercoin Platform. Different sets of rules may be useful for various purposes, such as raising money for a project, or making sure that money donated to a community circulates within the community’s economy enough times before it may be cashed out. Thus, any restrictions a community places on Cash Ins and Cash Outs will be known publicly by anyone who chooses to transact with that community.

Cross-community payments will be made by withdrawing Intercoins from one Community Platform and depositing the Intercoins into another Community Platform. The exchange rate between communities will be determined simply by comparing the respective exchange rates of the two Community Coins to Intercoins. These transactions can occur on a digital basis, making Intercoins not just a digital unit of value, but a "bridge currency” between different Community Coins. A member of a given community transacting on a cross-community basis may view prices in his or her preferred currency, while payments are seamlessly implemented with cross-community payments behind the scenes.

The Company anticipates that the Intercoins will be able to be traded for a variety of other currencies, either on an over-the-counter basis or via other trading platforms.

Development Plans

The Intercoin Platform, which will host all of the Intercoins, is in the initial stages of being developed by the Company. The Intercoin Platform development process will include development of the Intercoin Platform proof of concept, a testing version of the Intercoin Platform, and the final Intercoin Platform. None of these processes has been completed by the Company, and there is no guarantee that the Company will be successful in its development plans.

The Company must also develop the technology to facilitate the Community Coins and the Community Platforms, which are "side chains” from the main Intercoin distributed ledger. To accomplish this development, the Company intends to expand its development team and partner with experts in decentralized identity, data integrity, cryptography, distributed systems, byzantine consensus and other relevant areas. The Company also intends to develop the community kit (the "Community Kit”), which will be provided by the Company to communities. As conceived, the Community Kit will allow communities to issue their own Community Coins and integrate the Community Coins into their local community mobile applications. The Company has not begun to develop the Community Platform or the Community Kit, and there is no guarantee that the Company will be successful in its development plans.

In addition to the development plans above, the Company also intends to engage in significant marketing efforts to target various types of communities – e.g., companies, universities, townships, etc. – to issue Community Coins and join the Intercoin Platform. The successful adoption by multiple communities is an essential component to the success of the Company’s business model and the adoption and usage of the Intercoins.

The Company intends to move expeditiously toward expanding its development team and ramping up its development activities once it begins to receive funding through the Offering. The Company currently expects that development of the Intercoin Platform and the Community Platforms will be completed over a period of 12 to 36 months, depending on the timing and amount of funding obtained by the Company, the Company’s ability to identity and retain experienced individuals to complete the platforms, and the Company’s ability to resolve issues with the design and functionality of the platforms. However, as with any new technology in the beginning stages of development, the Company may encounter unanticipated issues (as well as significant known challenges referenced in this memorandum) during the development process, and it has very substantial work to do in order to demonstrate the viability and security of the Intercoin Platform design concept, to develop and deploy a test platform, to build out and deploy a functional Intercoin Platform and Community Platforms, and to promote adoption of the Intercoin Platform and the Community Platforms.

Prospective investors are cautioned to consider carefully the significant development and adoption challenges the Company faces, and the material possibility that one or more of these challenges will prove insurmountable. See "Risk Factors – Risks Related to the Business.”

Potential Benefits of Intercoin Platform

Many of the existing cryptocurrencies transact on global, monolithic networks, with a "one-size-fits-all” approach. They do not adapt to the needs of local communities, but instead treat all participants in the same manner. The Company will focus on developing platforms that facilitate the creation of digital currencies that meet the needs of each community. The intention is that a local currency would be customized by and for the community and would trade only within that community, but would be seamlessly "bridged” for use in other communities via the Intercoin Platform. By adopting a Community Coin, a community could gain access (subject to community-adopted rules and privacy considerations) to extensive data regarding how the currency is used within the community. That data, in turn, would enhance a community’s ability to further the community’s own objectives, whether they are commercial, social, or some combination.

For example, a community might consist of a metropolitan area with a diverse population spread over a relatively large geographic area. That community might use data generated by Community Coins to better understand net capital inflows and outflows in specific sub-communities. Such understanding then could be used, by way of example, in the creation of special development zones or other incentives intended to enable less affluent sub-communities to retain a greater percentage of sub-community capital locally, or to attract investment from more affluent sub-communities. In terms of a "real world” example, that might lead to the availability of banking services in a community historically lacking them, which in turn might lead to a greater tendency of sub-community residents to deposit their paychecks locally, and a greater tendency of the banking system to lend within that sub-community in support of homeownership, creation of new businesses, etc. Likewise, a community that has adopted a social program (e.g., a cost-of-living subsidy for persons below the poverty line) might use data generated by Community Coins to evaluate the results and effectiveness of the program with much greater precision than is currently possible, and to tweak the program as appropriate in view of lessons learned.

In a very different but equally feasible example, a community might consist of a chain of resorts or theme parks. That community might use data generated by Community Coins to develop a more nuanced view of spending habits at its resorts or parks for the simple commercial purpose of driving increased profits.

The potential uses for the Intercoins and Community Coins are many, including fundraising (e.g., selling currency to fund a new project), micropayments (e.g., content creators being paid as people engage with the content), donations, etc. The intention is to provide communities a platform and set of functionalities that will enable and encourage them to conceive of novel and productive uses for the Intercoins.

Prospective investors are cautioned to consider carefully the significant development and adoption challenges the Company faces, and the material possibility that one or more of these challenges will prove insurmountable.

Development of Other Operations

The Company will seek to make the Intercoins compatible with native apps (such as iOS and Android, Windows, Mac and Linux), and to develop the following features of the Intercoin and Community Platforms: reporting (including local consumer price index of the communities), governance (including provably random polling), basic income, user experience, visual design, payment widgets for apps (such as PayPal), third-party development platform and videos and guides.

Status of Development Process

One of the principals of the Company, Greg Magarshak, was integral to the development of the Qbix Platform, developed by Qbix, Inc., which is intended to serve as a basis for many features of the Intercoin Platform. The Qbix Platform includes social apps that run on local community servers, payment buttons and subscriptions, decentralized identity and authentication, as well as real-time communication and credits systems.

The Company has been working since 2017 to refine plans for the Intercoin Platform technology. As part of that process, the Company has consulted with development leaders from several projects, including Ripple and MaidSAFE, as well as researchers specializing in cryptocurrency and byzantine fault tolerant consensus, and several valuable advisers. Through these efforts, the Company has developed conceptual plans for a new technology architecture specifically designed to power secure payment networks for local communities, regardless of whether such communities have the critical mass of computing power that generally is considered a prerequisite to running a worldwide distributed ledger. As conceived, this technology will not be based on Proof of Work2 or Proof of Stake3, but rather will incorporate numerous innovations and safeguards to achieve appropriate levels of security with a relatively small number of computers.

Prior Rights Offering

The Company previously completed a private placement offering of ITR Tokens for 55,500,000 ITR Tokens at price of $0.01 per ITR Token, or a total of $555,000. The Company has agreed to pay these initial investors the amount of $1,650,000 upon the completion of the Company’s initial coin offering, which the Company plans to undertake in connection with the launch of the Intercoin Platform.

Prior Offering of Notes

The Company has previously undertaken an offering of promissory notes in order to meet its short-term working capital requirements. As of the date of this memorandum, the Company has received approximately $100,000 from the sale of these notes. Some of the notes had a maturity date of April 30, 2019 and some have a maturity date of April 30, 2021. All of the notes are payable on the earlier of: (i) their maturity date or (ii) five (5) business days after the Company’s receipt of an aggregate of $5,000,000 in gross proceeds from the Offering.

Each note bears interest at a rate of eight percent (8%) per annum. Each noteholder has the right to convert the amount of its note into ITR Tokens within twenty (20) days of the date of this memorandum at a price equal to $0.03 per ITR Token. In the event that some or all of the noteholders do not elect to convert their notes into the ITR Tokens, then the Company expects to utilize a portion of the proceeds of the Offering to repay the outstanding balances of the note plus any accrued interest.

Working Capital Requirements

The Company currently has a very limited amount of working capital.

The Company will require a substantial amount of working capital to develop, launch, promote, and support its Platforms. The Company is currently developing a budget of these items, but preliminarily estimates that its costs will be approximately $11 million per year for a period of five years or more.

The Company will also need a substantial amount of working capital to pay legal, accounting and administrative expenses related to the establishment of the Company’s business and other marketing, development and administrative expenses.

The Company is obligated to pay $1,665,000 to prior investors in the Company upon the launch of the Intercoin Platform. See "Risk Factors – Risks Related to the Offering.”

Estimated Annual Budget

The Company’s currently estimated operating budget is approximately $11.1 million per year, which will be funded by the proceeds of the Offering and subsequent offerings of ITR Tokens and Intercoins by the Company.

The Company’s annual budget for the first year of operations is currently estimated as follows:

Budget Item Amount
Development: $5,000,000
Community Administration: $1,000,000
Marketing and Sales: $2,000,000
Public Relations: $500,000
Executive Salaries: $600,000
Security Firms: $500,000
Legal Research and Execution Costs: $500,000
Accounting and Tax Research Costs: $500,000
Office Expenses: $500,000
Total $11,100,000

The foregoing budget figures represent estimates based on current information, but are not warranted and may be revised significantly based on market changes, evolutions in Company priorities, and other factors deemed relevant. However, that the Company intends to ensure that no more than 50% of its annual operating budget is expended on development costs, and no more than 6% of its annual operating budget is expended on executive salaries paid to the Company’s Executive Team.

The Company cannot be certain of the costs involved in the development, launch and continuing maintenance of the Intercoins, the Intercoin Platform, Community Coins and the Community Platforms, as well as its other business ideas, since this is a new and evolving technology and a novel concept. Any amounts set forth in this memorandum for these purposes reflect the Company’s estimates of such costs, but the Company cannot warrant the accuracy of those estimates. Moreover, although the Company may charge fees or receive income in connection with the platform-based services it will provide, there is no certainty that these fees will be sufficient to fund the Company’s operations. As a result, it is possible that the proceeds of this Offering, together with the proceeds of any prior and/or subsequent offerings, may not be sufficient to cover (or may be in excess of) the costs associated with development and continuing maintenance of the Platforms by the Company.

Office and Staff

The Company leased office space in New York City, New York. The Company currently has five individuals working for the Company on a full-time basis. In addition, the Company has entered into independent contractor arrangements with developers dedicated to building the Intercoin Platform. After the commencement of the offering, the Company will seek to hire up to 20 employees.

To operate and preserve limited cash resources pending its receipt of sufficient proceeds from this Offering, the Company may offer to pay certain employees and/or service providers for their services in whole or in part in the form of ITR Tokens rather than cash. To the extent it does so, and as a means of inducing the prospective recipients to perform services in exchange for ITR Tokens, the Company would pay twice the value otherwise payable in cash in the form of ITR Tokens, pricing the ITR Tokens for such purposes at the initial price in the Offering of $0.03. For example, if a service provider would be entitled to a cash payment of $1,000, the Company’s offer would be for $3,000 worth of ITR Tokens at a price of $0.03 per ITR Token, or a total of 100,000 ITR Tokens. Further, the Company would offer to repurchase some or all of such ITR Tokens at their then-current price, but in no event more than $0.09 per ITR Token, once the Company has raised sufficient capital to do so; provided, however, that any such repurchases by the Company would be limited in the aggregate to the lesser of $1,000,000 or 10% of the proceeds of the Offering. The Founders and their affiliates will be excluded from any offer of ITR Tokens in lieu of cash as described in this paragraph, thus ensuring that neither the Founders nor their affiliates will receive any proceeds of the Offering pursuant to these arrangements.

Legal Proceedings

The Company has not been subject to any legal proceedings. It is possible that the Company may be involved in legal proceedings in the future. The likelihood or possible results of such legal proceedings and claims cannot be predicted with certainty, and regardless of the outcome, legal proceedings could have an adverse impact on the Company’s business or the development of the Intercoin Platform as a result of defense and settlement costs, diversion of resources and other factors.


 

GOVERNMENTAL REGULATION

Federal Regulation

Until recently, cryptocurrencies received little to no attention from regulatory agencies in the United States and around the world. However, concerns regarding ICOs and the limited nature of protections afforded to cryptocurrency investors have led regulators to focus increased attention on the cryptocurrency sector. The U.S. Securities and Exchange Commission (the "SEC”), U.S. Commodity Futures Trading Commission (the "CFTC”), and U.S Financial Crimes Enforcement Network ("FinCEN”) are some of the U.S. federal regulatory agencies that have released regulatory guidance or information related to cryptocurrencies, but no federal agencies have yet issued formal regulations addressing cryptocurrencies and other digital currencies. Several U.S. state regulators have issued regulations and/or provided guidance regarding cryptocurrencies. In general, the guidance and/or regulations provided by U.S. federal and state regulatory agencies focus on the exchange of cryptocurrencies and cryptocurrencies themselves, and not on the blockchain technology that allows for their existence.

SEC

On July 25, 2017, the SEC published its Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 (the "DAO Report”). In that document, which is regarded as a "first shot across the bow” to the cryptocurrency industry, the agency confirmed that some crypto tokens should be considered securities. The DAO – an acronym for "decentralized autonomous organization” – was created by a for-profit German corporation that funded projects with assets acquired through the sale of DAO tokens to investors. Investors could participate by contributing ether tokens to the DAO in exchange for DAO tokens, which provided certain limited voting and ownership rights. According to promotional materials, the DAO would earn profits by funding projects that would, in turn, provide DAO token holders with a return on investment. In the DAO Report, the SEC illustrated that, in assessing whether a token should be treated as a security, the agency will look closely at the particular "facts and circumstances” of the offering.

Then, on December 11, 2017, the SEC issued its first-ever public statement on ICOs and cryptocurrencies. In its statement, the SEC did not opine as to whether instruments issued by cryptocurrency companies (e.g., tokens, coins) are "securities” under the Securities Exchange Act of 1934, and thus, subject to regulation. The SEC indicated that the "characteristics and use” of any particular digital asset that is labeled as a cryptocurrency will be indicative of whether it is a security or not. Although the SEC has appeared reluctant to take a blanket, one-size-fits-all approach when it comes to cryptocurrency regulation, in the December statement, SEC Chairman Jay Clayton stated that "by and large, the structures of initial coin offerings that I have seen promoted involve the offer and sale of securities and directly implicate the securities registration requirements and other investor protection provisions of our federal securities laws.” This sentiment was echoed in the Chairman’s February 6, 2018 testimony before the U.S. Senate Banking Committee, in which he stated "I believe every ICO I’ve seen is a security.”

Despite the limited volume of guidance issue by the SEC to date, it is clear that the SEC intends to exercise increased oversight of cryptocurrencies and, in many or most cases, to regulate ICOs under the existing securities law framework. The Chairman expressly stated that he "asked the SEC’s Division of Enforcement to continue to police this area vigorously.” The Chairman further indicated that, before issuing a cryptocurrency or a product with its value tied to one or more cryptocurrencies, issuers must either (i) demonstrate that the currency or product is not a security or (ii) comply with applicable registration or exemption and other requirements under U.S. law. As of the date of this memorandum, only one company, the Praetorian Group ("PAX”), has filed a Registration Statement on Form S-1 under the Securities Act of 1933 in an effort to conduct a registered ICO, and the SEC has not declared such Registration Statement effective.

CFTC

In addition to SEC jurisdiction, the CFTC has determined that virtual currencies are "commodities,” and has asserted jurisdiction over the exchange of crypto tokens in certain contexts. In particular, the CFTC has asserted its own jurisdiction with respect to derivatives trading, but also the trading of virtual currencies on a levered, margined or financed basis if certain other requirements are met. Some clarity regarding the CFTC’s treatment of cryptocurrencies can be found in the CFTC’s September 17, 2015 order issued in conjunction with its settlement of the Intercoinflip, Inc. d/b/a Derivabit ("Intercoinflip”) case, in which Intercoinflip and its chief executive officer were offering to connect buyers and sellers of Bitcoin option contracts.

The Intercoinflip order represents the first time the CFTC determined that virtual currencies are properly defined as commodities (rather than currencies) under the Commodity Exchange Act ("CEA”). The CFTC applied CEA provisions and CFTC regulations that apply to transactions in commodity options and swaps to Intercoinflip’s operation. Specifically, in its order, the CFTC defined Bitcoin and other "virtual currenciesas:

a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value, but does not have legal tender status in any jurisdiction. Bitcoin and other virtual currencies are distinct from ‘real’ currencies, which are the coin and paper money of the United States or another country that are designated as legal tender, circulate, and are customarily used and accepted as a medium of exchange in the country of issuance.

Firms that come under the CFTC’s jurisdiction may have to register with the CFTC, and could be subject to regulation by the CFTC. Such oversight will subject those firms to numerous regulatory obligations. As a result of the Intercoinflip case, almost any business whose business activities involve virtual currency-based derivatives will need to assess whether it is required to register with the CFTC and may be subject to CFTC regulation. Two such businesses might include firms running trading platforms involving virtual currency-based derivatives, or firms providing advisory services concerning virtual currency-based derivatives.

FinCEN

FinCEN was the first U.S. regulatory agency to issue guidance relating to the application of federal law to the cryptocurrency industry. Businesses engaged in digital currency activities may come under FinCEN’s regulations addressing money services businesses ("MSBs”). MSBs include businesses involved in "the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.” Any party that engages in the transmission of digital currency likely will be subject to FinCEN’s MSB regulations, just as if the business transmitted traditional currency. MSBs must comply with a plethora of Anti-Money Laundering ("AML”) requirements, including record maintenance, Suspicious Activity Reporting, and the adoption of AML and know-your-customer ("KYC”) programs. Furthermore, MSBs are required to register with FinCEN.

FinCEN has indicated that, generally speaking, users (those who use digital currency to purchase goods or services) are not considered MSBs. However, exchangers (those who provide for the exchange of digital currency for other currency) and administrators (those who issue and/or redeem digital currency) are likely to be subject to the MSB regulations. In a centralized digital currency system like Facebook Credit, the issuer of the currency (i.e., Facebook) must register as an MSB, because the act of buying digital currency transfers value from one location (the user's conventional bank account) to another (the user's digital currency account). This same reasoning would apply to digital currency exchanges.

FinCEN has highlighted that the following activities would not subject a party to the MSB regulations, so long as they are performed for the party’s own account, rather than by or on behalf of another party:

Mining digital currency;

Using digital currency to purchase goods and services;

Exchanging digital currency for fiat currency; and

Investing in digital currency.

Internal Revenue Service

The Internal Revenue Service ("IRS”) has determined that digital currencies are "property” rather than "currency” under the Internal Revenue Code (the "Code”). As a result, transfers of digital currencies may be considered taxable events under the Code, exposing parties to capital gains taxes and reporting requirements in respect of all transactions involving coin-to-currency sales, coin-to-coin trades, and purchases of goods or services using coins.

Financial Industry Regulatory Authority

The Financial Industry Regulatory Authority ("FINRA”) has also expressed interest in supervising the cryptocurrency market. In his 2018 Regulatory and Examination Priorities Letter, FINRA President and CEO Robert Cook expressed that FINRA will monitor developments in the cryptocurrency industry, including the role firms and FINRA registered representatives play in effecting transactions involving digital currencies and ICOs. If a particular digital currency is a security, or where an ICO involves the offer and sale of securities, FINRA may review the mechanisms—for example, supervisory, compliance and operational infrastructure—firms have put in place to ensure compliance with relevant federal securities laws and regulations and FINRA rules. Some of these rules could include rules governing customer funds and securities, net capital, books and records, AML and KYC programs, etc.

State Regulation

Certain state regulators have also issued guidance regarding cryptocurrency regulation, thus far primarily focusing on the following two areas of concern: (i) the use of cryptocurrencies as legal tender in business transactions and tax consequences in connection therewith; and (ii) regulating operations of cryptocurrency exchanges as money transmitters ("MTs”). The California Department of Financial Institutions, NYSDFS, Virginia Corporation Commission, Idaho Department of Financial Services and Washington State Department of Financial Institutions have all released guidance and/or mandates addressing the registration of digital currency exchanges and/or service providers as MTs or MSBs.

New York was the first state to take significant steps toward formal regulation of the cryptocurrency industry. In July of 2014, the NYSDFS proposed the first U.S. regulatory framework aimed at licensing parties involved in virtual currency business activities. The NYSDFS’ regime, known as the "BitLicense,” focuses on consumer protection and was implemented in June of 2015. "BitLicense” regulates businesses that are involved in virtual currencies in New York or with New York customers and prohibits any party involved in such activities to operate without a license. The "BitLicense” requirements are both time-consuming and expensive and include, among other things, that companies engaged in virtual currency business activities undergo a detailed application process (including the payment of a non-refundable $5,000 application fee), obtain a license, and comply with capitalization requirements, detailed recordkeeping requirements, AML requirements and other requirements. Furthermore, licensees are subject to examinations by the NYSDFS. It appears from publicly available data that only about five (5) BitLicenses have been granted by the NYSDFS, despite applications far exceeding that number. Under the BitLicense regime, the following five activities are considered virtual currency business activities, and therefore licensing is required:

Receiving virtual currency for transmission, or transmitting virtual currency through a third party;

Maintaining custody of virtual currency or holding virtual currency on behalf of others;

Buying or selling virtual currency as a customer business;

Performing virtual currency exchange services (whether converting virtual currency to fiat currency or vice versa, or converting one type of virtual currency for another type of virtual currency); and

Controlling, administering, or issuing virtual currency.

However, under BitLicense, several activities are exempt from the licensing requirement. These exempt activities resemble those exempt from FinCEN’s MSB regulations, and include:

Mining digital currency for one’s own account;

Using digital currency to purchase goods and services; and

Engaging in software development and dissemination.

Many have deemed the BitLicense regime to be unnecessarily burdensome, and a legislative effort currently is underway in New York to materially scale back its requirements. See, e.g., https://www.nasdaq.com/article/new-york-legislator-proposes-bitlicense-alternative-for-cryptocurrency-users-cm934301.

Soon after the NYSDFS’ enactment of the BitLicense regime, Connecticut passed a law amending Connecticut’s Money Transmission Act (the "CT Act”) to subject businesses engaging in the transmission of "virtual currency” to the CT Act, including its licensure requirement. The CT Act also subjects businesses involved in the virtual currency transmission business to additional requirements that do not apply to traditional currency transmitters, including special bonding requirements.

Similar to Connecticut’s approach, New Hampshire amended its Licensing of Money Transmitters Statute (the "NH Act”) to include transmitters of virtual currency. Under the amendment, any party receiving currency or convertible virtual currency for transmission to another location must obtain a license. However, parties conducting transactions conducted in whole or in part in virtual currency are exempted from the NH Act.

North Carolina and Washington State also have amended their money transmission statutes to include the transmission of virtual currency.

With some minor exceptions, the states of Illinois, Kansas, Texas, and Tennessee have determined that their respective money transmission statutes do not apply to virtual currency transmitters.

In July of 2017, the multi-state Uniform Law Commission met to discuss the "Uniform Regulation of Virtual Currency Businesses Act” in hopes of moving the nation toward a more uniform regulatory approach in regard to state regulation of cryptocurrencies, but it currently is impossible to predict the extent to which its efforts might come to fruition.

Foreign Regulation

International regulation of digital currency varies widely from jurisdiction to jurisdiction. Some jurisdictions have severely restricted the use of digital currencies, while others have yet to take any position on the issue. Among those nations taking steps to regulate digital currencies, some appear to be adopting new regulatory regimes, while others appear to be trying to adapt their currently existing regulations to address cryptocurrencies (which latter approach is reflective of the approach generally being taken in the United States). Recently, international regulators appear to be increasingly focused on ICOs, with some regulators even deeming ICOs to be an illegal form of raising capital. Some foreign government agencies have also initiated public inquiries similar to those taken by U.S. agencies, including hosting public hearings on Bitcoin.

It is clear that regulation of the cryptocurrency industry is in its early stages, and likely will evolve in substantial and perhaps surprising ways. Accordingly, it is impossible to predict the future of such regulation with any certainty, or the impact that evolving regulation may have on the value of the Intercoins and your investment.
 

MANAGEMENT

Management

The principals of the Company are Gregory Magarshak and Jason Page, who are the Company’s directors, executive officers and common shareholders.

Gregory Magarshak, age 36, is the Company’s co-founder and CEO. Mr. Magarshak is a web developer, software architect, and internet entrepreneur. He entered college at the age of 14, studying mathematics and computer science at Brooklyn College. He received a BS degree in Computer Science and Mathematics from Brooklyn College in 2003, and a Masters of Mathematics from NYU in 2006. Mr. Magarshak became a social app developer and consultant, working on social branding projects at dozens of companies throughout New York City. He worked for Bloomberg LP as a front-end engineer, where he built the autosuggest feature of the Bloomberg Terminal. Since 2011, he has been the chief executive officer of Qbix, Inc. an app development company, the apps of which have been downloaded and used by approximately 5 million people in over 100 countries. He architected the open source Qbix Platform to decentralize social networking networks. In 2017, he started Intercoin Inc. with Jason Page with a goal of helping to decentralize the local and global payment networks. His goals include moving both social networking and payments from a system resembling feudalism to a system with more permissionless innovation and freer market participants.

Jason Page, age 40, has over 6 years of experience in cryptocurrency and distributed ledger technologies. He studied moving image arts and political science from 1996 to 2000 at the College of Santa Fe. He worked in film distribution as a producer representative for over a decade. He was an early adopter of Bitcoin and has been actively involved in the cryptocurrency community since 2012. He was affiliated with the Bitcoin Center from 2013 to 2015. He has studied various public and private blockchains such as Ethereum, Hashgraph to Hyperledger. He has advised on various blockchain projects for Blockchain Tech Corp. Mr. Page co-founded Intercoin Inc. with Gregory Magarshak in November 2017 with a goal of helping to introduce basic income to communities.

Board of Directors

The Board of Directors of the Company currently consists of Gregory Magarshak and Jason Page.

Advisors

The Company has informal relationships with a number of industry experts who have provided the Company with advice concerning the Company’s planned platforms and business. The Company is seeking to enter into formal arrangements with one or more of these individuals to serve as formal advisors to the Company, although none of them is currently engaged.

The Company is compensating certain advisors for their services to the Company either in Intercoins, which will be distributed from the Intercoins owned by the Company, or through a form of an equity interest in the Company.

Other Activities of the Principals

The Company and the Founders and their affiliates are engaged in various business activities other than the Company’s business and expect to continue to be so engaged, although the Founders currently intend to devote substantially all of their time and effort to the business of the Company.

The Founders of the Company have entered into employment agreements with the Company, which agreements include restrictions on competing with the business of the Company.

Indemnification of the Company and its Affiliates

The Company is obligated to indemnify and hold harmless all of the principals from and against any and all damages that, in the judgment of the Company, arise out of, relate to or are in connection with the management or conduct of the business or affairs of the Company, except for any such damages that are finally found by a court of competent jurisdiction to have resulted primarily from the bad faith, gross negligence or intentional misconduct of, or knowing violation of law by, the person seeking indemnification. Upon request, the Company must advance an indemnified party’s attorneys’ fees and expenses as they are incurred, subject to such party’s provision of an undertaking to repay any amounts so advanced if it is ultimately determined that such party is not entitled to indemnification.


 

COMPENSATION OF MANAGEMENT AND THEIR AFFILIATES

Compensation of Founders

The Company has agreed to pay each of the Founders an annual salary consisting of the greater of ($75,000 each or 3% of the annual budget), pursuant to an employment agreement entered into between the Company and each Founder. The employment agreements also provide for standard benefits, such as medical and dental insurance, to be furnished to the Founders by the Company.

The Company will engage additional executives to assist the Company in the development of its business. The compensation of such persons will be determined at the time they are engaged.

Reimbursement of Expenses

The Company will reimburse the directors and their affiliates for out of pocket expense incurred by them on behalf of the Company. The accrued amount of such expenses as of November 31, 2019 is less than $150,000.

Grant of Intercoins

The Company has granted rights to 100,000,000 Intercoins to the Founders in connection with the founding of the Company. Neither the Founders nor their affiliates will be granted any further ITR Tokens or Intercoins, although they may receive dividend distributions from Intercoins that are sold by the Company after the launch of the Intercoin Platform.

The Company may grant Intercoins to future executives, employees and advisors in amounts to be determined by the Company in consideration for their services.


 

FEDERAL INCOME TAX CONSIDERATIONS

General

Summarized below are the material federal income tax principles applicable to an investment in the ITR Tokens and the Intercoins, based on the U.S. Internal Revenue Code of 1986, as amended, (the "Code”), the Treasury Regulations and published rulings and court decisions currently in effect. No assurance can be given that future legislative or administrative changes or court decisions will not significantly modify the law and render inapplicable or incorrect the statements and opinions expressed herein. Any such changes may or may not be retroactive with respect to transactions completed prior to the effective date of such changes. The applicable Treasury Regulations and interpretations dealing with this area of taxation are being developed by the Internal Revenue Service (the "IRS”) and may evolve substantially, and changes in such Treasury Regulations or interpretations could adversely affect the Company and the investors.

Tax effects on investors under federal income tax laws may not be the same as those of state or local income tax laws. EACH PROSPECTIVE INVESTOR SHOULD CONFER WITH ITS PERSONAL TAX ADVISERS REGARDING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE RIGHTS. THE COMPANY ASSUMES NO RESPONSIBILITY FOR THE TAX CONSEQUENCES OF THIS TRANSACTION TO ANY INVESTOR.

Summary

Set forth below is a discussion, in summary form, of certain United States federal income tax consequences relating to in investment in the ITR Tokens and the acquisition, ownership and disposition of Intercoins issued pursuant to the ITR Tokens. This summary does not attempt to present all aspects of the United States federal income tax laws or any state, local or foreign laws that may affect an investment in the ITR Tokens or in Intercoins. In particular, foreign investors, financial institutions, insurance companies, tax-exempt entities, investors subject to the alternative minimum tax, investors exchanging Bitcoin and/or Ether for ITR Tokens, and other investors of special status must consult with their own professional tax advisors regarding a prospective investment in the ITR Tokens. This summary is general in nature and should not be construed as tax advice to any prospective investor. No ruling has been or will be requested from the IRS, and no assurance can be given that the IRS will agree with the tax consequences described in this summary. The following discussion assumes that each prospective investor will acquire Intercoins as a capital asset (generally, property held for investment).

This description is based on the Code, existing, proposed and temporary U.S. Treasury Regulations and judicial and administrative interpretations thereof, in each case as available on the date hereof. All of the foregoing is subject to change, which change could apply retroactively and could affect the tax consequences described below.

The following discussion is limited to prospective investors who are "United States Persons” within the meaning of the Code and who purchase ITR Tokens solely with U.S. dollars.

Each prospective investor should consult with its own tax adviser in order to fully understand the United States federal, state, local and foreign income tax consequences of an investment in the ITR Tokens or in Intercoins. No formal or legal tax advice is hereby given to any prospective investor.

Transactions involving the ITR Tokens and similar instruments, as well as initial coin offerings ("ICOs”) and coin transactions, are relatively new and it is more than likely that the IRS will issue guidance, possibly with retroactive effect, impacting the taxation of investors in the ITR Tokens, participants in an ICO, and holders of Intercoins. Future tax guidance from the IRS (or guidance resulting from future judicial decisions) could negatively impact investors in the ITR Tokens and holders of Intercoins:

Tax Treatment of Virtual Currencies

On March 25, 2014, the IRS released guidance on the treatment of convertible virtual currencies (such as Bitcoin) for U.S. federal income tax purposes. The guidance classifies such currencies as "property” for U.S. federal income tax purposes and clarifies that such currencies can be held as capital assets. The guidance further states that general tax principles applicable to property transactions apply to transactions using such currencies. Therefore, a person that holds such currencies as capital assets and sells such currencies or transfers them in exchange for other property or services may recognize a capital gain or loss upon such sale or transfer. The IRS also clarified that a person who receives such currencies as payment (e.g., as wages or, in the case of a miner, as a reward for solving a block) would recognize ordinary income based on the fair market value of such currencies when received.

The treatment of such currencies for U.S. federal income tax purposes remains unclear. Furthermore, legislation has previously been introduced and may be introduced in the future that would change the tax considerations of an investment in virtual currencies. Future legislation or guidance issued by the IRS regarding the tax treatment of virtual currencies for U.S. federal income tax purposes may result in tax consequences to holders of the Intercoins that are materially different than those described herein.

Treatment of Issuance of ITR Tokens

Based on the current position of the IRS, there is a significant risk that the issuance of ITR Tokens by the Company will be treated as a taxable sale of property by the Company, thus subjecting the Company to substantial income tax on the proceeds of the Offering.

However, the Company does not expect that the issuance of the Intercoins will result in the recognition of taxable income by an investor. An investor should generally have a tax basis for U.S. federal income tax purposes in the Intercoins it acquires from the Company equal to the amount of money such investor paid for the ITR Tokens. The investor’s holding period in the Intercoins should begin on the day the Intercoins are issued to the investor.

Disposition of Intercoins

An investor who sells, exchanges, or otherwise disposes of the ITR Tokens or Intercoins for cash or other property (including pursuant to an exchange of such ITR Tokens or Intercoins for other convertible virtual currency) should, pursuant to IRS Notice 2014-21, recognize capital gain or loss in an amount equal to the difference between the fair market value of the property received in exchange for such ITR Tokens or Intercoins and the investor’s adjusted tax basis in the ITR Tokens or Intercoins. This capital gain may be long-term if the investor has held its ITR Tokens or Intercoins for more than one year prior to disposition.

Treatment of Conversion of ITR Tokens upon failure of Platform Launch

In the event the Intercoin Platform fails to launch and the Intercoins are not issued, the Company may wind up its operations and, under the circumstances described in this memorandum, distribute the remaining proceeds to the holders of the ITR Tokens. An investor who receives Company assets in exchange for its ITR Tokens generally should recognize taxable gain or loss in an amount equal to the difference between the fair market value of the assets the investor receives and its adjusted tax basis in its ITR Tokens (which will generally equal the amount of money it advanced to acquire the ITR Tokens).

EACH INVESTOR SHOULD SEEK, AND MUST DEPEND UPON, THE ADVICE OF HIS OR HER TAX ADVISOR WITH RESPECT TO THEIR INVESTMENT, AND EACH INVESTOR IS RESPONSIBLE FOR THE FEES OF SUCH ADVISOR. NOTHING IN THIS MEMORANDUM IS OR SHOULD BE CONSTRUED AS LEGAL OR TAX ADVICE TO AN INVESTOR. INVESTORS SHOULD BE AWARE THAT THE INTERNAL REVENUE SERVICE MAY NOT AGREE WITH ALL TAX POSITIONS TAKEN BY THE COMPANY AND THAT CHANGES TO THE INTERNAL REVENUE CODE OR THE REGULATIONS OR RULINGS THEREUNDER OR COURT DECISIONS AFTER THE DATE OF THIS MEMORANDUM MAY CHANGE THE ANTICIPATED TAX TREATMENT TO AN INVESTOR. THE COMPANY WILL NOT OBTAIN ANY RULING FROM THE INTERNAL REVENUE SERVICE WITH REGARD TO THE TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES.

TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, PROSPECTIVE INVESTORS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS MEMORANDUM IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY INVESTORS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON SUCH INVESTORS UNDER THE CODE; (B) SUCH DISCUSSION IS WRITTEN IN CONNECTION WITH THE PROMOTION OR MARKETING OF INVESTMENTS IN THE COMPANY; AND (C) PROSPECTIVE INVESTORS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

THE TAX TREATMENT OF THE RIGHTS, THE PURCHASE RIGHTS CONTAINED IN THE SUBSCRIPTION AGREEMENT AND THE COIN DISTRIBUTION IS UNCERTAIN AND THERE MAY BE ADVERSE TAX CONSEQUENCES FOR INVESTORS UPON CERTAIN FUTURE EVENTS. AN INVESTMENT IN THE RIGHTS AND THE PURCHASE OF COINS PURSUANT THERETO MAY RESULT IN ADVERSE TAX CONSEQUENCES TO INVESTORS, INCLUDING WITHHOLDING TAXES, INCOME TAXES AND TAX REPORTING REQUIREMENTS. EACH INVESTOR SHOULD CONSULT WITH AND MUST RELY UPON THE ADVICE OF ITS OWN PROFESSIONAL TAX ADVISORS WITH RESPECT TO THE UNITED STATES AND NON-TAX TREATMENT OF AN INVESTMENT IN THE RIGHTS AND THE INTERCOINS.

Possible Legislative Tax Changes

The foregoing summary of federal income tax law reflects current provisions of U.S. tax law. Because, however, Treasury Regulations and other official interpretations have not been issued with respect to a number of important issues, the application of current law is uncertain. In addition, legislation has been or may be proposed in Congress that might have a substantial and adverse effect on investors. Investors should consult with their own professional advisers as to all current and possible future proposals with respect to federal, state and local tax legislation and the effect, if any, that such legislation may have on an investment in ITR Tokens.

The income tax aspects of the Company summarized above are general in nature and are not intended to be a complete explanation of the income tax results of investing in the Company. Each prospective investor should consult with his or her own tax adviser for detailed information.


 

TERMS OF THE OFFERING

Offered Securities

The Company is offering of up to 350,000,000 ITR Tokens. Each ITR Token will entitle the holder to receive one Intercoin upon the launch of the Intercoin Platform on which the Company will issue the Intercoins.

Maximum Number of Intercoins

The Company will issue a maximum of 1 billion Intercoins.

Price of the Intercoins

The The Company has established a "base price” of $0.09 per ITR Token. The Offering will proceed in several "rounds", and the price of ITR Tokens sold in the earlier rounds will reflect an effective discount from this base price. The prices are set forth on a table included on the cover page to this memorandum.

Maximum Offering

The maximum number of ITR Tokens that may be sold in the Offering is 350,000,000 Rights, and a maximum gross proceeds of $15,000,000 (the "Maximum Offering”).

No Minimum Offering

The consummation of the Offering is not subject to the sale of any minimum number of ITR Tokens.

Minimum Purchase

Each subscriber will be required to purchase a minimum of $10,000 in ITR Tokens.

How to Subscribe

In order to subscribe to purchase the ITR Tokens, an investor would take the steps outlined in the Subscription Procedure section above.

You represent that the amounts invested by you in this Offering were not and are not directly or indirectly derived from any activities that contravene Federal, state or international laws and regulations, including anti-money laundering laws and regulations. Federal regulations and Executive Orders administered by the OFAC prohibit, among other things, the engagement in transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals. The lists of the OFAC-prohibited countries, territories, individuals and entities can be found on the OFAC website at http://www.treas.gov/ofac. In addition, the programs administered by the OFAC (the "OFAC Programs”) prohibit dealing with individuals or entities in certain countries, regardless of whether such individuals or entities appear on any OFAC list;

You represent and warrant that none of: (1) you; (2) any person controlling or controlled by you; (3) if you are a privately-held entity, any person having a beneficial interest in you; or (4) any person for whom you are acting as agent or nominee in connection with this investment is a country, territory, entity or individual named on an OFAC list, or a person or entity prohibited under the OFAC Programs. Please be advised that the Company may not accept any subscription amounts from a prospective investor if such investors cannot make the representation set forth in the preceding sentence. You agree to promptly notify the Company should you become aware of any change in the information set forth in any of these representations. You are advised that, by law, the Company may be obligated to "freeze the account” of any investor, either by prohibiting additional subscriptions from it, declining any redemption requests and/or segregating the assets in the account in compliance with governmental regulations, and that the Company may also be required to report such action and to disclose such investor’s identity to the OFAC;

You represent and warrant that none of: (1) you; (2) any person controlling or controlled by you; (3) if you are a privately-held entity, any person having a beneficial interest in you; or (4) any person for whom you are acting as agent or nominee in connection with this investment is a senior foreign political figure , or any immediate family Investor or close associate of a senior foreign political figure, as such terms are defined in the footnotes below; and

if you are affiliated with a non-U.S. banking institution (a "Foreign Bank”), or if you receive deposits from, make payments on behalf of, or handle other financial transactions related to a Foreign Bank, you represent and warrant to the Company that: (1) the Foreign Bank has a fixed address, and not solely an electronic address, in a country in which the Foreign Bank is authorized to conduct banking activities; (2) the Foreign Bank maintains operating records related to its banking activities; (3) the Foreign Bank is subject to inspection by the banking authority that licensed the Foreign Bank to conduct its banking activities; and (4) the Foreign Bank does not provide banking services to any other Foreign Bank that does not have a physical presence in any country and that is not a regulated affiliate.



 

PLAN OF DISTRIBUTION

Placement Agents and Foreign Intermediaries

The The Company may engage securities brokers to participate in the offering of the ITR Tokens and to compensate foreign intermediaries for introducing investors to the Company. The compensation payable to these parties may be deducted from the placement fees will not exceed a total of 8.0% of the gross proceeds of the Offering. The scope of the services to be provided by these brokers and intermediaries and their fees will be determined from time to time by the Company.

Offering of ITR Tokens to U.S. Persons

The Company is offering the ITR Tokens to U.S. investors in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act”), set forth in Rule 506(c) of Regulation D under the Securities Act. Under Rule 506(c), the Company can only sell the ITR Tokens and Intercoins to U.S. investors who are "accredited investors” as defined in Rule 501 of Regulation D. The Company is required to verify the status of each U.S. investor as an "accredited investor.” As a result, each U.S. investor who subscribes for ITR Tokens will be required to provide the Company with additional documentation that establishes that the investor is an accredited investor.

Offering of Rights to Non-U.S. Persons

The Company is offering the Rights to certain non-U.S. investors in offshore transactions in reliance on Regulation S under the Securities Act. Each non-U.S. investor will be required to confirm that such investor is a not a "U.S. person” for purposes of Regulation S and that such investor was offered the Rights outside of the United States and submitted its subscription documents to the Principal Placement Agent from outside the United States.

Certain Selling Restrictions

No action may be taken in any jurisdiction that would permit a public offering of the Rights or the possession, circulation or distribution of this memorandum in any jurisdiction where action for that purpose is required. Accordingly, the Intercoins may not be offered or sold, directly or indirectly, and neither this memorandum nor any other offering material or advertisements in connection with the Intercoins may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable rules and regulations of any such country or jurisdiction.

Notice to Prospective Purchasers in Australia

Neither this memorandum, nor any other disclosure document in relation to the Rights, has been, will be, or needs to be, lodged with the Australian Securities & Investments Commission. This memorandum is not a product disclosure statement under Division 2 of Part 7.9 of the Corporations Act 2001 (CTH) (the "Australia Act”) nor is it a prospectus under Chapter 6D of the Australia Act, and the Rights have not been, and will not be, registered as a managed investment scheme under the Australia Act.

An offer of the ITR Tokens is made in Australia only to "wholesale clients” as defined by the Australia Act ("Wholesale Clients”), and can only be accepted by a recipient if they are a Wholesale Client.

No Securities will be issued or arranged to be issued, and no recommendations to acquire Securities will be made, which would require the provision of a product disclosure statement under Division 2 of Part 7.9 of the Australia Act or the provision of a financial services guide or a statement of advice under Division 2 or 3 of Part 7.7 of the Australia Act.

Neither this memorandum, the offer contained herein nor any other disclosure document in relation to the ITR Tokens can be partially or wholly distributed, published, reproduced, transmitted or otherwise made available or disclosed by recipients to any other person in Australia.

Notice to Prospective Purchasers in the European Economic Area

In relation to each Member State of the European Economic Area (each a "Member State”), which has implemented the Prospectus Directive, the Company has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Member State it has not made and will not make an offer of the ITR Tokens to the public in a Member State, except that it may, with effect from and including such date, make an offer of Securities in a Member State at any time under the following exemptions as provided by the Prospectus Directive:

(a) to legal entities which are qualified investors, as defined in the Prospectus Directive;

(b) to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospective Directive;

(c) in any other circumstances falling within the scope of Article 3(2) of the Prospectus Directive.

For the purposes of the above, (i) the expression an "offer of the ITR Tokens to the public” in relation to any Securities in any Member State means the communication in any form and by any means of sufficient information on the terms of the Offering and the ITR Tokens to be offered so as to enable an investor to decide to purchase or subscribe the ITR Tokens, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and (ii) the expression "Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including Directive 2010/73/EU), and includes any relevant implementing measure in each Member State.

Notice to Purchasers in France

The Offering is not being made, directly or indirectly, to the public in the Republic of France ("France”). Neither this memorandum nor any other documents or materials relating to the Offering have been or will be distributed to the public in France and only (i) providers of investment services relating to portfolio management for the account of third parties (personnes fournissant le service d’investissement de gestion de portefeuille pour compte de tiers) and/or (ii) qualified investors (investisseurs qualifiés) acting for their own account (other than individuals), and all as defined in, and in accordance with, Articles L.411-1, L.411-2, D.411-1 and D.411-4, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code Monétaire et Financier, are eligible to participate in the Offering. Neither this memorandum nor any other documents or materials relating to the Offering have been or will be submitted for clearance to or approved by the Autorité des marchés financiers. The direct or indirect distribution to the public in France of any so acquired Securities may be made only as provided by Articles L.411-1, L.411-2, L. 412-1 and L.621-8 to L.621-8-3 of the French Code Monétaire et financier and applicable regulations thereunder.

This memorandum, and any related document or material, shall not be considered, nor construed, as any form of financial investment advice, solicitation or advertisement.

Notice to Prospective Purchasers in Hong Kong

The Securities have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than to "professional investors” as defined in the ITR Tokens and Futures Ordinance (Cap. 571) of Hong Kong (the "SFO”) and any rules made thereunder, or in circumstances which do not result in the document being a "prospectus” as defined in the Companies (Winding up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 622) of Hong Kong.

No person has issued or had in its possession for the purposes of issue, or will issue or have in its possession of the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the ITR Tokens, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the ITR Tokens which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors” within the meaning of the SFO and any rules made thereunder.

Notice to Prospect Investors in Israel

This memorandum does not constitute a prospectus under the Israeli Securities Law, 5728-1968, and has not been filed with or approved by the Israel Securities Authority. In Israel, this memorandum is being distributed only to, and is directed only at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters purchasing for their own account, venture capital funds, and entities with shareholders’ equity in excess of NIS 250 million, each as defined in the Addendum (as it may be amended from time to time, collectively referred to as institutional investors). Institutional investors may be required to submit written confirmation that they fall within the scope of the Addendum. In addition, the Company may distribute and direct this memorandum in Israel, at its sole discretion, to certain other exempt investors or to investors who do not qualify as institutional or exempt investors, provided that the number of such non-qualified investors in Israel shall be no greater than 35 in any 12-month period.

Notice to Residents of Monaco

The ITR Tokens may only be offered or sold, directly or indirectly, to the public in Monaco by a Monaco duly authorized intermediary, i.e., banks duly licensed by "Comité des Etablissements de Crédit et des Entreprises dInvestissement” and to portfolio management companies licensed by virtue of law n°1.144 of July 26, 1991 and law n°1.338 of September 7, 2007 by the "Commission de Controle des Activités Financières.

Notice to the Residents of the Russian Federation

This memorandum is not an offer, or an invitation to make offers, to sell, purchase, exchange or otherwise transfer securities or foreign financial instruments in the Russian Federation to or for the benefit of any Russian person or entity, unless and to the extent otherwise permitted under Russian laws. This document is not an advertisement in connection with the "placement” or "circulation” (as both terms are defined under Russian securities law) of any securities, and financial instruments described herein are not intended for "placement” or "circulation” in the Russian federation, in each case unless and to the extent otherwise permitted under Russian laws. Information contained in this document is not intended for any persons in the Russian Federation and must not be distributed or circulated into the Russian Federation or made available in the Russian federation to any persons unless and to the extent they are otherwise permitted to access such information under Russian law. Neither financial instruments described herein nor a prospectus relating to such financial instruments has been or will be registered with the Central Bank of the Russian Federation.

Notice to Prospective Purchasers in Singapore

Each investor has acknowledged that this memorandum has not been and will not be registered as a prospectus with the Monetary Authority of Singapore (the "MAS”). Accordingly, this memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the ITR Tokens, may not be circulated or distributed, nor may the ITR Tokens be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the ITR Tokens and Futures Act (Chapter 289 of Singapore) (the "SFA”)) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions, specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA.

Where the ITR Tokens are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the units, as the case may be, pursuant to an offer made under Section 275 of the SFA except:

(1) to an institutional investor pursuant to Section 274 of the SFA or to a relevant person pursuant to Section 275(1) of the SFA, or to any person pursuant arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(2) where no consideration is or will be given for the transfer;

(3) where the transfer is by operation of law;

(4) as specified in Section 276(7) of the SFA; and/or

(5) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

By accepting receipt of this memorandum, any person in Singapore represents and warrants that he is entitled to receive such memorandum in accordance with the restrictions set forth above and agrees to be bound by the limitations contained herein.

Notice to Residents of South Korea

This memorandum is not, and under no circumstances is to be construed as, an offering of securities in South Korea. Neither the Company nor any of its Placement Agents may make any representation with respect to the eligibility of any recipients of this memorandum to acquire the ITR Tokens under the laws of South Korea, including, without limitation, Indirect Investment Asset Management Business Law, the Securities and Exchange Act and the Foreign Exchange Transaction Act and regulations thereunder. The ITR Tokens have not been registered under the Securities and Exchange Act, Securities Investment Trust Business Act or the Securities Investment Company Act of South Korea and none of the ITR Tokens may be offered, sold or delivered, directly or indirectly, or offered or sold to any person for re-offering or re-sale, directly or indirectly, in South Korea.

Notice to Residents of Switzerland

Neither this memorandum nor any other offering or marketing material relating to the ITR Tokens or the Offering may be publicly distributed or otherwise made publicly available in Switzerland.

This memorandum may only be freely circulated and the ITR Tokens may only be freely offered, distributed or sold to regulated financial intermediaries such as banks, securities dealers, fund management companies, asset managers of collective investment schemes and central banks as well as to regulated insurance companies.

Circulating this memorandum and offering, distributing or selling the ITR Tokens to other persons or entities including qualified investors as defined in the federal act on collective investment schemes ("CISA”) and its implementing ordinance ("CISO”) may trigger, in particular, (i) licensing/prudential supervision requirements for the Company, (ii) a requirement to appoint a representative and paying agent in Switzerland and (iii) the necessity of a written distribution agreement between the representative in Switzerland and the distributor. Accordingly, legal advice should be sought before providing this memorandum to and offering, distributing or selling/on-selling ITR Tokens to any other persons or entities.

This memorandum does not constitute an issuance prospectus pursuant to Article 652A or 1156 of the Swiss Code of Obligations or Article 5 of the CISA and may not comply with the information standards required thereunder. The ITR Tokens will not be listed on the Six Swiss Exchange or on any other stock exchange, multilateral or organized trading facility in Switzerland, and consequently, the information presented in this document does not necessarily comply with the information and disclosure standards set out in the relevant listing rules.

Neither this memorandum nor any other offering or marketing material relating to the Offering, the Company or the ITR Tokens have been or will be filed with or approved by any Swiss regulatory authority. In particular, this memorandum will not be filed with, and the Offering will not be supervised by, the Swiss financial market supervisory authority ("FINMA”), and neither the Company nor the ITR Tokens have been or will be authorized under the CISA. The investor protection affected to acquirers of interests in collective investment schemes under the CISA does not extend to subscribers of the ITR Tokens.

This memorandum does not constitute investment advice. It may only be used by those persons to whom it has been handed out in connection with the ITR Tokens and may neither be copied nor directly or indirectly distributed or made available to other persons.

Notice to Prospective Purchasers in The Netherlands

The Securities may not be offered or sold in The Netherlands to any persons other than qualified investors within the meaning of the Prospectus Directive. For purposes of the above, the expression "Prospectus Directive” shall have the meaning given to it in the paragraph "Notice to Prospective Purchasers in the European Economic Area” above.

Notice to Residents of the United Arab Emirates

This memorandum does not, and is not intended to, constitute an invitation or an offer of the ITR Tokens in the United Arab Emirates (including the Dubai International Financial Centre) and accordingly should not be construed as such.

this memorandum is being issued to a limited number of institutional/sophisticated subscribers (a) upon their request and confirmation that they understand that the issuer and the ITR Tokens have not been approved or licensed by or registered with the United Arab Emirates Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates; and (b) on the condition that it will not be provided to any person other than the original recipient, is not for general circulation in the United Arab Emirates and may not be reproduced or used for any other purpose. This memorandum has not been approved by or filed with the Dubai Financial Services Authority.

Notice to Prospective Purchasers in the United Kingdom

With respect to offers and sales of the ITR Tokens that are the subject of this memorandum, offers or sales of any of such Securities to persons in the United Kingdom are prohibited in circumstances which have resulted in or will result in such Securities being or becoming the subject of an offer of transferable securities to the public as defined in Section 102B of the Financial Services and Markets Act 2000 (as amended) (the "FSMA”) and all applicable provisions of the FSMA must be complied with, with respect to anything done in relation to such Securities in, from or otherwise involving the United Kingdom.

To the extent this memorandum is distributed in the United Kingdom, it will only be distributed to and directed at: (i) persons who have professional experience in matters relating to investments falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the "FPO”); (ii) high net worth entities and other persons to whom it may otherwise lawfully be communicated falling within Article 49 of the FPO; (iii) certified sophisticated investors falling within Article 50 of the FPO; or (iv) other persons to whom it may lawfully be directed under an exemption contained in the FPO (the persons specified in (i), (ii), (iii) and (iv) above are, together, referred to as "relevant persons”). Persons who are not relevant persons must not act on or rely on this memorandum or any of its contents. Any investment or investment activity to which this memorandum relates is available only to relevant persons and will be engaged in only with relevant persons. Relevant persons in receipt of this memorandum must not distribute, publish, reproduce, or disclose this memorandum (in whole or in part) to any person who is not a relevant person.

In addition, any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received in connection with the issue or sale of such Securities will only be communicated, or be caused to be communicated, in circumstances in which Section 21(1) of the FSMA does not apply to the Company.


 

TRANSFER RESTRICTIONS

The Offering has not been registered or qualified under the securities laws of any jurisdiction anywhere in the world. The ITR Tokens and the Intercoins, if issued, are being offered and sold only in jurisdictions where such registration or qualification is not required, including pursuant to applicable exemptions that generally limit the purchasers who are eligible to purchase the ITR Tokens and the Intercoins, if issued, and that restrict their resale.

Holders of the ITR Tokens may not offer, sell, assign, transfer, pledge, encumber or otherwise dispose of the ITR Tokens except with the prior consent of the Company. The ITR Tokens and the Intercoins may not be offered, sold, assigned, transferred, pledged, encumbered or otherwise disposed of except as permitted under applicable securities laws and the additional restrictions imposed on the Intercoins hereunder. In addition, holders of the Intercoins will not be able to transfer their Intercoins until the Company designates or creates a Designated Mechanism or Designated Exchange, or notifies holders of the Intercoins that peer-to-peer transfers will be permitted and provides holders with the requirements and conditions to effect peer-to-peer transfers. Furthermore, there can be no assurance that any Designated Mechanism or Designated Exchange will be chosen or created or that all holders of the Intercoins will have access to a Designated Mechanism or Designated Exchange or that peer-to-peer transfers will ever be permitted.

Notice to Purchasers

Neither the ITR Tokens nor the Intercoins, if issued, have been registered under the Securities Act or any securities laws of any state and, unless so registered, the Intercoins may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and such other securities laws. Accordingly, the ITR Tokens are being initially offered and sold only (1) to "accredited investors” (as defined under Regulation D), in each case, in reliance on, and in compliance with, the exemption from the registration requirements of the Securities Act provided by Rule 506(c) of Regulation D under the Securities Act, and (2) outside the United States to non-U.S. persons in offshore transactions in reliance upon Regulation S under the Securities Act.

As used herein, the terms "United States,” "U.S. person” and "offshore transactions” have the meanings given to them in Regulation S under the Securities Act.

Representations and Warranties of Purchasers

Each purchaser that executes a ITR Token will be deemed to have acknowledged, represented and warranted to, and agreed with, the Company as follows:

(1) It understands and acknowledges that (i) the issuance of the ITR Tokens and the Intercoins, if issued, has not been and will not be registered under the Securities Act or any other applicable securities law, unless required by applicable law, (ii) the ITR Tokens are being offered for sale in transactions not requiring registration under the Securities Act or any other applicable U.S. state securities law, (iii) the Intercoins, if issued, will be issued in transactions not requiring registration under the Securities Act or any other applicable U.S. state securities law, and (iv) the Intercoins may not be offered, sold or otherwise transferred or disposed of, except in compliance with the registration requirements of the Securities Act and any other applicable securities law, or pursuant to an exemption therefrom and, in compliance with the conditions for transfer set forth in paragraphs (5) and (9) below.

(2) It acknowledges that this memorandum relates to an offering that is exempt from registration under the Securities Act and may not comply in important respects with SEC rules that would apply to an offering document relating to a public offering of securities.

(3) It is:

(a) an "accredited investor” (as defined in Regulation D) acquiring the Right, and it is aware that the Right and the Intercoins, if, as and when issued, are being issued in reliance on an exemption from the registration requirements of the Securities Act; or

(b) not a "U.S. person” and it is not acquiring the Right and the Intercoins for the account or benefit of a "U.S. person,” and it is acquiring such Right in an offshore transaction in accordance with all of the requirements of Regulation S under the Securities Act and in accordance with the laws applicable to it in the jurisdiction in which such acquisition is made.

(4) It acknowledges that the purchase of a ITR Token is also the purchase of Intercoins, if, as and when they are issued.

(5) In addition to all applicable transfer restrictions under applicable securities laws, it acknowledges and agrees that: (i) holders of the ITR Tokens may never offer, sell, assign, transfer, pledge, encumber or otherwise dispose of the ITR Tokens and (ii) the Intercoins may not be offered, sold, assigned, transferred, pledged, encumbered or otherwise disposed of until such time as the Company (A) designates or creates a Designated Exchange and notifies Intercoin holders thereof or (B) notifies Intercoin holders that peer-to-peer transfers will be permitted and provides holders with the requirements and conditions to effect peer-to-peer transfers.

(6) It acknowledges that neither the Company, nor any of its representatives or affiliates, have made any statement, representation or warranty, express or implied, to it other than the information contained in this memorandum, which has been delivered to it and upon which it is solely relying in making its investment decision with respect to the Securities. It has had access to such financial and other information concerning the Company and the Securities as it has deemed necessary in connection with its decision to invest, including an opportunity to ask questions of and request information from the Company, and such information has been made available to it.

(7) It is acquiring the ITR Token and the Intercoins, if, as and when issued, for its own account, or for one or more purchaser accounts for which it is acting as a fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or any other applicable securities laws, subject to any requirement of law that the disposition of its property or the property of such purchaser account or accounts be at all times within its or their control and subject to its or their ability to resell the Intercoins, if, as and when issued, pursuant to Rule 144A, Regulation S, or any other exemption from registration available under the Securities Act, in each case, subject to the conditions set forth in (9).

(8) Each holder of the Securities acknowledges that the Company is not making any representations as to the availability of the exemption provided by Rule 144 for resale of the Intercoins, if, as and when issued.

(9) Each holder of a ITR Token acknowledges that:

The ITR Token and each Intercoin come with a legend substantially to the following effect:

THIS SECURITY AND ANY INTERCOINS WHEN ISSUED PURSUANT TO IT (THE "INTERCOINS”), HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY, NOR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES. EACH HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF REPRESENTS THAT IT IS AN "ACCREDITED INVESTOR” (AS DEFINED IN REGULATION D UNDER THE SECURITIES ACT)

THE HOLDER OF ANY INTERCOINS AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH INTERCOINS, PRIOR TO THE EXPIRATION OF THE APPLICABLE ONE-YEAR HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT (THE "RESALE RESTRICTION TERMINATION DATE”), ONLY (A) TO THE COMPANY OR ANY OF THE COMPANY’S SUBSIDIARIES, (B) PURSUANT TO A COMPLIANT REGULATION S SALE, OR (C) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, SUBJECT, IN EACH OF THE FOREGOING CASES, TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH PURCHASER ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY APPLICABLE JURISDICTION.

HEDGING TRANSACTIONS INVOLVING THE INTERCOINS MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.]

[FOR REGULATION D ONLY (THE "REGULATION D LEGEND): THE HOLDER OF ANY INTERCOINS AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH INTERCOINS, PRIOR TO THE EXPIRATION OF THE APPLICABLE ONE-YEAR HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT (THE "RESALE RESTRICTION TERMINATION DATE”), ONLY (A) TO THE COMPANY OR ANY OF THE COMPANY’S SUBSIDIARIES, (B) PURSUANT TO A COMPLIANT REGULATION S SALE OR (C) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, SUBJECT, IN EACH OF THE FOREGOING CASES, TO ANY REQUIREMENT OF LAW

THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH PURCHASER ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS, INCLUDING SECURITIES LAWS OF ANY U.S. STATE OR ANY OTHER APPLICABLE JURISDICTION.]

A "COMPLIANT REGULATION S SALE” MEANS A SALE, FOLLOWING THE ESTABLISHMENT BY THE ISSUER OF A SUFFICIENT PROCESS TO VERIFY THE IDENTITY OF SUBSEQUENT INTERCOIN HOLDERS IN ORDER TO ENSURE COMPLIANCE WITH ALL REGULATORY REQUIREMENTS FOR DIVIDEND PAYMENTS

AND COMPLIANCE WITH APPLICABLE LAW (E.G., THROUGH THE APPOINTMENT OF AN SEC-REGISTERED TRANSFER AGENT) AND NOTICE TO INTERCOIN HOLDERS THEREOF AND OF ALL APPLICABLE CONDITIONS, (1) TO A PERSON WHO IS NOT A "U.S. PERSON” THAT OCCURS IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH ALL OF THE REQUIREMENTS OF REGULATION S AND IN ACCORDANCE WITH THE LAWS APPLICABLE TO SUCH SALE IN THE JURISDICTION IN WHICH SUCH SALE AND PURCHASE IS MADE AND (2) FOR WHICH SELLER HAS A REASONABLE BELIEF THAT EACH PERSON TO WHOM THE INTERCOIN IS TRANSFERRED WILL BE PRESENTED WITH NOTICE SUBSTANTIALLY SIMILAR TO THE "REGULATION S LEGEND” AND WILL HAVE AFFIRMATIVELY SIGNALED HIS, HER OR ITS UNDERSTANDING; PROVIDED, THAT THE COMPANY AND THE TRANSFER AGENT, IF ANY, WITH RESPECT TO THIS INTERCOIN SHALL HAVE THE RIGHT PRIOR TO PERMITTING ANY SUCH COMPLIANT REGULATION S SALE OCCURRING PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AS TO THE COMPLIANCE OF SUCH COMPLIANT REGULATION S SALE WITH ALL APPLICABLE SECURITIES LAWS.

IN ADDITION, AND INCLUDING FOLLOWING THE EXPIRATION OF RESALE RESTRICTION TERMINATION DATE, ANY AFFILIATE OF THE COMPANY (OR PERSON WHO HAS BEEN AN AFFILIATE OF THE COMPANY WITHIN THE IMMEDIATELY PRECEDING THREE MONTHS) SHALL OFFER, SELL OR OTHERWISE TRANSFER INTERCOINS ONLY (I) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (II) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR (III) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (INCLUDING IN ACCORDANCE WITH RULE 144, IF AVAILABLE), SUBJECT IN EACH OF THE FOREGOING CASES, TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH PURCHASER ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY U.S. STATE OR ANY OTHER APPLICABLE JURISDICTION. IN ADDITION, THE COMPANY WIL REQUIRE, PRIOR TO ANY OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (III), THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION OR OTHER INFORMATION SATISFACTORY TO THE COMPANY AND THE COMPANY’S TRANSFER AGENT, IF ANY.

THE HOLDER OF THIS SECURITY OR INTERCOINS BY ITS ACCEPTANCE WILL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT EITHER (1) NO PORTION OF THE ASSETS USED BY SUCH HOLDER TO ACQUIRE OR HOLD THIS SECURITY OR INTERCOIN CONSTITUTES THE ASSETS OF AN EMPLOYEE BENEFIT PLAN THAT IS SUBJECT TO TITLE I OF THE U.S. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA”), A PLAN TO WHICH SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE”) APPLIES (INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT), AN ENTITY WHOSE UNDERLYING ASSETS ARE CONSIDERED TO INCLUDE PLAN ASSETS OF ANY SUCH EMPLOYEE BENEFIT PLAN, OR PLAN, A GOVERNMENTAL PLAN (AS DEFINED IN SECTION 3(32) OF ERISA), A CHURCH PLAN (AS DEFINED IN SECTION 3(33) OF ERISA) THAT HAS NOT MADE AN

ELECTION UNDER SECTION 410(D) OF THE CODE, OR A NON-U.S. PLAN, OR (2)(A) THE HOLDER IS, OR IS USING, THE ASSETS OF A GOVERNMENTAL PLAN, A CHURCH PLAN THAT HAS NOT MADE AN ELECTION UNDER SECTION 410(D) OF THE CODE, OR A NON-U.S. PLAN AND (B) THE ACQUISITION AND HOLDING OF THIS SECURITY OR INTERCOIN WILL NOT CONSTITUTE A VIOLATION UNDER ANY APPLICABLE PROVISIONS UNDER ANY FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER LAWS OR REGULATIONS THAT REGULATE SUCH PLAN’S INVESTMENTS.

Each purchaser of a ITR Token agrees to be bound by the legends set forth in paragraph (5) and this paragraph (9) notwithstanding any differences appearing in the legend appearing on the ITR Token previously delivered to such purchaser. The legends set forth in this paragraph (9) shall be deemed to be set forth on any such ITR Token delivered prior to the date of this memorandum.

(10) It agrees that it will not transfer Intercoins unless it is given reasonable assurance that each person to whom it transfers Intercoins receives notice of any restrictions on transfer of such Intercoins.

(11) If it is an acquirer in a transaction that occurs outside the United States within the meaning of Regulation S, it acknowledges that until the expiration of the Distribution Compliance Period (as defined in Regulation S under the Securities Act), any offer or sale of the Intercoins within the United States or to a U.S. Person by a dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act.

(12) It acknowledges that the Company will not be required to accept for registration of transfer any ITR Tokens or Intercoins, except upon presentation of evidence (including an opinion of counsel) satisfactory to the Company that the restrictions set out therein have been complied with.

(13) It understands that no action has been taken in any jurisdiction in the U.S. or elsewhere by the Company that would result in a public offering of the ITR Tokens or the possession, circulation or distribution of this memorandum or any other material relating to the Company or the Securities in any jurisdiction where action for such purpose is required. Consequently, any transfer of the Intercoins will be subject to the transfer restrictions set forth under this "Notice to Purchasers.”

(14) It (a) is able to act on its own behalf in the transactions contemplated by this memorandum, (b) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its prospective investment in the ITR Tokens and (c) (or the account for which it is acting as a fiduciary or agent) has the ability to bear the economic risks of its prospective investment in the Securities, and can afford the complete loss of such investment.

(15) It acknowledges that the Company will rely upon the truth and accuracy of the acknowledgements, representations, warranties and agreements set forth in this "Notice to Purchasers” section and agrees that, if any acknowledgements, representations, warranties and agreements deemed to have been made by its participation in the Offering are no longer accurate, it will promptly notify the Company.

(16) If it is acquiring the Securities as a fiduciary or agent for one or more purchaser accounts, it represents that it has sole investment discretion with respect to each such account and that it has full power to make the acknowledgements, representations, warranties and agreements set forth in this "Notice to Purchasers” section on behalf of each such purchaser account.

(17) Either (i) the Holder is not acquiring or holding such Securities or an interest therein with the assets of (A) an employee benefit plan that is subject to Part 4 of Subtitle B of Title I of ERISA, (B) a "plan” to which Section 4975 of the Code applies (including an individual retirement account), (C) an entity deemed to hold "plan assets” of any of the foregoing by reason of an employee benefit plan’s or plan’s investment in such entity, (D) a governmental plan (as defined in Section 3(32) of ERISA), (E) a church plan (as defined in Section 3(33) of ERISA) that has not made an election under Section 410(d) of the Code, or (F) a non-U.S. plan, or (ii) the Holder is acquiring or holding such Securities or an interest therein with the assets of (A) a governmental plan, a church plan that has not made an election under Section 410(d) of the Code, or a non-U.S. plan and (B) the acquisition and holding of such Securities by the purchaser, throughout the period that it holds the Securities and the disposition of such Securities or an interest therein will not constitute or result in a violation of any provisions of any applicable United States federal, state or local laws or non-U.S. laws that regulate such plan’s investments.


 

ACCESS TO INFORMATION

Prospective investors are invited to contact the Company to review any written materials or documents relating to the Offering or the Company. The Company will answer all inquiries from prospective investors relative to the Offering and will provide additional information (to the extent that the Company possesses such information or can acquire it without unreasonable effort or expense) necessary to verify the accuracy of any representations or information set forth in this memorandum.

For further information regarding frauds involving cryptocurrency, see https://www.wsj.com/articles/buyer-beware-hundreds-of-Bitcoin-wannabes-show-hallmarks-of-fraud-1526573115 and https://www.howeycoins.com/index.html.

"Proof of Work” is the original consensus algorithm in a blockchain network. This algorithm is used to confirm transactions and produce new blocks to the chain. The algorithm rewards participants who solve cryptographic puzzles in order to validate transactions and create new blocks (i.e., mining)

"Proof of Stake” is a category of consensus algorithms for public blockchains that depend on a validator's economic stake in the network. In Proof of Stake-based public blockchains, a set of validators take turns proposing and voting on the next block, and the weight of each validator's vote depends on the size of its deposit (i.e., stake).


Notes

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