BTCS Signs Non-Binding Letter of Intent to Merge with Blockchain Global

BTCS Inc. (OTCQB: BTCS) (“BTCS” or the “Company”), a blockchain technology focused company, has signed a non-binding Letter of Intent (“LOI”) to merge with Blockchain Global Limited (“BCG”), an Australian blockchain company, which will be subject to a number of conditions detailed at the end of this press release.

BCG operates four distinct business lines, an institutional exchange platform, transaction verification services (bitcoin mining), a blockchain start-up accelerator, and a blockchain technology consultancy. BCG generated AU$5.9 million (approximately US$4.4 million) revenue in FY16, a 300% increase over FY2015 revenue. BCG has approximately US$3.5 million in assets comprised of bitcoin and cash as of July 1, 2017, and is currently supporting its business through profit from operations. The reported revenues are audited in accordance with International Financial Reporting Standards and are financial measures not calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). See the section below under “Non-GAAP Financial Measures”.

BCG’s ACX.io Exchange:
BCG wholly owns and operates ACX.io, an Australian Bitcoin Exchange and liquidity provider. Leveraging BCG’s asset security, exchange IP, and a proprietary liquidity engine, ACX provides a process to buy and sell bitcoin. Further, through ACX, BCG operates a proprietary arbitrage engine which captures a spread across multiple liquidity pools.

BCG Transaction Verification Services (bitcoin mining):
BCG currently owns approximately 6 petahash (“PH”) of mining capacity in a purpose-built outsourced facility in China. BCG’s China operation has access to electricity at approximately US$0.04/kwh.

BCG’s Start-up Accelerator:
BCG complements its core business operations with a novel start-up accelerator program targeted at companies that are developing innovative blockchain technologies and applications. Through BCG’s Melbourne Blockchain Center, a 6,000 square-foot leased facility launched in late 2014 and located in the heart of Melbourne, BCG has played a role in accelerating the development of a number of companies. BCG typically retains an equity stake in the companies it incubates and/or receives a licensing agreement or other economic incentive.

BCG’s Technology Consultancy:
BCG also provides blockchain technology advisory services including the preparation and support of crowd-sourced Blockchain token sales and Initial Coin Offerings.

“As early movers in a rapidly developing industry, we’ve assembled a talented team with the necessary expertise to excel,” stated Sam Lee, CEO of BCG. “In addition to our work with innovative companies through the Melbourne Blockchain Center, we’ve also positioned ourselves to be a leading consultant in the space, servicing companies that recognize the importance of incorporating blockchain technology into their organizational strategies. By teaming up with BTCS, we’re deepening our pool of talent.”

“The blockchain space continues to suffer from a talent void,” commented Charles Allen, CEO of BTCS. “Together with BCG, and their track record of success, we’re positioning ourselves to fill this talent void, ultimately capitalizing on the immense opportunity in blockchain technologies and leveraging our early-mover advantage.”

The LOI is subject to a number of conditions including the approval of BCG’s shareholders and board and the approval of BTCS’s board, and the settlement of all of BTCS’ debt prior to closing. The LOI is also subject to the execution of a definitive agreement which the parties agreed to execute within 30 daysfollowing the Company receiving the audited financial statements of BCG, audited in accordance with GAAP by an auditor registered with the Public Company Accounting Oversight Board. Under the terms of the LOI, BCG shareholders shall receive a combination of common stock, convertible preferred stock and warrants equal to 75% of the fully-diluted equity securities of the Company post-closing (the “Fully Diluted Equity”). The warrants will be a series of warrants drafted to reflect the differing outstanding warrants of the Company as of the closing date and contain similar terms including exercise prices, terms, and anti-dilution protection.

The LOI also provides that the two current executive officers of the Company will receive 12% of the Fully Diluted Equity in the form of common stock, preferred stock or restricted stock units in a manner to be determined by the Company.

Another key condition of the LOI is that the existing holders of BTCS securities which have anti-dilution protection, redemption features and similar protections must be eliminated as determined solely by BCG. The LOI requires the Company to establish an Equity Incentive Plan to acquire 20% of the Fully Diluted Equity which will be administered by an independent compensation committee. The binding agreement will provide that the Company shall have five directors of which, two shall be appointed by the Company prior to closing and three appointed by BCG. Three of the directors shall be independent, with one appointed by the Company and two by BCG, and two may be non-independent, one appointed by the Company and one by BCG. The Company’s Chief Executive Officer, Charles Allen, shall be deemed an acceptable non-independent director.

All insiders of the combined company would agree to a one-year lock-up on any equity issued in connection with the proposed transaction. There can be no assurance that the conditions to closing will be satisfied or the merger will be completed.