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    INVESTMENT RESEARCH BitGold Inc. Watch List(TSX.V:XAU, $4.65)

    Please refer to the final page(s) of this report for required disclosures. 

     May 25, 2015  Noel Atkinson, CFA (416) 343-3352

    A Golden Payment System with Global Scalability

    We are adding BitGold to our investmentWatch List. BitGold allows people ofany means the ability to purchase physical gold, and soon use it as acurrency within the global paymentsinfrastructure.

      The pending $51.7MM purchase

    of GoldMoney transforms BitGold intothe world’s #2 pureplay gold vaultservice with US$1.2B of assets. It also provides immediate entry into the USmarket.

      BitGold’s payment platformcould offer network effect opportunitiesthat create a virtuous circle of user andmerchant growth. When PayPal achievedthis network effect, its average customeracquisition cost fell to a few cents each

    as it built a base of over 160 millionusers.

      Physical gold as account currencycombines the allure of owning gold andthe potential benefits of holding USD-denominated assets. The payment platform transforms the gold into ahighly liquid asset and enables fast, low-cost payments, remittances andwithdrawals.

      There are two business lines with potential for network effect growth to global scale: an asset repository and paymentsystem for those seeking to hold gold and USD-denominated assets, especially inrestrictive or economically volatile regions, and the US$440 billion internationalremittance market.

      Growth catalysts this summer include the close of the GoldMoney acquisition,launch of the standalone mobile app, and deployment of the linked debit and prepaid credit cards.

    Estimates (C$) 2015e 2016e 2017e 2018e

    Revenue (MM) N/A N/A N/A N/A

    EBITDA ($MM) N/A N/A N/A N/A

    EBITDA Margin N/A N/A N/A N/A

    Diluted EPS N/A N/A N/A N/A

    Market Data

    Previous Close C$4.65

    52-Week High - Low C$8.00 - C$2.35

    Avg . Daily Vol. (3-month)

    Shares Basic / Diluted (MM) 35.4 / 40.6

    Mgmt & Dir. Ownership 57.8%

    Market Cap (C$MM) $188.7

     Net Cash (C$MM) $6.6

    Enterprise Value (C$MM) $182.2

    Fiscal Year End Sep-30

    Company Profile

    1,106,644

    BitGold is an early-stage internet technology business

    that facilitates the buying and selling of bullion-grade

    gold for accountholders. Once fully operational, the

    Company's platform is intended to provide various

    transaction capabilities, including instant cross-border

    gold payments, merchant invoicing and p rocessing for

    gold, and u tilization of gold as currency online and at

    retail points of sale.

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      BitGold Inc. 

    Please refer to the final page(s) of this report for required disclosures. 

     May 25, 2015 / p.2 Noel Atkinson, CFA (416) 343-3352

    TABLE OF CONTENTS 

    SUMMARY ............................................................................................................................................................................ 3 

    COMPANY BACKGROUND ................................................................................................................................................ 3 

    BUSINESS OPPORTUNITIES WITH POTENTIAL TO ACHIEVE  NETWORK EFFECT GROWTH TO GLOBAL

    SCALE ................................................................................................................................................................................... 9 

    COMPETITIVE E NVIRONMENT ....................................................................................................................................... 19 

    R ECENT CORPORATE EVENTS ....................................................................................................................................... 23 

    MANAGEMENT A ND DIRECTOR BIOGRAPHIES ......................................................................................................... 24 

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      BitGold Inc. 

    Please refer to the final page(s) of this report for required disclosures. 

     Noel Atkinson, CFA (416) 343-3352  May 25, 2015 / p.3

    SUMMARY 

    BitGold has an opportunity to disrupt two enormous industries – the US$1 trillion consumer payments sector and the US$400 billion international remittances sector – with its innovativegold-based asset repository and payments network. It allows anyone in more than 180 countriesand territories an opportunity to buy and sell physical gold in increments as little as one cent withvery low fees, and actually have physical ownership of that gold in one of 6 Brink’s (NYSE:BCO, NR) vaults worldwide. Its payment system then transforms the gold into a liquid, highlymobile currency, with zero fee payments between accountholders and linking to debit and prepaid credit cards to use that gold within the global retail infrastructure.

    BitGold has announced the $51.7 million acquisition of GoldMoney, the #2 pureplay preciousmetals vaulting service in the world with nearly 22,000 accounts and over US$1.2 billion ofassets in custody. GoldMoney gives BitGold a foothold in the US market, creates scale that

     boosts legitimacy to potential customers and merchant service partners, and delivers US$1.2 billion of customer assets that can be monetized through the payment platform.

    We believe BitGold has the potential to ride network effect growth to global scale as:

    1.  An asset repository effectively denominated in US Dollars and providing accountholderswith access to physical gold but with cash-like liquidity and mobility, driving merchantsto accept BitGold as a payment method and in turn accelerating customer growth at verylow cost; and

    2.  A platform for self-directed instantaneous peer-to-peer remittances with little to notransfer fees, which forces the recipient to become an accountholder (zero acquisitioncost for BitGold) and utilize the platform.

    COMPANY BACKGROUND 

    CREATING A GLOBAL ASSET REPOSITORY AND PAYMENTS PLATFORM BASED ON PHYSICAL GOLD 

    BitGold was incorporated in August 2014. The Company completed a reverse merger in April2015 and became freely trading on the TSX Venture exchange in May 2015. It is based inToronto with an office in Milan, Italy that in part houses much of the platform developmentteam. The BitGold platform completed its beta and went live worldwide on May 4, 2015.

    The Company is developing a global asset repository and online payments platform that

    leverages the benefits of physical gold as a store of value. In turn, this should offer:  an inexpensive way for people worldwide to diversify their investible asset portfolio by

     purchasing and holding physical gold rather than synthetic proxies such as gold ETFs,mining company stocks or gold derivative contracts; and

      a very low-cost and highly mobile method of undertaking transfers (and also merchant purchases) using their physical gold as a liquid currency.

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      BitGold Inc. 

    Please refer to the final page(s) of this report for required disclosures. 

     May 25, 2015 / p.4 Noel Atkinson, CFA (416) 343-3352

    Regardless of the name, BitGold is not a virtual currency. It does not utilize a Bitcoin-likedistributed blockchain and does not require users to have virtual wallets nor go through unknown

    exchanges of dubious security.What BitGold is embracing from the virtual currency sector is an escape from the costs andsystemic friction of conventional banks and payment networks. It also adds an allure of havingassets backed by gold – which can be attractive for people concerned by inflation, governmentencroachment, or who have otherwise been holding gold, or bitcoin or other cryptocurrency.

    This is a “very big idea” – building a global online platform with full underlying infrastructurefor managing the physical gold, handling debits and credits into a BitGold account fromestablished bank and credit systems and in global payment networks, and managing the anti-money laundering (AML) and know-your-customer (KYC) requirements to remain incompliance with international Financial Action Task Force (FATF) requirements. Recentfunding rounds for the Company have included sophisticated investors (Soros Brothers) andgold-related companies (Sandstorm Gold [TSX: SSL, NR] and Sprott Inc. [TSX: SII, NR]).

    PENDING ACQUISITION TRANSFORMS BITGOLD INTO #2  PUREPLAY GOLD VAULTING SERVICE

    WITH US$1.2B OF CUSTOMER ASSETS THAT CAN BE MONETIZED ON THE PAYMENT PLATFORM 

    On May 22, 2015, BitGold announced an agreement to acquire GoldMoney Network Ltd., whichis the second-largest pure-play gold vaulting service in the world. The Company will pay11,169,794 shares (worth $51.9 million as of the announcement) for GoldMoney.

    GoldMoney, based in Jersey (UK), was the first successful firm to offer people of all means theability to purchase and store gold in a segregated custodial account. Founded in 2001, it has

    nearly 22,000 active accounts and serves as custodian for US$1.2 billion of precious metals andcash in customers’ accounts.

    GoldMoney offers customers access to vaults in the UK, Switzerland, Hong Kong, Canada andSingapore, and provides fully online onboarding for customers residing in 44 countries. Notably,it has registered as a money service business in Jersey. More importantly, it operates in the USand provides BitGold with an immediate and sizable foothold in the US market for at least the precious metals vaulting service.

    BitGold reported that GoldMoney generated revenues of £185.6 million (C$340.1 million) inFY2015 (ended March 31), as compared to £325.2 million (C$545.4 million) in FY2014. The business’s strength has generally correlated to gold price volatility, with a reported peak of

    £873.0 million (C$1.38 billion) in FY2012. However, we stress that most of this revenue is purchases and sales of precious metals to and from the customer base at relatively small margin.Gross margin was £2.9 million (C$5.4 million) in FY2015 versus £4.2 million (C$7.0 million) inFY2014. GoldMoney recorded a loss of about £800,000 (C$1.5 million) in FY2015, but BitGoldmanagement believes there could be some synergies and cost savings that could move the business to profitability in relatively short order.

    GoldMoney will have the right to appoint 3 directors to BitGold’s board for three years afterclosing. Mr. Mahendra Naik will join the board of directors immediately upon the closing of the

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      BitGold Inc. 

    Please refer to the final page(s) of this report for required disclosures. 

     Noel Atkinson, CFA (416) 343-3352  May 25, 2015 / p.5

    acquisition, and James Turk and Hector Fleming will be nominees for directorships at ashareholder meeting of BitGold to be held within 90 days of closing. More details on the

     proposed director additions are in a summary section at the end of this report.

    Exhibit 1: Summary Annual Financials of GoldMoney, FY2012-FY2015 (FYE March) 

     Note: GoldMoney experienced certain gains and losses on unhedged metals inventories and a software assetwritedown in FY2014. BitGold does not intend to hold unhedged precious metals inventories. Conversion fromGBP to CAD uses monthly average GBP/CAD exchange rate for the corresponding fiscal years.

    Source: Clarus with data from BitGold and X-rates.com.

    HOW BITGOLD WORKS 

    An individual has to visit the BitGold website (www.bitgold.com) to register for an account. Astandalone mobile app for onboarding and account service is slated to go live this summer. Usersin over 180 countries and territories can access the BitGold platform; residents in the US and itsterritories are currently not supported. The few other countries not supported by BitGold are

    either on the US State Department list for state-sponsored terrorism or are considered by FATFto have weak AML and terrorist financing restrictions.

    Creation of an account requires multifactor verification through email, and a user also has to takea photo of their driver’s license, passport or national ID card and upload it to BitGold to initiatethe AML/KYC compliance process.

    Once onboarded, an accountholder can purchase gold for their account. The Company deals in14 base currencies; it also shows conversion into 146 other currencies, but users of those othercurrencies must convert into a base currency before a purchase can occur. Funds deposited are

    In Millions of British Pounds FY2012 FY2013 FY2014 FY2015

    Sales of Gold Grams and Currencies £431.1 £224.7 £194.0 £107.3

    Sales of Silver Ounces and Currencies 421.0 174.9 122.4 69.2

    Sales of Platinum and Currencies 13.1 6.6 4.3 3.9

    Sales of Palladium Grams and Currencies 2.2 1.9 2.0 3.1

    Storage Fee Income 5.5 5.3 2.5 2.1

    Total Revenue 873.0 413.5 325.2 185.6

    Cost of Sales 854.9 404.8 321.0 182.7

    Gross Profit 18.1 8.7 4.2 2.9

    Net Profit (Loss) 7.3 0.3 (9.4) (0.8)

    Cash Flow from Operations 0.9 2.2 (1.6) (0.8)

    In Millions of CAD FY2012 FY2013 FY2014 FY2015

    Sales of Gold Grams and Currencies $683.3 $355.5 $325.3 $196.6

    Sales of Silver Ounces and Currencies 667.2 276.7 205.3 126.8

    Sales of Platinum and Currencies 20.8 10.5 7.2 7.1

    Sales of Palladium Grams and Currencies 3.5 3.1 3.3 5.7

    Storage Fee Income 8.7 8.4 4.1 3.9

    Total Revenue 1383.5 654.2 545.4 340.1

    Cost of Sales 1354.8 640.3 538.4 334.7

    Gross Profit 28.7 13.8 7.0 5.4

    Net Profit (Loss) 11.6 0.5 (15.8) (1.5)

    Cash Flow from Operations 1.5 3.4 (2.6) (1.5)

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      BitGold Inc. 

    Please refer to the final page(s) of this report for required disclosures. 

     May 25, 2015 / p.6 Noel Atkinson, CFA (416) 343-3352

    automatically converted into physical gold within 1% of the spot price utilizing BitGold’s proprietary Aurum pricing platform. The Company has developed relationships with several

     bullion dealers to obtain institutional pricing for gold, and sales (redemptions) back to currencyalso occur within 1% of the spot price. The Company retains the net fee spread (“trading turn”) between the buy and sell prices. BitGold can also generate foreign exchange spread fees whenaccountholders are depositing a currency other than the 14 base currencies.

    Exhibit 2. Mobile App Development Screen Shots – Onboarding, Account Status, Transactions 

    Source: BitGold.

    Our research suggests BitGold offers a broader range of methods to deposit and redeem fundsthan any other gold repository or payments processor:

      Bank wire;  Debit card – Interac, Visa Debit, and China UnionPay;  Credit card – Visa, MasterCard, American Express, Discover, and JCB; and  Bitcoin (deposit only currently; withdrawal capability coming soon).

    Another important distinction is that BitGold provides users with far more asset liquidity andmobility for redemptions. Accountholders can use a wire to any bank in which the holder has anaccount, and use a different method of redemption than deposit (i.e. deposit via bank wire,redeem in Bitcoin or credit card). The only restriction (to be able to track flow of funds) is thatredemptions to a credit card must correspond to prior deposits from the same credit card.

    A BitGold accountholder can allocate purchased gold to be stored in six Brink’s gold vaults

    (Toronto, Zurich, Singapore, Hong Kong, London and Dubai). around the world. These vaultsare operated by Brink’s Global Services, which handles all storage and transport of the physicalgold for the Company. GoldMoney also uses Brink’s vaults in Toronto and Singapore, and has precious metals held in six additional vaults in London, Hong Kong, Zurich and Singaporeoperated by other large security firms.

    BitGold’s custodial arrangement theoretically allows customers to quickly move their ownershipof physical gold from one continent or country to another without the cost and security issues ofactually transporting bullion. The accountholder can redeem his holdings in one country and then purchase gold again via the platform in a different country.

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      BitGold Inc. 

    Please refer to the final page(s) of this report for required disclosures. 

     Noel Atkinson, CFA (416) 343-3352  May 25, 2015 / p.7

    Exhibit 3. List of Available Gold Vaults on BitGold Platform

     Note: These are likely to be the vault cities after the GoldMoney acquisition as well. GoldMoney also utilizes Brink’s vaults inToronto and Singapore, and uses six additional vaults in London, Zurich and Singapore operated by other security companies.

    Source: BitGold.

    BitGold and GoldMoney both allow people of all means to own and store physical gold:

      Buy physical gold for your account at spot rates before fees, as compared to gold coinsthat typically have sizable markups versus their true value in gold;

      Minimum purchase of just 0.001 gram (~US$0.04) at BitGold and 1 gram at GoldMoney(US$39); and

      Little to no monthly storage/account fees (0.12%-0.18% of account value per year atGoldMoney, no such fees charged by BitGold).

    BitGold offers accountholders the ability to redeem funds in their account and take possession of physical gold. The Company has developed a unique 10-gram, .9995% pure “GoldCube” – worthabout US$382  –   and also offers a 1-kilogram gold bar worth about US$38,200. GoldMoneyoffers delivery but only in 100-gram or 1-kilogram gold bars.

    Exhibit 4. BitGold 10-Gram GoldCubes

    Source: BitGold.

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      BitGold Inc. 

    Please refer to the final page(s) of this report for required disclosures. 

     May 25, 2015 / p.8 Noel Atkinson, CFA (416) 343-3352

    THE NEXT STAGE – TRANSFORMING GOLD INTO A LIQUID, MOBILE CURRENCY 

    BitGold offers an appealing structure for holding assets denominated in gold. However, BitGold

    seeks to generate velocity  of account holdings through transfers and payments and transformgold sitting in a vault into a cash-like, highly liquid and mobile currency that can be used fortransfers, remittances, and purchases online and in retail stores.

    Management seeks to add the following capabilities this summer:

      Linked debit/credit cards;  Merchant payments;  Micropayments; and  ATM transactions.

     Linked Debit and Credit Cards.  BitGold intends to start offering a debit card linked to the

    holder’s account and a MasterCard-branded prepaid credit card during this summer. The debitcard and credit card will provide users the ability to use assets in their BitGold account to makeonline and retail purchases, as well as withdraw funds. As we understand it, the accountholderwill be able to preset a minimum amount of funding on the prepaid cards; once the card fundsdrop below the preset floor, the gold account will automatically sell some gold from the accountand reload the card – which is similar in concept to a linked transit pass or other solution.BitGold expects to generate net per-transaction fees of 1% of value for debit card and 2% forcredit card transactions.

    This is highly innovative, as we have not found any competitor that allows for “direct” use ofgold in the account as a liquid currency; all other “gold-backed” accounts typically forcecustomers to first manually sell gold in their account to create cash in a second account that then

    is preloaded onto the debit or prepaid card for use. As with a bank, customer retention andvelocity of money (transaction fees) should increase as BitGold users sign up for these additionalfeatures. We expect these cards to appeal to accountholders with lower balances, especially ifthey are using BitGold as a “vault” for proceeds from virtual currencies, and to customers thatwant to access BitGold account funds as a source of funds for day-to-day activities.

     Merchant Payments.  The Company intends to launch a formal merchant services program,whereby merchants can accept online payments in BitGold at a fee of 1% of transaction value.The benefit for BitGold customers is that fees for payments are allocated to the merchant ratherthan the accountholder. We would expect BitGold to be responsible for fraud and chargebackexpenses, but if linked to a prefunded BitGold account we doubt this would become a

    meaningful cost. Cost to the merchants should in line or lower than what they typically pay forcredit card transaction fees. Merchants should be willing to accept BitGold if they feel there isscale of users and security and credibility of the BitGold program; the GoldMoney acquisitionshould help enormously in this regard. This type of merchant program has been the main driverfor PayPal’s enormous growth in users, transaction volume, and revenue, and BitGold believesmerchant acceptance can do the same for the Company.

    PayPal is currently the world’s largest alternative merchant payment platform, with customersusing PayPal primarily as a privacy firewall to make online purchases without disclosing theircredit card or bank account details. Its services are available in 26 currencies and 193 countries

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      BitGold Inc. 

    Please refer to the final page(s) of this report for required disclosures. 

     Noel Atkinson, CFA (416) 343-3352  May 25, 2015 / p.9

    and territories worldwide. PayPal’s net total payment volume (TPV) grew 27% year-over-yearin 2014 to US$228 billion, with merchant services rising 33% and eBay-related volume up 3%.

    Mobile transactions reached US$46 billion (up 70% year-over-year). PayPal gained 18.9 millionusers in 2014 to end the year with 162 million worldwide, who undertook more than 3.6 billiontransactions in the year. Total revenue was US$7.9 billion, up 19% from 2013 with adjustedEBITDA of US$1.6 billion and free cash flow of US$1.4 billion (18% of sales). eBay providedguidance of PayPal revenue to exceed US$9 billion in 2015 with gross margin between 24% and25%. eBay estimated that PayPal handled about 1 of every 6 dollars transacted online in 2013.Itappears from the PayPal financial data that the company achieves extremely high operatingleverage, as total cash operating expenses appear to be less than 5% of revenues. eBay intends tospinoff PayPal in the second half of 2015.

     Micropayments. Micropayments are online or point-of-sale transfers of small amounts of moneythrough a financial network rather than in cash. They represent a rapidly growing segment for

    conventional banks and credit card systems, with major credit card companies adding RFIDfunctionality to their cards for “one-tap” interactions for small point-of-sale purchases. PayPalhas been the leader in online micropayments. It charges merchants a processing fee equal to 5%of a micropayment value plus $0.05.

    It can also serve as a mechanism to send small payments within a social network. The BitGold platform can send as little as one cent of gold to a recipient with zero transaction fees.Management believes there is a market opportunity to incorporate its micropayments into socialnetworking platforms, such as “happy birthday” wishes with a small payment of gold. This mayhave particularly strong resonance with social networking users in countries where gold is ahighly prized gift. Recipients would have to create an account to access these gifts, so this could be a very low-cost mechanism for BitGold to expand its registered user base.

     ATM Network. The Company has devised custom free-standing ATMs that are able to acceptcash deposits and withdrawals. It has installed three BitGold ATMs in downtown Toronto. AnATM network could make it much easier for users to redeem their gold holdings for cash, and inturn generate more transaction fees for BitGold. However, we believe the network would have tohave meaningful scale to be more than a curiosity. This could be an expensive undertaking interms of capex and logistical oversight, particularly if the Company wants to maintain a globaloperating footprint, unless it partners with existing ATM operators.

    BUSINESS OPPORTUNITIES WITH POTENTIAL TO ACHIEVE NETWORK EFFECT

    GROWTH TO GLOBAL SCALE

    COMPANIES THAT ACHIEVE GLOBAL SCALE THROUGH LOW-COST NETWORK EFFECT

    GROWTH CAN REALIZE MASSIVE VALUATIONS 

    “Network effect” means that the utility or value of a product or service to a user increases asmore users begin to use the service. Many of the most successful (in terms of users) onlinecompanies – think Waze, WhatsApp, Airbnb, Facebook (NASDAQ: FB, NR), eBay (NASDAQ:EBAY, NR), and LinkedIn (NASDAQ: LNKD, NR) – have ridden the network effect wave to

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      BitGold Inc. 

    Please refer to the final page(s) of this report for required disclosures. 

     May 25, 2015 / p.10 Noel Atkinson, CFA (416) 343-3352

     build enormous global user bases. Optimally, a company can build network effect “virally” by people telling their friends, coworkers and family, who in turn sign up and repeat the

    dissemination cycle. When marketing goes viral – a dollar invested in marketing to attract aninitial customer ultimately results in that customer driving at least one more customer to sign upfor no additional ad spend – then the business has the potential to build a very large user base.

    This sounds theoretically simple, but the execution is incredibly difficult – which is why privatecompanies that achieve global-level network effect can enjoy multi-billion-dollar valuations before even generating any revenue. Some online services are able to scale to global usage levelswith a very lean infrastructure – instant messaging platform WhatsApp claimed to have just 55employees serving 400 million users (and adding 1 million new users each day) when it was soldto Facebook in 2014 for US$19 billion.

    The online platform needs a compelling service that can drive network effect and viralmarketing, and normally a baseline version is offered for free to drive that user growth. It is notuncommon that companies intentionally drive usage to tens or hundreds of millions of users before attempting to create a revenue model, and are able to base investor expectations andcompany valuation on user metrics rather than conventional revenue and profitability. Once atglobal scale these companies attempt to pivot and create a sustainable revenue model or sell to alarge, established tech company.

    PAYPAL ENJOYED TWO SEPARATE NETWORK EFFECTS TO BECOME THE GLOBAL ONLINE

    PAYMENTS LEADER

    PayPal (the resultant entity of a merger between Elon Musk’s x.com and Peter Thiel’s Confinity)launched an online (email-based) payments service in October 1999. Its team included many of

    today’s tech legends: Musk, Thiel, Max Levchin, David Sacks, and Reid Hoffman, to name afew. PayPal is the proof of concept that you can have global-scale, virtual network growth infinancial services with a fully-formed revenue model in place from the start.

    PayPal launched its online payments service in October 1999 by its 24 employees sending email payments to their friends. The company grew virally because the recipient had to open a PayPalaccount to get the payment while transfers were free and instantaneous. It was also novel in itsability to protect the financial privacy of the sender. At the end of 1999, PayPal had 10,000accounts, which grew geometrically to 100,000 by early February 2000 and 824,000 by the endof March 2000. We note that BitGold had over 20,000 prelaunch signups, suggesting thatthe Company could organically grow even faster than PayPal in its first couple of monthsof service, not including the 21,000+ accounts to be added via the GoldMoney acquisition.

    The second rocket stage for PayPal was its decision in mid-2000 to add merchant services,whereby merchants could accept payments directly from PayPal accounts and be protectedagainst fraud and chargebacks by PayPal – great for the nascent online market and particularlyembraced by eBay and other auction sites. Fees were lower than credit cards, and PayPalcustomers paid no transaction fees. Merchant accounts grew from zero at the end of March 2000to 14,000 at the end of June, and reached 800,000 accounts by the end of December 2000. At thesame time, users saw merchants accepting PayPal and signed up with zero promotional cost fromPayPal. Its average customer acquisition cost plummeted to less than a dollar per new user and it

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      BitGold Inc. 

    Please refer to the final page(s) of this report for required disclosures. 

     Noel Atkinson, CFA (416) 343-3352  May 25, 2015 / p.11

    steadily added 15,000 to 30,000 users per day from mid-2000 until it was acquired by eBay inlate 2002.

    eBay acquired PayPal in 2002 for approximately US$1.4 billion in stock. The transaction wasvalued at about 6.5x PayPal’s annualized revenue run-rate of about US$216 million and 0.2xannualized transaction volume run-rate of nearly US$6.5 billion. In the 12 years following theacquisition, PayPal effectively grew transaction volume and revenue more than 35-fold(including the effect of some subsequent acquisitions folded into PayPal).

    Exhibit 5. PayPal Quarterly Operating Metrics from Launch until Acquisition (in US$ Millions)

    Source: Corporate filings (SEC EDGAR).

    BITGOLD HAS AT LEAST TWO NETWORK EFFECT OPPORTUNITIES WITH GLOBAL APPEAL

    We believe BitGold has two service offerings that incorporate network effect opportunities and

    could realistically drive significant viral coefficients:

    1.  A global online asset repository effectively denominated in US Dollars and providing anyacceptable accountholder with access to physical gold plus cash-like liquidity andmobility; and

    2.  Self-directed cross-border remittances with little to no transfer fees, nearly instantexecution (once users are onboarded) and undertaken from a computer or mobile device.

    Each of these user segments is global in scope and scale. We believe the Company could behighly successful if either of these service offerings can scale.

    OPPORTUNITY 1:  GLOBAL ONLINE USD-DENOMINATED ASSET REPOSITORY WITH ACCESSTO PHYSICAL GOLD AND HIGH ASSET LIQUIDITY /MOBILITY

    BitGold offers people in more than 180 countries and territories the ability to purchase physicalgold and have it stored at any of six vaults available worldwide. We see many benefits of theBitGold platform to a user as an asset repository:

      Virtually zero financial barrier to entry for ownership of physical gold;

      Ownership of a USD-denominated asset;

      High liquidity between gold and a redemption currency;

    in Millions except as noted Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02

    Total Accounts 0.0 0.8 2.2 3.7 5.5 7.2 8.8 10.6 12.8 12.2 14.1

    Personal Accounts 0.0 0.8 2.2 3.4 4.7 5.9 7.1 8.5 10.2 9.0 10.4

    Merchant Accounts 0.0 0.0 0.0 0.3 0.8 1.3 1.7 2.1 2.6 3.2 3.7

    Total Payments in Quarter 1.0 5.5 9.4 12.3 13.5 15.1 18.0 22.3 26.6 28.8

    Total Payment Volume (TPV) $46 $249 $423 $544 $643 $747 $925 $1,206 $1,460 $1,615 Average Payment Amount ($) $45 $46 $45 $44 $48 $50 $51 $54 $55 $56

     Average Payments/Account/Quarter 1.2 2.5 2.5 2.2 1.9 1.7 1.7 1.7 2.2 2.0

    Gross Merchant Sales $0 $2 $56 $336 $547 $663 $815 $1,071 $1,314 $1,449

    Merchant Sales as % of TPV 0% 1% 13% 62% 85% 89% 88% 89% 90% 90%

    Fee Revenue 0 $0 $1 $7 $13 $19 $29 $39 $48 $54

    Fee Revenue as % of TPV 0.0% 0.0% 0.2% 1.4% 2.0% 2.5% 3.1% 3.3% 3.3% 3.3%

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       No upside limit on ownership amount;

       No storage fees (for the time being); and

      Ability to purchase goods and services with investment assets with minimal friction.

    In terms of potential users, the lowest-hanging fruit likely is investors that seek to hold a portionof their assets in gold. Gold ETFs are today the most common way to purchase exposure to physical gold. According to ETFDB.com, the top 10 gold ETFs and ETNs had aggregate assetsof US$35.8 billion as of May 12, 2015. The SPDR Gold Shares (NYSE: GLD, NR) is theindustry heavyweight – shareholders receive beneficial fractional ownership in an underlyingtrust that owns more than 23.4 million troy ounces (worth US$28 billion). Purchase of an ETFrequires setup of an investment account at a brokerage, and transaction fees for individualinvestors on self-directed trading systems are typically $9.95 to $19.95 to buy and sell one ormore shares, plus monthly or annual fees for accounts not meeting minimum size requirements.

    Cash settlement to a user’s account for sale of a ETF typically takes three business days.Investors do not actually have any direct beneficial ownership in the trust’s gold holdings, and ashare sale cannot settle in physical gold held by the trust. Purchases and sales of ETFs can onlyoccur during trading hours. In addition, shareholders incur sponsor’s and marketing agent’s feesof up to 0.3% of assets per year, plus 0.4% of assets for trust expenses. Finally, foreign investorsmay have restrictions on the purchase of ETFs listed on US exchanges.

    Exhibit 6. Daily Closing Spot Gold Price, in USD per Troy Ounce, May 2005-May 2015

         M    a    y  -     0     5

         M    a    y  -     0     7

         M    a    y  -     0     9

         M    a    y  -     1     1

         M    a    y  -     1     3

         M    a    y  -     1     5

    $200.00

    $400.00

    $600.00

    $800.00

    $1000.00

    $1200.00

    $1400.00

    $1600.00

    $1800.00

    $2000.00

    S ource : F ac tS e t P r ic e s 

    Source: FactSet.

    The other common alternative for physical ownership of gold by retail investors is gold coins.They can be purchased from government mints, banks or metals dealers. The coins tend to havesizable purchase markups and shipping costs, and can have poor liquidity and high transactioncosts (i.e. discounts on value) in an urgent sale. New issuance of gold coins by government mintstends to be geographically restricted. Coins do offer a meaningful benefit of being able to touchand hold the gold asset, can be as much as 99.99% pure, and can also have incremental value beyond the inherent gold if a coin is rare.

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    BitGold offers anyone the ability to own physical gold. Purchases and redemptions can occur24/7/365, settle instantly, and is available to customers worldwide using a wide variety of

     payment and redemption methods. People can also redeem funds in 10-gram physical GoldCubesor in 1-kg gold bars. Fees are relatively low. We believe there could be several million retailinvestors worldwide who are interested in purchasing gold as a basic component of theirinvestment portfolio, and BitGold appears to offer a very inexpensive way for “gold bugs” to purchase gold if they seek protection against perceived inflationary or geopolitical concerns.

    A USD-DENOMINATED ASSET REPOSITORY AND PAYMENT SOLUTION

    We believe BitGold’s platform has a large greenfield opportunity to serve as a USD-denominated asset repository with cash-like asset liquidity and easy cross-border usage for people of all wealth levels living in countries with capital expatriation restrictions, weak localcurrency trends, high inflation or other structural barriers that make savings accounts orinvestment ownership in local currency a poor investment or there is a desire to move assets to

    foreign countries to support a future personal migration to the recipient country.

    We think of countries such as Argentina, Russia, Ukraine, Venezuela and Zimbabwe. These fivecountries (combined 274 million population) have experienced serious depreciation of theircurrency versus the USD recently, and face government-imposed restrictions on currencyconversions, geopolitical turmoil, international sanctions or all of the above. Capital flight fromRussia alone in 2014 was estimated to exceed US$123 billion. Being able to store value in USDwhile the local currency depreciates would be a valuable tool for people in these countries. If aRussian purchased gold with rubles at the end of 2009, it would have been a strong performer inhis/her portfolio during the currency crisis in 2014, and still be up 80% versus the purchase price.In comparison, an American buying gold at the end of 2009 would have less than 6% return as of

    the end of April 2015. We believe there is some potential value in having the gold appreciate, butBitGold can be a much more powerful tool to protect wealth in times of local currency volatility.

    Exhibit 7. Relative Appreciation of Gold in Russian Rubles and USD, Monthly 12/31/2009 to4/30/2015 (12/31/2009 = 100) 

    Source: Clarus using data from World Gold Council.

    80

    100

    120

    140

    160

    180

    200

    220

    240

            1        2        /        1        /        2        0        0        9

            3        /        1        /        2        0        1        0

            6        /        1        /        2        0        1        0

            9        /        1        /        2        0        1        0

            1        2        /        1        /        2        0        1        0

            3        /        1        /        2        0        1        1

            6        /        1        /        2        0        1        1

            9        /        1        /        2        0        1        1

            1        2        /        1        /        2        0        1        1

            3        /        1        /        2        0        1        2

            6        /        1        /        2        0        1        2

            9        /        1        /        2        0        1        2

            1        2        /        1        /        2        0        1        2

            3        /        1        /        2        0        1        3

            6        /        1        /        2        0        1        3

            9        /        1        /        2        0        1        3

            1        2        /        1        /        2        0        1        3

            3        /        1        /        2        0        1        4

            6        /        1        /        2        0        1        4

            9        /        1        /        2        0        1        4

            1        2        /        1        /        2        0        1        4

            3        /        1        /        2        0        1        5

    in Rubles in USD

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    OFFERS THE ABILITY TO MORE AFFORDABLY OWN AND GIVE GOLD Gold is a common gift worldwide for major events but academic research shows gold jewelry

    and coins given as gifts in Middle Eastern and Asian cultures typically are high karat with anunderlying association that the gifts can be easily sold and converted back to base gold.1 Most of

    the largest countries for consumer gold demand fall into this category.

    Exhibit 8. Consumer Gold Demand in Metric Tons, 2014

    Source: Clarus using data from Statistica.

    BitGold can allow people to give money that can be directly redeemed by the recipient intoGoldCubes or even gold bars. GoldCubes have an innovative design and are branded, suggesting

    that they could become status symbols.CHINA ALONE COULD DRIVE SUBSTANTIAL “DEPOSIT” GROWTH 

    China represents a very intriguing market for BitGold. A 2014 report by Capgemini and RBCWealth Management estimated there were 758,000 people in China with at least US$1 million ofliquid investible assets.

    Gold and foreign currency are important asset holdings for a meaningful portion of the wealthy population in China. According to a 2014 survey of its private wealth clients, the Bank of Chinafound that 40% considered gold a favoured asset holding, and 23% felt the same regardingforeign currency. We note that BitGold offers exposure to both assets, in that customers’ goldholdings are also always priced in USD.

    A January 2014 article from BloombergBusiness stated that imports of gold bullion to Chinareached an all-time high in 2013 even as the gold price fell.

    2 Brink’s SVP for Asia-Pacific stated

    in the article that the company was adding space in Hong Kong and mainland China to meet

    1 Ertimer and Sandikci, Giving Gold Jewelry and Coins as Gifts: the Interplay of Utilitarianism and Symbolism, Advances in

    Consumer Research, Volume 32 (2005); pp. 322-327. 

    2 Larkin et.al., “Gold flows east as bars recast for Chinese defying slump,” BloombergBusiness, January 28, 2014.

    0 200 400 600 800 1000

    UK

    Switzerland

    Indonesia

    Egypt

    Saudi ArabiaUAE

    Vietnam

    Russia (2013)

    Thailand

    Germany

    Turkey

    USA

    China

    India

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    growing storage demand for gold. A reputable storage firm called Malca-Amit Global opened avault in Shanghai in late 2013 that can store 2,000 tons. The article also references that banks in

    China are selling gold bars to people that feel owning a bar or two (a standard bar is 400 troy oz,or about US$480,000 each) is “a good long-term investment.” We believe the BitGold platform,with ability to own physical gold in a secure fashion while having easy liquidity to convert backto currency, could be highly attractive to Chinese consumers.

    Exhibit 9. Estimated High Net Worth Individuals in China, 2008-2013

     Note: High Net Worth Individual defined as owning at least US$1 million of investible assets, excluding primary residence.

    Source: Capgemini/RBC Asia-Pacific Wealth Report 2014.

    Exhibit 10. Bank of China Private Wealth Client Survey – Favoured Asset Holdings (June 2014)

    Source: Julius Baer/Bank of China.

    The BitGold platform also makes a useful platform for Chinese nationals that seek to have USD-denominated assets stored outside China. Property markets in Australia, Canada, the UK andeven now the US have experienced sharp capital inflows from China as wealthier people seek tomove assets out of China and potentially gain residency or citizenship in the foreign country.

    0

    100,000

    200,000

    300,000

    400,000

    500,000

    600,000

    700,000

    800,000

    2008 2009 2010 2011 2012 2013

    4%

    7%

    11%

    15%

    19%

    23%

    40%

    45%

    52%

    60%

    63%

    Futures

    Commodities

    Other Precious Metals

    Foreign Stocks

    Bonds

    Foreign Exchange

    Gold

    Insurance

    Chinese Stocks

    Real Estate

    Equity Funds

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    However, people that seek to move themselves or family out of China to the foreign country alsowill require liquid assets in the destination country. BitGold can be a powerful way for these

     people to build a pool of USD-denominated assets that then can be easily converted to localcurrency on demand. The upcoming debit and credit cards would also provide easy mechanismsto utilize those asset bases on demand.

    If BitGold gains awareness with the Chinese middle class, its user base could grow very quickly.A 2014 report by Ernst & Young estimated there were over 25 million Chinese households withannual income over US$35,000 (thereby seeking consumer products and investible assets), and projected a trebling to nearly 80 million households by 2022.3 

    There are several other emerging markets besides China with rapidly-expanding middle classes,a cultural affinity for gold ownership, and have experienced currency volatility in the recent past.These countries together have tens of millions of households who could utilize BitGold today,and their middle classes are expected to grow nicely over the next several years.

    Exhibit 11. Households with US$35,000+ Income, Selected Countries 2012-2022E (Millions) 

    Source: Oxford Economics; Haver Analytics; Ernst & Young.

    OPPORTUNITY 2: SELF-DIRECTED INTERNATIONAL REMITTANCES

    Remittances – money transfers by people to friends and family in foreign (typically developing)countries – represent an enormous opportunity for BitGold, if it can resolve issues of onboardingthe recipients in developing countries. Remittances are a huge global business. According to UNagency IFAD, there were an estimated 1.5 billion remittance transactions worldwide in 2013. Atotal of US$440 billion was transmitted during the year, most often for US$200 at a time, and itcost the senders US$37 billion in fees. The World Bank estimated in April 2015 that the global

    3 EY Rapid-Growth Markets Forecast, published February 2014.

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    average cost to send an international remittance was nearly 8% of the amount sent.4 Remittance

    cost has been slowly declining over the past decade (11% in 2005, 9% in 2012), but pricing has

    remained stubbornly high even with the advent of online money transfer services.The majority of remittances are sent from developed countries (North America, Europe, andJapan) to developing countries. There are wide differences in average remittance fees betweenG8 countries; Russia’s average international remittance fee was 3% of the amount sent inQ1/2015, as compared to 6% in the US, 8% for most large EU countries, almost 10% in Canadaand over 13% in Japan. Elsewhere there are some pockets of very high fees; transfer costs withinAfrica still average 20% and those attempting to move money in or out of Venezuela werecharged fees equal to 90% of the amount sent.

    Exhibit 12. International Remittance Flows (2013)

    Source: UN International Fund for Agricultural Development. 

    Remittances are usually undertaken through money transfer companies such as Western Union

    (NYSE: WU, NR) and MoneyGram (NYSE: MGI, NR) that have a network of local agentsworldwide to send and receive money. Fees are generated through a combination of originationfees and foreign exchange spreads.

    4 Massimo Cirasino (World Bank), The Global Effort in the Remittances Arena: Updates from the World Bank, presented April

    16, 2015. 

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    Online services have led to much faster delivery times and lower fees than traditional bank-initiated transfers, but even online services can result in very high fees. As shown in Exhibit 13,

    we believe BitGold could be one of the lowest-cost methods for cross-border remittances.Exhibit 13. Total Transaction Fee Percentage for CAD200 Remittance from Canada to SelectedDestinations, as of May 2015

     Note: Costs include origination fee and foreign exchange spread. PP = PayPal.Source: Clarus using World Bank remittance survey data (February 2015), WorldRemit and PayPal corporate data.

    However, a BitGold funds transfer recipient needs to be onboarded, and therefore requires personal identification and some way to redeem the transfer into a usable currency. This can be asignificant issue in developing countries where bank infrastructures are weak outside of higher-income neighborhoods. If recipients had a smartphone, they could be onboarded with a nationalID card or passport, and then use a mobile-money platform as a method of redeeming funds fromthe BitGold system. Smartphone penetration is rising quickly in the developing world, andmobile money platforms have gained traction in many emerging markets. A mobile money platform allows the registered user to make bill payments and buy top-up airtime with SMScodes and visit an authorized agent (usually a small store) to receive cash transfers.

    The most successful mobile money platform is M-Pesa, operated by Vodafone (LSE: VOD, NR).In its home country of Kenya, over 19 million people (more than half of all Kenyans age 15 andolder) had an M-Pesa account and there were 13.9 million active users with monthly fee ARPUof KSH209 (US$2.18). Over 85,000 agents and stores in Kenya accept M-Pesa payments.5 

    Exhibit 14. Top Destinations for International Remittances (US$ Billions) and Adult Smartphoneor Other Internet Users (Millions), 2013

    Source: World Bank, UNICEF, Pew Research Center, ITU.

    5 Business Daily (Kenya), “No respite in M-Pesa tariffs as talks on fees begin,” May 10, 2015. 

    Service Provider Online/Branch Service Transaction Speed India Jamaica Kenya Philippines

    BitGold Online User-to-User Instant 2.0% 2.0% 2.0% 2.0%

    PayPal Online (PP or Linked Bank Acct) Instant 4.0% 4.0% 4.0% 4.0%

    PayPal Online (Linked Credit/Debit Card) Instant 7.6% 7.6% 7.6% 7.6%

    WorldRemit Online - bank pickup Less than one hour 4.2% 5.0% 8.4% 6.2%

    RBC Branch-initiated Bank Transfer 3-6+ business days 24.0% 24.0% 24.5% 25.4%

    MoneyGram Agent to Agent Less than one hour 6.4% 11.3% 10.0% 5.6%

    Western Union Agent to Agent Less than one hour 8.0% 11.9% 12.1% 4.6%

    2013

    Remittance

    Receipts

    (US$B)

    2013

     Adult

    Population

    (MM)

     Adult

    Smartphone

    Owners or

    Internet Users

    %

    2013 Adult

    Smartphone or

    Internet Users

    (MM)

    India 70.0 816.7 20%   163.3

    China 38.8 1084.4 63%   683.2

    Philippines 26.7 58.6 42%   24.6France 23.3 50.2 82%   41.2

    Mexico 23.0 80.4 50%   40.2

    Germany 15.8 69.4 84%   58.3

    Pakistan 14.6 108.2 8%   8.7

    Bangladesh 13.9 99.9 11%   11.0

    Belgium 11.1 8.8 82%   7.2

    Ukraine 9.7 37.3 53%   19.8

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    Seven of the top 10 countries for remittance receipts in 2013 (with a collective US$148 billion ofremittances received that year) had adult smartphone or internet usage penetration over 40%,

    suggesting viable markets for online peer-to-peer remittance services, subject to regulatoryrestrictions. Perhaps surprisingly, four of the top ten recipient countries were actually in Europe.We also believe India could be a viable market for online peer-to-peer remittances because it is by far the largest recipient of international remittances worldwide, and more than 160 millionadults had a smartphone or other access to the Internet.

    FORT KNOX INSTEAD OF MT. GOX 

    Another way that BitGold could grow its account base quickly is to serve as a low-cost vault forholders of virtual currencies such as Bitcoin. This solution appears useful for people who are being paid in virtual currencies, want to store that value outside the traditional financial systems,

    are concerned about the security and recourse issues inherent in blockchain-based financialsystems, and who are not interested in speculating on the virtual currency’s price movements.

    There have been several high-profile instances – including Mt. Gox in Japan, BitStamp inEurope, BTER in China, and Canadian Bitcoins – of hacking or administrative errors that led tosizable losses for those exchanges’ accountholders. The distributed blockchain structure ofBitcoin and most other virtual currencies means that there is zero ability to recover stolen orotherwise lost funds. As the virtual currency sector grows and matures, we believe there will bean expanding population of users that seek to diversify their holdings into a less volatilealternative currency with greater protections such as BitGold.

    Management is pursuing partnerships with companies already paying employees or contract staffin Bitcoin to offer payment in BitGold instead. We believe these users could be a sweet spot forBitGold – frequent deposits and payments, highly accustomed to alternative financial platforms, perhaps otherwise underbanked and could find debit and prepaid credit cards appealing, and beactive users of social networks that may drive viral marketing.

    COMPETITIVE ENVIRONMENT 

    COMPETING AGAINST BULLIONVAULT IN PURE-PLAY PHYSICAL GOLD STORAGE PROVIDER 

    BitGold’s first service to customers is as a storage vehicle for physical gold. GoldMoney was thefirst pureplay gold vaulting service. It has a minimum gold bullion purchase requirement of 1gram, which costs about US$39 at spot price. Fees of up to 2.49% are charged for agency

     purchases of gold on the customer’s behalf, along with a storage fee of less than 0.2% of thevalue of the gold per year, which basically covers the vault and insurance cost incurred by aninstitutional custodian utilizing Brink’s or other vault providers. There are no fees charged forgold sales back to GoldMoney at the spot price.

    The pending acquisition of GoldMoney will add over 650,000 troy ounces of customer gold incustody, plus over 27 million ounces of silver, platinum and palladium. GoldMoney also hadalmost US$60 million of various currencies in customer accounts as of April 30, 2015.

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    Exhibit 15. GoldMoney Assets in Custody at April 30, 2015

    Source: GoldMoney.

    BullionVault, based in London, UK, has taken the GoldMoney concept and added an internalmarketplace for registered accountholders to buy and sell gold from each other. Founded in

    2003, the company holds about US$1.3 billion of gold (plus about US$175 million in customercash accounts) for more than 53,000 active customers from 175 countries. Approximately one-third of the company’s customers are located in the US. Minimum purchase size is 1 gram ofgold. BullionVault holds almost 1.1 million troy ounces of gold in custody at vaults in Canada,Switzerland, the UK, the US and Singapore. Fees are much less than GoldMoney, with up to0.5% fee for bullion purchase and sale transactions on the open market plus a 0.3% currencyspread when customer cash accounts are not in USD (most are not), and a 0.12% annual storagefee. The company also takes a 0.55% commission fee on its internal market, and can step in frontof customers to act as buyer or seller to capture a deal priced out of step with the spot market.

    Euro Pacific’s offshore bank also offers a “gold-backed debit card” program. It requires a USDcash account and a gold storage account at the bank. The debit card is prefunded from the USD

    account, and the USD account can be funded by requesting gold sales from the storage account.The minimum initial deposit is US$500 and via wire transfer only. The debit card costs US$150and takes up to three weeks for delivery. The bank takes a fee of 4% for gold purchases and salesin customer accounts for “instant fills”; the commission drops to 3% or less if transacted duringAustralian office hours and minimum US$5,000 order.

    As mentioned earlier, large banks and private wealth management firms may offer gold custodialservices to their clients and some also offer custom-branded gold bullion down to 1 gram in size.Vault services are typically limited to clients with at least US$1 million in investible assets, andoffer storage and direct or agency bullion purchases/sales only. Theoretically, anyone could purchase gold coins or bullion from a dealer and store it in a safety deposit box in a bank.

    There are a variety of smaller gold bullion agents and storage providers worldwide, but theytypically have sizable minimum initial account requirements. Sprott Money would be arepresentative example; it requires a minimum $15,000 invested within the first 12 months, andcharges between 0.45% and 0.65% of the account value per year ($200 minimum). Bullion (barsor coins) must be purchased from Sprott Money at about 2.5% markup from spot price. Sales areat spot price back to Sprott except for gold bars, which incur a 0.55% fee. One such provider ofnote, Las Vegas-based AnthemVault, provides storage at a single vault in Salt Lake City forabout 600 troy ounces of customer gold and claims to be developing a gold-backedcryptocurrency called the “Hayek” that would use the Bitcoin-style administrative blockchain.

     Asset Troy Ounces USD Value

    Gold 629,663 $756,746,512

    Silver 27,141,887 $450,315,115

    Platinum 17,271 $19,679,089

    Palladium 9,413 $7,318,346

    Total Precious Metals 27,798,233 $1,234,059,062

    Currency $59,926,383

    Total Customer Assets $1,293,985,445

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    Exhibit 16. Comparison of BitGold, GoldMoney and Competitors

    Source: BitGold, GoldMoney, BullionVault, eBay, corporate filings.

    PLANNED SPIN-OUT OF PAYPAL TO PROVIDE A STRONG PUBLIC COMPARABLE 

    What we took away from our discussions with management was their desire to build a global payments platform that provides deposit stability in the form of USD-denominated physical gold,

    and leveraging that real asset base to permit customers to engage in online, point-of-sale and peer-to-peer transactions with unsurpassed flexibility. While management focused on pre-revenue global-scale businesses as templates for considering a valuation for BitGold, we think perhaps the best comparable could be PayPal once BitGold achieves some scale with its platform. Moreover, eBay intends to spin off PayPal in the second half of 2015, which will provide a direct publicly-traded comparable.

    As shown in Exhibit 16 above, BitGold appears highly competitive with PayPal in terms of feesand ease of moving funds in and out of the account and undertaking peer-to-peer payments.

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    PayPal has created a strong business of serving as a firewall for credit card payments to retailsites when users are concerned about security. A 2014 market research project by Ipsos Vantis

    with more than 17,000 consumers in 22 countries (funded by PayPal), found that the top tworeasons that consumers used their preferred cross-border payment method (credit card, PayPal orother) were “safer way to pay” and “purchase protection.”

    Whether it is in competition with PayPal for payments, BullionVault and GoldMoney for goldstorage, or Western Union for remittances, we believe BitGold could be successful with its platform if it can:

      Maximize transactional security, and keep hackers (and therefore regulators) away;

      Continue to add bank/credit/debit partners, particularly mobile payments such as m-Pesaand credit/debit/bank options outside Canada and China; and

      Offer maximum possible integration into global retail payment networks to engageaccountholders in transactional activities.

    We note the survey found a willingness by online cross-border purchasers worldwide to tryalternative payment platforms that meet consumers’ core security and transactional needs, as“well-known, trusted brand” and “habit” were cited less often than security and convenience.

    Exhibit 17. PayPal Cross-Border Research 2014 Project: Most Common Reasons for Preference ofOnline Cross-Border Payment Preference (Any Method)

     Note: Survey of 4,670 cross-border shoppers who had used more than one payment method in the past.

    Source: PayPal.

    We also have to watch other payment platforms that seek to capture market share as a paymentexpeditor or firewall from PayPal. Most notable is Apple Pay, which works on iPhone 6 phonesand Apple watches. It offers one-touch purchases at online retailers and also facilitates purchasesfrom a linked bank/credit account at integrated retailer points of sale. It launched in the US inOctober 2014, and is expected to arrive in Canada in late 2015 and expand throughout Europeand Asia thereafter. Apple Pay could achieve meaningful market share in areas where Apple

    10%

    11%

    11%

    13%

    24%

    24%

    28%

    28%

    31%

    44%

    49%

    54%

    0% 10% 20% 30% 40% 50% 60%

    Receiver rewards or cash back

    Habit

    Better currency conversion rate

    No fees/commission on foreign purchases

    Well-known, trusted brand

    Faster checkout

     Accepted by most retailers

    Does not divulge details to seller 

    Payment processed quickly

    More convenient way to pay

    Purchase protection

    Safer way to pay

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    Please refer to the final page(s) of this report for required disclosures. 

     Noel Atkinson, CFA (416) 343-3352  May 25, 2015 / p.23

     phones have strong sales (US, Canada, China), but having the system linked only to Appledevices probably minimizes its penetration rate in the rest of the world where the smartphone

    installed base predominantly uses Android.RECENT CORPORATE EVENTS 

    BitGold’s recent corporate events of significance have included:

    August 14, 2014:  Predecessor company incorporated. Private placement completed for15,750,000 million common shares at $0.033 per share for gross proceeds of $525,000.Appointed Roy Sebag as President and CEO, Joshua Crumb as Chief Strategy Officer, andDaniel Crandall as Chief Financial Officer. Company acquires certain IP from CEO Roy Sebagfor 3,000,000 million common shares at a deemed issue price of $0.033 per share.

    September 30, 2014: Appointed Alessandro Premoli as Chief Technology Officer.

    December 11, 2014:  Completed a non-brokered private placement of debentures worth anaggregate total of $800,000. These debentures converted into common shares pari passu with theAmalgamation (see below) at a conversion price of $0.211, which resulted in the issuance of3,987,600 shares.

    December 31, 2014: Completed a non-brokered private placement of 4,554,952 common sharesat a price of $0.44 per share for aggregate gross proceeds of $2,004,179.

    February 19, 2015: Completed a brokered private placement of 7,777,777 Subscription Receiptsat a price of $0.90 per Subscription Receipt for gross proceeds of approximately $7,000,000.

    Each Subscription Receipt included one common share and one half of one warrant with anexercise price of $1.35 per share.

    February 23, 2015: Entered into Amalgamation Agreement with shell company.

    April 22, 2015: Completed brokered private placement of 504,000 common shares at $0.90 pershare for gross proceeds of $453,600, and a non-brokered private placement of 140,000 commonshares at $0.90 per share for gross proceeds of $126,000.

    April 29, 2015: Amalgamation with shell company completed.

    May 4, 2015: BitGold platform exits beta phase and is publicly launched.

    May 13, 2015:  BitGold common shares commenced trading on TSX Venture Exchange. Atcommencement of trading, BitGold had 36,619,885 common shares, 3,888,888 investor warrants($1.35 exercise price), 462,346 agents’ warrants ($0.90 exercise price), and options for1,974,428 common shares outstanding. Roy Sebag, President and CEO, owns 50.4% of theoutstanding common shares plus 504,000 warrants and 265,165 options.

    May 22, 2015:  BitGold announces pending acquisition of privately-held precious metal vaultservice GoldMoney for 11,169,794 common shares ($51.9 million).

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     May 25, 2015 / p.24 Noel Atkinson, CFA (416) 343-3352

    MANAGEMENT AND DIRECTOR BIOGRAPHIES 

     Roy Sebag – Chairman, President, Chief Executive Officer and Director

    Roy Sebag is a co-founder of BitGold and has served as its Chief Executive since 2014. Mr.Sebag previously served as founder and Managing Principal of Braavos Capital, Ltd. aninternational private investment organization engaged in value-oriented investments across avariety of asset classes and industries. From 2004 through to 2010 Mr. Sebagwas the Founder and Portfolio Manager of Essentia Equity, Ltd., an investment partnership thatengaged in fundamental long and short equity investing in distressed, event-driven, and naturalresource related opportunities. He is also the Founder, Chairman and Chief Executive Officer of Natural Resource Holdings, Ltd., an investment company engaged in the acquisition,development and ownership of natural resource assets in North America.

     Joshua Crumb – Chief Strategy Officer and Director

    Mr. Crumb is a co-founder of BitGold and has served as its Chief Strategy Officer and Directorsince 2014. Mr. Crumb was previously an Executive Director at Goldman Sachs (NYSE: GS, NR) - the Senior Metals Strategist in the Global Economics, Commodities and Strategy ResearchDivision in London; a co-founder and Chief Financial Officer of Coffee Flour, and a Director ofCorporate Development at the Lundin Group of Companies. Mr. Crumb holds a Master ofScience in Mineral Economics, a Graduate Certificate in International Political Economy, and aBachelor of Science degree in Engineering from the Colorado School of Mines.

     James Eaton – Director

    James Eaton has been an Independent Director of BitGold since 2014. Mr. Eaton is the Presidentof Weatons Holdings Inc., a Canadian private holding company, and has been active in the

    founding, growth and divestiture stages of the Weatons portfolio companies across a widevariety of industries. Mr. Eaton serves on the boards of JC Clark Ltd., Defyrus Inc., Dream HardAsset Alternatives Trust, Syncordia Technologies and Healthcare Solutions Inc. and Ceviche.Mr. Eaton also serves on the boards of the Canadian Art Foundation, the True Patriot LoveFoundation, and is a trustee of the John David and Signy Eaton Foundation. Mr. Eaton holds aBachelor of Arts from the University of Colorado at Boulder.

     Dennis Peterson – Director

    Dennis Peterson has been a director of BitGold since 2014. Mr. Peterson has 25 years ofexperience as a corporate securities lawyer specializing in corporate finance matters. Most of Mr.Peterson's practice focuses on emerging public companies, and he has extensive experience with

    all aspects of prospectus financings, private placements, mergers and acquisitions. Companies hehas worked with are listed on the Toronto Stock Exchange and the TSX Venture Exchange.

     Alessandro Premoli – Chief Technology Officer

    Mr. Premoli is the Chief Technology Officer of BitGold. He is the architect of the BitGold proprietary platform, and leads the BitGold development team in Milan, Italy. Over the lastdecade, he has developed encrypted storage and messaging systems for highly sensitive, data-intensive organizations, gaining comprehensive experience in security, cryptography and digitalsignature solutions. Mr. Premoli has been an important member of the cryptocurrency

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     Noel Atkinson, CFA (416) 343-3352  May 25, 2015 / p.25

    community for several years and has been involved in the Ripple financial protocol since itsearly days. He holds a Master’s Degree in Informatics from the University of Milano-Bicocca.

     Daniel Crandall – Chief Financial Officer

    Mr. Crandall is a CPA, CA and is the CFO of BitGold. He has provided CFO, accounting,regulatory compliance, and management advisory services to numerous issuers on the TSX,TSX-Venture and other Canadian and US exchanges. Previously, he was a Manager at CollinsBarrow Toronto LLP, a public accounting firm where he worked for over five years. He holds anHonours Bachelor of Accounting (Co-op) degree from Brock University.

    GoldMoney Nominees to BitGold Board of Directors upon Completion of Acquisition:

     Mahendra Turk, CA, CPA – Mr. Turk will join the Board immediately upon the closing of theGoldMoney acquisition. He is a CPA with more than 32 years of financial accounting, miningand investment company experience. Mr. Naik is President and CEO of FinSec Services Inc., a private management services company, and a director of GoldMoney. He practiced as aChartered Professional Accountant for nine years with a major Canadian accounting firm. Mr. Naik is a director and member of the Audit and Finance Committee of IAMGOLD Corporation(TSX: IMG, HOLD), and Chairman of the Board and Chairman of the Audit Committee ofFortune Minerals Inc. (TSX: FT, NR). In addition, Mr. Naik is a director of several large privatecompanies. Mr. Naik will be appointed as Chair of the Audit Committee of BitGold. He holds aBachelor of Commerce degree from the University of Toronto.

     Mr. James Turk – Mr. Turk will be a nominee for election of directors at a shareholder meetingto be held within 90 days of closing of the GoldMoney acquisition. Mr. Turk has over 40 years’experience in international banking, finance and investments. He began his career at The Chase

    Manhattan Bank with assignments in Thailand, the Philippines and Hong Kong. In 1983, he wasappointed as manager of the Commodity Department of the Abu Dhabi Investment Authority.After leaving that post in 1987, he went on to hold various advisory roles in money management.In 2001 he co-founded GoldMoney and remains a director of the group. Mr. Turk makes regularconference appearances around the world, provides commentary for numerous publications andnewswires as well as producing articles for his website and GoldMoney.

     Mr. Hector Fleming – Mr. Fleming will be a nominee for election of directors at a shareholdermeeting to be held within 90 days of closing of the GoldMoney acquisition. Mr. Fleming is afounder of Fleming Wulfsohn Africa Limited, a private investment company, and has over 10years of private equity experience across Africa and other emerging markets. He is a director ofThe Johannesburg Land Company Limited, Clover Alloys SA Limited, GoldMoney Network

    Limited and Netagio Holdings Limited. Mr Fleming is a former director of Standard CharteredBank’s (LSE: STAN, NR) private equity coverage team with a central focus on Sub-SaharanAfrica and was previously in the bank’s private equity group, investing growth capital from the bank’s balance sheet and third party funds into private equity opportunities in emerging Asianeconomies. He holds a B.A. (Hons) degree from the University of Newcastle upon Tyne.

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    Please refer to the final page(s) of this report for required disclosures. 

     May 25, 2015 / p.26 Noel Atkinson, CFA (416) 343-3352

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