IMPORTANT: If you are in any doubt about this document, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser. This document (the Information Memorandum) is a private information memorandum, and has not been approved by any person, including any authorised person within the meaning of the UK Financial Services and Markets Act 2000, as amended. This document does not constitute a prospectus for the purposes of Directive 2003/71/EC, and amendments thereto, including Directive 2010/73/EC (the Prospectus Directive), the Prospectus Rules of the UK Financial Conduct Authority or any other competent authority, and has not been approved by or filed with the UK Financial Conduct Authority or any other competent authority. The SPiCE Tokens have not been and will not be registered under the Securities Act of 1933, as amended (the Securities Act), or any other law or regulation governing the offering, sale or exchange of securities in the United States or any other jurisdiction. The Offering is being made (1) inside the United States to up to 99 beneficial beneficial owners that are “accredited investors” (as defined in Rule 501 of the Securities Act) in reliance on Regulation D under the Securities Act who are U.S. Persons (as defined in Section 902 of Regulation S under the Securities Act) and (2) outside the United States to Non-U.S. Persons in reliance on Regulation S. Persons purchasing as U.S. accredited investors will be required to hold their SPiCE Tokens until the first anniversary of the issuance of the SPiCE Tokens and will be required to make undertakings to SPiCE VC that they will not sell their SPiCE Tokens to any U.S. Person unless they sell all of their SPiCE Tokens to a single U.S. Person. Persons purchasing as Non-U.S. Persons will only be entitled to resell their SPiCE Tokens to other Non-U.S. Persons in an offshore transaction (as defined in Rule 902 of the Securities Act). See the sections of this Information Memorandum entitled “Important Notice”, Notice ”, “Risk “Risk Factors” Factors” and “Description “Description of the SPiCE Tokens — Transfer Transfer Restrictions” Restrictions ” for further information. SPiCE VC will not be required to, nor does it currently intend to, offer to exchange the SPiCE Tokens for any securities registered under the Securities Act or any other law or register the SPiCE Tokens for resale under the Securities Act or any other law. The distribution of this Information Memorandum in certain jurisdictions may be restricted by law. Persons into whose possession this Information Information Memorandum Memorandum comes should inform themselves themselves about and observe observe any such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, subject to certain limited exceptions, the SPiCE Tokens may not, directly or indirectly, be offered or sold within Canada, Australia, South Africa or Japan or offered or sold to or for the account or benefit of a resident of Canada, Australia, South Africa or Japan. In addition, the SPiCE Tokens may not be marketed in the Russian Federation or certain EEA jurisdictions, including Spain, France, Italy and Germany, due to the marketing and/or private placement regimes applicable in these jurisdictions. In addition, addition, this Information Memorandum Memorandum may not be distributed in, and the SPiCE Tokens may not, directly or indirectly, be offered or sold in or into the People’s Republic of China or the Republic of Korea. Prospective investors should read the whole of this Information Memorandum and should be aware that these instruments are speculative and involve a high degree of risk. See the section of this Information Memorandum entitled “Risk Factors” for a discussion of certain risks and other factors which should be considered prior to any investment in the SPiCE Tokens.
SPiCE Venture Capital Pte. Ltd. Incorporated Incorporated in Singapore Singapore with unique unique entity number number 201726716D 201726716D
Offer of up to 130,000,000 130,000,000 SPiCE Tokens Information Memorandum as updated on 30 November 2017
The SPiCE Tokens are a new series of Ethereum-based smart contract digital tokens to be issued by SPiCE Venture Capital Pte. Ltd. (SPiCE VC) at an offering price of USD 1 per SPiCE Token (inclusive, in the case of Singapore, of any GST) (the Offering Price). SPiCE VC is a newly-incorporated Singaporean private limited company with no operating history. SPiCE VC will use the proceeds of the Offering to invest in start-ups in accordance with its investment thesis, as described in more detail in this Information Memorandum.
i
Subscriptions for SPiCE Tokens in the Pre-Sale and the Main Sale can be paid for in U.S. dollars ( USD), Euros (EUR ), ), BTC ETH Bitcoin ( ) or Ether ( ). The Pre-Sale will end at the earlier of: (1) 7:00 a.m. (London time) on 1 February 2018; and (2) the time and date on which the Pre-Sale is closed or otherwise terminated by SPiCE VC in its sole discretion. The Main Sale will end at the earlier of: (1) 8:00 p.m. (London time) on 3 March 2018 and (2) the time and date on which the Main Sale is closed or otherwise terminated by SPiCE VC in its sole discretion. The Offering is expected to close at 8:00 p.m. on 3 March 2018, unless closed at an earlier date as specified above. Subscribers will be alerted to the closing and whether they were successful in subscribing by e-mail and an update to their accounts on the bespoke platform developed by SPiCE VC for the SPiCE Tokens (the SPiCE Token Platform) accessible at https://www.spicevc.com/. SPiCE VC intends to list the SPiCE Tokens on multiple cryptocurrency exchanges that accept tokens. SPiCE VC expects to deliver the SPiCE Tokens against payment through the SPiCE Token Platform, directly or by other means on or before 31 March 2018.
ii
IMPORTANT NOTICE
The SPiCE Tokens may be a suitable investment only for those investors who are able to understand the unique nature of the Offering, SPiCE VC, the SPiCE Token, digital tokens and cryptocurrency exchanges. In making an investment decision, investors must rely on their own examination of SPiCE VC, the SPiCE Tokens and the terms of the Offering, including the merits and risks involved. Prospective investors should not construe the contents of this Information Memorandum as legal, business, tax, accounting, accounting, investment investment or other advice. Each prospective investor is urged to consult its own advisers as to legal, business, tax, regulatory, accounting, financial and other consequences of its investment in the SPiCE Tokens. This Information Memorandum is furnished for the purpose of providing certain information about an investment in the SPiCE Tokens. This Information Memorandum is to be used by each person to whom it has been made available solely in connection with the consideration of the purchase of the SPiCE Tokens described herein. All recipients agree that they will use this Information Memorandum for the sole purpose of evaluating a possible investment in SPiCE Tokens, and acknowledge and agree that this Information Memorandum is not a prospectus and does not purport to contain all information an investor may require to form an investment decision. No person is authorised to give any information or make any representation in connection with SPiCE VC, the SPiCE Tokens or the Offering that is not contained in this Information Memorandum. Any representation or information not contained herein must not be relied upon as having been authorised by SPiCE VC or any of its partners, members, officers, employees, managers, affiliates or agents. The contents of this Information Memorandum are not to be construed as a recommendation or advice to any prospective investor in relation to the subscription, purchase, holding or disposal of SPiCE Tokens and prospective investors should consult their own professional professional advisers accordingly accordingly.. The information in this Information Memorandum is current only as of the date on its cover. For any time after the cover date of this Information Memorandum, the information, including information concerning SPiCE VC ’s business, financial condition, results of operations and prospects may have changed. Neither the delivery of this Information Memorandum nor any sale of SPiCE Tokens hereunder shall, under any circumstances, create any implication that there have been no changes in SPiCE VC’s VC’s affairs after the date of th is Information Memorandum. Save as may be required under applicable law or regulation, SPiCE VC does not undertake any obligation to update the information contained in this Information Memorandum after its date. To the extent that information has been sourced from a third party, this information has been accurately reproduced and, as far as SPiCE VC is aware and is able to ascertain from information published by such third party, no facts have been omitted which may render the reproduced information inaccurate or misleading. This Information Memorandum may not be used for the purpose of, and may not be construed as, an invitation to any person to subscribe for or purchase any securities or any other financial instrument or as an invitation or an offer to sell or a solicitation of an offer to subscribe for or purchase any securities or any other financial instrument in a jurisdiction in which such an invitation, offer or solicitation cannot lawfully be made to him or made without compliance with any registration or other legal requirements. Neither this Information Memorandum, nor any of the SPiCE Tokens, has been or will be registered or filed under the securities laws or regulations of any jurisdiction or approved, recommended or disapproved by any securities or other regulatory authority nor has any such authority confirmed the accuracy or determined the adequacy of this Information Memorandum. Notices to U.S. Persons
The SPiCE Tokens have not been approved or disapproved by the U.S. Securities and Exchange Commission (the SEC) or by the securities regulatory authority of any state or of any other jurisdiction of the United States, nor has the SEC or any such securities regulatory authority passed upon the accuracy or adequacy of this Information Memorandum. Any representation to the contrary is a criminal offence.
U.S U. S . I nvestme nvestment nt Compa Company ny Act A ct of of 1940 SPiCE VC intends to rely on an exemption from the provisions of the Investment Company Act of 1940, as amended (the Investment Company Act ), in reliance upon Section 3(c)(1) of the Investment Company Act, which excludes from the definition of “investment company” any issuer whose outstanding securities are beneficially owned by not more than 100 U.S. Persons and who meet the other conditions contained therein. Each S ubscriber’s subscription documents will contain representations and restrictions on transfer designed to insure that the relevant conditions are met.
R esale sale Restrictions Restri ctions Because of the following restrictions, you are advised to consult legal counsel prior to making any offer, resale, pledge or other transfer of the SPiCE Tokens offered pursuant to the Offering. THE SPiCE TOKENS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD, EXCEPT (A) IF THE HOLDER IS A U.S. PERSON, UNTIL THE FIRST ANNIVERSARY OF THE ISSUANCE OF THE SPiCE TOKENS AND SUCH HOLDER SHALL NOT TRANSFER OR SELL THEIR SPiCE TOKENS TO ANY U.S. PERSON UNLESS THEY SELL ALL OF THEIR SPiCE TOKENS TO A SINGLE BENEFICIAL OWNER THAT IS A U.S. PERSON; (B) IF THE HOLDER IS A NON-U.S. PERSON, TO OTHER NON-U.S. PERSONS OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
iii
COMPLIANCE WITH RULE 903 OR RULE 904 UNDER THE SECURITIES ACT; (C) TO THE RESERVE, AS PERMITTED UNDER APPLICABLE LAWS AND REGULATIONS OR PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM AND IN ACCORDANCE WITH THE TERMS OF THE SPiCE TOKENS; OR (D) TO SPiCE VC OR ANY SUBSIDIARY THEREOF AND, IN EACH CASE, AS PERMITTED UNDER APPLICABLE LAWS AND REGULATIONS OR PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. FURTHERMORE, IN THE EVENT OF ANY REDEMPTION, A MAXIMUM OF 99 BENEFICIAL OWNERS THAT ARE U.S. PERSONS WILL BE REDEEMED. Notice to all prospective investors
Prospective investors 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 SPiCE Tokens, and any foreign exchange restrictions that may be relevant thereto. The distribution of this Information Memorandum and the offer and sale of the SPiCE Tokens in certain jurisdictions may be restricted by law. This Information Memorandum does not constitute an offer to sell or the solicitation of an offer to buy in any state or other jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such state or jurisdiction. The information below is for general guidance only and it is the responsibility of any person or persons in possession of this Information Memorandum and wishing to make an application to subscribe for SPiCE Tokens to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. No person has been authorised by SPiCE VC to issue any advertisement or to give any information or to make any representation in connection with the contents of this Information Memorandum and, if issued, given or made, such advertisement, information or representation must not be relied upon as having been authorised by SPiCE VC. This Information Memorandum does not constitute, and may not be used for the purposes of, an offer or solicitation to anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. The distribution of this Information Memorandum may be restricted and accordingly persons into whose possession this Information Memorandum comes are required to inform themselves about and to observe such restrictions. Prospective investors should inform themselves as to: (a) the legal requirements of their own countries for the purchase, holding, transfer or other disposal of the SPiCE Tokens; (b) any foreign exchange restrictions applicable to the purchase, holding, transfer or other disposal of the SPiCE Tokens which they might encounter; and (c) the income and other tax consequences which may apply in their own countries as a result of the purchase, holding, transfer or other disposal of the SPiCE Tokens. Prospective investors must rely upon their own representatives, including their own legal advisers and accountants, as to legal, tax, investment or any other related matters concerning SPiCE VC, the SPiCE Tokens and an investment therein. The contents of SP iCE VC’s website, including any websites accessible from hyperlinks on SPiCE VC’s website, do not form part of this Information Memorandum. The contents of this Information Memorandum have not been approved by an authorised person within the meaning of the laws of the European Union. Reliance on this Information Memorandum for the purpose of engaging in any investment activities may expose an individual to a significant risk of losing all of the property or other assets invested. Notice to prospective EEA investors
This Information Memorandum does not constitute a prospectus for the Prospectus Directive, and has been prepared on the basis that any offer of SPiCE Tokens in any member state of the EEA which has implemented the Prospectus Directive (each, a Relevant Member State) will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of SPiCE Tokens or otherwise will not be subject to such requirements. SPiCE VC has not authorised and does not authorise the making of any offer of SPiCE Tokens in circumstances in which an obligation arises for SPiCE VC to publish or supplement a prospectus for such offer. In relation to each Relevant Member State, no offer of SPiCE Tokens has been, or will be, made to the public in that Member State, other than under the following exemptions under the Prospectus Directive: (a)
to any legal entity which is a “qualified investor ” 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); or
(c)
in any other circumstances falling within article 3(2) of the Prospectus Directive,
provided that no such offer of SPiCE Tokens referred to in (a) to (c) above shall result in a requirement for SPiCE VC to publish a prospectus pursuant to article 3 of the Prospectus Directive, or supplement a prospectus pursuant to article 16 of the Prospectus Directive. For the purposes of this provision, the expression “an offer of SPiCE Tokens to the public” in relation to any SPiCE Tokens in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the SPiCE Tokens to be offered so as to enable an investor to decide to purchase or subscribe for the SPiCE Tokens, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive.
iv
IN RELATION TO EACH MEMBER STATE OF THE EEA WHICH HAS IMPLEMENTED THE AIFM DIRECTIVE (AND FOR WHICH TRANSITIONAL ARRANGEMENTS ARE NOT/NO LONGER AVAILABLE), THIS INFORMATION MEMORANDUM MAY ONLY BE DISTRIBUTED AND SPiCE TOKENS MAY ONLY BE OFFERED OR PLACED IN A MEMBER STATE TO THE EXTENT THAT: (1) SPiCE VC IS PERMITTED TO BE MARKETED TO PROFESSIONAL INVESTORS IN THE RELEVANT MEMBER STATE IN ACCORDANCE WITH THE AIFM DIRECTIVE (AS IMPLEMENTED INTO THE LOCAL LAW/REGULATIONS OF THE RELEVANT MEMBER STATE); OR (2) THIS INFORMATION MEMORANDUM MAY OTHERWISE BE LAWFULLY DISTRIBUTED AND SPiCE TOKENS MAY OTHERWISE BE LAWFULLY OFFERED OR PLACED IN THAT MEMBER STATE (INCLUDING AT THE INITIATIVE OF THE INVESTOR). IN RELATION TO EACH MEMBER STATE OF THE EEA WHICH, AT THE DATE OF THIS INFORMATION MEMORANDUM, HAS NOT IMPLEMENTED THE AIFM DIRECTIVE, THIS INFORMATION MEMORANDUM MAY ONLY BE DISTRIBUTED AND SPiCE TOKENS MAY ONLY BE OFFERED OR PLACED TO THE EXTENT THAT THIS INFORMATION MEMORANDUM MAY BE LAWFULLY DISTRIBUTED AND SPiCE TOKENS MAY LAWFULLY BE OFFERED OR PLACED IN THAT MEMBER STATE (INCLUDING AT THE INITIATIVE OF THE INVESTOR). Notice to prospective United Kingdom investors
In the United Kingdom, this Information Memorandum is only distributed to and is only directed at (i) persons who have professional experience in matters relating to investments and fall within article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, (the Order); (ii) persons falling within article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of the Order; or (iii) any other person to whom it may otherwise lawfully be communicated under the Order (each such person being referred to as a Relevant Person). Any person in the United Kingdom that is not a Relevant Person should not act or rely on this Information Memorandum or any of its contents. In the United Kingdom, any activity to which this Information Memorandum relates is only available to, and will only be engaged in with, a Relevant Person. Notice to prospective Hong Kong investors
The SPiCE Tokens have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the SFO) and any rules made under the SFO; or (b) insofar as applicable, in other 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 (the CWUMPO) or which do not constitute an offer to the public within the meaning of the CWUMPO. No advertisement, invitation or document relating to the SPiCE Tokens has been or will be issued, or has been or will be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the SPiCE Tokens which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made under the SFO. Notice to prospective Singapore investors
This Information Memorandum has not been registered as a prospectus with the Monetary Authority of Singapore ( MAS). The arrangements made by SPiCE VC in relation to the SPiCE Tokens are also likely to be regarded as a collective investment scheme ( CIS) for the purposes of the Securities and Futures Act, Chapter 289 of Singapore ( SFA). However, no action has been, or will be, taken for the authorisation or recognition of any CIS relating to SPiCE VC or the SPiCE Tokens under Section 286 or 287 of SFA or registered as a "restricted scheme" with the MAS for the purposes of Section 305 of the SFA. Accordingly, this Information Memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of SPiCE Tokens may not be circulated or distributed, nor may SPiCE Tokens be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than: (a)
to an "institutional investor" within the meaning of Section 4A of the SFA and the Securities and Futures (Prescribed Classes of Investors) Regulations or any other applicable regulations made thereunder; or
(b)
pursuant to, and in accordance with, the conditions of the “ private placement” exemption in Section 302C of the SFA, pursuant to which offers or invitations in relation to the SPiCE Tokens (when aggregated with any other offer considered to be a closely-related offer) may be made to up no more than 50 persons in Singapore in reliance on the “ private placement” exemption within a period of 12 months.
No person in Singapore who is not an "institutional investor" (as defined above) may: (a)
receive the Information Memorandum or any other document or material in connection with, or subscribe for any SPiCE Tokens in, the Main Sale or the Offering, without first directly confirming with SPiCE VC if they are eligible to receive the Information Memorandum or other documents or materials, or to participate in the Pre-Sale or the Main Sale; or
v
(b)
subscribe for the SPiCE Tokens with a view to resale or distribution.
Notice to prospective Israel investors
The SPiCE Tokens are being offered pursuant to an exception to the public offering requirements of Israeli Securities Law of 1968 (the Israeli Securities Law). Any offering of the SPiCE Tokens in Israel will be exclusively made to, and directed at, Qualified Investors, as defined in Schedule 1 of the Israeli Securities Law. Accordingly, this Information Memorandum and/or any other offering materials relating to the SPiCE Tokens may be made available in Israel solely to Qualified Investors. None of the Offering, or the interests, or any constituent material of the foregoing, has been reviewed, qualified or approved by the Israeli Securities Authority or any other government or regulatory body. Notice to prospective Cayman Islands investors
No offer or invitation to subscribe for SPiCE Tokens may be made to the public in the Cayman Islands. Notice to persons in the People’s Republic of China
Following the joint announcement by the People’s Bank of China along with six other ministries of the People’s Republic of China on 4 September 2017, respectively, the Cyberspace Administration of China, the Ministry of Industry and Information Technology of the People’s Republic of China, the State Administration for Industry and Commerce of the People’s Republic of China, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission, initial coin offerings and other forms of digital token financing are prohibited in the People’s Republic of China. Accordingly, the distribution of this Information Memorandum in or into the People’s Republic of China is restricted and no invitation is made by this Information Memorandum or the information contained herein to enter into, or offer to enter into, any agreement to purchase, acquire, dispose of, subscribe for or underwrite any SPiCE Tokens or other securities or structured products in the People’s Republic of China. This Information Memorandum is being communicated only to persons outside the People’s Republic of China and ha s not been reviewed by any regulatory authority therein. Notice to persons in the Russian Federation
Neither the issuance of the SPiCE Tokens nor a securities prospectus in respect of the SPiCE Tokens has been registered, or is intended to be registered, with the Central Bank of Russia (the CBR ) and no decision to admit the SPiCE Tokens to placement or circulation in the Russian Federation has been made, or is intended to be made, by the CBR or a Russian stock exchange. The SPiCE Tokens are not eligible for offering or circulation in the Russian Federation and may not be sold or offered in the Russian Federation unless and to the extent otherwise permitted under Russian law. Information set forth in this Information Memorandum is not an offer, advertisement or invitation to make offers, to sell, exchange or otherwise transfer, the SPiCE Tokens in the Russian Federation or to or for the benefit of any Russian person or entity and must not be distributed or circulated in the Russian Federation, unless and to the extent otherwise permitted under Russian law. Notice to persons in the Republic of Korea
Following the announcement by the Financial Services Commission on 29 September 2017, initial coin offerings are prohibited in the Republic of Korea. Accordingly, the distribution of this Information Memorandum in or into the Republic of Korea is restricted and no invitation is made by this Information Memorandum or the information contained herein to enter into, or offer to enter into, any agreement to purchase, acquire, dispose of, subscribe for or underwrite any SPiCE Tokens or other securities or structured products in the Republic of Korea. This Information Memorandum is being communicated only to persons outside the Republic of Korea and has not been reviewed by any regulatory authority therein.
vi
TABLE OF CONTENTS
Page PRESENTATION OF INFORMATION .................................................................................................................................... 1 EXPECTED TIMETABLE TIMETABLE OF PRINCIPAL EVENTS ................... ...................... ...................... ...................... ..................... ... 2 THE OFFERING ........................................................................................................................................................................ 3 OVERVIEW OF THE OFFERING AND THE TERMS OF THE SPiCE TOKENS ................... ..................... ...................... . 11 RISK FACTORS ...................................................................................................................................................................... 16 ABOUT SPiCE VC .................................................................................................................................................................. 30 ABOUT THE FOUNDERS ...................................................................................................................................................... 40 DESCRIPTION OF THE SPiCE TOKENS.............................................................................................................................. 41 ADDITIONAL INFORMATION INFORMATION .................... ...................... ...................... ...................... ...................... ..................... ............ 48 DEFINITIONS ......................................................................................................................................................................... 55
vii
PRESENTATION OF INFORMATION
Forward-looking Statements
This Information Memorandum contains statements which, to the extent that they do not recite historical fact, constitute, or may be deemed to be, forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts and may include the words “may” may”, “will” will”, “could” could”, “should” should”, “would” would ”, “ believe” believe”, “expect” expect”, “anticipate” anticipate”, “estimate” estimate”, “intend” intend”, “ plan” plan” or other words or expressions of similar meaning or, in each case, their negative. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and, therefore, these forward-looking statements are based on the current expectations of SPiCE VC about future events. Forward-looking statements are not guarantees of future performance performance and the actual operating results and financial condition, and the development development of the industry in which SPiCE VC operates may differ materially from those made in or suggested by the forward-looking statements contained in this Information Memorandum. The forward-looking statements include statements that reflect SPiCE VC ’s beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect to the financial condition, results of operations, future performance and business of SPiCE VC. Prospective investors are required to carefully review this Information Memorandum, particularly the section entitled “Risk Factors” Factors”, for a more complete discussion of the risks of an investment in the SPiCE Tokens. Although SPiCE VC believes that the expectations reflected in the forward-looking statements are reasonable, SPiCE VC cannot guarantee future results, level of activity, performance or achievements. Many factors discussed in this Information Memorandum, some of which are beyond SPiCE VC ’s control, will be important in determining the future performance of SPiCE VC. Consequently, actual results may differ materially from those that might be anticipated anticipated from forward-looki forward-looking ng statements. statements. In light of these and other uncertainties, prospective investors should not regard the inclusion of a forward-looking statement in this Information Memorandum as a representation by SPiCE VC that its plans and objectives will be achieved, and should not place undue reliance on such forward-looking statements. These forward-looking statements speak only as at the date of this Information Memorandum. SPiCE VC expressly disclaims any obligation or undertaking to update any of the forwardlooking statements, whether as a result of new information, future events or otherwise, except as required by law. Past and Projected Performance
Prospective investors should bear in mind that past or projected performance is not necessarily indicative of future results, and there can be no assurance that SPiCE VC will achieve comparable results or that targeted returns will be met. Unless otherwise indicated, indicated, all internal rates of return and multiples of invested capital are presented on a “gross” gross” basis (i.e., they do not reflect the management fees, “carried interest” interest”, taxes and other expenses to be borne by investors in the SPiCE Tokens). Statements in this Information Memorandum regarding SPiCE VC ’s investment focus, targets and size of expected transactions, specific or general strategies and similar statements are not limitations, and the SPiCE VC Management Agreement, as described in the section of this Information Memorandum entitled “Additional “Additional Information — SPiCE VC Management Agreement” Agreement ”, will provide flexibility to invest outside of the parameters and terms described herein. Other Statements
Statements contained herein that are attributable to SPiCE VC or its investment professionals or other personnel or any other person are not not made in any any person person ’s individual capacity, but rather on behalf of SPiCE VC. Statements contained in this Information Memorandum that are not historical facts are based on current expectations, estimates, projections, opinions, and/or beliefs of SPiCE VC. Such statements are not facts and involve known and unknown risks, uncertainties, and other factors. Prospective investors should not rely on these statements as if they were fact.
1
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Publication Publicati on of original Information Memorandum
18 October 2017
Publication Publicati on of this revised Information Memorandum
30 November 2017
Start of the Pre-Sale Pre-Sal e
8:00 a.m. (London time) on 19 October 2017
Expected close of the Pre-Sale Pre-Sal e
7:00 a.m. (London time) on 1 February 2018
Expected start of the Main Sale
8:00 a.m. (London time) on 1 February 2018
Expected close of the Main Sale
8:00 p.m. (London time) on 3 March 2018
Expected date on which the SPiCE Tokens are issued to Subscribers pursuant pursuant to the terms of the Offering through the Smart Contract
No later than 31 31 March 2018 2018
Expected date on which the Reserve becomes operational
No later than 1 April 2018
E ach of of the times times and dat dates es referr refer r ed to abo above ve i s subjec subj ectt to change at the absolute absolute discr eti eti on of SPi S Pi C E V C .
2
THE OFFERING
The Offering will be separated into two periods, the Pre-Sale and the Main Sale. Further details as to how prospective investors can participate in the Pre-Sale and the Main Sale, including further details of the subscription conditions, are set out below. The SPiCE Tokens are being offered on SPiCE VC’s website at https://www.spicevc.com/. HOW TO APPLY FOR SPiCE TOKENS IN THE PRE-SALE
The Pre-Sale commenced on 19 October 2017 and is expected to close at the earlier of: (1) 7:00 a.m. (London time) on 1 February 2018; and (2) the time and date on which the Pre-Sale is closed or otherwise terminated by SPiCE VC in its sole discretion. Prospective investors who are interested in subscribing for SPiCE Tokens in the Pre-Sale must carefully read this Information Memorandum in its entirety before executing a subscription form for the Pre-Sale (the Pre-Sale Subscription Form). Information contained or linked on SPiCE VC’s website is not incorporated by reference into this Information Memorandum and is not a part of this Information Memorandum. During the Pre-Sale, prospective investors may subscribe for SPiCE Tokens in U.S. dollars, Euros, Bitcoin or Ether, subject to the terms and conditions of the Pre-Sale. U.S. Persons must apply to subscribe for a minimum amount of USD 200,000 or equivalent amount in EUR, BTC or ETH. Non-U.S. Persons must apply to subscribe for a minimum amount of USD 50,000 or equivalent amount in EUR, BTC or ETH. Pre-Sale Subscription Form
In order to apply to subscribe for SPiCE Tokens in the Pre-Sale, a prospective investor will need to complete and submit, before the Pre-Sale closes, the Pre-Sale Subscription Form (including Exhibit A of that Subscription Form), an electronic copy of which will be made available on SPiCE VC’s website at https://www.spicevc.com/. By executing the Pre-Sale Subscription Form, each prospective investor (a Pre-Sale Subscriber) will attest that, amongst other things listed therein, he, she or it :
has received, read and understood this Information Memorandum;
accepts and agrees to the terms of the SPiCE Tokens and the terms of the Pre-Sale;
is applying to purchase the SPiCE Tokens for his, her or its own account for investment purposes only and not with a view to resale or distribution; if the payment of the Subscription Amount is to be by way of BTC or ETH, is the owner of the public address for his, her or its digital wallet provided to SPiCE VC and he, she or it is the sole owner of the private key to that address; is the owner of the public address for his, her or its digital wallet provided to SPiCE VC as the wallet for the SPiCE Tokens to be delivered to following the closing of the Offering, and he, she or it is the sole owner of the private key to that address; represents that he, she or it is able to purchase SPiCE Tokens because he, she or it is either: o
an “accredited investor” as such term is defined in Rule 501 of Regulation D under the Securities Act; or
o
a Non-U.S. Person;
represents that any purchase of the SPiCE Tokens by him, her or it is permissible and complies in all respects with laws applicable to him, her or it and that, if the Pre-Sale Subscriber is a corporate or other legal entity, its investment in the SPiCE Tokens has been duly authorised; and is in compliance with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended, is not on any governmental authority watch list and he, she or it will comply with any other legal, regulatory and compliance requirements and checks, including, but not limited to, anti-money laundering and sanctions compliance checks that may be imposed by SPiCE VC.
A U.S. Pre-Sale Subscriber must provide SPiCE VC with all documents necessary to confirm, in SPiCE VC’s sole determination, that U.S. Pre-Sale Subscriber’s status as an “accredited investor”, as defined in Rule 501 of the Securities Act. An Israeli Pre-Sale Subscriber must provide SPiCE VC with all documents necessary to confirm, in SPiCE VC’s sole determination, that Israeli Pre-Sale Subscriber ’s status as a “qualified investor”, as defined in Schedule 1 of the Israeli Securities Law.
3
Each Pre-Sale Subscriber must state in the Pre-Sale Subscription Form the maximum subscription amount in USD, EUR, BTC or ETH (the Pre-Sale Maximum Subscription Amount) in respect of which he, she or it is willing to commit to SPiCE VC for the SPiCE Tokens. If the Pre-Sale Subscriber elects in its Pre-Sale Subscription Form to pay the Subscription Amount in BTC, USD or EUR, the Pre-Sale Subscriber must provide details of his, her or its digital wallet that the SPiCE Tokens will be transferred to, if the Pre-Sale Subscriber’s Pre-Sale Subscription Form is accepted, and must confirm that he, she or it is the owner of the public address for his, her or its digital wallet provided to SPiCE VC and he, she or it is the sole owner of the private key to that address. A Pre-Sale Subscriber paying in BTC, USD or EUR must send a message, containing a unique identifier which SPiCE VC will send to that Pre-Sale Subscriber, from the digital wallet specified in his, her or its Pre-Sale Subscription Form to the digital wallet specified by SPiCE VC or must comply with any other processes specified by SPiCE VC. Subscriptions for SPiCE Tokens will be effective only when SPiCE VC accepts them and SPiCE VC reserves the right to reject any Pre-Sale Subscription Form in whole or in part, in SPiCE VC’s sole discretion. Subscriptions need not be accepted in the order received and the S PiCE Tokens will be allocated among Pre- Sale Subscribers in SPiCE VC’s sole discretion. On or before 31 March 2018, following a successful closing of the Offering, the SPiCE Tokens will be issued to Pre-Sale Subscribers whose subscriptions have been accepted against payment, directly or by other means. SPiCE VC reserves the right to reject any Pre-Sale Subscription Form in whole or in part, in SPiCE VC’s sole discretion. SPiCE Tokenholder Checks
Before the rights to SPiCE Tokens can be issued to a Pre-Sale Subscriber, that Pre-Sale Subscriber must complete legal, regulatory and compliance requirements and checks including, but not limited to: (i) anti-money laundering and sanctions compliance checks; (ii) providing any information requested by SPiCE VC in SPiCE VC’s absolute discretion in order for SPiCE VC to comply with its reporting obligations under the US Foreign Account Tax Compliance Act and the OECD Common Reporting Standard, under the laws and regulations of Singapore (or any other applicable jurisdiction) implementing any inter-governmental agreement entered into by Singapore (or any other applicable jurisdiction) relating to any agreement entered into by SPiCE VC with respect to such reporting regimes; (iii) and confirmations regarding that PreSale Subscriber’s tax status in Israel ; and (iv) where applicable, confirmations regarding the ownership of the digital wallet, either by sending a message with a unique identifier to SPiCE VC or by complying with any other processes requested by SPiCE VC (the SPiCE Tokenholder Checks) (for further information see the sections of this Information Memorandum below entitled “The Offering – The SPiCE Tokenholder Checks” and “The Offering – SPiCE VC’s obligations to comply with laws and regulations relating to the US Foreign Account Tax Compliance Act and the OECD Common Reporting Standard”). If a Pre-Sale Subscriber fails to provide the requested information to complete the SPiCE Tokenholder Checks or does not meet the requirements of the SPiCE Tokenholder Checks ( in SPiCE’s VC absolute determination), that Pre-Sale Subscriber’s Pre-Sale Subscription Form shall be deemed null and void (determined at the sole discretion of SPiCE VC) and no rights to SPiCE Tokens will be created or granted to that prospective investor. Pre-Sale Payment Mechanics
Following completion of the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC in its absolute discretion, SPiCE VC will confirm to the Pre-Sale Subscriber the subscription amount to be paid by that Pre-Sale Subscriber (the Pre-Sale Subscription Amount) (which may be less than or equal to the Pre-Sale Maximum Subscription Amount). If the Pre-Sale Subscriber wishes to pay the Pre-Sale Subscription Amount in USD or EUR and is accepted by SPiCE VC, SPiCE VC will notify the Pre-Sale Subscriber by e-mail of the details of the account held with North Capital (the Fiat Account) to which the Pre-Sale Subscription Amount must be transferred. If the Pre-Sale Subscriber wishes to pay the Pre-Sale Subscription Amount in ETH or BTC and is accepted by SPiCE VC, SPiCE VC will notify the Pre-Sale Subscriber by e-mail of the details of the digital wallet held with Vo1t (the Digital Wallet) at https://vo1t.io/ to which the Pre-Sale Subscription Amount must be transferred together with a unique identifier, which must be submitted with the payment of the Pre-Sale Subscription Amount. Vo1t will hold a separate Digital Wallet for each Pre-Sale Subscriber. SPiCE VC reserves the right to replace North Capital and/or Vo1t, at its absolute discretion or to add alternative providers of fiat accounts or digital wallets. All amounts held in the Fiat Account and the Digital Wallet (the Accounts) shall remain in the Accounts until the issuance of the SPiCE Tokens to the Pre-Sale Subscribers. Number of SPiCE Tokens to be issued in the Pre-Sale
All Pre-Sale Subscribers who successfully subscribe for any SPiCE Tokens in the Pre-Sale shall have their allocation of rights to SPiCE Tokens multiplied by the Multiplier. The value of the Multiplier shall be determined by the value in USD of a Pre-Sale Subscriber’s Pre-Sale Subscription Amount, as follows: (a)
the Multiplier shall be 1.3, if the USD Subscription Amount is greater USD 5 million;
(b)
the Multiplier shall be 1.25, if the USD Subscription Amount is greater than or equal to USD 500,000 but less than or equal to USD 5 million; and
(c)
the Multiplier shall be 1.2, if the USD Subscription Amount is less than USD 500,000.
4
Only SPiCE Tokenholders who subscribed for SPiCE Tokens in the Pre-Sale shall be entitled to have their allocation of rights to SPiCE Tokens multiplied by the Multiplier. If, following the payment of the Pre-Sale Subscription Amount to SPiCE VC by the Pre-Sale Subscriber, the value of the Pre-Sale Subscription Amount in USD falls due to changes in the exchange rate, with the result that the Multiplier that applies, as calculated on the day after the closing of the Offering, is lower than the Multiplier that would have applied had the Multiplier been calculated on the date of the receipt of the Pre-Sale Subscription Amount by SPiCE VC (the Original Multiplier), then the Original Multiplier shall be used when determining the allocation of the number of rights to SPiCE Tokens to be issued. Following: (i) the closing of the Offering; (ii) confirmation that a prospective investor has completed the SPiCE Tokenholder Checks; and (iii) receipt of the Pre-Sale Subscription Amount from an account owned by the Pre-Sale Subscriber, in the case of payments in USD or EUR, or with the correct unique identifier, in the case of payments in ETH or BTC, SPICE VC shall determine the number of rights to SPiCE Tokens to be issued to that Pre-Sale Subscriber in accordance with the below:
where: USD Subscription Amount means:
(a)
if the Pre-Sale Subscription Amount has been received by SPiCE VC in U.S. dollars, the Pre-Sale Subscription Amount (inclusive, in the case of Singapore, of any GST); or
(b)
if the Pre-Sale Subscription Amount has been received by SPiCE VC in Euros, Bitcoin or Ether, a U.S. dollar equivalent of that Pre-Sale Subscription Amount (inclusive, in the case of Singapore, of any GST) calculated using the Conversion Rate.
Offering Price means USD 1 (inclusive, in the case of Singapore, of any GST); and Multiplier means:
(a)
1.3, if the USD Subscription Amount is greater USD 5 million;
(b)
1.25, if the USD Subscription Amount is equal to or greater than USD 500,000 but less than or equal to USD 5 million; or
(c)
1.2, if the USD Subscription Amount is less than USD 500,000, with the exception that if, following the payment of the Pre-Sale Subscription Amount to SPiCE VC by the PreSale Subscriber, the value of the Pre-Sale Subscription Amount in USD falls due to changes in the exchange rate, with the result that the Multiplier that applies, as calculated on the day after the closing of the Offering, is lower than the Original Multiplier, then the Original Multiplier shall be the Multiplier when determining the allocation of the number of rights to SPiCE Tokens to be issued.
Fractions of SPiCE Tokens will not be issued by SPiCE VC and any fraction of a SPiCE Token to which a Pre-Sale Subscriber would have otherwise been entitled to will be rounded down. Following the calculation of the number of SPiCE Tokens to be issued to a Pre-Sale Subscriber, SPiCE VC will inform the Pre-Sale Subscriber of the number of SPiCE Tokens to be issued to him, her or it. The Pre-Sale Subscriber’s account on the SPiCE Token Platform shall be updated accordingly. Pre-Sale Lock-Up
All of the SPICE Tokens issued to Pre-Sale Subscribers pursuant to the Pre-Sale shall be prohibited from being transferred to the Reserve or to any other person for a period of six months from the date of the issuance of those SPiCE Tokens (the PreSale Lock-Up). HOW TO APPLY FOR SPiCE TOKENS IN THE MAIN SALE
The Main Sale is expected to commence at 8:00 a.m. (London time) on 1 February 2018 and close at the earlier of: (1) 8:00 p.m. (London time) on 3 March 2018; and (2) the time and date on which the Main Sale is closed or otherwise terminated by SPiCE VC in its sole discretion. The Offering is expected to close at 8:00 p.m. on 3 March 2018, unless closed at an earlier date as specified above. In order to apply to subscribe for SPiCE Tokens in the Main Sale, a prospective investor will need to complete and submit a subscription form for the Main Sale (the Main Sale Subscription Form) including Exhibit A of that Subscription Form, an electronic copy of which will be made available on SPiCE VC’s website at https://www.spicevc.com/, before the Main Sale closes. The currency of the SPiCE Token will be in USD and the Offering Price will be USD 1 per SPiCE Token (inclusive, in the case of Singapore, of any GST). Subscribers may subscribe for SPiCE Tokens in USD, EUR, BTC or ETH during the Main Sale.
5
U.S. Persons must apply to subscribe for a minimum amount of USD 50,000 (or an equivalent amount in EUR, ETH or BTC). Non-U.S. Persons applying to subscribe for SPiCE Tokens in EUR or USD must apply to subscribe for a minimum amount of USD 50,000 (or an equivalent amount in EUR). There is no minimum subscription amount for Non-U.S. Persons applying to subscribe for SPiCE Tokens in ETH or BTC. Prospective investors who are interested in applying to subscribe for SPiCE Tokens must carefully read this Information Memorandum in its entirety before executing the Main Sale Subscription Form. Information contained or linked on SPiCE VC’s website is not incorporated by reference into this Information Memorandum and is not a part of this Information Memorandum.
Main Sale Subscription Form
By executing the Main Sale Subscription Form, each prospective investor (a Main Sale Subscriber) will attest that, amongst other things listed therein, he, she or it :
has received, read and understood this Information Memorandum;
accepts and agrees to the terms of the SPiCE Tokens;
is applying to purchase the SPiCE Tokens for his, her or its own account for investment purposes only and not with a view to resale or distribution; if the payment of the Subscription Amount is to be by way of BTC or ETH, is the owner of the public address provided to SPiCE VC and he, she or it is the sole owner of the private key to that address; represents that he, she or it is able to purchase SPiCE Tokens because he, she or it is either: o
an “accredited investor” as such term is defined in Rule 501 of Regulation D under the Securities Act; or
o
a Non-U.S. Person;
represents that any purchase of the SPiCE Tokens by him, her or it is permissible and complies in all respects with laws applicable to him, her or it and that, if the Main Sale Subscriber is a corporate or other legal entity, that its investment in the SPiCE Tokens has been duly authorised; and is in compliance with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended, is not on any governmental authority watch list and he, she or it will comply with any other legal, regulatory and compliance requirements and checks, including, but not limited to, anti-money laundering and sanctions compliance checks that may be imposed by SPiCE VC.
A U.S. Main Sale Subscriber must provide SPiCE VC with all documents necessary to confirm, in SPiCE VC’s sole determination, that U.S. Main Sale Subscriber’s status as an “accredited investor”, as defined in Rule 501 of the Securities Act. An Israeli Main Sale Subscriber must provide SPiCE VC with all documents necessary to confirm, in SPiCE VC’s sole determination, that Israeli Main Sale Subscriber ’s status as a “qualified investor”, as defined in Schedule 1 of the Israeli Securities Law. Each Main Sale Subscriber must state in the Main Sale Subscription Form the maximum subscription amount in USD, EUR, BTC or ETH (the Main Sale Maximum Subscription Amount) in respect of which he, she or it is willing to commit to SPiCE VC to apply for the SPiCE Tokens. If the Main Sale Subscriber elects in its Main Sale Subscription Form to pay the Subscription Amount in BTC, USD or EUR, the Main Sale Subscriber must provide details of his, her or its digital wallet that the SPiCE Tokens will be transferred to, if the Main Sale Subscriber’s Main Sale Subscription Form is accepted, and must confirm that he, she or it is the owner of the public address for his, her or its digital wallet provided to SPiCE VC and he, she or it is the sole owner of the private key to that address. A Main Sale Subscriber paying in BTC, USD or EUR must send a message, containing a unqiue identifier which SPiCE VC will send to that Main Sale Subscriber, from the digital wallet specified in his, her or its Main Sale Subscription Form to the digital wallet specified by SPiCE VC or must comply with any other processes specified by SPiCE VC. Subscriptions for SPiCE Tokens will be effective only when SPiCE VC accepts them and SPiCE VC reserves the right to reject any Main Sale Subscription Form in whole or in part, in SPiCE VC’s sole discretion. Subscriptions need not be accepted in the order received and the SPiCE Tokens will be allocated among Main Sale Subscribers in SPiCE VC’s sole discretion. On or before 31 March 2018, following a successful closing of the Offering, the SPiCE Tokens will be issued to Main Sale Subscribers whose subscriptions have been accepted against payment, directly or by other means. SPiCE VC reserves the right to reject any Main Sale Subscription Form in whole or in part, in SPiCE VC’s sole discretion. SPiCE Tokenholder Checks
Before the SPiCE Tokens can be issued to a Main Sale Subscriber, that Main Sale Subscriber must complete the SPiCE Tokenholder Checks) (for further information see the sections of this Information Memorandum below entitled “The
6
Offering – The SPiCE Tokenholder Checks” and “ The Offering – SPiCE VC’s obligations to comply with laws and regulations relating to the US Foreign Account Tax Compliance Act and the OECD Common Reporting Standard”) . If a Main Sale Subscriber fails to provide the requested information to complete the SPiCE Tokenholder Checks or does not meet the requirements of the SPiCE Tokenholder Checks ( in SPiCE’s VC absolute determination), that Main Sale Subscriber’s Main Sale Subscription Form shall be deemed null and void (determined at the sole discretion of SPiCE VC) and no rights to SPiCE Tokens will be created or granted to that prospective investor. Main Sale Payment Mechanics
Following completion of the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC in its absolute discretion, SPiCE VC will confirm to the Main Sale Subscriber the Main Sale Subscription Amount to be paid by that Main Sale Subscriber (which may be less than or equal to the Main Sale Maximum Subscription Amount). If the Main Sale Subscriber wishes to pay the Main Sale Subscription Amount in USD or EUR and is accepted by SPiCE VC, SPiCE VC will notify the Main Sale Subscriber by e-mail of the details of the Fiat Account to which the Main Sale Subscription Amount must be transferred. If the Main Sale Subscriber wishes to pay the Main Sale Subscription Amount in ETH or BTC and is accepted by SPiCE VC, SPiCE VC will notify the Main Sale Subscriber by e-mail of the details of the Digital Wallet to which the Main Sale Subscription Amount must be transferred together with a unique identifier, which must be submitted with the payment of the Main Sale Subscription Amount. Vo1t will hold a separate Digital Wallet for each Main Sale Subscriber. All amounts held in the Accounts shall be held in the Accounts until the issuance of the SPiCE Tokens to the Main Sale Subscribers. Number of SPiCE Tokens to be issued in the Main Sale
Following: (i) the closing of the Offering; (ii) confirmation that a prospective investor has completed the SPiCE Tokenholder Checks; and (iii) receipt of the Main Sale Subscription Amount from an account owned by the Main Sale Subscriber, in the case of payments in USD or EUR, or with the correct unique identifier, in the case of payments in ETH or BTC, SPICE VC shall determine the number of rights to SPiCE Tokens to be issued to that Main Sale Subscriber in accordance with the below:
where: USD Subscription Amount means:
(a)
if the Main Sale Subscription Amount has been received by SPiCE VC in U.S. dollars, the Main Sale Subscription Amount (inclusive, in the case of Singapore, of any GST); or
(b)
if the Main Sale Subscription Amount has been received by SPiCE VC in Euros, Bitcoin or Ether, a U.S. dollar equivalent of that Main Sale Subscription Amount (inclusive, in the case of Singapore, of any GST) calculated using the Conversion Rate; and
Offering Price means USD 1 (inclusive, in the case of Singapore, of any GST).
Fractions of SPiCE Tokens will not be issued by SPiCE VC and any fraction of a SPiCE Token to which a Main Sale Subscriber would have otherwise been entitled to will be rounded down. Following calculation of the number of SPiCE Tokens to be issued to a Subscriber, SPiCE VC shall immediately inform that Subscriber as to the number of SPiCE Tokens he, she or it will be issued following the closing of the Offering. Closing of the Main Sale
The Main Sale will end at the earlier of: (1) 8:00 p.m. (London time) on 3 March 2018 and (2) the time and date on which the Main Sale is closed or otherwise terminated by SPiCE VC in its sole discretion. The Main Sale is expected to close at 8:00 p.m. (London time) on 3 March 2018, unless closed at an earlier date as specified above. Subscribers will be alerted to the closing and whether they were successful in subscribing by e-mail and an update to their accounts on the SPiCE Token Platform. The Tranche Option
Any Subscriber whose Subscription Amount exceeds USD 6 million (or an equivalent amount in EUR, ETH or BTC) shall have the right to elect to pay its Subscription Amount in three tranches, subject to the terms and conditions set out below (the Tranche Option). The number of rights to SPiCE Tokens to be issued to a Pre-Sale Subscriber who opts for the Tranche Option (a Pre-Sale Tranche SPiCE Tokenholder) shall be determined in accordance with the formula set out in the paragraph entitled “The Offering – Number of SPiCE Tokens to be issued in the Pre- Sale” above (the Pre-Sale Total Tranched SPiCE Tokens ).
7
The number of SPiCE Tokens to be issued to a Main Sale Subscriber who opts for the Tranche Option (a Main Sale Tranche SPiCE Tokenholder, and, together with the Pre-Sale Tranche SPiCE Tokenholder, a Tranche SPiCE Tokenholder) shall be determined in accordance with the formula set out in the paragraph entitled “ The Offering – Number of SPiCE Tokens to be issued in the Main Sale” above (together with the Pre-Sale Total Tranched SPiCE Tokens, the Total Tranched SPiCE Tokens). The payments by the Tranche SPiCE Tokenholder of the Subscription Amount shall be divided into three equal tranches, payable as follows: (a)
one third of the Subscription Amount in USD shall be paid in accordance with the process set out in the paragraph entitled “The Offering – Pre-Sale Payment Mechanics” or “The Offering – Main Sale Payment Mechanics” as applicable above (the First Instalment );
(b)
an additional third of the Subscription Amount in USD (as set on the date of the First Instalment) shall be paid on the first anniversary of the closing of the Offering (the Second Instalment); and
(c)
the final third of the Subscription Amount in USD (as set on the date of the First Instalment) shall be paid on the second anniversary of the closing of the Offering (the Third Instalment , and together with the First Instalment and Second Instalment, the Instalments and each an Instalment).
On the closing of the Offering, SPiCE VC shall issue the Total Tranched SPiCE Tokens subscribed for by a Tranche SPiCE Tokenholder to the relevant Tranche SPiCE Tokenholder, provided that the relevant Tranche SPiCE Tokenholder has complete the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC in its absolute discretion. Before an Instalment can be paid, the Tranche SPiCE Tokenholder must complete the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC, in its absolute discretion. If a Tranche SPiCE Tokenholder does not pay the Second Instalment or the Third Instalment within 30 days of the relevant anniversary, the Total Tranched SPiCE Tokens shall be returned to SPiCE VC for no consideration and the Tranche SPiCE Tokenholders shall waive all rights to and claims in respect of those Total Tranched SPiCE Tokens. A Tranche SPiCE Tokenholder shall not be able to transfer its Total Tranched SPiCE Tokens until the Third Instalment has been paid. If the Tranche SPiCE Tokenholder fails to meet the requirements of the SPiCE Tokenholder Checks, SPiCE VC may, in its absolute discretion, designate the Total Tranched SPiCE Tokens as Blocked SPiCE Tokens. If a Realisation occurs before the Second Instalment or Third Instalment has been paid, the Tranche SPiCE Tokenholder shall be able to participate in the Realisation Buyback in respect of all of its Total Tranched SPiCE Tokens. Closing of the Offering
Following the closing of the Offering, SPiCE VC shall calculate the number of SPiCE Tokens to be issued pursuant to the Offering (the Preliminary Total). SPiCE VC shall then issue additional SPiCE Tokens to the Founders and to SPiCE VC’s partners, advisers and service providers for no consideration. The aggregate of the Preliminary Total plus the SPiCE Tokens issued to the Founders and S PiCE VC’s partners, advisers and service providers being the Total Issued SPiCE Tokens , such that, following the issue to the Founders, SPiCE VC’s partners, advisers and service providers: (a)
7.5 per cent. of the Total Issued Spice Tokens shall be held by the Founders; and
(b)
7.5 per cent. of the Total Issued Spice Tokens shall be held by SPiCE VC’s partners, advisers and service providers.
Following the closing of the Offering, where a Subscriber has paid the Subscription Amount in ETH, SPiCE VC shall deliver that Subscriber’s SPiCE Tokens to the digital wallet from which the Subscriber transferred its Subscription Amount with the unique identifier. Where the Subscriber has paid the Subscription Amount in BTC, USD or EUR, before SPiCE VC delivers the relevant SPiCE Tokens to the relevant digital wallet specified by that Subscriber in its Subscription Form, the Subscriber must send a message containing a unique identifier given to them by SPiCE VC from that specified digital wallet to the digital wallet specified by SPiCE VC or must comply with any other processes specified by SPiCE VC. If SPiCE VC receives the message with the correct unique identifier from a Subscriber, it shall deliver that Subscriber’s SPiCE Tokens to that digital wallet. SPiCE VC expects to deliver the SPiCE Tokens on or before 31 March 2018. Any unallocated SPiCE Tokens will be held by SPiCE VC and will be unable to participate in any Realisation Buyback (the Inactive SPiCE Tokens). Additional SPiCE Tokens
Following the closing of the Main Sale, SPiCE VC reserves the right, in its absolute discretion, to issue additional SPiCE Tokens (the Additional SPiCE Tokens ) until the earlier of: (a) 12 months from the day after the closing of the Offering; and (b) the aggregate of (i) the USD Subscription Amounts received by SPiCE VC during the Offering and (ii) the total subscription amounts received in respect of the Additional SPiCE Tokens is equal to USD 100,000,000. The subscription price for the Additional SPiCE Tokens shall be determined by SPiCE VC in its sole discretion, but shall be no less than the Offering Price.
8
THE ACCOUNTS
Subscribers will be able to subscribe for SPiCE Tokens during the Offering by paying USD, BTC, ETH or EUR into the Accounts. Tendered funds shall be held in the Accounts until the Offering closes or terminates. Fiat Account
Investors wishing to subscribe in USD or EUR shall do so by wire transfer only to the Fiat Account to be opened by SPiCE VC with North Capital. Once the Offering has closed, SPiCE VC may withdraw the funds held in the Fiat Account and, at their sole discretion, shall determine a portion of the funds received in EUR to convert into USD. If SPiCE VC terminates this Offering after funds have been transferred by the Pre-Sale Subscribers or the Main Sale Subscribers but before the SPiCE Tokens have been issued, such funds shall be promptly returned by North Capital net of any outgoing wire fees charged by North Capital ’s banking institution, subject to the completion of all SPiCE Tokenholder Checks. Digital Wallet
Investors wishing to subscribe in BTC or ETH shall do so by transferring the sum to the Digital Wallet notified to them by SPiCE VC, together with the unique identifier. Tendered funds shall be held in the Digital Wallet until the Offering closes or terminates. Once the Offering has closed, SPiCE VC may withdraw the cryptocurrency funds held in the Digital Wallet and, at their sole discretion, shall determine a portion of the funds received in ETH or BTC to convert into USD. If SPiCE VC terminates the Offering, after funds have been transferred by the Pre-Sale Subscribers or the Main Sale Subscribers but before the SPiCE Tokens have been issued, such funds shall be promptly returned by Vo1t net of any transfer fees, subject to the completion of all SPiCE Tokenholder Checks. THE SPiCE TOKENHOLDER CHECKS
SPiCE VC will conduct the SPiCE Tokenholder Checks and will, where appropriate, use third party service providers to conduct some of the SPiCE Tokenholder Checks. SPiCE VC reserves the right to replace or appoint further third party service providers. Upon receipt of a Subscription Form from a Subscriber, SPiCE VC will request that the Subscriber provides specific information and documentation, determined by SPiCE VC in its absolute discretion, for the purpose of completing the SPiCE Tokenholder Checks. The Subscriber shall provide the information required to complete the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC, in its sole discretion, within five days of receipt of the request from SPiCE VC. If a Subscriber fails to provide the required information to complete the SPiCE Tokenholder Checks or does not meet the requirements of the SPiCE Tokenholder Checks in SPiCE VC’s absolute discretion, SPiCE VC shall notify the Subscriber and the Subscriber’s Subscription Form shall be deemed null and void and no rights to SPiCE Tokens will be created or granted to that prospective investor. Fiat currency If a Subscriber wishes to pay the Subscription Amount in USD or EUR, SPiCE VC will notify the Subscriber by e-mail of the details of the Fiat Account held with North Capital to which the Subscription Amount must be transferred following completion of the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC. Cryptocurrency If a Subscriber wishes to pay the Subscription Amount in ETH or BTC, SPiCE VC shall notify the Pre-Sale Subscriber by email of: (i) the details of the Digital Wallet held with Vo1t to which the Subscription Amount must be transferred; and (ii) a unique identifier, which must be submitted with the payment of the Subscription Amount. If a Subscriber fails to provide the information requested by SPiCE VC and/or any third party service provider or does not meet the SPiCE Tokenholder Checks undertaken by SPiCE VC and/or any third party service provider, SPiCE VC shall notify the Subscriber and the Subscriber’s Subscription Form shall be deemed null and void and the Subscriber shall have no further claim or right to the SPiCE Tokens. SPiCE VC’s OBLIGATIONS TO COMPLY WITH LAWS AND REGULATIONS RELATING TO THE US FOREIGN ACCOUNT TAX COMPLIANCE ACT AND THE OECD COMMON REPORTING STANDARD
Singapore laws and regulations, and the Singapore-US intergovernmental agreement and other agreements or treaties entered into by Singapore, implementing the Standard for Automatic Exchange of Financial Account Information in Tax Matters (for the wider approach) developed and published by the Organisation for Economic Co-operation and Development, commonly known as the Common Reporting Standard ( CRS) and the U.S. Foreign Account Tax Compliance Act ( FATCA) each require certain Singaporean financial entities (which may include SPiCE VC) to report certain information regarding certain financial accounts (which may include SPiCE Tokens) to the Inland Revenue Authority of Singapore ( IRAS) and to follow related due diligence procedures.
9
Accordingly Subscribers will be required to provide SPiCE VC with certain information and signed or positively affirmed certifications to ensure that SPiCE VC can comply with its due diligence and reporting obligations relating to CRS and/or FATCA, before any Subscriber will be issued with SPiCE Tokens. SPiCE Tokenholders may be requested by SPiCE VC to provide certain information and certifications to ensure that SPiCE VC can comply with its CRS and FATCA obligations. This information may be requested at any time by SPiCE VC from SPiCE Tokenholders and may be requested on an ongoing basis or on a transfer of SPiCE Tokens. The required information and certifications from a Subscriber or a SPiCE Tokenholder will depend on whether the Subscriber or a SPiCE Tokenholder is a natural person. If it is a natural person this may include (without limitation):
their name;
their address;
their jurisdiction(s) of tax residence;
their Taxpayer Identification Number (TIN) or equivalent number (if any);
their date of birth;
whether it is a US citizen; and
the date on which the SPiCE Tokenholder acquired or disposed of any SPiCE Token.
For Subscribers or SPiCE Tokenholders which are not natural persons, the Subscriber or SPiCE Tokenholder will, in addition to providing information and certifications about itself, also be required in certain cases, (for example, where it is regarded as a passive non-financial entity for FATCA or CRS purposes), to provide the above information and certifications in respect of some or all of the ir “controlling persons”, i.e. natural persons who exercise direct or indirect control over it (including, in the case of a trust, the settlor(s), trustee(s), protector(s) (if any), beneficiary(ies) or class(es) of beneficiaries, and any other natural person(s) exercising ultimate effective control over the trust, and in the case of a legal arrangement other than a trust, persons in equivalent or similar positions). The term “Controlling Persons” should also be interpreted in a manner consistent with the Financial Action Task Force Recommendations meaning that (amongst other things) a stake which is not sufficient to result in outright legal control (for example, a 25% interest) may be regarded as “controlling” for the purposes of FATCA and/or CRS reporting. This information may be provided by IRAS to the US Internal Revenue Service and to any other tax authority with which IRAS has in force a CRS Competent Authority Agreement or to which a multilateral competent authority agreement on the automatic exchange of financial account information applies. As detailed in the section “Risk Factors – Risks Relating to the SPiCE Tokens”, failure to validly provide information requested by SPiCE VC in its absolute discretion in order to comply with its obligations under CRS and FATCA may result in a SPiCE Token being determined as a Blocked SPiCE Token by SPiCE VC in its absolute discretion. If a SPiCE Tokenholder fails to satisfy the requirements of the SPiCE Tokenholder Checks in SPiCE VC’s absolute discretion, within 30 days of the SPiCE Tokens becoming Blocked SPiCE Tokens, SPiCE VC reserves the right, in its sole discretion, to undertake a Regulatory Redemption or to burn the relevant Blocked SPiCE Tokens. Prospective investors or, following completion of the Offering, SPiCE Tokenholders who have any questions in the event of a request for information from SPiCE VC or about how to determine their tax residency status should contact their tax adviser.
10
OVERVIEW OF THE OFFERING AND THE TERMS OF THE SPiCE TOKENS
The following is a summary of the principal features of the Offering and the SPiCE Tokens and is taken from, and is qualified in its entirety by, the remainder of this Information Memorandum. In particular, prospective investors should consider and carefully review the section of this Information Memorandum entitled “Risk Factors” for a discussion of the risks of an investment in the SPiCE Tokens.
SPiCE Token
An Ethereum-based smart contract digital token issued by SPiCE VC.
Issuer
SPiCE VC, a newly-incorporated Singaporean private limited company.
Underlying Assets
SPiCE VC has no underlying assets at the time of the Offering. SPiCE VC will invest the proceeds of the Offering directly or indirectly, through its subsidiary entities, including SPiCE Investments LP, in start-ups in accordance with its investment thesis, as described in more detail in this Information Memorandum. It is intended that SPiCE Investments LP will be formed after the date of this Information Memorandum and will be the investment vehicle for investing in Israeli based companies. SPiCE Investments LP may also be an investment vehicle to invest in non-Israeli based companies.
Target Amount Offered
130,000,000 SPiCE Tokens.
Target Fund Size
USD 100,000,000.
Founder and Partner SPiCE Tokens
Of the Total SPiCE Issued Tokens: 7.5 per cent. shall be issued to the Founders; and
7.5 per cent. shall be held in reserve to pay to SPiCE VC’s partners, advisers and service providers.
Offering Price
USD 1 (inclusive, in the case of Singapore, of any GST) per SPiCE Token, other than SPiCE Tokens issued as a result of the Multiplier pursuant to the terms of the Pre-Sale.
Currencies accepted for the Offering
USD, EUR, ETH and BTC.
Minimum subscription amount during the Pre-Sale
U.S. Persons must subscribe for a minimum amount of USD 200,000 (or an equivalent amount in EUR, ETH and BTC). Non-U.S. Persons must subscribe for a minimum amount of USD 50,000 (or an equivalent amount in EUR, ETH and BTC).
Minimum subscription amount during the Main Sale
U.S. Persons must subscribe for a minimum amount of USD 50,000 (or equivalent amount in EUR, ETH or BTC). Non-U.S. Persons subscribing for SPiCE Tokens in EUR or USD must subscribe for a minimum amount of USD 50,000. There is no minimum subscription amount for Non-U.S. Persons subscribing for SPiCE Tokens in ETH or BTC in the Main Sale.
Expected closing date of the Offering
3 March 2018.
Smart Contract
The SPiCE Tokens will be issued by SPiCE VC electronically on the ERC20 smart contract standard consisting of software code, existing on the Ethereum blockchain (the Smart Contract). The software code of the Smart Contract is open source and will be published on the SPiCE VC website in due course.
Realisation Buybacks
If there is a realisation event (a Realisation) in the portfolio of investments held directly or indirectly by SPiCE VC, following determination of SPiCE VC of the amount of net proceeds realised (if any) after deducting fees and expenses and on notification of such aggregate amount in USD has been made to SPiCE Tokenholders, there will be a mandatory buyback of a portion of the issued SPiCE Tokens from all SPiCE Tokenholders at a price to be determined by SPiCE VC (a Realisation Buyback ). The formula used for determining the price per SPiCE Token on a Realisation Buyback (the Repurchase Price) is as follows: for all Realisation Buybacks (other than the Final Realisation Buyback), the Repurchase Price shall be the higher of (i) the market price of the SPiCE Token
11
(determined to be the average price at 8:00 a.m. (London time) on the day before the Realisation Buyback Notice is published over the three largest cryptocurrency exchanges trading the SPiCE Token by volume); and (ii) the Net Asset Value per SPiCE Token; and for the Final Realisation Buyback, the Repurchase Price shall be the net asset value (the NAV) per SPiCE Token.
The number of issued SPiCE Tokens to be repurchased in a Realisation Buyback by SPiCE VC following a Realisation shall be determined using the following formula:
Where: Net Realisation Proceeds are the proceeds from the Realisation less any applicable fees and expenses;
Repurchase Price is the price per SPiCE Token as calculated using the Repurchase Price formulae above; and
Issued SPiCE Tokens is the total number of SPiCE Tokens held by SPiCE Tokenholders.
In advance of a Realisation Buyback, once the proceeds of the Realisation have been transferred to SPiCE VC and all fees and expenses have been deducted, SPiCE VC shall publish a notice on the SPiCE Token Platform to inform SPiCE Tokenholders of the Realisation Buyback (the Realisation Buyback Notice ). The Realisation Buyback Notice shall state the date and time the Realisation Buyback will take effect and the total proceeds from the Realisation in USD (the Realisation Amount) to be used to buy back SPiCE Tokens from SPiCE Tokenholders pro rata to the SPiCE Tokenholders’ holdings and the information to be provided to SPiCE VC by a SPiCE Tokenholder in order to participate in the Realisation Buyback. The proceeds of the Realisation shall be paid in ETH, converted from USD at the prevailing exchange rate available to SPiCE VC at the time of the Realisation Buyback. SPiCE VC reserves the right to change the currency in which a Realisation Buyback shall be paid. Prior to a Realisation Buyback, all SPiCE Tokenholders must meet the requirements of the SPiCE Tokenholder Checks, including verifying the identity of any digital wallets to which the proceeds of the Realisation Buyback will be sent, either by sending a unique identifier from the digital wallet to SPiCE VC or by any other processes specified by SPiCE VC, to the satisfaction of SPiCE VC in its absolute discretion. If, at the time of a Realisation Buyback, there are any Blocked SPiCE Tokens, the holders of the Blocked SPiCE Tokens will not be able to receive their pro rata share of the Realisation Amount in respect of the Blocked SPiCE Tokens on the date of the Realisation Buyback, as set out in the Realisation Buyback Notice. If the SPiCE Tokenholder complies with the terms and conditions of the SPiCE Tokens and meets the requirements of the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC in its absolute discretion within 30 days of the Realisation Buyback, so that that SPiCE Tokenholder’s SPiCE Tokens are no longer Blocked SPiCE Tokens, that SPiCE Tokenholder shall be able to receive its pro rata proportion of the Realisation Amount in respect of the Blocked SPiCE Tokens from SPiCE VC. If, 30 days after the Realisation Buyback, a SPiCE Tokenholder’s SPiCE Tokens are still Blocked SPiCE Tokens, that SPiCE Tokenholder shall forfeit its right to its pro rata proportion of the Realisation Amount in respect of its Blocked SPiCE Tokens and shall waive all rights to such amount. That SPiCE Tokenholder’s pro rata share of the Realisation Amount in respect of its Blocked SPiCE Tokens shall be returned to SPiCE VC to be dealt with as follows: (a)
if the Realisation Buyback occurred prior to the fourth anniversary of the closing of the Offering, to be used for investment purposes; or
12
(b)
if the Realisation Buyback occurred on or after the fourth anniversary of the closing of the Offering, to be returned to the SPiCE Tokenholders as part of the next Realisation Buyback.
SPiCE VC does not expect to receive any dividends from start-ups, but if there are any, they shall be treated as a Realisation. On a Realisation Buyback, SPiCE VC shall be able to repurchase fractions of SPiCE Tokens. All SPiCE Tokens or fractions of SPiCE Tokens repurchased through a Realisation Buyback by SPiCE VC will immediately be burned. Liquidity Buybacks
If the market price of a SPiCE Token (determined to be the average price at 8:00 p.m. (London time) over the three largest cryptocurrency exchanges trading the SPiCE Token by volume) on any particular day drops below 70 per cent. of the NAV per SPiCE Token based on SPiCE VC’s most recent NAV Report, SPiCE VC may, in its sole discretion, purchase SPiCE Tokens on the open market in exchange for ETH (or such other currency ass SPiCE VC may choose in its sole discretion) (a Liquidity Buyback ). SPiCE VC shall decide, in its sole discretion, whether to burn or resell the redeemed SPiCE Tokens pursuant to a Liquidity Buyback, subject to applicable laws and regulation. Any such sale will not be a Realisation. Prior to a Liquidity Buyback, a SPiCE Tokenholder must meet the requirements of the SPiCE Tokenholder Checks, including verifying the identity of any digital wallet to which the proceeds of the Liquidity Buyback will be sent, either by sending a unique identifier from the digital wallet to SPiCE VC or by any other processes specified by SPiCE VC, to the satisfaction of SPiCE VC in its absolute discretion.
Distribution Policy
The SPiCE Tokens have no distribution or dividend rights, as described further in the sections of this Information Memorandum entitled “Description of the SPiCE Tokens – Distribution Policy” and “Risk Factors — SPiCE Tokenholders will have no distribution or liquidation rights”. Any return of capital to SPiCE Tokenholders will occur through Realisation Buybacks of the SPiCE Tokens as described above.
Voting Rights
The SPiCE Tokens have no voting rights, as described further in the section of this Information Memorandum entitled “Description of the SPiCE Tokens Voting”.
Regulatory Redemption
SPiCE VC may at any time redeem all or some of the SPiCE Tokens of a SPiCE Tokenholder, in SPiCE VC’s absolute discretion, at a redemption price in ETH calculated as the lower of (i) 100 per cent. of the market price per SPiCE Token (determined to be the average price at 8:00 a.m. (London time) over the three largest cryptocurrency exchanges trading the SPiCE Token by volume on the day prior to redemption), (ii) the then NAV per SPiCE Token, or (iii) the funds available from liquidation of the assets of SPiCE VC and SPiCE Investments LP within the following three month period, in each case, upon receipt of information that the status of the relevant SPiCE Tokenholder may cause regulatory concern for SPiCE VC, as described in this Information Memorandum under “Description of the SPiCE Tokens — Regulatory Redemption” (a Regulatory Redemption). SPiCE VC shall decide, in its sole discretion, whether to burn or resell the redeemed SPiCE Tokens pursuant to a Regulatory Redemption, subject to applicable laws and regulation. Any such sale will not be a Realisation. The purpose of this regulatory redemption provision is (i) to maintain the number of U.S. Persons holding SPiCE Tokens at 99 persons or fewer, (ii) to enforce against any non-compliance with the terms of the SPiCE Tokens, including non-compliance with any of the SPiCE Tokenholder Checks; and (iii) to ensure compliance with any other legal, regulatory or compliance requirements. Prior to a Regulatory Redemption, a SPiCE Tokenholder, where applicable, must meet the requirements of the SPiCE Tokenholder Checks, including verifying the identity of any digital wallet to which the proceeds of the Regulatory Redemption will be sent, either by sending a unique identifier from the digital wallet to SPiCE VC or by any other processes specified by SPiCE VC, to the satisfaction of SPiCE VC in its absolute discretion.
13
Term of SPiCE VC
SPiCE VC has a fixed termination date of seven years from the date of the closing of the Offering, which can be extended by a further two years, if determined by SPiCE VC, SPiCE Manager, SPiCE GP and SPiCE Investments LP (if formed) to be in the best interests of the SPiCE Tokenholders (the Term). At the end of the Term, the Term Liquidation will occur with SPiCE Manager appointed as the liquidator.
Liquidation Rights
Subject to applicable law, SPiCE Tokenholders will not have any liquidation rights in the event of the bankruptcy or liquidation of SPiCE VC, other than on a liquidation at the end of the Term (the Term Liquidation) of SPiCE VC. SPiCE VC is under no obligation to redeem the SPiCE Tokens at any time.
Listing
SPiCE VC intends to list the SPiCE Tokens on multiple cryptocurrency exchanges that accept security tokens. There are currently no plans to apply for the inclusion of the SPiCE Tokens in any securities exchange or automated quotation system.
Reporting
SPiCE VC will publish on the SPiCE VC website a quarterly NAV estimation on 31 March, 30 June, 30 September and 31 December of each calendar year in respect of its portfolio (the NAV Report). The Founders and employees of SPiCE VC, SPiCE Manager, SPiCE GP or SPiCE Investments LP may not offer, sell, pledge or otherwise transfer their SPiCE Tokens in the period which is two weeks before the publication of each NAV Report.
Transfer
On a transfer of a SPiCE Token from a SPiCE Tokenholder to a transferee (the SPiCE Token Transferee ), the SPiCE Token Transferee will be required to provide to SPiCE VC the information requested by SPiCE VC in its absolute discretion in order for SPiCE VC to comply with its reporting obligations under FATCA. Failure by a SPiCE Token Transferee to validly provide on the transfer the information required by SPiCE VC in its absolute discretion in order for SPiCE VC to comply with its reporting obligations under FATCA may result in the SPiCE Token Transferee’s SPiCE Tokens being designated Blocked SPiCE Tokens by SPiCE VC, in its absolute discretion. The SPiCE Token Transferee shall also provide the information requested to complete the SPiCE Tokenholder Checks (other than the information provided in respect of FATCA, which is to be provided on transfer) to the satisfaction of SPiCE VC, in its sole discretion, within 30 days of the transfer. Failure by a SPiCE Token Transferee to validly provide, within the timeframe, the information required to complete the SPiCE Tokenholder Checks may result in the SPiCE Token Transferee’s SPiCE Tokens being designated Blocked SPiCE Tokens by SPiCE VC, in its absolute discretion.
No Registration Rights and Transfer Restrictions
The SPiCE Tokens have not been and will not be registered by any U.S. or nonU.S. federal, state, provincial or territorial securities authority. The SPiCE Tokens may not be resold or otherwise transferred by (i) U.S. Persons until after the first anniversary of the issuance of the SPiCE Tokens and then not to any U.S. Person unless they sell all of their SPiCE Tokens to a single beneficial owner that is a U.S. Person; (ii) Non-U.S. Persons, except to other Non-U.S. Persons in offshore transactions in compliance with Rule 903 or Rule 904 under the Securities Act; (iii) to SPiCE VC or any subsidiary thereof, and, in each case, unless permitted under applicable laws and regulations or pursuant to registration or exemption therefrom and in accordance with the terms of the SPiCE Tokens; or (iv) to the Reserve, as permitted under applicable laws and regulations or pursuant to registration or exemption therefrom. These transfer restrictions may adversely impact a SPiCE Tokenholder’s ability to resell the SPiCE Tokens and the price at which a SPiCE Tokenholder may be able to resell the SPiCE Tokens, if at all. See the sub-section e ntitled “Overview of the Offering and the terms of the SPiCE Tokens - Limit on U.S. Accredited Investors” below and “Important Notice” and “Risk Factors” elsewhere in this Information Memorandum.
Limit on U.S. Accredited Investors
The SPiCE Tokens will only be available to purchase by up to a maximum of 99 verified beneficial owners that are “accredited investors” (as defined in Regulation D under the Securities Act) that are U.S. Persons. In the event of any redemption, a maximum of 99 beneficial owners that are U.S. Persons will be redeemed. In any such redemption, U.S. Persons who purchased SPiCE Tokens
14
in the Offering may, in SPiCE VC’s discretion, receive priority in being redeemed. The selected 99 beneficial owners that are U.S. Persons will be notified that they have been selected on or before the date 15 calendar days before redemption. U.S. PERSONS NOT SO NOTIFIED WILL NOT RECEIVE ANY FUNDS ON REDEMPTION. Any U.S. Person offered SPiCE Tokens by a Non-U.S. Person following this Offering is warned such transfer is not permitted pursuant to the transfer and resale restrictions applicable to the SPiCE Tokens and that any such transfer or sale may result in the loss of the full value of their investment, including that they may be unable to redeem such SPiCE Tokens. U.S. Persons permitted to purchase SPiCE Tokens must continue to hold their SPiCE Tokens until the first anniversary of the issuance of the SPiCE Tokens and will be required to give undertakings that they will not sell to any U.S. Person unless they sell all of their SPiCE Tokens to a single U.S. Person. Expenses
Expenses relating to this Offering, including advisory, legal, accounting and fund set-up costs, will be paid by SPiCE VC using the proceeds of the Offering. Ongoing accounting, legal and tax expenses will be charged to SPiCE VC.
Management Fees
SPiCE Manager and SPiCE GP will in aggregate be paid by SPiCE VC and SPiCE Investments LP respectively an amount equal to, on average over the seven years of the fund, 2.5 per cent. of the total proceeds of the Offering per annum. SPiCE Manager’s and SPiCE GP’s fees will be paid quarterly in advance.
Carry
Once the Realisation Buybacks have in aggregate returned to SPiCE Tokenholders the amount raised in the Offering, SPiCE VC shall distribute 85 per cent. of all further Realisations to the SPiCE Tokenholders in accordance with the Realisation Buyback process and shall distribute the remaining 15 per cent. to SPiCE Manager and SPiCE GP.
Ongoing SPiCE Tokenholder Checks
SPiCE Tokenholders will have an ongoing obligation to comply with any SPiCE Tokenholder Checks as and when requested by SPiCE VC at any given time, in its absolute discretion. Failure to meet any SPiCE Tokenholder Checks may result in those SPiCE Tokens being designated as Blocked SPiCE Tokens by SPiCE VC, in its absolute discretion. SPiCE VC reserves the right to undertake a Regulatory Redemption in respect of any Blocked SPiCE Tokens or to burn the relevant Blocked SPiCE Tokens, such decision to be made by SPiCE in its absolute discretion.
Additional SPiCE Tokens
Following the closing of the Main Sale, SPiCE VC reserves the right, in its absolute discretion, to issue Additional SPiCE Tokens until the earlier of: (a) 12 months from the day after the closing of the Offering; and (b) the aggregate of (i) the USD Subscription Amounts received by SPiCE VC during the Offering and (ii) the total subscription amounts received in respect of the Additional SPiCE Tokens is equal to USD 100,000,000. The subscription price for the Additional SPiCE Tokens shall be determined by SPiCE VC in its sole discretion, but shall be no less than the Offering Price.
15
RISK FACTORS
Any investment in SPiCE Tokens is subject to a high degree of risk. There can be no assurance that SPiCE Tokenholders will be able to receive a return of their capital or any returns on their investment. Prior to investing in SPiCE Tokens, prospective investors should carefully consider the risks associated with SPiCE VC, the SPiCE Tokens and cryptocurrency exchanges, together with the other information contained in this Information Memorandum. The risk factors described below are not an exhaustive list or explanation of all the risks which investors may face when making an investment in SPiCE Tokens and should be used as guidance only. Additional risks and uncertainties relating to SPiCE VC and the SPiCE Tokens that are not currently known to SPiCE VC, or that SPiCE VC currently deems immaterial, may individually or cumulatively also h ave a material adverse effect on SPiCE VC’s business, operations, results, financial condition or prospects and, if any such risk should occur, SPiCE Tokenholders could lose all or part of their investment. Prospective investors should consider carefully whether an investment in SPiCE Tokens is suitable for them in the light of the information in this Information Memorandum and their personal circumstances. Risks relating to the SPiCE Tokens
There can be no assurance of investment return. SPiCE VC can provide no assurance that it will be able to choose, make and realise investments in any particular company or portfolio of companies. There is no assurance that SPiCE VC will be able to generate returns on its investments or that any returns will be commensurate with the risks of investing in the type of companies and transactions described herein. Furthermore, there is no assurance that if SPiCE VC does achieve returns on its investments, such returns will either be reflected in the trading price of the SPiCE Tokens or that SPiCE Tokenholders will realise any of such returns. There can be no assurance that expected returns for the SPiCE Tokenholders will be achieved, or that they will receive a return of their invested capital. The timing of any Realisation, if any, is highly uncertain. SPiCE VC’s and SPiCE Investments LP’s operating costs, including the management fees payable to SPiCE Manager and SPiCE GP, may exceed SPiCE VC’s and SPiCE Investments LP’s income, thereby requiring the difference to be paid out of SPiCE VC’s and/or SPiCE Investments LP’s capital. In particular during the early years of investment, the expenses of SPiCE VC and SPiCE Investments LP will likely exceed their income. Such expenses will therefore reduce SPiCE VC’s and SPiCE Investments LP’s capital, resulting in losses that may never be recovered. An investment in SPiCE Tokens should only be considered by persons who can afford a loss of their entire investment. SPiCE VC’s intended investments, by their nature, involve a high degree of financial risk. Such investments may expose SPiCE VC’s assets to the risks of material financial loss, which may in turn adversely affect the trading price of the SPiCE Tokens and the availability of funds for repurchases or redemptions of the SPiCE Tokens.
The SPiC E Tokens are subject to signi ficant transfer restrictions. The SPiCE Tokens have not been registered under the Securities Act, the securities laws of any state of the United States or the securities laws of any other jurisdiction and therefore cannot be resold, except as described in the section of this Information Memorandum entitled “Description of the SPiCE Tokens — Transfer Restrictions”. U.S. Persons permitted to purchase SPiCE Tokens must continue to hold their SPiCE Tokens until the first anniversary of the issuance of the SPiCE Tokens and will be required to give undertakings that they will not sell to any U.S. Person unless they sell all of their SPiCE Tokens to a single U.S. Person. Non-U.S. Persons holding SPiCE Tokens will only be permitted to resell or transfer such tokens to other Non-U.S. Persons. Both U.S. Persons and non-U.S. Persons holding SPiCE Tokens will be able to transfer their SPiCE Tokens to the Reserve, subject to any restriction on transferability due to the SPiCE Tokens being Blocked SPiCE Tokens or subject to the Pre-Sale Lock-Up. These restrictions may adversely impact certain SPiCE Tokenholders’ ability to resell the SPiCE Tokens or the price at which certain other SPiCE Tokenholders may be able to resell them, if at all. The SPiCE Tokens are not redeemable at the option of the SPiCE Tokenholder and SPiCE Tokenholders will not have the right to withdraw their capital. It is not contemplated that the SPiCE Tokens will ever be registered. No public market for the SPiCE Tokens may develop. Each Subscriber for SPiCE Tokens will be required to represent that it is a qualified investor under applicable securities laws and that it is acquiring the SPiCE Tokens for investment purposes and not with a view to resale or distribution. Further, each SPiCE Tokenholder must represent that it will only sell or transfer its SPiCE Tokens in accordance with the restrictions set out in the section of this Information Memorandum entitled “Description of the SPiCE Tokens — Transfer Restrictions” and in a manner permitted by applicable laws and regulations. Consequently, SPiCE Tokenholders must be prepared to bear the risk of an investment in the SPiCE Tokens for an extended period of time.
SPi CE VC may be required to redeem SPi CE Tokens held by a U.S. Person. At any given time, a maximum of 99 verified beneficial owners that are “accredited investors” (as defined in Regulation D under the Securities Act) that are U.S. Persons can be SPiCE Tokenholders. If more than 99 U.S. Persons hold SPiCE Tokens at any given time, SPiCE VC may, at its sole discretion, redeem all or some of the SPiCE Tokens. The price at which the SPiCE Tokens are redeemed at may be lower than the Subscription Amount paid by such SPiCE Tokenholder or the price paid to acquire the SPiCE Tokens on the secondary market.
16
There is no existing trading market for the SP iCE Tokens and an active trading market may not develop. The SPiCE Tokens are a new issue of digital tokens for which there is no established public market. Although SPiCE VC intends to list the SPiCE Tokens on several cryptocurrency exchanges, there can be no assurance that such exchanges will accept the listing of SPiCE Tokens or maintain the listing if it is accepted. There can be no assurance that a secondary market will develop or, if a secondary market does develop, that it will provide SPiCE Tokenholders with liquidity of investment or that it will continue for the life of the SPiCE Tokens. The liquidity of any market for SPiCE Tokens will depend on a number of factors, including:
the number of SPiCE Tokenholders;
SPiCE VC’s performance and financial condition;
the market for similar digital tokens;
the interest of traders in making a market in the SPiCE Tokens; and
regulatory developments in the digital token or cryptocurrency industries.
The digital token market is a new and rapidly developing market which may be subject to substantial and unpredictable disruptions that cause significant volatility in the prices of digital tokens. There are no assurances that the market, if any, for SPiCE Tokens will be free from such disruptions or that any such disruptions may not adversely affect SPiCE Tokenholders’ ability to sell their SPiCE Tokens. Therefore, no assurances are given that SPiCE Tokenholders will be able to sell their SPiCE Tokens at a particular time or that the price they receive when they sell will be favourable.
SPi CE Tokenholders will have no voting ri ghts and may have conflicts of interest with SPiCE VC’s shareholders. The SPiCE Tokens have no voting rights or other management or control rights in SPiCE VC or in or any of SPiCE VC’s subsidiaries or group companies, including SPiCE Investments LP. As the sole shareholders in SPiCE VC, the Founders will control decisions with respect to SPiCE VC that require shareholder or limited partner approval, including the election of directors and significant corporate transactions, such as a merger or other sale of SPiCE VC or its assets, or the election to liquidate or terminate the fund. SPiCE GP, once incorporated, will control decisions for SPiCE Investments LP, once formed, that in other situations would require shareholder or limited partner approval.
SPi CE Tokenholders will have no distribution rights. The SPiCE Tokens will have no distribution or dividend rights. The only right of capital return that the SPiCE Tokens have is a Realisation Buyback which shall occur upon a Realisation, subject to the terms and conditions of the SPiCE Tokens. Such Realisation Buyback may not return 100 per cent. of the initial investment made in the SPiCE Tokens. Upon a bankruptcy or other dissolution of SP iCE VC, SPiCE Tokenholders will not be entitled to liquidation rights. Furthermore, SPiCE VC is under no obligation to redeem the SPiCE Tokens at any time.
SPi CE Tokenholders will have no ri ght to compel a repurchase or redemption of the SPi CE Tokens. SPiCE Tokenholders do not have the right to compel SPiCE VC to redeem the SPiCE Tokens. SPiCE VC may, however, purchase outstanding SPiCE Tokens from time to time. SPiCE Manager may allocate funds to SPiCE VC for open-market purchases or privately negotiated transactions in the SPiCE Tokens from time to time when deemed to be in the best interest of SPiCE VC. SPiCE VC will have no funds apart from those allocated by SPiCE Manager available for the repurchase or redemption of the SPiCE Tokens. SPiCE Manager may or may not decide to allocate any funds to SPiCE VC for the repurchase or redemption of the SPiCE Tokens.
F ailure by a SPiCE Tokenholder to comply with all SPiCE Tokenholder C hecks may result in their SPiCE Tokens being desig nated as Blocked SPiCE Tokens. SPiCE Tokenholders will be required to comply on an ongoing basis with SPiCE Tokenholder Checks. Failure by a SPiCE Tokenholder to validly provide information requested by SPiCE VC in its absolute discretion in order to comply with the SPiCE Tokenholder Checks may result in the SPiCE Tokenholder’s SPiCE Tokens being designated as Blocked SPiCE Tokens by SPiCE VC in its absolute discretion . In the event that a SPiCE Tokenholder’s SP iCE Tokens are designated Blocked SPiCE Tokens, the SPiCE Tokenholder will not be able to transfer its SPiCE Tokens or participate in a Realisation Buyback of its SPiCE Tokens. The Blocked SPiCE Tokens will remain inactive unless and until the requested information is provided by the SP iCE Tokenholder in order to comply with the SPiCE Tokenholder Checks within 30 days of the SPiCE Tokens being designated Blocked SPiCE Tokens by SPiCE VC. If a SPiCE Tokenholder fails to satisfy the requirements of any SPiCE Tokenholder Checks to the satisfaction of SPiCE VC in its absolute discretion, within 30 days of the SPiCE Tokens being designated Blocked SPiCE Tokens, SPiCE VC reserves the right, in its absolute discretion, to redeem, pursuant to a Regulatory Redemption, or to burn the Blocked SPiCE Tokens.
F ailure by a Tranche SPiCE Tokenholder to pay the Second I nstalment and Third I nstalment may adversely impact SPiCE VC’s and SPiCE Investment LP’s returns.
A Tranche SPiCE Tokenholder may not pay the Second Instalment or the Third Instalment and other SPiCE Tokenholders will not have any right to draw on the contractual commitment between SPiCE VC and Tranche SPiCE Tokenholder. This will result in a smaller pool of liquidity for the SPiCE Tokenholders. The value of SPi CE VC’s funds to invest will also be
17
reduced and this may impact on SPiCE VC’s ability to compete with other venture capital firms and funds. If the fund size is smaller than SPiCE VC expected as a result of SPiCE VC not receiving the Second Instalment or the Third Instalment, SPICE VC’s and/or SPiCE Investment LP’s investment return might be affected to a greater degree by errors in investment decisions than the investment returns of other entities with larger funds. A smaller fund size also means that S PiCE VC may have reduced diversification in its investments, which may have a significant impact on the aggregate return of SPiCE VC and SPiCE Investments LP.
SPi CE VC does not owe SPi CE Tokenholders any fiduciary duties. Direct investors in investment funds are generally owed an obligation by the fund and its managers of good faith, fairness in all dealings and other fiduciary duties. However, to the extent permitted by law, SPiCE Tokenholders will not be entitled to any such protections from SPiCE VC. Accordingly, SPiCE Tokenholders will have very limited, if any, rights of recovery against SPiCE VC if such parties engage in gross negligence or act against the interests of the SPiCE Tokenholders. Furthermore, SPiCE VC has no obligation to the SPiCE Tokenholders to enforce any rights that it may be deemed to have against SPiCE Manager, SPiCE GP or SPiCE Investments LP. Risks relating to the token regulatory environment
Regulation of tokens and token offerings is undeveloped and is li kely to evolve rapidly, with potentially adverse consequences. In addition, developments in regulation may alter the nature of SPiCE VC’s business or restrict the use o f blockchain assets or the operation of a blockchain network upon which SPi CE VC will rely. Regulation of tokens (including the SPiCE Tokens) and token offerings such as the Offering, cryptocurrencies (including Ethereum), blockchain technologies, and cryptocurrency exchanges is currently undeveloped and likely to evolve rapidly, vary significantly among international, federal, state and local jurisdictions and is subject to significant uncertainty. Some of the companies in which SPiCE VC invests may operate in highly regulated industries. SPiCE VC believes that various legislative and executive bodies in the United States and in other countries are currently considering, or may in the future consider, laws, regulations, guidance, or other actions, which may severely impact SPiCE VC’s ability to invest, or SPiCE VC’s portfolio companies’ ability to gain market share. Failure by SPiCE VC, SPiCE Manager, SPiCE GP, SPiCE Investments LP or any of SPiCE VC’s portfolio companies to comply with any laws, rules and regulations, some of which may not exist yet or are subject to interpretation and may be subject to change, could result in a variety of adverse consequences, including civil penalties and fines. As blockchain networks and blockchain assets have grown in popularity and in market size, governments and regulatory agencies have begun to take interest in, and in some cases regulate, their use and operation. The regulation of non-currency use of blockchain assets is of particular relevance to SPiCE VC’s business. To the extent that a government or quasigovernmental agency exerts regulatory authority over a blockchain network or asset upon which SPiCE VC’s business relies, SPiCE VC’s business and a SPiCE Tokenholder’s investment in the SPiCE Tokens may be adversely affected. Blockchain networks currently face an uncertain regulatory landscape in many jurisdictions which may, in the near future, adopt laws, regulations or directives that affect the Ethereum network and its users, particularly Ethereum exchanges and service providers that fall within such jurisdictions’ regulatory scope. For example, on 4 September 2017, the Peop le’s Bank of China announced that initial coin offerings are illegal in the People’s Republic of China and that all fundraising activity involving digital token sales should be halted with immediate effect and, on 29 September 2017, the Financial Services Commission in the Republic of Korea prohibited initial coin offerings ( ICOs) in the Republic of Korea. In addition, digital token financing and trading platforms are prohibited from undertaking conversions of coins with fiat currencies in China, meaning that digital tokens cannot be used as currency in the market. Cryptocurrencies themselves were not expressly referenced in the announcement. Other jurisdictions, such as the United States, Singapore, the United Kingdom and Hong Kong, have indicated that the sale or offering of digital tokens could be considered to be securities offerings falling within existing securities laws and regulations. The effect of any future legal or regulatory change is impossible to predict, but such laws, regulations or directives may directly and negatively impact SPiCE VC’s business. New or changing laws and regulations or interpretations of existing laws and regulations may adversely impact SPiCE VC’s ability to earn returns on investments, the value of the currency in which SPiCE VC may redeem SPiCE Tokens or otherwise make distributions on SPiCE Tokens, the liquidity and market price of SPiCE Tokens, any SPiCE Tokenholder’s ability to access marketplaces on which to trade SPiCE Tokens, SPiCE VC’s ability to operate as an ongoi ng concern and the structure, rights and transferability of SPiCE Tokens. In extreme circumstances, SPiCE VC may be required to refund money raised through the Offering or other initial coin offerings conducted in the future, which would potentially require SPiCE VC to dispose of investments in a short space of time and at a considerable undervalue, including to the amount originally invested. Therefore, there can be no assurance that any new or continuing regulatory scrutiny or initiatives will not have an adverse impact on the value of the SPiCE Tokens and otherwise impede SPiCE VC’s activities.
The tax characterisation of SPiCE Tokens is uncertain and may result in adverse tax consequences for investors. The tax characterisation of SPiCE Tokens is uncertain and potential investors must seek their own tax advice in connection with an investment in SPiCE Tokens. An investment in SPiCE Tokens may result in adverse tax consequences to investors, including withholding taxes, income, corporation or profit taxes, value-added taxes or goods and services taxes, stamp duties or other forms of transactional taxes, and tax reporting requirements. In addition, it is possible that the income of SPiCE VC would be subject to significant amounts of income and/or withholding taxes (whether in Singapore or in other jurisdictions).
18
Each potential investor should consult with and must rely upon the advice of its own professional tax advisers with respect to the U.S. and non-U.S. tax treatment of an investment in SPiCE Tokens.
SPi CE VC intends to invest in companies in multiple juri sdictions, which exposes it to ri sks inherent in investments in foreign securi ties. SPiCE VC will initially invest directly or indirectly through subsidiary entities of SPiCE VC, including SPiCE Investments LP, in companies based in Europe and Israel and, as a limited partner in SPiCE Investments LP, in companies based in Israel and may also invest, in the future, in companies outside of Europe. Foreign securities involve certain factors not typically associated with investing in U.S. securities, including risks relating to (i) currency fluctuations and associated conversion costs; (ii) differences between the U.S. and foreign securities markets, including volatility in and relative illiquidity of some foreign securities markets, the absence of uniform accounting, auditing and financial reporting standards, practices and disclosure requirements and less government supervision; (iii) certain economic and political risks, including potential restrictions on foreign investment and repatriation of capital and the possibility of expropriation or confiscatory taxation; and (iv) the imposition of foreign withholding or other taxes with respect to such investment. Prospective investors should also note the considerations discussed in the section of this Information Memorandum entitled “Additional Information — Certain Singapore Tax Considerations”.
None of SPiCE VC , SP iCE Manager, SP iCE GP or SPi CE I nvestments LP will be registered for the purposes of U.S. securi ties or any other applicable laws or regulations. None of SPiCE VC, SPiCE Manager, SPiCE GP, SPiCE Investments LP or any of their respective affiliates, or the Offering, is currently or will be registered under the U.S. Investment Advisers Act of 1940, as amended (the Advisers Act), the Investment Company Act, the Securities Act, the Securities and Exchange Act of 1934, as amended (the Exchange Act), as a broker-dealer under U.S. securities laws, or under any other applicable international, federal or state securities, commodity, derivative or other applicable legal or regulatory regime, other than the SPiCE Manager may register with the SEC as a Registered Investment Adviser. Due to its potential engagement in asset management activities, it is expected that SPiCE Manager will undertake "securities investment business" as defined in the Securities Investment Business Law (2015 Revision) of the Cayman Islands ( SIBL). Prior to carrying on securities investment business, SPiCE Manager will register with the Cayman Islands Monetary Authority as an 'Excluded Person' and will therefore be exempt from the requirement to obtain a securities investment business licence under SIBL. Persons, instruments or offerings registered under the Advisers Act, the Investment Company Act, the Securities Act, the Exchange Act, as a U.S. broker-dealer and under other legal or regulatory regimes, as applicable, may be required to comply with a variety of disclosure, reporting, compliance and operating-related obligations intended to protect investors. So long as SPiCE VC, SPiCE Manager, SPiCE GP, SPiCE Investments LP and their respective affiliates are not and will not be subject to such requirements, or if such entities fail to adequately comply with such requirements if applicable, an investor will not have the benefit of such investor protections and will not receive disclosure commensurate with that provided by registered entities. If the SEC, U.S. Commodity Futures Trading Commission (the CFTC) or any other body were to require the registration of the Offering, the SPiCE Tokens or SPiCE VC, SPiCE Manager, SPiCE GP or SPiCE Investments LP, or any of their respective affiliates, under the Advisers Act, the Investment Company Act, the Securities Act, the Exchange Act or any other legal or regulatory scheme, as applicable, there can be no assurance that such persons would be able to comply with the requirements of such registration in a timely manner or at all. There can be no assurance that SPiCE VC, SPiCE Manager, SPiCE GP, SPiCE Investments LP or any of them may not become subject to the Investment Company Act, the Advisers Act, the Exchange Act, U.S. broker-dealer rules or other burdensome regulations either as a result of new or evolving laws and regulations and interpretations or existing laws, regulations and interpretations. Compliance with the disclosure, reporting, compliance and operating-related obligations of a registered entity or offering may be expensive and timeconsuming, which may distract management from its investment and operating objectives, increase overhead expenses and decrease funds available for investments and the repurchase or redemption of the SPiCE Tokens. Such compliance may require SPiCE VC to change the management and governance provisions outlined in this Information Memorandum or the rights of SPiCE Tokenholders. Any requirement for SPiCE VC, SPiCE Manager, SPiCE GP or SPiCE Investments LP, or any of their respective affiliates, to register under the Advisers Act, the Investment Company Act, the Securities Act, the Exchange Act, as a broker-dealer under U.S. securities laws, or under any other applicable federal or state securities, commodity, derivative or other applicable legal or regulatory regime, or any penalty for failure to do so, or any determination that this Offering was not conducted in accordance with applicable laws and regulations, could subject such persons to civil or criminal penalties and fines, which could adversely impact the ability of SPiCE VC, SPiCE Manager, SPiCE GP or SPiCE Investments LP to take the actions outlined in this Information Memorandum and conduct their business as described in this Information Memorandum, or at all. Furthermore, such a requirement, penalty or determination could adversely impact the rights, value and transferability of the SPiCE Tokens and impair a SPiCE Tokenholder’s ability to recover its investment in the SPiCE Tokens.
SPi CE VC will rely on complex exemptions from statutes in conducting its business activities. SPiCE VC will rely on exemptions from various requirements of the Securities Act, the Exchange Act and the Investment Company Act, in conducting their asset management activities. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties not controlled by SPiCE VC. If for any reason these exemptions were to become unavailable to SPiCE VC, SPiCE VC could become subject to regulatory action or third party claims and SPiCE VC’s business could be materially and adversely affected. For example, t he “bad actor” disqualification provisions of Rule 506 of Regulation D under the Securities Act ban an issuer from offering or selling securities pursuant to the safe
19
harbour rule in Rule 506 if the issuer or any other “covered person” is the subject of a criminal, regulatory or court order or other “disqualifying event” under the rule which has not been waived. The definition of “covered person” includes : an issuer’s directors, managing members and executive officers; affiliates who are also issuing securi ties in the offering; beneficial owners of 20 per cent. or more of the issuer’s outstanding equity securities; and promoters and persons compensated for soliciting investors in the offering. Accordingly, SPiCE VC’s ability to rely on Rule 506 to offer or sell securities to U.S. Persons would be impaired if SPiCE VC or any “covered person” is the subject of a disqualifying event under the rule and SPiCE VC is unable to obtain a waiver. The requirements imposed by regulators are designed primarily to ensure the integrity of the financial markets and to protect investors in investment funds and are not designed to protect SPiCE Tokenholders. Consequently, these regulations could limit SPiCE VC’s activities and impose burdensome compliance requirements.
Regi stration under the U.S. Commodity Exchange Act. Registration with the CFTC as a “commodity pool operator ” or as a “commodity trading advis er” or any change in SPiCE VC’s or SPiCE Investments LP’s operations necessary to maintain SPiCE Manager ’s or SPiCE GP’s r espective abilities to rely upon the exemptions from registration could adversely affect the ability of SPiCE VC and/or SPiCE Investments LP ’s ability to implement its investment programme, conduct its operations and/or achieve its objectives and subject SPiCE VC and/or SPiCE Investments LP to certain additional costs, expenses and administrative burdens. Furthermore, any determination by SPiCE Manager and/or SPiCE GP to cease or to limit investing in interests which may be treated as “commodity interests” in order to comply with the regulations of the CFTC may have a material adverse effect on SPiCE VC’s and/or SPiCE Investments LP’s ability to implement its investment objectives and to hedge risks associated with its operations. In addition, the treatment of instruments such as the SPiCE Tokens under current regulation is extremely uncertain. The CFTC may decide to regulate the SPiCE Tokens as commodities. If that were to occur, the Offering may be deemed not to comply with applicable laws and regulations for the offering and sale of commodities, which may expose SPiCE VC to civil penalties or fines with may impair its ability to continue operating and adversely impact the value of the SPiCE Tokens. Furthermore, if the CFTC were to regulate the SPiCE Tokens as commodities, SPiCE VC, SPiCE Manager, SPiCE GP and/or SPiCE Investments LP may be subject to additional registration, reporting, compliance and operating restrictions. There can be no assurance that any of such persons would be capable of meeting such requirements in a timely manner or at all. If SPiCE VC, SPiCE Manager, SPiCE GP and/or SPiCE Investments LP, or any of them, were unable to comply with requirements imposed by the CFTC, they may be subject to civil penalties or fines if their actions are not deemed to comply with applicable laws and regulations. Such consequences may endanger their ability to continue to operate as described in this Information Memorandum or at all and adversely impact the value of a SPiCE Tokenholder’s investment.
The requirement to comply with the AI F M Dir ectivemay adversely impact SPiCE VC’s ability to market in the EU . The European Union Alternative Investment Fund Managers Directive (the AIFM Directive) entered into force on 21 July 2011 and had to be implemented at a national level within the member states of the European Union by 22 July 2013. The AIFM Directive regulates managers of alternative investment funds that are not Undertakings for Collective Investment in Transferable Securities but which are marketed or managed in the EU. The AIFM intends to fall within a partial exemption from the provisions of the AIFM Directive by managing a single AIF and to limit the AIF’s assets under management to remain under a specified threshold at all times. Despite this partial exemption, the AIFM Directive may still restrict SPiCE Manager (the AIFM) and SPiCE VC (the AIF) from engaging in certain activities and impose certain other requirements that may restrict their operations and increase the operating expenses of the AIF. For example, the AIFM Directive imposes strict restrictions and requirements on non-EU AIF managers which market alternative investment funds to professional investors within the EU. The AIFM Directive restricts the ability of the AIFM to offer SPiCE Tokens to investors in certain EU member states and may therefore limit SPiCE VC’s ability to attract investors based in the EU and lead to a reduction in the overall amount of capital invested in SPiCE VC. This may, in turn, have an adverse impact upon the operations of SPiCE VC, including the range of investment strategies that SPiCE VC is able to pursue. The AIFM Directive may also impose additional disclosure and reporting requirements in relation to SPiCE VC and its investments, compliance with which may involve additional costs. The AIFM is required to periodically report to regulators, among other things, information regarding the main categories of assets in which the AIF has invested, the AIF’s borrowing or leverage policy, principal markets and instruments in which the AIFM trades on behalf of the AIF, and the value of assets under management, which are to be calculated on a periodic basis. The partial exemption which the AIFM seeks to rely upon is conditional on it remaining below a threshold of assets under management. There can be no assurance that the competent authority of a Member State will not require the AIFM to provide information on a more frequent basis or to impose more stringent requirements on the AIFM than what is currently required.
Risks may arise under The E mployment Retir ement I ncome Security Act 1974 (E RI SA ) fr om potential control gr oup liability in respect of SPiCE VC’s portfolio companies . Under ERISA, upon the termination of a tax-qualified single employer defined benefit pension plan, the sponsoring employer and all members of its “controlled group” will be jointly and severally liable for 100 per cent. of the plan’s unfunded benefit liabilities whether or not the controlled group members have ever maintained or participated in the plan. In addition, the Pension Benefit Guaranty Corporation (the PBGC) may assert a lien with respect to such liability against any
20
member of the controlled group on up to 30 per cent. of the collective net worth of all members of the controlled group. Similarly, in the event a participating employer partially or completely withdraws from a multi-employer (union) defined benefit pension plan, any withdrawal liability incurred under ERISA will represent a joint and several liability of the withdrawing employer and each member of its controlled group. A “controlled group” includes all “trades or businesses” under 80 per cent. or greater common ownership. This common ownership test is broadly applied to include both “parent -subsidiary groups” and “brother -sister groups” applying complex exclusion and constructive ownership rules. However, regardless of the percentage ownership that SPiCE VC or SPiCE Investments LP will hold in one or more of its portfolio companies, SPiCE VC or SPiCE Investments LP cannot be considered part of an ERISA controlled group unless SPiCE VC or SPiCE Investments LP is considered to be a “trade or business”. While there are a number of cases that have held that managing investments is not a “trade or business” for tax purposes, in 2007 the PBGC Appeals Board ruled that an investment fund was a “trade or business” for ERISA controlled group liability purposes and at least one Federal Circuit Court has similarly concluded that an investment fund could be a trade or business for these purposes based upon a number of factors, including the fund’s level of involvement in the management of its portfolio companies and the nature of any management fee arrangements. If SPiCE VC or SPiCE Investments LP were determined to be a trade or business for purposes of ERISA, it is possible, depending upon the structure of the investment by SPiCE VC or SPiCE Investments LP and/or its affiliates and other co-investors in a portfolio company and their respective ownership interests in the portfolio company, that any tax-qualified single employer defined benefit pension plan liabilities and/or multi-employer plan withdrawal liabilities incurred by the portfolio company could result in liability being incurred by SPiCE VC or SPiCE Investments LP, with a resulting need for additional capital contributions, the appropriation of SPiCE VC’s or SPiCE Investments LP’s assets to satisfy such pension liabilities and/or the imposition of a lien by the PBGC on certain of SPiCE VC’s or SPiCE Investments LP’s assets. Moreover, regardless of whether or not SPiCE VC or SPiCE Investments LP were determined to be a trade or business for purposes of ERISA, a court might hold that one of SPiCE VC’s or SPiCE Investments LP’s portfolio companies could become jointly and severally liable f or another portfolio company’s unfunded pension liabilities pursuant to the ERISA “controlled group” rules, depending upon the relevant investment structures and ownership interests as noted above. Risks relating to SPiCE VC and SPiCE Investments LP
SPi CE VC and SPi CE I nvestments LP are newly-formed entities with no operating history. SPiCE VC was incorporated on 19 September 2017, but is yet to commence operations, and SPiCE Investments LP will be formed in the future. SPiCE VC is and SPiCE Investments LP will be subject to all of the business risks and uncertainties associated with any new business, including the risk that SPiCE VC and/or SPiCE Investments LP will not achieve their investment objectives and that the value of SPiCE Tokenholders ’ investments could decline substantially.
SPi CE VC will be operating in a highly competitive market for investment opportunities. The activity of identifying, completing and successfully disposing of attractive public and private investments is highly competitive and involves a high degree of uncertainty. A number of entities will compete with SPiCE VC and SPiCE Investments LP to make the types of investments that SPiCE VC and SPiCE Investments LP plan to make. SPiCE VC and SPiCE Investments LP will compete with other venture capital firms and venture capital funds, various public and private investment funds, including hedge funds, other business development companies, commercial and investment banks, commercial financing companies and various technology companies’ internal venture capital arms. Many of SPiCE VC’s and SPiCE Investments LP’s potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than SPiCE VC and SPiCE Investments LP do. For example, some competitors may have a stronger network of contacts and better connections for deal flows or have access to funding sources that are not available to SPiCE VC and SPiCE Investments LP. In addition, some of SPiCE VC’s and SPiCE Investments LP’s competitor s have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than SPiCE VC and SPiCE Investments LP. There are no assurances given that the competitive pressures SPiCE VC and SPiCE Investments LP face will not have a material adverse effect on their businesses, financial conditions and results of operations. Also, as a result of this competition, SPiCE VC and SPiCE Investments LP may not be able to take advantage of attractive investment opportunities from time to time, and no assurance can be given that SPiCE VC and SPiCE Investments LP will be able to identify and make investments that are consistent with their investment objectives or that SPiCE VC will be able to fully invest the proceeds of the Offering.
There may be limits imposed on the ultimate size of the SPiCE VC fund. The number of investments and potential profitability of SPiCE VC and SPiCE Investments LP could be affected by the amount of funds at their disposal. If SPiCE VC obtains less than the target amount of capital for investment, SPiCE VC’s and/or SPiCE Investments LP’s investment return might be affected to a greater degree by errors in investment decisions than the investment returns of other entities with greater capitalisation.
SPi CE VC and SPi CE I nvestments LP are subject to cyber securi ty and data loss ri sks or other securi ty breaches. SPiCE VC and SPiCE Investments LP’s business involves the storage and transmission of users’ proprietar y information, and security breaches could cause a risk of loss or misuse of this information, and to resulting claims, fines, and litigation.
21
SPiCE VC and SPiCE Investments LP may be subjected to a variety of cyber-attacks, which may continue to occur from time to time. Cyber-attacks may target SPiCE VC and SPiCE Investments LP, their customers, suppliers, banks, credit card processors, delivery services, e-commerce in general or the communication infrastructure on which they depend. An attack or a breach of security could result in a loss of private data, unauthorised trades, an interruption of trading for an extended period of time, violation of applicable privacy and other laws, significant legal and financial exposure, damage to reputation, and a loss of confidence in security measures, any of which could have a material adverse effect on the SPiCE VC and SPiCE Investments LP’s financial results and business. Any such attack or breach could adversely affect the ability of SPiCE VC to operate, which could adversely affect the value of the SPiCE Tokens. Any breach of data security that exposes or compromises the security of any of the private digital keys used to authorise or validate transaction orders, or that enables any unauthorised person to generate any of the private digital keys, could result in unauthorised trades and would have a material adverse effect on SPiCE VC and SPiCE Investments LP. Because trades utilising blockchain technology settle on the trade date, it could be impossible to correct unauthorised trades. Furthermore, attackers can manipulate the cryptocurrency market. The price of cryptocurrencies, such as BTC and ETH, are set by several exchanges. If an exchange is attacked such that it is taken offline, traders can take advantage of price differences. Additionally, attackers can target platforms that buy and sell cryptocurrencies and digital wallets that hold cryptocurrencies. It is possible that such an attack could adversely affect SPiCE VC and SPiCE Investments LP ’s investments and the value of the SPiCE Tokens.
Significant ri sks are associated with participating in I COs as part of SPiCE VC’s investment strategy . SPiCE VC may invest some of its assets through ICOs. Such investments in these assets may be very sensitive to movements in related markets and trends and ICO markets, including regulatory developments, enforcement actions, security concerns and technological developments. In addition, by investing in such assets, SPiCE VC may be subject to international, federal and state securities, commodity or other laws which may, among other things, restrict SPiCE VC’s ability to sell a portfolio investment and adversely impact the value of its assets. Some or all of the risks contained under the heading “Risks relating to the SPiCE Tokens” above may apply to SPiCE VC’s investments through ICOs.
Reliance on portfoli o company management teams may have an adverse effect on SPiCE VC’s performance if those management teams fail to perform successfully. Each portfolio company’s day-to-day oper ations will be the responsibility of such company’s management team. Although SPiCE VC will, through SPiCE Manager and/or SPiCE GP, be responsible for monitoring the performance of each portfolio investment, there can be no assurance that the existing management team, or any successor, will be able to operate the portfolio company successfully. In some of SPiCE VC’s and SPiCE Investments LP’s investments, SPiCE VC or SPiCE Investments LP may seek constructively to work with management. There can be no assurance that the management of any company will agree or acquiesce to SPiCE VC’s or SPiCE Investments LP’s involvement in the affairs of the company, or that the strategies that SPiCE VC or SPiCE Investments LP helps to implement will be effective. While SPiCE VC believes the confidentiality of the SPiCE Tokenholders will be protected, there is no certainty that any adverse publicity attaching to SPiCE VC’s or SPiCE Investments LP’s efforts to influence management will not have adverse consequences for SPiCE T okenholders, as well as for SPiCE VC generally. SPiCE VC’s success depends on the ability of SPi CE Manager and SPiC E GP to formulate a strategy to identify and
exploit successful investment opportunities. The success of SPiCE VC’s and SPiCE Investments LP’s investment activities depends on SPiCE Manager ’s and SPiCE GP’s respective abilities to identify investment opportunities. Identification and exploitation of investment opportunities to be pursued by SPiCE VC and SPiCE Investments LP involves a high degree of uncertainty. Although SPiCE VC and SPiCE Investments LP currently intend to pursue the investment strategy set out in the section of this Information Memorandum entitled “About SPiCE VC – The SPiCE Investment Criteria”, they may change any aspect o f their strategy at their discretion at any time. Accordingly, the industries, risk profiles, types of assets, technologies and types of portfolio companies in which SPiCE VC and SPiCE Investments LP invest may differ from those described in this Information Memorandum and those currently contemplated. The success of SPiCE VC and SPiCE Investments LP ’s trading activities depends in large part on SPiCE Manager ’s and SPiCE GP’s ability to identify attractive investment opportunities. Identification and exploitation of the investment strategies to be pursued by SPiCE VC and SPiCE Investments LP involves a high degree of uncertainty. No assurance can be given that SPiCE Manager or SPiCE GP will be able to locate suitable investment opportunities in which to deploy all of SPiCE VC’s and/or SPiCE Investments LP’s capital.
I nvestments in start-ups and smaller capitalisation companies carr y higher risks than investments in larger or more established companies, and are susceptible to volatility. Many investment opportunities in blockchain industries and technologies in which SPiCE VC’s intends to invest are with start-ups with limited operating history and small market capitalisation companies. While SPiCE VC believes that such investments can provide significant potential for appreciation, it recognises that such investments may involve higher risks than investments in larger or more established companies and the value of such investments is likely to be more volatile. Further, the risk of bankruptcy or insolvency of many start-ups and smaller companies (with the attendant loss to investors) is higher than for larger and more established companies. In addition, investments in these types of companies may be characterised by reduced liquidity and more abrupt and erratic market price movements than those of larger, more established companies.
22
Non-control investments provide limited protection, which may result in confli cts of i nterest. SPiCE VC and SPiCE Investments LP will hold a non-controlling interest in most of their portfolio companies and, therefore, may have a limited ability to protect their positions in such companies. In these cases, SPiCE VC and SPiCE Investments LP will be significantly reliant on the existing management and board of directors of such companies, which may include representatives of other financial investors with whom SPiCE VC and SPiCE Investments LP are not affiliated and whose interests may conflict with the interests of SPiCE VC and SPiCE Investments LP. Such investments may also involve risks not present in investments where a third party is not involved, including the possibility that a third party partner or co-investor may have financial difficulties resulting in a negative impact on such investment, may have economic or business interests or goals which are inconsistent with those of SPiCE VC and SPiCE Investments LP, or may be in a position to take action contrary to SPiCE VC’s and SPiCE Investments LP’s investment objectives. In those circumstances where such third parties involve a management group, such third parties may receive compensation arrangements relating to such investments, including incentive compensation arrangements. Such compensation arrangements will reduce the return to participants in the investments. In addition, SPiCE VC and SPiCE Investments LP may in certain circumstances be liable for the actions of its third party partners or co-investors.
SPi CE VC and SPiCE I nvestments LP may be restri cted from acting on the basis of materi al non-public information received from time to time. By reason of its investment in a portfolio company or otherwise, SPiCE Manager and/or SPiCE GP may acquire confidential or material non-public information or otherwise be restricted from initiating transactions in certain securities. SPiCE VC and SPiCE Investments LP will not be able to act upon any such information. Due to these restrictions, SPiCE VC and SPiCE Investments LP may not be able to initiate a transaction that they otherwise might have initiated and may not be able to sell a portfolio investment that they otherwise might have sold.
I nvestments made by SPiCE VC and SPiCE I nvestments LP may be illiquid and long-term investments. SPiCE VC and SPiCE Investments LP may make investments in securities that have limited liquidity. Some investments held by SPiCE VC and SPiCE Investments LP may not be able to be sold except pursuant to the requirements of securities regulation in specific jurisdictions. The market prices, if any, of such investments tend to be volatile and SPiCE VC and SPiCE Investments LP may not be able to sell such investments when they desire, or, upon sale, to realise what they perceive to be their fair value. Further, companies whose securities are not publicly traded are not subject to the disclosure and other investor protection requirements applicable to publicly traded securities. Dispositions of such investments may require a lengthy time period locking up capital and decreasing funds available for repurchases or redemptions of the Tokens or investments in more attractive opportunities. If either SPiCE VC or SPiCE Investments LP were forced to sell such an investment, including in the event of changes in the regulatory regimes applicable to digital token offerings which might require money raised through the Offering or other future initial coin offerings to be refunded, it may not receive fair value for that investment.
Portfolio companies in which SPi CE VC and SPiCE I nvestments LP invest may have signifi cant leverage, which may adversely impact the return on investment achieved. Certain of SPiCE VC’s and SPiCE Investments LP’s portfolio companies may have capital structures with significant leverage. Consequently the leveraged capital structure of such portfolio companies will increase their exposure to adverse factors such as rising interest rates, downturns in the economy or a deterioration in the business of a portfolio company or its industry, and may impair such companies’ ability to meet their debt obligations. Additionally, SPiCE VC and SPiCE Investments LP may leverage their investment positions by borrowing. Failure to satisfy the terms of debt incurred by SPiCE VC and SPiCE Investments LP can have negative consequences, including forced liquidation of other SPiCE VC and SPiCE Investments LP investments in orde r to satisfy the borrower’s obligations. Leverage may also take the form of trading on margin, which will result in interest charges that could be substantial. The use of leverage will have the effect of increasing the volatility of SPiCE VC’s and SPiCE Investments LP’s investments.
SPi CE VC may employ hedging policies and techniques that entail certain inherent ri sks. SPiCE VC may employ hedging techniques, including, but not limited to, short sales and put and call options, designed to reduce the risks of adverse movements in interest rates, securities prices and currency exchange. While such transactions may reduce certain risks, such transactions themselves may entail certain other risks. Thus, while SPiCE VC may benefit from the use of these hedging mechanisms, unanticipated changes in interest rates, securities prices, or currency exchange rates may result in a poorer overall performance for SPiCE VC than if it had not entered into such hedging transactions. For example, to complete a short sale, SPiCE VC generally must borrow the securities from a third party in order make delivery to the buyer. SPiCE VC will be obligated to return securities equivalent to those borrowed at any time on demand of the lender of the securities borrowed by purchasing them at the market price at the time of replacement. Theoretically, short selling may be subject to unlimited risk of loss because there may be no limit on how much the price of a security may appreciate before the short position is closed. As a hedging technique, SPiCE VC may also purchase exchange-listed and over-the-counter put and call options on specific securities or write and sell covered or uncovered call and put option contracts. Use of put and call options may result in losses to SPiCE VC, force the sale or purchase of portfolio securities at inopportune times or for prices higher than (in the case of put options) or lower than (in the case of call options) current market values, limit the amount of appreciation SPiCE VC can realise on its investments or cause SPiCE VC to hold a security it might otherwise sell. For example, a decline in the market price of a particular security could result in a complete loss of the amount expended by SPiCE VC to purchase a call option (equal to the premium paid for the option and any associated transaction charges). An adverse price movement may result in unanticipated losses with respect to covered
23
options sold by SPiCE VC. The use of uncovered option writing techniques may entail greater risks of potential loss to SPiCE VC than other forms of options transactions.
Participation in a limited number of investments will adversely affect the returns generated by SPiCE VC and SPiCE I nvestments LP. SPiCE VC and SPiCE Investments LP may participate in a limited number of investments and, as a consequence, the aggregate return of SPiCE VC and SPiCE Investments LP may be substantially adversely affected by the unfavourable performance of even a single investment. Investors have no assurance as to the degree of diversification of SPiCE VC’s and SPiCE Investments LP’s portfolio investments, either by geographic region, asset type or sector. In circumstances where SPiCE Manager or SPiCE GP intends to refinance all or a portion of the capital invested in a transaction, there will be a risk that such refinancing may not be completed, which could lead to increased risk as a result of SPiCE VC and SPiCE Investments LP having an unintended long-term investment as to a portion of the amount invested and/or reduced diversification.
Contingent liabilities on disposals of portfolio investments may result in losses to SPiCE VC and SPiCE I nvestments LP. In connection with the disposal of a portfolio investment, SPiCE VC and SPiCE Investments LP may be required to make representations about the business and financial affairs of such company typical of those made in connection with the sale of a business. SPiCE VC and SPiCE Investments LP also may be required to indemnify the purchasers of such investment to the extent that any such representations are inaccurate. These arrangements may result in the incurrence of contingent liabilities for which SPiCE Manager and/or SPiCE GP may establish reserves or escrows.
Valuations of SPi CE VC may differ in a liquidation scenario fr om interim valuations made by SPiCE Manager. Because of the illiquidity of certain positions that may be held by SPiCE VC and SPiCE Investments LP, the liquidation values of SPiCE VC’s and SPiCE Investments LP’s assets and other investments may differ significantly from the interim valuations of such assets and investments made by SPiCE Manager. Such differences may be further affected by the time frame within which such liquidation occurs. Third-party pricing information may not be available regarding certain of SPiCE VC’s and SPiCE Investments LP’s assets and other investments.
Undertaking investment decisions on an expedited basis in order to take advantage of available opportunities may result in limited information being available. Investment analyses and decisions by SPiCE Manager or SPiCE GP may be undertaken on an expedited basis in order for SPiCE VC and SPiCE Investments LP to take advantage of available investment opportunities. In such cases, the information available to SPiCE Manager or SPiCE GP at the time of the investment decision may be limited, and SPiCE Manager and SPiCE GP may not have access to the detailed information necessary for a thorough evaluation of the investment opportunity. Further, SPiCE Manager and SPiCE GP may conduct their due diligence activities over a very brief period.
NAV valuations will depend in part on SPiCE VC’s judgment and may be speculative. A large percentage of SPiCE VC’s and SPiCE Investments LP’s portfolio investments will be in the form of securities that are not publicly traded. When SPiCE VC and SPiCE Investments LP invest in illiquid securities or instruments it may be difficult for SPiCE VC to accurately determine the fair value as there will generally not be a readily available market for a substantial number of SPiCE VC’s and SPiCE Investments LP’s investments. SPiCE VC will value these securities quarterly at fair value according to its written valuation procedures and as determined in good faith by them. The methods for valuing these securities may include: fundamental analysis (sales, income, or earnings multiples, etc.), discounts from market prices of similar securities, purchase price of securities, subsequent private transactions in the security or related securities, or discounts applied to the nature and duration of restrictions on the disposition of the securities, as well as a combination of these and other factors. However, valuations of such assets for the purposes of determining SPiCE VC’s NAV may be speculative and will depend largely on SPiCE VC ’s judgment. Despite SPiCE VC’s efforts to acquire sufficient information to monitor certain of SPiCE VC’s and SPiCE Investments LP’s investments and make well-informed valuation and pricing determinations, SPiCE VC may only be able to obtain limited information at certain times. It is possible that SPiCE VC may not be aware on a timely basis of material adverse changes that have occurred with respect to certain of SPiCE VC’s and SPiCE Investments LP’s investments. SPiCE VC may have to make valuation determinations without the benefit of an adequate amount of relevant information. Furthermore, SPiCE VC may rely on estimates or information provided by third parties in valuing SPiCE VC’s and SPiCE Investments LP’s liquid or illiquid assets and its liabilities, which information which may be incomplete, inaccurate or otherwise unreliable. To the extent SPiCE VC relies on such information, its valuations and NAV calculations may be inaccurate. SPiCE VC’s judgment on such matters shall be made in good faith and subject to an audit by independent auditors. Prospective investors should be aware that as a result of these difficulties, as well as other uncertainties, any valuation made by SPiCE VC may not represent the fair market value of the securities acquired by SPiCE VC and SPiCE Investments LP and may differ materially from the values that would have been used if a ready market for these securities existed.
24
Mi sconduct of employees and of thir d party service providers may have an adverse effect on SPiCE VC’s business, financial position and results of operation. Misconduct by employees of SPiCE Manager, SPiCE GP or third party service providers could cause significant losses to SPiCE VC and/or SPiCE Investments LP. Employee misconduct may include binding SPiCE VC and SPiCE Investments LP to transactions that exceed authorised limits or present unacceptable risks and unauthorised trading activities or concealing unsuccessful trading activities (which, in either case, may result in unknown and unmanaged risks or losses). Losses could also result from actions by third party service providers, including, without limitation, failing to recognise trades and misappropriating assets. In addition, employees and third party service providers may improperly use or disclose confidential information, which could result in litigation or serious financial harm, including limiting SPiCE VC’s and SPiCE Investments LP’s business prospects or future marketing activities. No assurances can be given that the due diligence performed by SPiCE Manager or SPiCE GP will identify or prevent any such misconduct.
The past performance and track record of the Founders is not indicative of SPiCE VC’s future results . The performance of the prior investments and general track record of the Founders may not be indicative of SPi CE VC’s future results. While SPiCE Manager intends for SPiCE VC, and SPiCE GP intends for SPiCE Investments LP, to make investments that have estimated returns commensurate with the risks undertaken, there can be no assurance that targeted results will be achieved. Loss of principal is possible on any given investment. There can be no assurance that SPiCE VC will achieve its investment objective over the long term.
Conflicts of interest may arise between the interests of SPiCE Manager, SPiC E GP and the F ounders on the one hand, and those of SPi CE VC, SPiC E I nvestments LP and SPiCE Tokenholders on the other. Instances may arise where the interests of SPiCE Manager, SPiCE GP, or the Founders may potentially or actually conflict with the interests of SPiCE VC, SPiCE Investments LP and SPiCE Tokenholders. For example, the management fee arrangements may create an incentive for SPiCE Manager and SPiCE GP to make more speculative investment decisions than would be the case in the absence of such performance-based arrangements. Additionally, the Founders and other members of SPiCE Manager ’s or SPiCE GP’s management team will not be required to manage SPiCE Manager or SPiCE GP as their sole and exclusive function, and are entitled to have other business interests and may engage in other business activities in addition to those relating to SPiCE VC and SPiCE Investments LP. SPiCE Manager, SPiCE GP or the Founders may also form and devote their time to other investment partnerships with activities similar to those of SPiCE VC and SPiCE Investments LP. The Founders may also have conflicts of interest in allocating time, services and functions among SPiCE VC, SPiCE Investments LP and other business ventures. Conflicts may arise in the allocation of investment opportunities and the Founders’ time among SPiCE VC and SPiCE Investments LP, on the one hand, and existing or future investments and other business ventures managed by the Founders on the other hand. A conflicts of interest policy will be implemented by SPiCE VC, SPiCE Investments LP and the Founders in accordance with which SPiCE VC, SPiCE Investments LP and the Founders intend to act in accordance with at all times, in order to avoid conflicts of interest arising; however there is a risk that conflicts of interest may still arise. The Founders are not required to refrain from such management activities or to disgorge profits from such activities. SPiCE VC’s financial condition and results of operation will depend on SPiCE VC’s and SPi CE I nvestments LP ’s ability
to manage future growth effectively. SPiCE VC’s ability to achieve its investment objectives will depend on its ability to grow, which will depend, in turn, on SPiCE Manager ’s and, in respect of Israeli investments, SPiCE GP’s ability to identify, invest in, and monitor companies that meet the investment criteria. Accomplishing this result on a cost-effective basis will be largely a function of SPiCE Manager ’s and SPiCE GP’s structuring of the investment process, their ability to provide competent, attentive, and efficient services to SPiCE VC and SPiCE Investments LP respectively, and SPiCE VC’s and SPiCE Investments LP’s access to financing on acceptable terms. SPiCE Manager will have substantial responsibilities under the Management Agreement. Any failure to manage the future growth if SPiCE VC and SPiCE Investments LP effectively could have a material adverse effect on SPiCE VC’s business, financial condition, and results of operations.
SPi CE Tokenholders will rely on SPiC E Manager ’s and SPiCE GP ’s investment discretion for SPiC E VC and SPiC E I nvestments LP. SPiCE Manager will have sole discretion over the investment of the funds committed to SPiCE VC, and SPiCE GP will have sole discretion over the investment of the funds invested through SPiCE Investments LP, as well as the ultimate realisation of any profits in each case. The success of SPiCE VC and SPiCE Investments LP will depend in part on the skill and expertise of the personnel of SPiCE Manager and SPiCE VC. SPiCE Tokenholders will not receive the detailed financial information issued by portfolio companies that will be available to SPiCE VC and SPiCE Investments LP. Accordingly, SPiCE Tokenholders will not have the opportunity to evaluate the relevant economic, financial and other information that will be utilised by SPiCE Manager and SPiCE GP in their selection of investments. As such, the pool of funds in SPiCE VC and SPiCE Investments LP represents a blind pool of funds. SPiCE Tokenholders will be relying on SPiCE Manager and SPiCE GP to identify, structure, and implement investments consistent with SPiCE VC’s and SPiCE Investments LP’s investment objectives and policies and to conduct the business of SPiCE VC and SPiCE Investments LP as contemplated by this Information Memorandum. SPiCE Tokenholders will not make decisions with respect to the management, disposition or other realisation of any investment made by SPiCE VC and SPiCE Investments LP, or other decisions regarding SPiCE VC’s and SPiCE Investments LP’s business and affairs. SPiCE Tokenholders will have no voting or other rights to make decisions with respect to SPiCE VC or its management.
25
SPi CE Manager and SPi CE GP, and their respective affiliates, may engage in other activities, which may conflict with those of SPiCE VC . SPiCE Manager and SPiCE GP, and certain of their respective personnel or affiliates, may in the future serve as investment manager for other investment funds and investment accounts, including those with substantially the same investment objectives as SPiCE VC’s (which may pur sue its investment activities by contributing its assets to SPiCE VC SPiCE Investments LP), and also including additional investment funds and/or client accounts with investment objectives that differ in some respects from SPiCE VC’s investment objective.
None of SP iCE Manager, SPiCE GP or any of their respective personnel or affiliates is obligated to make any particular investment opportunity available to SPiCE VC or SPi CE I nvestments LP, and they may take advantage of any opportunity, either for other accounts that SPiCE Manager, SPiC E GP, their respective personnel or affiliates manage or for themselves. SPiCE VC’s f ocused investment strategy may give rise to risks associated with particular economic, political, regulatory, technology or industry issues, compared to a more diversified or broader industry investment strategy. SPiCE VC will generally be focused on investments in start-up technology companies, blockchain technologies, cryptocurrency businesses and ICOs, although it may change its investment focus at any time without the consent of the SPiCE Tokenholders. A specific investment focus is inherently more risky and could cause SPiCE VC ’s investments to be more susceptible to particular economic, political, regulatory, technological or industry conditions or occurrences compared with a fund, or a portfolio of funds, that is more diversified or has a broader industry focus. SPiCE VC may invest in companies with no operating history, making the evaluation of the future prospects of those companies difficult. Before deciding to purchase SPiCE Tokens, a prospective investor should consider the risks and difficulties frequently encountered by early-to mid-stage companies in new and rapidly evolving markets, particularly those companies whose businesses depend on the internet and blockchain technology. These risks include the ability to (i) increase revenues and manage costs; (ii) increase awareness of the company; (iii) offer compelling content; (iv) maintain current, and develop new, strategic relationships; (v) respond effectively to competitive pressures; (vi) continue to develop and upgrade technology; (vii) attract, retain and motivate qualified personnel; and (viii) raise additional capital. SP iCE VC cannot assure prospective investors that SPiCE VC’s business strategy will be successful or that its portfolio companies will address these risks successfully.
Portfolio company turnover may impact the profitability of SPiCE VC’s investments. Changes with respect to portfolio companies will be made as SPiCE Manager or SPiCE GP consider necessary in seeking to achieve SPiCE VC’s and SPiCE Investments LP’s investment objectives. The rate of portfolio turnover will not be treated as a limiting or relevant factor when circumstances exist that are considered by management to make portfolio changes advisable. Although SPiCE VC expect that many of SPiCE VC’s and SPiCE Investments LP’s investments will be relatively long term in nature, SPiCE Manager and SPiCE GP may make changes in particular portfolio holdings whenever it is considered that an investment no longer has substantial growth potential or has reached its anticipated level of performance, or (especially when cash is not otherwise available) that another investment appears to have a relatively greater opportunity for capital appreciation. SPiCE Manager and SPiCE GP may also make general portfolio changes to increase SPiCE VC’s and SPiCE Investments LP’s cash to position it in a defensive posture. SPiCE Manager and SPiCE GP may make portfolio changes without regard to the length of time SPiCE VC or SPiCE Investments LP has held an investment, or whether a sale results in profit or loss, or whether a purchase results in the reacquisition of an investment that SPiCE VC or SPiCE Investments LP may have only recently sold. SPiCE VC’s and SPiCE Investments LP’s investments in privately held companies are illiquid, which limits portfolio turnover. The portfolio turnover rate may vary greatly during a year as well as from year to year and may also be affected by cash requirements.
SPi CE VC may encounter limitations on its ability to exit investments. SPiCE VC expects to exit from its investments in two principal ways: (i) private sales (including acquisitions of its portfolio companies) and (ii) initial and secondary public offerings. At any particular time, one or both of these avenues may not be open to SPiCE VC, or timing with respect to these exit mechanisms may be inopportune. As such, the ability to exit from and liquidate portfolio holdings may be constrained at any particular time.
The retention of proceeds of the Offering may impair investment returns. As is customary in the industry, SPiCE Manager or SPiCE GP may retain a portion of the proceeds of the Offering for follow-on investments by SPiCE VC and SPiCE Investments LP in portfolio companies, operating expenses (including the management fees), SPiCE VC’s and SPiCE Investments LP’s liabilities, and other matters. Estimating the appropriate amount of such retained proceeds is difficult, especially for follow-on investment opportunities, which are directly tied to the success and capital needs of portfolio companies. Inadequate or excessive retained proceeds could impair the investment returns to SPiCE VC and SPiCE Investments LP and the NAV. If the retained proceeds are inadequate, SPiCE VC and SPiCE Investments LP may be unable to take advantage of attractive follow-on or other investment opportunities or to protect its existing investments from dilutive or other punitive terms associated with “pay-to- play” or similar provisions. If the retained proceeds are excessive, SPiCE VC and SPiCE Investments LP may decline attractive investment opportunities or hold unnecessary amounts of capital in money market or similar low-yield accounts.
26
The lack of liquidity in SPiCE VC’s and SPi CE I nvestments LP ’s investments may adversely affect the value received by SPi CE VC on any Realisation. SPiCE VC and SPiCE Investments LP will primarily make investments in private companies. Substantially all of these securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of SPiCE VC’s and SPiCE Investments LP’s portfolio or a portion of SPiCE VC’s and SPiCE Investments LP’s portfolio means that SPiCE VC and SPiCE Investments LP cannot realise the portfolio quickly and may realise significantly less than the value at which their investments have been previously recorded. In addition, SPiCE VC and SPiCE Investments LP may face other restrictions on their ability to liquidate an investment in a portfolio company to the extent that they have material non-public information regarding such portfolio company.
Political and military risks in the Middle East may impact on the performance and returns of SPi CE VC and SPi CE I nvestments LP Spice VC intends to invest, through SPiCE Investment LP, a substantial portion of its assets in portfolio companies located or doing business in Israel. Any disruption to the political and military stability of Israel and its neighbouring nations could have a material adverse impact on the performance of Spice Investments LP. An outbreak of war or other hostilities in the region could have a negative impact on the investments that are made and SPiCE VC’s overall performance . Since the establishment of the State of Israel, a state of hostility has existed, varying in degree and intensity, between Israel and the Arab countries. In addition, certain countries, as well as individual companies, participate in a boycott of Israeli firms and others doing business in Israel or with Israeli companies. This boycott could have a material adverse effect upon certain portfolio companies in which it is intended Spice Investments LP will invest. Although the effects of the boycott have gradually been reduced with time, there remain a number of countries which restrict the ability of their residents to do business with Israel or Israeli companies. It remains unlikely that a full resolution of these problems will be achieved, either in the short or long term and, if achieved, what the nature of such resolution would be.
SPi CE VC and SPi CE I nvestments LP may experi ence fluctuations in their quarterly results. SPiCE VC and SPiCE Investments LP could experience fluctuations in their quarterly operating results due to a number of factors, including the performance of the portfolio securities they hold; the level of their expenses; variations in, and the timing of the recognition of, realised and unrealised gains or losses; the degree to which they encounter competition in other markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods. Risk Factors Related to Blockchain Networks
Potential investors may not have the skills necessary to secure, trade, or collect distributions using the SP iCE Tokens or to comply with the requirements of the fund. Participating in the Offering requires technical skill beyond that of many investors. Securing, trading or collecting distributions relating to the SPiCE Tokens requires working knowledge of blockchain technology, blockchain assets and their attendant systems and processes. Similar knowledge of blockchain asset exchanges and other industry participants may be required to comply with the requirements of the Offering.
The loss or destruction of a private key requir ed to access blockchain assets may be irreversible. L oss of access to pri vate keys – or any other data loss concerning SPiCE VC’s blockchain assets – could have a material adverse effect on the business or the SPiC E Tokens. Blockchain assets include, without limitation, Bitcoins and other cryptocurrencies, Ether, SPiCE Tokens and other cryptographic tokens. Blockchain assets are controllable only by those who know the unique private cryptographic key relating to the network address at which the blockchain assets are held. SPiCE VC and SPiCE Tokenholders are required by the operation of many blockchain networks to publish the addresses concerning blockchain assets in use by them. To the extent a private key is lost, destroyed or otherwise compromised and no backup of the private key is accessible, SPiCE VC and SPiCE Tokenholders may not be able to access the blockchain asset associated with the corresponding address and the private key will not be capable of being restored by the network. Any loss of private keys relating to digital wallets used t o store blockchain assets could have a material adverse effect on SPiCE VC’s business or individual SPiCE Tokenholders. A temporary or permanent blockchain “fork” could adversely affect an investment in cryptocurrency.
A temporary or permanent blockchain “fork” could adversely affect an investment in a cryptocurrency. In June 2016, the Decentralized Autonomous Organization (the DAO), an organisation using the Ethereum network, was hacked, resulting in a loss of approximately ETH 3.6 million. In response to this loss, the Ethereum community agreed to create a new “hard fork” on the Ethereum network blockchain which returned the lost ETH to the DAO. A “hard fork ” is a change to the underlying Ethereum protocol, which creates new rules for the Ethereum system. At the time of the initial attack, the market price of ETH declined significantly. Since the attack on the DAO, there have been several more hacks of a similar nature. Funds submitted for subscription in an ICO may also be stolen through hacking the system. There is no assurance that future attacks could not occur or would not result in a sustained decline in the market price of cryptocurrencies like BTC and ETH.
27
A disruption of the I nternet or the Bitcoin or Ethereum networks could impair the value and the ability to transfer BTC or E TH , r espectively. A significant disruption in Internet connectivity could disrupt the Bitcoin or Ethereum network’s operations until the disruption is resolved, and could have an adverse effect on the value of the SPiCE Tokens. In addition, cryptocurrency networks have been subjected to a number of denial of service attacks, which led to temporary delays in transactions. It is possible that such an attack could adversely affect SPiCE VC’s or SPiCE Investments LP’s investments and the value of the SPiCE Tokens.
The fur ther development and acceptance of blockchain networks, which are part of a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of the blockchain networks upon which SPi CE VC will rely would have an adverse material effect on the business. The growth of the blockchain industry in general, as well as the blockchain networks on which SPiCE VC will rely, is subject to a high degree of uncertainty. The factors affecting the further development of the cryptocurrency industry, as well as blockchain networks, include, without limitation:
Worldwide growth in the adoption and use of Bitcoin, Ether and other blockchain 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 protocol of the Bitcoin or Ethereum 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 Bitcoin or Ethereum networks would adversely affect SPiCE VC’s operating results.
The prices of blockchain assets are extremely volatile. F luctuations in the pri ce of Bitcoins or E ther could materially and adversely affect the business. The prices of blockchain assets are significant uncertainties for SPiCE VC’s business. The price of Bitcoin and Ether are subject to dramatic fluctuations. Several factors may affect the price, including, but not limited to:
Global blockchain asset supply; Global blockchain asset demand, which can be influenced by the growth of retail merchants’ and commercial businesses’ acceptance of blockchain assets like cryptocurre ncies as payment for goods and services, the security of online blockchain asset exchanges and digital wallets that hold blockchain assets, the perception that the use and holding of blockchain assets is safe and secure, and the regulatory restrictions on their use;
Investors’ expectations with respect to the rate of inflation;
Changes in the software, software requirements or hardware requirements underlying a blockchain network;
Changes in the rights, obligations, incentives, or rewards for the various participants in a blockchain network;
Interest rates;
Currency exchange rates, including the rates at which ether may be exchanged for fiat currencies;
Fiat currency withdrawal and deposit policies of blockchain asset exchanges and liquidity on such exchanges;
Interruptions in service from or failures of major blockchain asset exchanges;
Investment and trading activities of large investors, including private and registered funds, that may directly or indirectly invest in blockchain assets;
Monetary policies of government, trade restrictions, currency devaluations and revaluations;
Regulatory measures, if any, that affect the use of blockchain assets;
The maintenance and development of the open-source software protocol of the Bitcoin or Ethereum networks;
Global or regional political, economic or financial events and situations;
Expectations among blockchain participants that the value of blockchain assets will soon change; or
A decrease in the price of blockchain assets may have a material adverse effect on our financial condition and operating results.
28
The suitability of the blockchain networks on which SPiCE VC will rely could decline due to a vari ety of causes, adversely affecting the business or the functionality of the SPi CE Tokens. Blockchain networks are based on software protocols that govern the peer-to-peer interactions between computers connected to these networks. The suitability of the networks for SPiCE VC’s business or the functionality of the SPiCE Tokens depends upon a variety of factors, including:
The effectiveness of the informal groups of (often uncompensated) developers contributing to the protocols that underlie the networks; Effectiveness of the network validators (sometimes called “miners”) and the network’s consensus mechanisms to effectively secure the networks against confirmation of invalid transactions; Disputes among the developers or validators of the networks; Changes in the consensus or validation schemes that underlie the networks, including without limitation shifts between so-called “proof of work” and “proof of stake” schemes; The failure of cybersecurity controls or security breaches of the networks; The existence of other competing and operational versions of the networks, including without limitation so-called “forked” networks; The existence of undiscovered technical flaws in the networks; The development of new or existing hardware or software tools or mechanisms that could negatively impact the functionality of the systems;
The price of blockchain assets associated with the networks;
Intellectual property rights- based or other claims against the networks’ participants; or
The maturity of the computer software programming languages used in connection with the networks.
Unfavourable developments or characteristics of any of the above circumstances could adversely affect SPiCE VC’s business or the functionality of the SPiCE Tokens.
29
ABOUT SPiCE VC
Prospective investors should read this section in conjunction with the more detailed information contained in this Information Memorandum, including but not limited to the section entitled “Risk Factors”. Overview of organisational structure
SPiCE VC is a newly-incorporated Singaporean private limited company, which has no prior operating history. SPiCE VC will hold its investments in non-Israeli assets directly or through subsidiary entities of SPiCE VC. SPiCE VC intends to use a limited partnership ( SPiCE Investments LP ), to be formed after the date of this Information Memorandum, to invest in Israel-based investments and potentially non-Israeli based investments. SPiCE Investments LP, if formed, will be managed by a Cayman Islands-exempted company, which shall be incorporated at a later date ( SPiCE GP). SPiCE VC is managed, and SPiCE GP will be managed, by Spice Funds Management Limited, a Cayman Islands-exempted company ( SPiCE Manager), pursuant to a management agreement (the SPiCE VC Management Agreement). SPiCE Manager, as a small AIFM, has notified the FCA of its intention to market the SPiCE Tokens issued by SPiCE VC to UK professional investors pursuant to the AIFMD, as implemented by the United Kingdom. SPiCE VC and SPiCE Manager are, and SPiCE GP will be, wholly owned by Tal Elyashiv, Amihay Ben David and Carlos Domingo (the Founders).
SPiCE Tokenholders The Founders
SPiCE Tokens
SPiCE General Partner
Spice Funds Management Limited
SPiCE VC
Limited Partner
General Partner
SPiCE Investments LP
Industry Overview
F unds in the blockchain era Following the publication in 2008 of a seminal paper describing the cryptocurrency Bitcoin by an unknown cryptologist, under the pseudonym Satoshi Nakamoto cryptocurrencies and their underlying technology, blockchain, have taken the world by storm and are disrupting industries. Today, blockchain technologies are used in sectors such as finance, healthcare, insurance, Internet of Things, supply chain management, real estate and energy management and, as at the date of this Information Memorandum, are being considered not only by start-ups but also by Fortune 500 companies including Accenture, BP, Deloitte, Intel, Microsoft and large financial institutions, such as BBVA, Credit Suisse and Banco de Santander. The combined market cap of Bitcoin and other cryptocurrencies is estimated to have surpassed USD 120 billion. Ethereum, invented in 2013 by a young crypto programmer called Vitalik Buterin, expands on the potential of Bitcoin to support distributed applications as well as smart contracts. In the Ethereum distributed network, a smart contract represents a digital asset called an Ethereum token and specifies its properties and functionality according to its intended usage as well as its characteristics (such as supply, inflation rate, etc.). Ethereum specifications included a mechanism for a crowdsale that would allow companies to sell their Ethereum tokens to the public. Ethereum itself was initially funded via a crowdsale by issuing Ethers, the main Ethereum cryptocurrency used in this network. These crowdsales of crypto tokens (for which the Ethereum network is the dominant platform), are commonly referred to as initial coin offerings ( ICOs). ICOs have become
30
increasingly popular and, as at the date of this Information Memorandum, blockchain companies are estimated to have raised over USD 1.2 billion through ICOs in 2017. With the increase in price in USD of Bitcoin, Ethereum and Ripple by more than 700 per cent. in the past year, as at the date of this Information Memorandum, and the significant returns of some ICOs, there has been a rise in the number of funds dedicated to investing in cryptocurrencies, ICOs and/or blockchain companies, which intend to facilitate the entry of traditional investors to this new asset class. One of the first of these funds was Metastable Capital, which was co-founded in 2014 by the CEO and co-founder of Angel List and reportedly has USD 45 million in assets under management. Polychain, founded in September 2016, has an estimated USD 200 million in assets under management and has received investments from Andreessen Horowitz, Founders Fund, Sequoia Capital and Union Square Ventures. Since then, many more have followed or are set to launch before the end of 2017, including Auryn Capital, BlockTower Capital, BKCM, Coinshares1 LP and Crypto Asset Fund. Some of these funds are raising funds by issuing tokens via an ICO. One of the first venture capital funds to undertake an ICO was Blockchain Capital, founded by blockchain pioneer Brock Pierce, which is estimated to have raised USD 10 million in early 2017. However, SPiCE VC is different from other funds that raise their capital via an ICO, in the following ways:
Investment model: Funds raising capital through an ICO tend to invest purely in ICOs and cryptocurrencies. SPiCE VC will be different. SPiCE VC regards the tokens as a means to deliver liquidity and inclusivity to the fund and its investment thesis covers both blockchain and non-blockchain start-ups, including sectors such as artificial intelligence, augmented reality/virtual reality, cybersecurity, and Internet of Things. This may provide much better diversification to tokenholders and a balanced and less volatile portfolio across technology start-ups. Returning exit money directly to investors: SPiCE VC is also different to other token-based hedge funds or venture capital funds in the way it will return money to investors. Most other token based venture capital funds or hedge funds are “evergreen funds”, which means they do not return a ll exit revenues but keep some for future investments. When they do return money, they only buy back a portion of the tokens in the open market – not from all tokenholders – in the hope that the increase in token price will bring value to investors. SPiCE VC will instead return the exit proceeds directly to SPiCE Tokenholders following Realisations made by SPiCE VC (net of fees and expenses). This means that whenever there is an exit from one of its portfolio companies, SPiCE VC will buy back the relative portion of SPiCE Tokens from every single SPiCE Tokenholder, to return the full net revenues to SPiCE Tokenholders. SPiCE VC will not be taking any carried interest from those SPiCE Tokenholders before all the money invested has been fully returned. For fur ther information see “Description of the SPiCE Tokens – Realisation Buybacks.”.
Disrupting venture capital with the blockchain In SPiCE VC’s opinion, a significant limitation of the venture model is that venture capital funds are not liquid. In the book “The Business of Venture Capital”, Mahendra Ramsinghani describes the problem as follows: “A VC partnership is a 10 year blind-pool - a long relationship in which investors have limited ability to exit, and no clarity of outcomes. ” For that reason, investing in the earliest stages of technology start-ups is usually reserved only for those who do not need their capital or any returns for five to ten years. It is the reason why groups of smaller investors are often left out, and why large financial institutions only dedicate a small portion of their investments to this asset class. Making venture capital funds liquid will help to transform the industry, and at the same time make venture capital funds much more inclusive (within regulatory frameworks), thereby attracting increased funding to venture capital.
Liquidity = potentially better I RR Increasing the liquidity of venture capital funds could give investors the option to exit early and may also give them opportunities to increase their internal rate of return ( IRR ). As an example (used for illustrative purposes only), a liquid fund (the Liquid Fund) and a traditional venture capital fund (the Traditional Fund) invest in the same start-up, which later becomes successful. Investors in the Traditional Fund will not receive any proceeds until the Traditional Fund achieves an exit from the start-up, which could potentially be years later. Whereas, assuming there is demand in the secondary market for the Liquid Fund’s tokens, the investors in the Liquid Fund would be able to sell, for example, a portion of their tokens when the start-up announces a major milestone, that leads to an increase in the value of the Liquid Fund’s investment in the start-up and thereby impacts on the value of the Liquid Fund’s tokens. To quantify this advantage, SPiCE VC intends to measure its performance not only by its IRR, but also by a new metric, which SPiCE VC calls Liquid IRR. IRR is calculated based on cash flows (negative and positive) of cash over time to show the attractiveness of an investment. However, SPiCE VC’s suggested formula is to look at the end of each period in the life of the fund, and assume that the SPiCE Tokenholder is capturing the value from any increase of the NAV (if any) at that point. This allows a return of a portion of the funds years earlier than could be the case for a traditional venture capital fund, which may translate to a higher effective IRR. This is described in more detail below.
31
Liquid I RR and its calculation In order to show to potential SPiCE VC investors how a liquid venture capital fund might have advantages compared to a traditional illiquid venture capital fund, SPiCE VC believes that it is necessary to reconsider the metrics that are used to measure and compare traditional venture capital f unds’ perf ormances. Simply using measures such as IRR and Cash on Cash (CoC) will not appropriately measure the potential performance of SPiCE VC. To quantify the potential liquidity advantage of SPiCE VC, SPiCE VC proposes to measure its fund not only by its IRR, but also by a new metric SPiCE VC calls “Liquid IRR”. Liquid IRR is in essence a modified notion of the IRR that embeds in a representation of the value of added liquidity i t is anticipated will be available to investors in SPiCE Tokens. For example, consider the following investment portfolio (A) performance:
Investment
Cash Flow - USD 100,000 Date
1/1/2017
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
1
2
3
4
5
6
7
8
9
10
USD 0 1/6/2017
USD 0
USD 0
USD 60,000
USD 30,000
USD 110,000
USD 50,000
USD 0
USD 150,000
USD 100,000
1/6/2018
1/6/2019
1/6/2020
1/6/2021
1/6/2022
1/6/2023
1/6/2024
1/6/2025
1/6/2026
An investment in portfolio (A) would provide a CoC return of 4.5 times over the example period and an IRR of 28.32 per cent.. The example above is a representation of many traditional funds, where the money invested in the fund can be locked in for a long period of time (typically 7 to10 years) and no value is generated until some exits or M&A events begin to occur. Given that the SPiCE VC Tokens are expected to be liquid and may be traded by SPiCE Tokenholders (subject to the terms of the SPiCE Tokens), SPiCE VC may offer increased liquidity for investors compared with a traditional venture capital fund. In order to assess the potential value of the additional liquidity, SPiCE VC will analyse both the expected IRR in tandem with the graph of the NAV (based on the same assumptions such as investment dates, write offs, etc.) and assume that an investor in SPiCE Tokens that wants to take advantage of liquidity may liquidate the SPiCE Tokens by selling some SPiCE Tokens to another party for a value representing the increase in NAV of SPiCE VC prior to exits made by SPiCE VC. This could generate some positive cash flow streams for SPiCE Tokenholders prior to exits by SPiCE VC crystallising the value for SPiCE VC. It means it would also be possible to calculate the potential IRR based on the combined stream of cash flows – exits by SPiCE VC of investments and sales by a holder of SPiCE Tokens of a proportion of the SPiCE Tokenholder’s investment in the SPiCE Tokens. So using the same example of the fund’s investment as before, if the published NAV is as follows:
32
and the tokenholder took advantage of the token price by selling tokens in years 4, 5, 7 and 8,
Exit
Year
Year
Year
Year
Yea
Year
Year
Year
Year
Year
Investment
1
2
3
4
5
6
7
8
9
10
- USD 100,000
USD 0
USD 0
USD 0
USD 10,000
USD 0
USD 10,000
USD 60,000
USD 120,000
USD 150,000
USD 100,000
NAV (+ Exits) Date
1/1/2017
- USD Cash Flow 100,000
USD 100,000
USD 100,000
USD 135,000
USD 300,000
USD 300,000
USD 300,000
USD 340,000
USD 360,000
USD 390,000
USD 450,000
1/6/2017
1/6/2018
1/6/2019
1/6/2020
1/6/2021
1/6/2022
1/6/2023
1/6/2024
1/6/2025
1/6/2026
USD 0
USD 0
USD 0
USD 150,000
USD 35,000
USD 0
USD 98,235
USD 50,000
USD 87,558
USD 29,186
the CoC would still be 4.5 times but the Liquid IRR would be higher at 31.87 per cent. than in comparison to a fund where no liquidity event for an investor during the life of the fund was possible.
H ow to calculate Liquid I RR To calculate the Liquid IRR one needs to solve for IRR in the following equation:
Where : represents the initial investment : represents cash flows arising from exit proceeds of SPiCE VC from underlying investments being distributed to SPiCE Tokenholders : represents the time from the beginning of CFn occurring : represents cash flows arising from voluntary sale of tokens by a tokenholder : represents the time from the beginning of occurring (does not have to be a whole number) As reflected in the following formula:
Where: : represents the token quantity the tokenholder had prior to the sale : represents the token quantity the tokenholder liquidated : represents the total number of tokens in the market
The share of a tokenholder in the distribution of an exit is calculated using the following formula:
Where: : represents the number of tokens a t okenholder owns : represents the total number of tokens in the market : represents the distributable proceeds of the exit
I mpact of liquidity event for SPi CE Tokenholders Of course, if an investor sells its SPiCE Tokens before an exit event involving SPiCE VC selling the underlying investment, the investor may also give up some potential upside, depending on the value at which the underlying exit occurs. In addition whenever a SPiCE Tokenholder transfers SPiCE Tokens their rel ative “share” in future exits is reduced . This is a choice for the investor based on its investment criteria and liquidity needs.
Liquidity = inclusivity The other advantage of SPiCE VC’s token-based venture capital model is that it could open venture capital to new audiences and makes it more inclusive. This is not only because more investors may participate (an advantage in its own right), but also because more people can afford to participate as the investment is anticipated to be more liquid than the traditional fund model.
The model for investing in liquid start-up projects via I COs The blockchain is disrupting the venture capital industry in more than one way: it is not just how venture capital funds raise and distribute funds; it is also how start-ups raise money from venture capital funds.
33
SPiCE VC believes that the difficulty for a start-up to secure a venture capital round is one of the main forces driving the current wave of ICOs. Entrepreneurs can now be funded directly by their communities. Theoretically, tokens are a powerful new way of funding companies. From a venture capital perspective, they offer an opportunity for liquid investments and faster exits. As a simplified example (used only for illustrative purposes), under the traditional equity model, a venture capital fund invests USD 5 million in return for 20 per cent. of a company and the company later has a USD 100 million exit. The venture capital fund has made a four times return. In an ICO equivalent scenario, the company issues tokens for USD 1 each and the venture capital fund buys five million tokens for USD 5 million and then the company becomes successful and the value of the token in the secondary market increases to USD 4:
In the traditional equity example, the venture capital fund can make the same exact exit from the same investment, four times, but in the ICO example, the investment is liquid, so the venture capital fund will not have to wait for an actual equity exit (which may come years later or may never come at all) and can choose to sell their tokens when the valuation of these tokens reaches USD 4, provided there is demand in the secondary market for the token. Some ICOs such as the NXT, Spectrecoin and Stratis ICOs have reportedly had a token price increase of 400 per cent. or more in less than three years; while other ICOs have not and never will. SPiCE VC cannot guarantee any return on its investments in portfolio companies or any returns for SPiCE Tokenholders. SPiCE VC believes that the token model requires a suitable company is suitable for it. SPiCE VC is open to investing in both start-ups via the equity model and the token model – whichever suits the specific company and market conditions best. What does a token-based venture capital fund mean for investors?
F or crypto investors: diversifi cation. This industry is in its very early days and the market is volatile and unpredictable, with massive fluctuations. Tokens offer an alternative which is available for investment in cryptocurrencies, but have a right to a return based on the performance of the underlying assets, rather than the state of the market. SPiCE VC offers qualified investors the option to diversify some of their cryptocurrency holdings, into a portfolio of technology start-ups across a variety of sectors, including blockchain, artificial intelligence, augmented reality, virtual reality, Internet of Things, cyber security enterprise and SMB platforms, consumer/social apps and services, IT and software development, media, gaming, e-commerce and retail.
F or institutional investors: a tectonic shift. For traditional investors, the liquidity of a complete asset class is increasing. Until now, venture capital funds have dominated technology investments. Suddenly with liquidity at both the fund and company level, hedge funds have started to invest directly in both company and venture capital tokens. Given that SPiCE VC is also going to invest in blockchain companies and ICOs, SPiCE VC’s fund also gives institutional investors exposure to this new asset class.
F or accredited/qualifi ed investors: a new world. For smaller qualified and/or sophisticated investors interested in technology investments, their main options previously were either to invest very early in start-ups – as angels – or to participate in crowdsourcing projects. SPiCE VC could provide such investors an opportunity to enjoy the diversified venture capital portfolio approach, with the added benefit of potentially lower risk due to the investments being made at a later stage in the lifecycle of start-ups. SPiCE VC may also provide investors with greater liquidity than a typical angel investment. SPiCE Investment Thesis
What does SPi CE VC invest in? Since 2012, the amount of venture capital raised by companies in Europe and Israel increased from a reported EUR 4.2 billion to EUR 16.2 billion in 2016. It was reported that venture capital fund raising was also at a record high level in 2016 with close to an estimated USD 10 billion raised, an increase in funding of up to 12 per cent. from the previous year. Geographically, in addition to Israel, the industry in Europe is concentrated in the UK and Germany. France is emerging as a start-up hub as well, and other parts of Europe like Spain and Scandinavia, while still smaller, are growing significantly. However, SPiCE has observed that in last few years a gap developed in this market: it is relatively easy for new start-ups to raise the first money for a new tech idea, often with only “a team and a dream”; but the money raised a t this stage, often does not provide enough runway for most start-ups to reach the ever-growing milestones required for a series A round. As entrepreneurs and investors, the Founders have witnessed the gap first hand and seen companies reaching the market with great teams and great products but struggling to then raise the interim USD 0.5 to USD 2 million required to show the metrics required by bigger venture capital funds. With the rise of micro venture capital firms, angel investors, accelerators and incubators like, Startupbootcamp, Wayra, investment instruments like SAFE and the growing popularity of equity
34
crowdfunding sites such as, CrowdCube and Seedrs in the United Kingdom, OurCrowd, iAngels and Exit Valley in Israel, Companisto in Germany or StartupXplorer in Spain, it has become relatively easy in the past few years for new start-ups to raise initial seed capital. In addition, many successful tech entrepreneurs and executives have turned some of their cash back into fuelling the ecosystem by investing in new start-ups in their own communities and areas of expertise. SPiCE VC believes that there are fewer series A rounds, the average A-round is larger and the milestones required to secure them are much more demanding as well. This is, in part, due to consolidation and growth in the size of venture capital funds. For example, in SPiCE VC’s opinion, if a start -up raised between USD 50,000 and USD 300,000 in an initial angel and/or seed financing, it is much harder for that start-up to reach the necessary milestones to raise between USD 5 and USD 10 million or more from the venture capital funds and corporates that invest at this stage in Europe and Israel. SPiCE VC believes that the series A crunch that occurred in the United States a few years ago is now happening in Europe and Israel. As a result, SPiCE VC believes many of the start-ups that received pre-seed and small seed funding through one of the many available mechanisms, do not have enough runway to reach the necessary metrics and milestones to raise capital from a series A round involving established venture capital firms. In SPiCE VC’s opinion, many start -ups find themselves with potentially great businesses but where they are “too early” for series A rounds, and “too late” for the angels and incubators. SPiCE VC has estimated that there are over 500 companies in that gap each year and SPiCE VC aims to identify seven to nine potentially successful start-ups in this gap each year, which are most likely to reach the next funding event within 12 to 18 months. These are companies that have received seed or pre-seed funding, have a working business and are reaching product-market fit, but have not yet reached the necessary metrics and milestones to launch a series A round or a successful ICO. The filters SPiCE VC will use to identify those seven to nine companies a year are set out in the SPiCE Investment Criteria section below. The SPiCE Investment Criteria
SPiCE VC will aim to invest in start-ups that could potentially meet the following criteria:
achieving a strong series A funding or a successful ICO;
within 12 to 18 months;
which SPiCE VC expects will generate a three to five times increase in company valuation.
Start-ups are now exploring the ICO route instead of the series A model. SPiCE VC will be able to invest in both types of start-ups, those opting for series A rounds and those opting for an ICO – whichever suits the specific company and market conditions best in SPiCE VC’s opinion, and so all of SPiCE VC’s filters are designed to analyse both types of companies. SPiCE VC has developed an investment algorithm with five filters, designed to find the seven to nine companies a year which SPiCE VC believes are most suitable for the SPiCE VC model. SPiCE VC reserves the right to adapt its investment criteria and/or strategy at any given time. SPiCE VC cannot guarantee that any portfolio company will have a successful series A round or ICO or that any returns will be generated by an investment in a portfolio company.
F ilter 1: Overall Series A / I CO F undabili ty Seri es A basic fundability Some of the factors that SPiCE VC will take into consideration when considering whether a company is 12 to 18 months away from a Series A round, in SPiCE VC’s opinion, are whether SPiCE VC believes that:
the team is impressive, has no critical role or technology gaps and the CEO is a leader;
the company has a positive culture, a vision and great practical execution;
the market is attractive for series A investors and there is a path to scale;
the product is strong and the technology is differentiated with a defendable competitive advantage; and
the company has strong evidence that it is achieving product-market fit.
This is not an exhaustive list and a company may not satisfy all of the criteria. In order to satisfy this filter, the company should, in SPiCE VC’s opinion, appear to be a strong series A calibre candidate.
I CO fundability When considering whether to invest in a company that is anticipating an ICO in the following 12 to 18 months, SPiCE VC is interested in those companies with a real potential to harness the blockchain to disrupt a market or create an entirely new one. The company’s offering also has to be naturally suitable for the token it sells in SPiCE VC’s opinion. The way most current ICOs work is by selling a token which can (or will in the future) be usable in conjunction with the issuer’s platform. The
35
value of the token is expected to be relative to the value it gives its users, which applies where a token is needed for the platform to function. SPiCE VC will not invest in companies where token value is unclear.
F ilter 2: Market Sector SPiCE VC is a horizontal fund. It will invest at a specific stage in the start-up lifecycle where SPiCE VC believes the startup is 12 to 18 months away from a successful series A round or an ICO. Therefore SPiCE VC will only look at sectors that can generate start-ups that meet its criteria and avoid start-ups in sectors which traditionally require longer development time such as hardware, biotech or medtech. SPiCE VC is not limited to investing in blockchain start-ups. It will invest in start-ups that meet its investment criteria and that utilise disruptive new technologies such as blockchain, cryptocurrencies, artificial intelligence, augmented reality/virtual reality, Internet of Things, autonomous systems and big data. It will focus on companies that will leverage these technologies to transform established industries and evergreen sectors such as enterprise and SMB platforms, financial services, consumer/social apps and services, IT and software development, media, gaming, e-commerce, retail, marketplaces and cybersecurity.
Geographic split SPiCE VC expects its investments to be split based on market conditions and its physical presence in the market, such split to be, approximately, an allocation of 80 per cent. of funds raised to invest in companies based in Israel and the United Kingdom and 20 per cent. of funds raised to invest for the rest of Europe. This may change over time and is dependent on market conditions. SPiCE VC will make investments in companies either directly or through subsidiaries of SPiCE VC and will invest through Spice Investments LP for Israeli investments and potentially investments in other jurisdictions, depending on the circumstances.
F ilter 3: Company Stage and Trajectory When it comes to companies targeting a series A round within 12 to 18 months, the company will have to have, in SPiCE VC’s opinion, a clear vision, strategy and growth plan. It can be pre-market scaling, but must have , in SPiCE VC’s opinion, strong enough market indicators that the series A milestones are within reach. SPiCE VC expects its targets investments to include companies that are consumer facing companies that are post initial launch and business-to-business companies that are able to show pilots, proof of concepts and/or partnerships with relevant clients. Candidate companies will not have reached series A milestones when SPiCE VC invests, but they must show that they track, in SPiCE VC’s opinion, the relevant metrics, have a clear plan to reach the required milestones and demonstrate the right trajectory towards these milestones. Therefore, SPiCE VC will only invest in companies that SPiCE VC believes to be at a stage where they have a significant product, which may not be publicly launched yet, but must be real and have, in SPiCE VC’s opinion, potential. The companies should be seeking an investment from SPiCE VC to refine and add features to their products and to ready their products to go live before or at the same time as the ICO or the series A round. There can be no guarantee that the companies SPiCE VC invests in will have a successful series A round or ICO.
F ilter 4: F it to SPi CE Business Model For traditional start-ups SPiCE VC is intending to hold approximately 15 to 25 per cent. of a company after the initial investment. SPiCE VC believes that the companies it invests in, if successful, may be able to increase in valuation by up to three to five times over a period of time. In order for SPiCE VC to invest in a company targeting an ICO, the company’s tokens should have such utility that, if the company is successful, SPiCE VC can believe that their value will increase up to five times over several years. SPiCE VC cannot guarantee that the investments SPiCE VC will make will result in any returns.
F ilter 5: Vi sion Alignment F ilter SPiCE VC’s target for its portfolio companies will be a strong partnership with a significant series A investor or, where appropriate, a successful ICO, within 12 to 18 months. If the company ’s management or board are not aligned with that model, SPiCE VC will not invest. The SPiCE Investment Process
SPiCE VC’s process for generating, evaluating, investing and managing its portfolio has seven stages:
Stage 1: Pipeline creation The SPiCE VC team will utilise their network to attempt to generate potential investment opportunities. SPiCE VC expects start-ups to arrive from four major sources:
referrals from series A venture capital funds where it is too early for the venture capital fund to invest;
36
through the Founders connections and relationships;
referrals from angel investors, incubators and accelerators; and
from the SPiCE Tokenholders.
Stage 2: Review of Materials Expectation: SPiCE VC hopes that its pipeline will generate up to 100 new candidates each month. At this stage, SPiCE VC will eliminate companies in which SPiCE VC cannot invest because the companies do not match SPiCE VC’s model. SPiCE VC will attempt to meet as many founders as possible.
Stage 3: Meeting and I nitial Discussions Expectation: An average of one meeting with a new start-up per day per partner. The purpose of the first meeting is to gather enough data to decide if it is worthwhile to pursue deeper analysis. This means applying SPiCE VC’s filters in parallel to assessing that a start-up is 12 to 18 months away from a strong series A round or a successful ICO in which SPiCE VC can expect a three to five times increase in the valuation of the start-up.
Stage 4: Deep Di ve Expectation: An average of one deep dive per week per partner. SPiCE will review each filter, set out in the SPiCE Investment Criteria section above, in detail. SPiCE VC acknowledges that the companies may not satisfy all of the investment criteria, but SPiCE VC will need to build enough evidence and conviction that the company can reasonably achieve, in SPiCE VC’s opinion, the next successful funding event within 12 to 18 months before deciding whether to invest. SPiCE VC intends to have further meetings with the founders and team before conducting reference checks, collecting additional metrics and data points for trajectory analysis and an examination of the product, technology, intellectual property, user experience, marketing, as well as reviewing the market and competition. SPiCE VC will work with its team of advisers as needed, as well as talking to potential future series A investors, partners, customers and community members.
Stage 5: Term Sheet and Closing Expectation: seven to nine deals per year (approximately on average one deal every six to seven weeks). SPiCE VC intends to have detailed discussions with the companies and to negotiate a term sheet regarding its investments. Subject to the outcome of the negotiations and the terms of the potential deal, SPiCE VC will seek to invest at the end of this stage.
Stage 6: Working to secure a strong seri es A round or successful I CO Expectation: up to four companies per partner, at any given time. SPiCE VC will seek a board position at each portfolio company, in order to help the company transition successfully to the next stage. SPiCE VC’s approach is to focus its efforts and help to achieve, in SPiCE VC’s opinion, a successful series A round or an ICO. SPiCE VC will work with companies to ensure that the key metrics are monitored and analysed and that there are strategies in place to improve those key metrics. SPiCE VC will use its network of connections to assist the company in achieving its targets. SPiCE VC will work with founders to prepare for either a series A round or an ICO and will contribute its experience, network and community connections.
Stage 7: Portfolio management to exit Expectation: up to six to seven per partner. Once a company has secured a series A investment, or has closed its ICO, SPiCE VC will take a less active role on the board of the Company. SPiCE VC’s plan is to stay with companies until they exit, or in case of token holding, until SPiCE VC thinks, at its sole discretion, that the token has reached a point where it is the equivalent of an exit. At that point, SPiCE VC will seek an exit and return the proceeds to the SPiCE Tokenholders. Fund liquidity
In order to attempt to increase the liquidity of the SPiCE Tokens:
SPiCE VC will publish the NAV Report on the SPiCE VC website. This report estimates the current value of SPiCE VC’s assets including the value of all portfolio companies and cash. The NAV provides a guideline to what the assets are worth at the time of the report’s creation ; however, the market can use it to predict the future value of the SPiCE Token. SPiCE VC does not expect the NAV to change for at least the first year after the Offering closes. This is because the NAV is based on portfolio companies’ latest external transactions or relevant
37
comparables in the market, so the calculated NAV will, in all likelihood, not change until one or more of the portfolio companies launches a follow-on round of investment or an ICO or there has been an exit.
SPiCE VC will, where permitted and subject to any confidentiality obligations, list the companies it invests in on its website and will share announcements made by its portfolio companies. SPiCE VC intends to initially hold approximately 15 to 25 per cent. in its portfolio companies. If any portfolio companies are successful, this may influence the price and/or demand for SPiCE Tokens. If any portfolio companies report negative news, such news will reduce the valuation of the SPiCE Tokens. SPiCE VC will not share any more information than is shared by the portfolio companies.
As SPiCE VC is a venture capital fund focusing on investing in technology companies, SPiCE VC expects that it will take several months before an investment is made and will be at least a year before an ICO or series A round occurs. SPiCE VC is attempting to increase the liquidity of the SPiCE Tokens through various options, which are designed to cater for different stages in the life of the fund and to ensure supply and demand in various potential scenarios and for different types of investors. Token exchanges
Token exchanges provide both the platform and the technical infrastructure for people to trade tokens. SPiCE VC plans to list the SPiCE Tokens on an exchange as soon as practical after the closing of the Offering and potentially list on more exchanges in the future. Currently, the majority of the exchanges are not able to support security tokens, but SPiCE VC expects exchanges to start supporting security tokens in the coming months. Being listed on an exchange does not guarantee supply or demand; this will depend on the performance of SPiCE VC and market conditions. Reserve liquidity
SPiCE VC will allocate up to 5 per cent. of the total proceeds received, calculated in USD, from the Offering to a reserve (the Reserve). From the third anniversary of the closing of the Offering, SPiCE VC reserves the right to wind-up the Reserve at any given time. SPiCE VC intends to launch the Reserve no later than 1 February 2018. SPiCE VC anticipates that the Reserve will increase the liquidity for smaller transfers of SPiCE Tokens (up to hundreds of thousands of dollars). The algorithm that will be used to calculate the price of each trade against the Reserve and its mechanism will be published on the SPiCE website in due course. The price at which the SPiCE Tokens may be bought from or sold to the Reserve may differ from the market price of the SPiCE Tokens at any given time. When SPiCE VC decides, in its absolute discretion, to windup the Reserve, SPiCE VC shall release any funds remaining in the Reserve to its general assets available for investment in accordance with its investment policy and shall sell any SPiCE Tokens held in the Reserve on the open market. Such disposal shall not be a Realisation and SPiCE VC shall be free to invest the proceeds from those disposals in accordance with its investment policy. SPiCE VC will provide further details on the Reserve following the date of this Information Memorandum. Fund Net Asset Value (NAV) Calculation Policy
SPiCE VC will publish a quarterly NAV estimation on 31 March, 30 June, 30 September and 31 December of each calendar year in respect of its portfolio. SPiCE VC expects the calculation and adherence of the NAV calculation to accounting practices to be verified by one Deloitte, PwC, EY and KPMG. In general, there are several methods used to calculate the NAV of venture capital funds. SPiCE VC’s NAV calculation method
The NAV is calculated as the sum of the estimated fair value of the securities, tokens, cash and other assets held by SPiCE VC less all current liabilities. SPiCE VC’s assets at any given t ime can be categorised as follows:
Cash and cash equivalents (including ETH and BTC): typically from a Realisation which is yet to be used to fund a Realisation Buyback and/or proceeds from the Offering not yet invested; Level 1 assets: if relevant, typically tokens held as a result of an investment in ICOs; Level 2 assets: these assets will typically be as a result of investments in ICOs when the tokens are not yet tradable; and Level 3 assets: these assets are a result of an investment in a portfolio company and are in the form of equity in start-up companies.
SPiCE VC will use the following methods to calculate the NAV for each category of assets. Level 1 assets
38
The fair value of the assets will be determined by taking their actual quoted market price on the day of the NAV calculation in USD or, if the assets are tokens, the average of their quoted market prices on the three largest exchanges (by volume) trading these tokens on the day of NAV calculation (if the tokens are traded on fewer than three exchanges, the average quoted market price by the largest exchange (by volume) on which the tokens are traded shall be used). Where the asset is price or denominated in a fiat currency other than USD, SPiCE VC will provide details of the exchange rate used to convert the value into USD. Level 2 assets SPiCE VC will use the USD value of the actual amount invested by SPiCE VC as the fair value for this type of asset. Level 3 assets SPiCE VC will use a combination of two methods to calculate the NAV for this type of asset:
Precedent Transactions Method: in most cases this will be based on recent funding or acquisitions of similar companies, determined by revenue, EBITDA or enterprise value metrics. In some instances the data might be hard to obtain or might be out of date and represent SPICE VC’s estimate of the value of the asset . Industry Comparables Method: SPiCE VC will, where possible, compare portfolio companies against publicly listed companies which are clear industry comparables and whose valuation has been validated. Once SPiCE VC has a comparison set, it will find the average enterprise value/EBITDA multiple and use that multiple as the basis for valuing the portfolio company.
Calculating the total NAV The total calculated NAV will be the sum of SPiCE VC’s cash and cash equivalent and the calculated NAV for all SPiCE VC assets less any liabilities of SPiCE VC: CASH +
NAV(
)+
NAV(
)+
NAV(
) – SPICE LIABILITIES
Where: : represents cash and cash equivalent assets; : represents level 1 assets; : represents level 2 assets; : represents level 3 assets; and SPICE LIABILITIES: represents the total liabilities of SPiCE VC. The above NAV valuation methods may be modified by SPICE VC if, and to the extent that, SPICE VC shall determine that such modifications are advisable in order to reflect factors which may impact the value or cost of any investment including (i) restrictions upon marketability (including the suspension or termination of trading of any liquid investment in any market), (ii) the expected costs, including brokerage commissions, of liquidating any liquid investment or other asset, (iii) any distribution made with respect to any liquid investment or any accruals thereon.
39
ABOUT THE FOUNDERS
The founding team at SPiCE is comprised of three experienced and complementary individuals that bring a wealth of investment, entrepreneurial and corporate expertise. Throughout their careers, the Founders have been involved in building technology companies from scratch, managing them, investing in them and securing venture capital for them. They know the technology ecosystem intimately and have a strong network in the technology community. Amihay Ben David
Ami is a serial entrepreneur and product innovator. He has founded four companies, where he was the inventor of key products and led their subsequent marketing. His products ranged across internet banking, CRM applications, mobile content distribution, business messaging, mobile search engines and a mobile AI-powered phone interface. On the business side, he has experience of bringing products to market and raising funds for his companies from venture capitalists. Ami was also a Vice President in the Investments division of Magma VC and was a Senior Vice President involved in establishing and running the European and Asian operations of Oberon Media. Tal Elyashiv
Tal is a senior executive, entrepreneur and early stage investor. In the financial industry, he served as a CIO at Capital One from Capital One’s inception to becoming a Fortune 500 company, managing 1,200 IT professionals, and as Senior Vice President in Bank of America where he led the technological development of the consumer banking business. He was then Head of Technology at 888 Gaming and at BondDesk. On the entrepreneurial side, Tal was the founder and CEO of three start-ups in China, the United States and Israel. He has also made many successful angel investments and has served as a board member of multiple start-ups. Carlos Domingo
Carlos is a senior executive, entrepreneur and investor. He was the President and CEO of Telefonica R&D and CEO of New Business and Innovation at Telefonica Digital, as well as co-founder and board mem ber of Wayra, one of the world’s largest corporate accelerators. He has been CTO, CEO or board member of multiple tech start-ups. On the investment side, he is the founder of Sling Ventures, an angel investment fund co-invested by the European Invested Bank, one of the founders of Dubai Angel Investors, a Venture Partner in THCAP VC and he previously managed the corporate venture capital of Telefonica Digital. Carlos was also one of the leaders of open source project Firefox OS.
40
DESCRIPTION OF THE SPiCE TOKENS
Each SPiCE Token will be issued by SPiCE VC. In aggregate up to 130,000,000 SPiCE Tokens will be offered pursuant to the Offering. The SPiCE Tokens have no voting, distribution, pre-emptive or conversion rights and offer redemption rights only for SPiCE VC. This section sets out the key terms of the SPiCE Tokens, which shall be set out in the SPiCE Token Instrument. Of the Total Issued SPiCE Tokens:
7.5 per cent. shall be issued to the Founders; and
7.5 per cent. shall be reserved to pay to SPiCE VC’s partners, advisers and service providers.
Smart Contract
The SPiCE Tokens will be issued electronically and comply with the ERC20 smart contract standard consisting of software code, existing on the Ethereum blockchain (the Smart Contract). ERC20 standard is an industry standard for tokens issued on the Ethereum blockchain and requires certain standard functions and events to be included into the software code. The software code of this Smart Contract is open source and will be published on the SPiCE VC website in due course. Distribution Policy
The SPiCE Tokens have no distribution or dividend rights, other than on a Realisation Buyback, a Regulatory Redemption and a Liquidity Buyback as further set out below. Any return of capital to SPiCE Tokenholders will occur through the Realisation Buyback process of the SPiCE Tokens as described below. Realisation Buybacks
If there is a Realisation in the portfolio of investments held directly or indirectly by SPiCE VC, there will be a Realisation Buyback subject to the terms and conditions of the SPiCE Token Instrument at a price to be determined by SPiCE VC, using the funds received from the Realisation (after the deduction of any applicable fees and expenses). The Repurchase Price on a Realisation Buyback shall be determined as follows:
for all Realisation Buybacks (other than the Final Realisation Buyback), the Repurchase Price shall be the higher of (i) the market price of the SPiCE Token (determined to be the average price at 8:00 a.m. (London time) on the day before the Realisation Buyback Notice is published over the three largest cryptocurrency exchanges trading the SPiCE Token by volume); and (ii) the NAV per SPiCE Token; and for the Final Realisation Buyback, the Repurchase Price shall be the NAV per SPiCE Token.
The number of issued SPiCE Tokens to be repurchased in a Realisation Buyback by SPiCE VC following a Realisation shall be determined using the following formula:
where:
Net Realisation Proceeds are the proceeds from the Realisation less any applicable fees and expenses;
Repurchase Price is the price per SPiCE Token as determined pursuant to the above; and
Issued SPiCE Tokens is the total number of SPiCE Tokens held by SPiCE Tokenholders.
In advance of a Realisation Buyback, once the proceeds of the Realisation have been transferred to SPiCE VC and all fees and expenses have been deducted, SPiCE VC shall publish a Realisation Buyback Notice. The Realisation Buyback Notice shall state: (i)
date and time the Realisation Buyback will take effect;
(ii)
the Realisation Amount to be shared amongst SPiCE Tokenholders pro rata to each SPiCE Tokenholder’s holding of SPiCE Tokens; and
(iii)
the information SPICE Tokenholders will need to provide in order to complete the SPiCE Tokenholder Checks.
A SPiCE Tokenholder ’s proportion of the Realisation Amount shall be paid in ETH, converted from USD at the prevailing exchange rate at the time of the Realisation Buyback available to SPiCE VC. SPiCE VC reserves the right to pay the Realisation Amount to the SPiCE Tokenholder in another currency of its choice. Following the publication of the Realisation Buyback Notice, SPiCE VC will pay the proceeds of the Realisation Buyback to a SPiCE Tokenholder subject to the SPiCE Tokenholder meeting the requirements of the SPiCE Tokenholder Checks,
41
including verifying the identity of any digital wallets to which the proceeds of the Liquidity Buyback will be sent, either by sending a unique identifier from the digital wallet to SPiCE VC or by any other processes specified by SPiCE VC, within 10 days of the publication of the Realisation Buyback Notice, to the satisfaction of SPiCE VC in its absolute discretion, and complying with the terms and conditions of the Token Instrument. Failure by a SPiCE Tokenholder to validly provide information required to complete the SPiCE Tokenholder Checks may result in the SPiCE Tokenholder’s SPiCE Tokens being designated Blocked SPiCE Tokens by SPiCE VC in its sole discretion. In the event that a SPiCE Tokenholder’s SPiCE Tokens are designated as Blocked SPiCE Tokens, that SPiCE Tokenholder will not be able to transfer its SPiCE Tokens or participate in a Realisation Buyback of its SPiCE Tokens. The Blocked SPiCE Tokens will remain inactive until the requested information is provided by the SPiCE Tokenholder and the SPiCE Tokenholder meets the requirements of the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC in its absolute discretion. If a SPiCE Tokenholder fails to meet the requirements of the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC in its absolute discretion within 30 days of the SPiCE Tokens being designated Blocked SPiCE Tokens, SPiCE VC reserves the right, in its absolute discretion, to redeem the relevant Blocked SPiCE Tokens pursuant to a Regulatory Redemption or to burn the relevant Blocked SPiCE Tokens and not to pay the Repurchase Price of the SPiCE Tokens subject to the Realisation Buyback to that SPiCE Tokenholder. Following such event the SPiCE Tokenholder whose SPiCE Tokens were burned will have no further right or claim to the SPiCE Tokens or against SPiCE VC. If, at the time of a Realisation Buyback, there are any Blocked SPiCE Tokens, the holders of the Blocked SPiCE Tokens will not be able to receive their pro rata share of the Realisation Amount in respect of the Blocked SPiCE Tokens on the date of the Realisation Buyback, as set out in the Realisation Buyback Notice. If the SPiCE Tokenholder complies with the terms and conditions of the SPiCE Tokens and meets the requirements of the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC in its absolute discretion within 30 days of the Realisation Buyback , so that that SPiCE Tokenholder’s SPiCE Tokens are no longer Blocked SPiCE Tokens, that SPiCE Tokenholder shall be able to receive its pro rata proportion of the Realisation Amount in respect of the Blocked SPiCE Tokens from SPiCE VC. If, 30 days after the Realisation Buyback, a SPiCE Tokenholder’s SPiCE Tokens are still Blocked SPiCE Tokens, that SPiCE Tokenholder shall forfeit its right to its pro rata proportion of the Realisation Amount in respect of its Blocked SPiCE Tokens and shall waive all rights to such amount. That SPiCE Tokenholder’s pro rata share of the Realisation Amount in respect of its Blocked SPiCE Tokens shall be returned to SPiCE VC to be dealt with as follows: (a)
if the Realisation Buyback occurred prior to the fourth anniversary of the closing of the Offering, to be used for investment purposes; or
(b)
if the Realisation Buyback occurred on or after the fourth anniversary of the closing of the Offering, to be returned to the SPiCE Tokenholders as part of the next Realisation Buyback.
SPiCE VC reserves the right, in its sole discretion, to designate a SPiCE Token as a Blocked SPiCE Token and to burn the relevant Blocked SPiCE Tokens in accordance with the terms and conditions of the SPiCE Tokens. SPiCE VC does not expect to receive any dividends from start-ups, but if there are any, they shall be treated as a Realisation. On a Realisation Buyback, SPiCE VC shall be able to repurchase fractions of SPiCE Tokens. All SPiCE Tokens or fractions of SPiCE Tokens repurchased through a Realisation Buyback by SPiCE VC will immediately be burned. Liquidity Buybacks
If the market price of a SPiCE Token, determined to be the average price at 8:00 p.m. (London time) over the three largest cryptocurrency exchanges trading the SPiCE Token by volume, on any particular day drops below 70 per cent. of the NAV per SPiCE Token based on SPiCE VC’s most recent NAV Report, SPiCE VC may, in its sole discretion, purchase SPiCE Tokens on the open market in exchange for ETH (or such other currency as SPiCE VC may choose in its sole discretion). SPiCE VC shall decide, in its sole discretion, whether to burn or resell the redeemed SPiCE Tokens pursuant to a Liquidity Buyback, subject to applicable laws and regulation. Any such sale will not be a Realisation. Prior to transferring the proceeds of a Liquidity Buyback, a SPiCE Tokenholder must meet the requirements of the SPiCE Tokenholder Checks, including verifying the identity of any digital wallet to which the proceeds of the Liquidity Buyback will be sent, either by sending a unique identifier from the digital wallet to SPiCE VC or by any other processes specified by SPiCE VC, to the satisfaction of SPiCE VC in its absolute discretion. Voting
SPiCE Tokenholders will not be entitled to any voting rights or other management or control rights in relation to SPiCE VC or any of SPiCE VC’s investments. Regulatory Redemption
SPiCE VC may at any time redeem all or some of the SPiCE Tokens, in its sole discretion, at a redemption price calculated as the lower of (i) 100 per cent. of the market price per SPiCE Token (determined to be the average price at 8:00 a.m. (London time), over the three largest cryptocurrency exchanges trading the SPiCE Token by volume on the day prior to the redemption), (ii) the then NAV per SPiCE Token, or (iii) the funds available from liquidation of the assets of SPiCE VC and SPiCE Investments LP within the following three month period (the Redemption Price), in each case, upon receipt of
42
information that the status of the relevant SPiCE Tokenholder may cause regulatory concern for SPiCE VC, as described in this Information Memorandum under “Description of the SPiCE Tokens — Regulatory Redemption”. The purpose of this regulatory redemption provision is (i) to maintain the number of U.S. Persons holding SPiCE Tokens at 99 persons or fewer; (ii) to enforce against any non-compliance with the terms of the SPiCE Tokens or the SPiCE Tokenholder Checks; and (iii) to ensure compliance with any other legal, regulatory or compliance requirements. SPiCE VC will issue a notice of redemption at least 30 and not more than 60 calendar days prior to the date fixed for redemption (the Redemption Date). On the Redemption Date, SPiCE VC shall redeem the SPICE Tokens in exchange for the Redemption Price. Such redeemed SPiCE Tokens can be sold again by SPiCE VC, subject to applicable laws and regulation or can be burned. Prior to transferring the proceeds of a Regulatory Redemption, a SPiCE Tokenholder must meet the requirements of the SPiCE Tokenholder Checks, including verifying the identity of any digital wallet to which the proceeds of a Regulatory Redemption will be sent, either by sending a unique identifier from the digital wallet to SPiCE VC or by any other processes specified by SPiCE VC, to the satisfaction of SPiCE VC in its absolute discretion. Liquidation Rights
Subject to applicable law, SPiCE Tokenholders will not have any liquidation rights in the event of the bankruptcy or liquidation of SPiCE VC, other than on a liquidation at the end of the Term (the Term Liquidation) of SPiCE VC. SPiCE VC is under no obligation to redeem the SPiCE Tokens at any time. Term of the SPiCE VC
SPiCE VC has a fixed termination date of seven years from the date of the closing of the Offering, which can be extended by a further two years, if determined by SPiCE VC, SPiCE Manager, SPiCE GP and SPiCE Investments LP (if formed), to be in the best interests of the SPiCE Tokenholders (the Term). At the end of the Term, the Term Liquidation will occur with SPiCE Manager appointed as the liquidator. Listing
The SPiCE Tokens will constitute a new class of securities, offering conditional rights to the returns based on the underlying assets of SPiCE VC in accordance with the terms of the SPiCE Tokens, with no established trading market. SPiCE VC intends to list the SPiCE Tokens on multiple cryptocurrency exchanges that accept tokens. SPiCE VC does not intend to list the SPiCE Tokens on any national securities exchanges. There is no assurance that the prices at which the SPiCE Tokens will sell in the market after the Offering will not be lower than the Offering Price or that an active trading market for the SPiCE Tokens will develop and continue after the Offering. Accordingly, there can be no assurance as to the liquidity of, or the trading market, for the SPiCE Tokens. Reporting
SPiCE VC will publish the NAV Report on the SPiCE VC website on 31 March, 30 June, 30 September and 31 December of each calendar year in respect of its portfolio. The SPiCE Tokens may not be offered, sold, pledged or otherwise transferred in the period which is two weeks before the publication of each NAV Report. Management Fees
SPiCE Manager and SPiCE GP will in aggregate be paid by SPiCE VC and SPiCE Investments LP respectively an amount equal to, on average over the seven years of the fund, 2.5 per cent. of the total proceeds of the Offering per annum. SPiCE Manager’s and SPiCE GP’s fees will be paid quarterly in advance. Carry
Once the Realisation Buybacks have in aggregate returned to SPiCE Tokenholders the amount raised in the Offering, SPiCE VC shall distribute 85 per cent. of all further Realisations to the SPiCE Tokenholders in accordance with the Realisation Buyback process and shall distribute the remaining 15 per cent. to SPiCE Manager and SPiCE GP. Ongoing Expenses
Ongoing operational costs including accounting, legal and tax expenses will be charged to SPiCE VC. Investor Allocation
The SPiCE Tokens will only be available for purchase by up to a maximum of 99 verified beneficial owners that are “accredited investors” (as Defined in Regulation D under the Securities Act) that are U.S. Persons. Redemption, if ever made, can only be made to a maximum of 99 beneficial owners that are U.S. Persons, with priority granted for U.S. Persons who purchased SPiCE Tokens in the Offering, in SP iCE VC’s absolute discretion. The selected 99 beneficial owners that are U.S. Persons will be notified that they have been selected on or before the date 15 calendar days before redemption by e-mail
43
to the e-mail address maintained on the SPiCE Token Platform. Any U.S. Person offered SPiCE Tokens by a Non-U.S. Person following the Offering are warned that such transfer is not permitted pursuant to the transfer and resale restrictions applicable to the SPiCE Tokens and that any such transfer or sale may result in the loss of the full value of their investment, including that they may be unable to redeem such SPiCE Tokens. U.S. Persons permitted to purchase SPiCE Tokens will also be required to maintain their SPiCE Tokens on the SPiCE Token Platform for a period of one year from the issuance of the SPiCE Tokens to comply with Section 144 of the Securities Act, and will be required to make undertakings to the SPiCE Token Platform that they will, if they remove their SPiCE Tokens from the SPiCE Token Platform, not sell unless they sell (A) to a Non-U.S. Person outside the United States of America in an offshore transaction in compliance with Rule 903 or Rule 904 under the Securities Act; or (b) to any single beneficial owner that is a U.S. Person but only if they sell all of their SPiCE Tokens to that U.S. Person and notify the SPiCE Token Platform of the new U.S. investor ’s contact details. It is understood and agreed that SPiCE VC shall have the sole right, at its complete discretion, to accept or reject subscriptions for SPiCE Tokens, in whole or in part, for any reason and that the same shall be deemed to be accepted by SPiCE VC only when SPiCE Tokens are issued. Subscriptions need not be accepted in the order received, and the SPiCE Tokens may be allocated among Subscribers by SPiCE VC in its sole discretion. Exchange Rate
The currency of the SPiCE Tokens will be U.S. dollars and the price per SPiCE Token will be USD 1 (inclusive, in the case of Singapore, of any GST). Subscribers shall subscribe for SPiCE Tokens in one of USD, EUR, BTC and ETH in both the Pre-Sale and the Main Sale. The minimum subscription amounts for the Pre-Sale are as follows: U.S. Persons must subscribe for a minimum amount of USD 200,000 (or equivalent in EUR, ETH or BTC); and
Non-U.S. Persons must subscribe for a minimum amount of USD 50,000 (or an equivalent amount in EUR, ETH and BTC).
The minimum subscription amounts for the Main Sale shall be as follows: U.S. Persons must subscribe for a minimum amount of USD 50,000 (or an equivalent amount in EUR, ETH or BTC).
Non-U.S. Persons subscribing for SPiCE Tokens in EUR or USD must subscribe for a minimum amount of USD 50,000 (or an equivalent amount in EUR).
There is no minimum subscription amount for Non-U.S. Persons subscribing for SPiCE Tokens in ETH or BTC.
SPiCE VC, at their sole discretion, will determine a portion of the funds collected in EUR, ETH and BTC to convert into U.S. dollars within several business days following a successful closing of the Offering. SPiCE VC will aim to convert the cryptocurrency received on a best-execution basis, within two business days of closing the book building, at a market rate with minimal slippage. SPiCE VC will approach three cryptocurrency exchanges and institutional liquidity providers where it has accounts open, and request quotes from each of those exchanges. BTC and ETH received will then be converted to U.S. dollars with the exchange that has offered the best terms. The total number of SPiCE Tokens to be issued to each Subscriber shall be determined in accordance with the process set out in the section of this Information Memorandum entitled “The Offering” . Subscribers will be alerted to the closing and whether they were successful in subscribing by e-mail and an update to their accounts. Unclaimed Funds
Unclaimed USD, EUR, ETH or BTC from a redemption will be attempted to be returned by e-mail invitation to the e-mail address given by a SPiCE Tokenholder. The SPiCE Tokenholder will be asked to provide the instructions where the returned funds should be sent to. If the SPiCE Tokenholder does not respond for a period of 60 days following an e-mail requesting instructions for a refund, the funds shall be deemed to become the property of SPiCE VC, which SPiCE VC will be able to invest in accordance with SPiCE VC’s investment policy, and the SPiCE Tokenholder will have no further claim or right to such amount. Form of Ownership
The SPiCE Token is a digital token on the Ethereum blockchain with an ability to execute code. Upon the closing of the Offering, all SPiCE Tokens issued to successful Subscribers will be deposited into Ethereum wallets. SPiCE VC anticipates that the SPiCE Tokens will be sent to the digital wallet from which the payment of the Subscription Amount in ETH or BTC was received or to the digital wallet set out in the Subscription Form where the payment of the Subscription Amount has been made in USD or EUR. Transfer
On a transfer of a SPiCE Token from a SPiCE Tokenholder to a transferee (the SPiCE Token Transferee ), the SPiCE
44
Token Transferee will be required to provide to SPiCE VC the information requested by SPiCE VC in its absolute discretion in order for SPiCE VC to comply with its reporting obligations under FATCA. Failure by a SPiCE Token Transferee to validly provide on the transfer the information required by SPiCE VC in its absolute discretion in order for SPiCE VC to comply with its reporting obligations under FATCA may r esult in the SPiCE Token Transferee’s SPiCE Tokens being designated Blocked SPiCE Tokens by SPiCE VC, in its absolute discretion. The SPiCE Token Transferee shall also provide the information requested to complete the SPiCE Tokenholder Checks (other than the information provided in respect of FATCA, which is to be provided on transfer) to the satisfaction of SPiCE VC, in its sole discretion, within 30 days of the transfer. Failure by a SPiCE Token Transferee to validly provide, within the timeframe, the information required to complete the SPiCE Tokenholder Checks may result in the SPiCE Token Transferee’s SPiCE Tokens being designated Blocked SPiCE Tokens by SPiCE VC, in its absolute discretion. In the event that a SPiCE Token is designated an Blocked SPiCE Token, the SPiCE Token Transferee will not be able to transfer its SPiCE Tokens or participate in a Realisation Buyback of its SPiCE Tokens. The Blocked SPiCE Tokens will remain blocked until the requested information is provided by the SPiCE Token Transferee and the SPiCE Token Transferee meets the requirements of the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC in its absolute discretion. If a SPiCE Token Transferee fails to meet the requirements of the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC in its absolute discretion within 30 days of the SPiCE Tokens becoming Blocked SPiCE Tokens, SPiCE VC reserves the right, in its absolute discretion to burn the SPiCE Tokens. Following such event the SPiCE Token Transferee will have no further right or claim to the SPiCE Tokens or against SPiCE VC. Transfer Restrictions
The issuance and sale of the SPiCE Tokens have not been registered under the Securities Act or any other applicable securities laws and, unless so registered, the SPiCE Tokens may not be offered, sold, pledged or otherwise transferred within the United States or to or for the account of any U.S. Person, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws. The SPiCE Tokens are being offered and issued, only outside the United States to persons other than U.S. Persons in reliance upon Regulation S under the Securities Act. Each purchaser of SPiCE Tokens will be deemed to represent, warrant, and agree as follows will be deemed to represent, warrant, and agree as follows: (1)
Either it is: (A)
an “accredited investor ” (as defined in Rule 501 of Regulation D under the Securities Act); or
(B)
not a “U.S. Person” and is acquiring the SPiCE Tokens in an “offshore transaction” (each as defined in Rule 902 of Regulation S under the Securities Act).
(2)
It understands that the SPiCE Tokens are not registered under the Securities Act or any other securities laws, including U.S. state securities or blue sky laws and non-U.S. securities laws, and SPiCE VC does not intend to register the SPiCE Tokens under such laws.
(3)
It is acquiring the SPiCE Tokens for its own account for investment purposes only and not with a view to resale or distribution.
(4)
If such purchaser is an acquirer in a transaction that occurs outside the United States within the meaning of Regulation S, it acknowledges that it may not sell or otherwise transfer the SPiCE Tokens at any time to a U.S. Person or for the account or benefit of a U.S. Person within the meaning of Rule 902 under the Securities Act.
(5)
If such purchaser is an acquirer in a transaction occurring inside the United States, it acknowledges that until one year following the issuance of the SPiCE Tokens it will not be permitted to offer, sell or transfer the SPiCE Tokens, other than to the Reserve, as permitted under applicable laws and regulations or pursuant to registration or exemption therefrom, and that after such date it will not be permitted to sell or otherwise transfer the SPiCE Tokens to any other U.S. Person unless they sell all of their SPiCE Tokens to a single U.S. Person.
(6)
It understands that the SPiCE Tokens will, unless otherwise agreed by SPiCE VC and the holder thereof, be deemed to bear a legend substantially to the following effect: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT ) , AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE F OLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (1)
AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A) IF IT IS A U.S. PERSON, THEN NOT UNTIL THE FIRST ANNIVERSARY OF THE ISSUANCE OF THE SPiCE TOKENS AND NOT TO ANY U.S. PERSON (AS DEFINED IN REGULATION S) UNLESS THEY SELL ALL OF THEIR SPiCE TOKENS TO A SINGLE U.S. PERSON; (B) IF IT IS A NON-U.S. PERSON OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR RULE 904 UNDER THE SECURITIES ACT; (C) TO THE
45
RESERVE, AS PERMITTED UNDER APPLICABLE LAWS AND REGULATIONS OR PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM AND IN ACCORDANCE WITH THE TERMS OF THE SPiCE TOKENS; (D) TO SPiCE VC OR ANY SUBSIDIARY THEREOF; OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE AND LOCAL SECURITIES LAWS, AND (2)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE (1)(E) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. (7)
It (a) is able to act on its own behalf in the transactions contemplated by this Information 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 SPiCE Tokens, and (c) (or the account for which it is acting) has the ability to bear the economic risks of its prospective investment in the SPiCE Tokens and can afford the complete loss of such investment.
(8)
It acknowledges that (a) none of SPiCE VC or any person acting on its behalf has made any statement, representation, or warranty, express or implied, to it with respect to the issuers or the offer or sale of any SPiCE Tokens, other than the information included in this Information Memorandum, and (b) any information it desires concerning SPiCE VC, the SPiCE Tokens or any other matter relevant to its decision to acquire the SPiCE Tokens (including a copy of this Information Memorandum) is or has been made available to it.
(9)
Either (i) no portion of the assets used by it to purchase or hold the SPiCE Tokens constitutes assets of any (a) employee benefit plan that is subject to Title I of ERISA, (b) plan, individual retirement account or other arrangement that is subject to Section 4975 of the U.S. Internal Revenue Code (the Code) or provisions under any other federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, Similar Laws) , or (c) entity whose underlying assets are considered to include “ plan assets” of any such plan, account or arrangement or (ii) the purchase and holding of the SPiCE Tokens will not constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a similar violation under any applicable Similar Laws.
(10)
If it is located or resident within a member state of the European Economic Area, that it is a “qualified investor ” within the meaning of the Prospectus Directive .
(11)
If it is located or resident within the United Kingdom, that it is (i) an “investment professional” within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order); or (ii) a person falling within Article (2)(a) to (d) of the Order; or (iii) any other person to whom the Offering may otherwise lawfully be communicated under the Order.
(12)
It acknowledges that SPiCE VC will not be required to accept for registration of transfer any SPiCE Tokens acquired by it, except upon presentation of evidence satisfactory to SPiCE VC that the restrictions set forth herein have been complied with.
(13)
It acknowledges that SPiCE VC and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements and agrees that if any of the acknowledgments, representations or agreements deemed to have been made by its purchase of the SPiCE Tokens are no longer accurate, it shall promptly notify SPiCE VC. If it is acquiring the SPiCE Tokens as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such account and it has full power to make the foregoing acknowledgments, representations and agreements on behalf of each account.
SPiCE VC’s obligations to comply with laws and regulations relating to the US Foreign Account Tax Compliance Act and the OECD Common Reporting Standard
Singapore laws and regulations, and the Singapore-US intergovernmental agreement and other agreements or treaties entered into by Singapore, implementing the Standard for Automatic Exchange of Financial Account Information in Tax Matters (for the wider approach) developed and published by the Organisation for Economic Co-operation and Development, commonly known as the Common Reporting Standard ( CRS) and the US Foreign Account Tax Compliance Act ( FATCA) each require certain Singaporean financial entities (which may include SPiCE VC) to report certain information regarding certain financial accounts (which may include SPiCE Tokens) to the Inland Revenue Authority of Singapore ( IRAS) and to follow related due diligence procedures. Accordingly Subscribers for SPiCE Tokens will be required to provide SPiCE VC with certain information and signed or positively affirmed certifications to ensure that SPiCE VC can comply with its due diligence and reporting obligations relating to CRS and/or FATCA, before any Subscriber will be issued with SPiCE Tokens. SPiCE Tokenholders may be requested by SPiCE VC to provide certain information and certifications to ensure that SPiCE VC can comply with its CRS
46
and FATCA obligations. This information may be requested at any time by SPiCE VC from SPiCE Tokenholders and may be requested on an ongoing basis or on a transfer of SPiCE Tokens. The required information and certifications from a Subscriber or a SPiCE Tokenholder will depend on whether the Subscriber or a SPiCE Tokenholder is a natural person. If it is a natural person this may include (without limitation):
their name;
their address;
their jurisdiction(s) of tax residence;
their Taxpayer Identification Number (TIN) or equivalent number (if any);
their date of birth;
whether it is a US citizen; and
the date on which the SPiCE Tokenholder acquired or disposed of any SPiCE Token.
For Subscribers or SPiCE Tokenholders which are not natural persons, the Subscriber or SPiCE Tokenholder would in addition to providing information and certifications about itself, also be required in certain cases, (for example, where it is regarded as a passive non-financial entity for FATCA or CRS purposes), to provide the above information and certifications in respect of some or all of the ir “controlling persons”, i.e. natural persons who exercise direct or indirect control over it (including, in the case of a trust, the settlor(s), trustee(s), protector(s) (if any), beneficiary(ies) or class(es) of beneficiaries, and any other natural person(s) exercising ultimate effective control over the trust, and in the case of a legal arrangement other than a trust, persons in equivalent or similar positions). The term "Controlling Persons" should also be interpreted in a manner consistent with the Financial Action Task Force Recommendations meaning that (amongst other things) a stake which is not sufficient to result in outright legal control (for example, a 25% interest) may be regarded as "controlling" for the purposes of FATCA and/or CRS reporting. This information may be provided by IRAS to the US Internal Revenue Service, and to any other tax authority with which IRAS has in force a CRS Competent Authority Agreement or to which a multilateral competent authority agreement on the automatic exchange of financial account information applies. As detailed in the section “Risk Factors – Risks Relating to the SPiCE Tokens” failure to validly provide information requested by SPiCE VC in its absolute discretion in order to comply with its obligations under CRS, FATCA may result in a SPiCE Token being determined as a Blocked SPiCE Token by SPiCE VC in its absolute discretion. If a SPiCE Tokenholder fails to satisfy the requirements of the SPiCE Tokenholder Checks in SPiCE VC’s absolute discretion, within 30 days of the SPiCE Tokens becoming Blocked SPiCE Tokens, SPiCE VC reserves the right, in its sole discretion to burn the SPiCE Tokens. Prospective investors or, following completion of the Offering, SPiCE Tokenholders who have any questions in the event of a request for information from SPiCE VC or about how to determine their tax residency status should contact their tax adviser.
47
ADDITIONAL INFORMATION
General information
SPiCE VC was incorporated under the laws of Singapore on 19 September 2017. As at the date of this Information Memorandum, its registered office is at 50 Collyer Quay, #09-01 OUE Bayfront, Singapore, 049321, Singapore. Its directors are Tal Elyashiv, Amihay Ben David, Carlos Domingo and Denise Fatima Galistan. It currently has an issued share capital of USD 3 and its issued share capital is held by Tal Elyashiv, Amihay Ben David and Carlos Domingo, each of whom hold one ordinary share of USD 1. SPiCE Manager was incorporated under the laws of the Cayman Islands on 11 September 2017. The registered office of SPiCE Manager is at Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The directors of SPiCE Manager are Tal Elyashiv, Amihay Ben David and Carlos Domingo. SPiCE Manager has an authorised share capital of USD 50,000 and its issued share capital is held by Tal Elyashiv, Amihay Ben David and Carlos Domingo, each of whom holds one share in SPiCE Manager. SPiCE Manager, as a small AIFM, has notified the FCA of its intention to market the SPiCE Tokens issued by SPiCE VC to UK professional investors pursuant to the AIFMD, as implemented by the United Kingdom. SPiCE GP will be incorporated under the laws of the Cayman Islands at a later date. It is intended that SPiCE Investments LP will be formed after the date of this Information Memorandum. It is proposed that the sole general partner will be SPiCE GP, who will manage SPiCE Investments LP. It is proposed that SPiCE VC will be a limited partner. Conflicts of interest and fiduciary responsibilities
Conflicts of interest may arise in future between SPiCE VC, SPiCE Investments LP, SPiCE GP, SPiCE Manager and the Founders. Each SPiCE Tokenholder, by subscribing for SPiCE Tokens, will be deemed to have acknowledged the existence of any actual or potential conflicts of interest and to have waived any claim with respect to any liability arising from the existence of any such conflicts of interest. SPiCE Manager, SPiCE GP and the key men involved in senior management positions in SPiCE Manager and SPiCE GP, the Founders, are not obligated to devote any specific amount of time to the affairs of SPiCE VC and SPiCE Investments LP and they will devote such time to the affairs of SPiCE VC and SPiCE Investments LP as they determine to be necessary for the conduct of the business of SPiCE VC and SPiCE Investments LP. Therefore SPiCE Manager or SPiCE GP and certain of its respective personnel or affiliates including the Founders, may in the future serve as investment manager for other investment funds and investment accounts, including those with substantially the same investment objectives as SPiCE VC or SPiCE Investments LP, and which may pursue its investment activities by contributing its assets to SPiCE VC, and also including additional investment funds and/or client accounts with investment objectives that differ in some respects to SPiCE VC’s and SPiCE Investments LP’s investment objective. The Founders, SPiCE Manager and SPiCE GP may also have conflicts of interest in allocating time, services and functions to SPiCE VC and SPiCE Investments LP. Conflicts may arise in the allocation of investment opportunities. A conflicts of interest policy will be implemented by SPiCE VC, SPiCE Investments LP and the Founders, which SPiCE VC, SPiCE Investments LP and the Founders intend to act in accordance with at all times, in order to avoid conflicts of interest arising; however there can be no assurance that conflicts of interest may still arise. None of SPiCE Manager, SPiCE GP or any of their respective personnel or affiliates is obligated to make any particular investment opportunity available to SPiCE VC or SPiCE Investments LP respectively, and they may take advantage of any opportunity, either for other accounts that SPiCE Manager, SPiCE GP, their respective personnel or affiliates manage or for themselves. SPiCE Manager or SPiCE GP may, without prior notice to SPiCE VC or SPiCE Investments LP, act in circumstances in which SPiCE Manager, SPiCE GP or the Founders have a direct or indirect material interest or a relationship of any description with another party which may involve an actual or potential conflict with SPiCE Manager's or SPiCE GP’s duty to SPiCE VC or SPiCE Investments LP respectively so long as SPiCE Manager and SPiCE GP comply with the conflicts of interest policy. SPiCE Manager, SPiCE GP or any of their respective personnel or affiliates are not obliged to give any prior notification to SPiCE VC or SPiCE Investments LP respectively of any material interests. SPiCE Manager, SPiCE GP or any of their respective personnel or affiliates are not under any duty to account to the SPiCE VC or SPiCE Investments LP for any of its or its personnel’s or affiliates' profits, commissions, remuneration or other benefits made or received as a result of such transaction or service nor will SPiCE Manager's or SPiCE GP’s fees be abated. SPiCE Tokenholders will not be entitled to any fiduciary duty protections from SPiCE VC. Use of proceeds and expenses
The gross proceeds of the Offering will used by SPiCE VC to pay all expenses incurred in connection with the Offering and for investment purposes.
48
SPiCE VC Management Agreement
The following is a summary of the key terms of the SPiCE VC Management Agreement, to be entered into following the date of this Information Memorandum. SPiCE Manager and SPiCE VC will enter into a management agreement after the date of this Information Memorandum, pursuant to which SPiCE Manager will provide certain management services to SPiCE VC. Under the SPiCE VC Management Agreement, SPiCE Manager and its personnel and affiliates will not have any liability to SPiCE VC in connection with the provision of its services under the SPiCE VC Management Agreement, except for liability determined by a court of competent jurisdiction (from which no further appeal is permitted to be taken) to have resulted from the fraud, gross negligence or wilful default of SPiCE Manager. SPiCE Manager and the key men involved in senior management positions in SPiCE Manager, the Founders, will not be obligated by the SPiCE VC Management Agreement to devote any specific amount of time to the affairs of SPiCE VC and they will devote such time to the affairs of SPiCE VC as they determine to be necessary for the conduct of the business of SPiCE VC. In addition, SPiCE Manager will not have any liability for the acts or omissions of: (i) any delegate other than an affiliate; (ii) any agent or other person appointed in accordance with the terms of the SPiCE VC Management Agreement; or (iii) any other person appointed by any of them on behalf of SPiCE VC, provided that where such agent or other person was selected and retained by SPiCE Manager, it was selected and retained applying reasonable care in all the circumstances. Pursuant to the terms of the SPiCE VC Management Agreement, SPiCE VC will indemnify SPiCE Manager, its personnel and affiliates, and each of their affiliates, from and against any claims and expenses, including any and all expenses (including reasonable legal fees), liabilities, obligations, losses, damages, penalties, actions, suits, costs, or disbursements of any kind or nature whatsoever arising from or relating to the performance of SPiCE Manager's obligations under the SPiCE VC Management Agreement, except to the extent that such amounts are attributable to the acts or omissions of that person determined by a court of competent jurisdiction (from which no further appeal is permitted to be taken) to have resulted from fraud, gross negligence or wilful default of the SPiCE Manager, its personnel or affiliates. The SPiCE VC Management Agreement will remain in full force and effect continuously until terminated in accordance with the terms set out in that agreement. The SPiCE VC Management Agreement will be able to be terminated by SPiCE Manager with at least 6 months’ notice of termination in writing. Notwithstanding this, the SPiCE VC Management Agreement will terminate upon the occurrence of any of the following events:
the provision of services under the SPiCE VC Management Agreement breaching any laws or regulations applicable to SPiCE Manager or SPiCE VC, or SPiCE Manager becoming unable to perform its duties due to any change in law or regulation;
SPiCE Manager or SPiCE VC being subject to an act of insolvency;
the board of SPiCE VC resolving to cease trading in accordance with the constitution of SPiCE VC; or
the board of SPiCE VC resolving to terminate the appointment on 6 months’ notice if all the Founders cease to be involved in senior management positions in SPiCE Manager and the board and SPiCE Manager is unable to find satisfactory replacements to the Founders.
It is intended that the SPiCE VC Management Agreement will be governed by English law and the parties to the SPiCE VC Management Agreement will submit to the exclusive jurisdiction of the courts in England. Litigation
Neither SPiCE VC nor SPiCE Manager is currently subject to any legal proceedings nor, so far as SPiCE VC is aware, are any such legal proceedings pending or threatened. From time to time, SP iCE VC and the SPiCE Manager, the SPiCE GP or SPiCE Investments LP may be a party to legal proceedings in the ordinary course of business, including proceedings of SPiCE VC relating to the enforcement of its rights under agreements with its portfolio companies and/or other assets. The outcome of any such legal proceedings cannot be predicted with any certainty. Certain Singaporean tax considerations
The statements below are general in nature and are based on certain aspects of tax laws in Singapore and administrative guidelines issued by the Inland Revenue Authority of Singapore in force as at the date of this Information Memorandum and are subject to any changes in such laws or administrative guidelines or the interpretation of those laws or guidelines, occurring after such date, which changes could be made on a retroactive basis. Neither these statements nor any other statements in this Information Memorandum are intended or are to be regarded as advice on the tax position of any holder of the SPiCE Tokens or of any person acquiring, selling or otherwise dealing with the SPiCE Tokens or on any tax implications arising from the acquisition, sale or other dealings in respect of the SPiCE Tokens. The statements made herein do not purport to be a comprehensive or exhaustive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the SPiCE Tokens and do not purport to deal with the tax consequences applicable to all categories of investors. Nor do the statements below address the tax position of SPiCE VC, the SPiCE Manager, SPiCE GP, SPiCE Investments LP or any other person other than a holder or potential holder of the SPiCE Tokens. It is possible that the income of SPiCE VC would be subject to significant amounts of income and/or withholding taxes (whether in Singapore or
49
in other jurisdictions). Prospective holders of the SPiCE Tokens are advised to consult their own professional tax advisers as to Singapore or other tax consequences of the acquisition, ownership of or disposal of the SPiCE Tokens, including the effect of any foreign, state or local tax laws to which they are subject. It is emphasised that neither SPiCE VC, SPiCE Manager, SPiCE GP, SPiCE Investments LP, any of their respective affiliates, nor any other persons involved in the Offering accepts responsibility for any tax effects or liabilities resulting from the subscription, purchase, holding or disposal of the SPiCE Tokens.
I ncome Tax Under current Singapore income tax laws, gains or profits of an income nature which are sourced in Singapore or which are sourced outside Singapore but are received or deemed received in Singapore will be subject to Singapore income tax, unless otherwise exempt under the Singapore Income Tax Act (Cap. 134 of Singapore). There is generally no tax on capital gains in Singapore. Holders that acquire SPiCE Tokens for long-term investment purposes may therefore enjoy a capital gain from the disposal of the SPiCE Tokens which is not subject to Singapore income tax. Holders that acquire and dispose of SPiCE Tokens in the ordinary course of a trade or business, or who acquire SPiCE Tokens for the purpose of short-term resale at a profit, may, subject to the relevant income satisfying Singapore's tax jurisdiction as being derived in Singapore (for example, because it arises from a trade or business carried on in Singapore) or received or deemed received in Singapore, be taxed on the gains or profits derived from trading in or carrying on a business in respect of SPiCE Tokens, subject to the possibility of relief under a double taxation treaty. Whether gains or profits from the disposal of the SPiCE Tokens are regarded as income or capital gains depends on the facts and circumstances of each case. Factors such as intention, frequency of transactions, and holding periods are considered when determining if such gains or profits are taxable.
Goods and Services Tax ( GST) The supply (including the issue or transfer) of SPiCE Tokens is likely to be regarded as a standard-rated supply for which GST at the rate of 7 per cent. is chargeable on such supply which is made in Singapore by a GST-registered person or a person who is liable to register for GST in the course or furtherance of that person’s business, unless such supply is made t o a person belonging outside Singapore for the purposes of Singapore GST for which the supply may be zero-rated at zero per cent. GST. Where SPiCE Tokens are issued to a person belonging in Singapore, SPiCE VC will therefore charge the subscriber of SPiCE Tokens any applicable GST in addition to the price of the tokens issued. Certain Cayman Islands tax considerations
The Government of the Cayman Islands will not, under existing legislation, impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon the SPiCE Manager or the SPiCE GP, or their respective shareholders. The Cayman Islands are not party to a double tax treaty with any country that is applicable to any payments made to or by the SPiCE Manager or the SPiCE GP. Certain Israeli tax considerations
The following is a brief summary of certain Israeli tax considerations that may be applicable to an investment in SPiCE VC, either under the provisions of the R uling described under “The Tax Ruling” section below, or in the event that all or part of the Ruling is not granted by the Israeli Tax Authority ( ITA). In this section only, entitled “ Additional Information – Certain Israeli tax considerations”, SPiCE Investments LP and SPiCE VC shall be referred to as the Fund. This summary does not contain a comprehensive discussion of all relevant tax matters and it is not intended to be, and should not be construed as, legal or tax advice to any prospective SPiCE Tokenholders. The discussion set forth below is based upon Israeli laws, regulations and announcements promulgated thereunder, and published rulings and court decisions, all as in effect on the date hereof and without giving effect to changes, if any, adopted after the date hereof, which may have retroactive effect. It should be noted that as this summary is based, to some extent, on new legislation which has not, at present, been subject to in-depth judicial or administrative interpretation, if any, no assurance may be given that the interpretation of such legislation set forth in this summary will be accepted by the relevant tax authorities or the courts. Each prospective SPiCE Tokenholder is urged to consult his, her or its own tax advisers with respect to Israeli tax consequences and any potential state, local or foreign tax consequences arising from the purchase, ownership and disposition of the SPiCE Tokens.
I nternal Law I sraeli Taxation General Israeli residents are subject to income tax on their worldwide income (i.e. on a personal basis), whereas non-residents are subject to tax in Israel upon their Israeli sourced income. The following sections therefore outline the tax rates and exemptions relating to business income as well as interest, dividends and capital gains. Tax liability under Israeli law is subject to relief under the various tax treaties to which Israel is a signatory. In addition, Israeli taxes which are paid may be allowed as a tax credit against the tax liability in the i nvestor’s country of residence. The Ruling that may be issued by the ITA, as discussed below, may also modify some of the tax implications of the investment.
50
Partnership Taxation Generally, a partnership is not subject to tax in Israel as an entity. Instead, the partners of the partnership are required to report and to pay Israeli tax on their proportionate shares of the partnership ’s taxable net income and gains, or losses, which will be allocated among such partners. Additionally, a partner will generally be subject to income tax on its share of the partnership’s income as if such income was realised directly by the partner, regardless of whether such income is actually distributed to such partner. Non Israeli Investors Non-Israeli investors are generally subject to Israeli income tax on (i) income accrued, derived or realised in Israel or from sources in Israel, and (ii) on capital gains attributable to dispositions of assets situated in Israel or rights connected to such assets. The ITA might treat a foreign investor as if it were engaged in business in Israel through a permanent establishment in Israel, and therefore, as subject to the Israeli income tax described in the preceding paragraph, regardless of whether or not that non-Israeli investor was subject to non-Israeli income tax. In that case, net in come (including, but not limited to, dividends, interest and royalties) that is attributable to the permanent establishment will be subject to Israeli income tax at the rates applicable to Israeli residents. Business/Ordinary Income. In 2017, under current law, the highest marginal income tax rate imposed on individuals with respect to ordinary income in Israel is 47 per cent., and the corporate tax rate is 24 per cent. The corporate tax rate is due to go down to 23 per cent. from 2018. Net business losses may be carried forward (but not backwards) for an indefinite period. Such losses may be offset against any income in the year in which the losses incurred and only against business income or capital gains arising from the disposition of a business asset once they are carried forward. The classification of income from the disposition of investments held, directly or indirectly, by investment vehicles similar to the Fund is not entirely clear under Israeli income tax law. It is possible that the Fund ’s investment profile increases the risk of its income being classified as ordinary or business income and not as capital gains, and hence being subject to full tax rates. Capital Gains General Under Israeli tax law, gains arising upon the disposition (sale, exchange, transfer etc.) of most types of tangible and intangible capital assets located in Israel or constituting direct or indirect rights to assets in Israel are treated as Israeli-source income and are subject to Israeli tax, regardless of the seller’s residency. For example, a gain arising upon the s ale of the securities of an Israeli company or a non-Israeli company, substantially all of whose assets are located in Israel, is taxable in Israel. In addition, an Israeli seller is subject to Israeli capital gains tax upon the disposition of any capital asset, regardless of its direct or indirect location. Capital losses may be offset in the current year against capital gains, except for capital losses from the sale of securities, which can also be offset against dividend and interest income paid in respect of these securities or dividend and interest income paid in respect of other securities, which are taxed at a rate of up to 25 per cent.. In the following years, capital losses may be offset only against capital gains. Capital losses may be carried forward (but not backwards) for an indefinite period of time. Tax rates on capital gains. Corporations are taxable in respect of real capital gains arising upon the sale of non-listed securities and other capital assets at the corporate tax rate of 24 per cent. (23 per cent. in 2018). Individuals are subject to tax in respect of real capital gains from the sale of capital assets at 25 per cent. An individual holding, directly or indirectly, at least 10 per cent. of the interests in a company (a Significant Shareholder) at the time of sale or at any time during the 12 months preceding the sale of its securities, is subject to a 30 per cent. tax. Relevant Exemptions from Capital Gains Tax A non-Israeli resident will be exempt from capital gains tax derived from the sale of securities of Israeli companies and from selling rights in an entity which most of its assets, directly or indirectly, are located in Israel, provided that the certain conditions are met, including: (i) the securities or rights were purchased commencing 1 January 2009; (ii) the gain is not attributable to a permanent establishment of the foreign resident; (iii) the securities were not purchased from a relative; (iv) the securities and the rights are not traded on the stock exchange market in Israel on the date of the sale. In addition, capital gains derived from the sale of shares listed for trading on a stock exchange in Israel are exempt from tax if such capital gains are not attributable to that foreign resident’s permanent establishment in Is rael. This exemption shall not be relevant to the part of the capital gains allocable to the period before the shares were listed for trading in the stock exchange. All of the above mentioned exemptions require further conditions to be satisfied.
51
Notwithstanding the foregoing, a non-Israeli resident company will not be entitled to the foregoing exemptions if an Israeli resident controls that company (i.e., holds, directly or indirectly, more than 25 per cent. of certain rights in the company), or is entitled to at least 25 per cent. of the income or profits of that company (directly or indirectly). Dividends. The tax rate on dividend income received by an Israeli resident shareholder, other than an Israeli corporation, is 25 per cent. In the case of a Significant Shareholder, determined at the time of distribution or at any time during the preceding 12 month period, the tax rate is 30 per cent. Generally, dividends received by Israeli corporations from another Israeli corporation are tax exempt. The tax on dividends is 20 per cent. (regardless of the holding percentage) if the distribution is from profits attributable to an “approved enterprise”, a “ beneficial enterprise”, a “ preferred enterprise”, “ preferred technology enterprise” or a “special preferred technology enterprise” (as defined under the Law for the Encouragement of Capital Investments, 1959) of the distributing company. Dividends distributed out of profits attributable to a “ preferred enterprise”, “ preferred technology enterprise” or a “special preferred technology enterprise ” to an Israeli corporation are tax exempt. The tax on dividends distributed from profits attributable to “ preferred technology enterprise” or a “special preferred technology enterprise”, and in certain cases an “approved enterprise”, to a non-Israeli resident company, under certain conditions detailed in the Law for the Encouragement of Capital Investments, 1959, is at the rate of 4 per cent.. Dividends received by non-Israeli residents from an Israeli resident company are subject to withholding tax which is currently at a rate of 30 per cent. or 25 per cent. if the non-Israeli resident is not a Significant Shareholder at the time of distribution or at any time during the preceding 12 month period, or if the company is traded on a stock exchange. Distribution from profits attributable to an “approved enterprise”, a “ beneficial enterprise” or a “ preferred enterprise” is subject to withholding tax rate of 20 per cent.. These rates may be reduced by Israeli law, rulings or tax treaty. Interest. Companies are generally subject to tax on interest income at the corporate tax rate. Individuals are taxed on interest income from financial instruments (for example, bonds, savings plans and bank deposits) which are linked to the Consumer Price Index (CPI) or which are held as foreign currency at 25 per cent. and are generally exempt from tax on the indexation income. Interest income from financial instruments not linked to the CPI or foreign currency is taxed at 15 per cent.. The reduced rates are not available to individuals claiming a deduction of interest expenses being a Significant Shareholder or having a special relationship with the company paying out the interest; or if the interest is a business income of the investor. In such cases, the interest income will be taxed at the individual's marginal rates. Interest paid by an Israeli resident to non-Israeli company is generally subject to withholding tax at the corporate tax rate. Again, the rates specified herein may be reduced under a specific ruling or a tax treaty. Excise Tax. Individual investors that are subject to tax in Israel are subject to 3 per cent. excise tax on income exceeding 640,000 NIS (as of 2017; this sum is linked to the CPI and updates every year), including, but not limited to, business income, dividends, capital gain, interest and royalties. Relief Available under Income Tax Treaties. Israel is a party more than 50 treaties for the avoidance of double taxation. The tax liability for non-Israeli residents in respect of capital gains and other income items is subject to relief under Israel’s income tax treaties. Most income tax treaties generally provide that a non-Israeli resident (as defined in the treaties) is not taxable in Israel on capital gains arising from the disposition of shares in an Israeli company unless, among other things, the gain is attributable to a permanent establishment of the seller in Israel. As discussed below, the ITA has in the past expressed the view that investors in funds may be deemed to have a permanent establishment in Israel by virtue of the activities of the local fund manager. In addition, most income tax treaties generally provide reduced tax rates on Israeli-sourced dividends and interest to nonIsraeli residents. The Tax Ruling The Fund intends to apply for a tax ruling (the Ruling) from the ITA with respect to the taxation of the Fund as well as for SPiCE VC to be considered as transparent for Israeli tax and for the Ruling requirements as described below. The Ruling is expected to determine that notwithstanding the fact that the Fund will maintain an office in Israel, the Fund and its nonIsraeli investors will be exempt from tax in Israel on specific investments or for a reduced rate of Israeli taxation, on gains or income derived by the non-Israeli non-exempt investors on their investments in Israeli and Israeli related companies. NonIsraeli investors will not be deemed to have a permanent establishment in Israel solely by virtue of their investment in the Fund. Should the ITA approves the transparency of SPiCE VC, the SPiCE Tokenholders shall be treated as investors/Limited Partners in SPiCE Investments LP for Israeli tax purposes, and the SPiCE Tokens shall be considered as interests in the Fund. While there is a lot of experience with the ITA issuing similar rulings to standard venture capital funds operating in
52
Israel, there are no precedents for rulings issued in the case of a combination of an ICO into a venture capital fund. Currently, the ITA is still considering the Ruling, and its application to the case herein. Ruling Qualification Requirements The main requirements that the Fund will have to satisfy in order to enable SPiCE Tokenholders to qualify for the benefits of the Ruling are generally as set forth below. SPiCE GP intends to ensure, to the extent feasible, that all such requirements are satisfied.
The Fund will maintain an office in Israel to serve as its permanent place of business in Israel. All of the Fund ’s investments in Israeli and Israeli related companies will be carried out by that office. The Fund will invest at least USD 10 million in Israel through the office in Israel within 48 months from the first closing date. The Fund will have at least 10 investors and no investor will hold more than 20 per cent. of the capital of the Fund. Absent additional direct investors in the Fund, in order to be compliant with this amount of investors' requirement, SPiCE VC must be considered as transparent for Israeli tax purposes, so that the SPiCE Tokenholders will be considered as the Fund's investors. The total commitments of the Fund from foreign investors will not be less, on the average, over the whole period of the ruling, than USD 5 million. The Fund will invest in “Qualifying Investments” an amount in excess of half (50 per cent.) of the Fund’s total commitments, as long as at least 30 per cent. of the Fund’s total commitments is invested in Israeli resident companies that own the intellectual property developed therein and/or in foreign resident companies that hold Israeli resident subsidiaries that themselves (the subsidiaries) own such intellectual property. For this purpose, at least 75 per cent. of the investment in each company will be implemented through allocation of shares (including options for the allocation of shares and convertible debentures that are secured by technologies owned by such company).
A “Qualifying Investment” is an Israeli or Israeli -related company that primarily engages in establishing or expanding enterprises in Israel in the industrial, agricultural, tourist, transportation, water, energy, communications, computer, biotechnology or medical sectors or in research and development in those sectors. An “Israeli-related” company is a company not registered in Israel, but whose main as sets and/or activity, direct or indirect, is in Israel or whose main technology is acquired or developed in Israel. A “Qualifying Investment in Venture Capital” – Qualifying Investments in high tech industry where at least 75 per cent. of the Fund’s investment in each company shall be in exchange for the issuance of shares.
The Fund will not invest an amount in excess of 20 per cent. of the Fund’s total commitments (net of management fees) in any single company. The Fund will not hold short-term monetary deposits or marketable securities unless they originate from money transferred by investors pursuant to their commitments for the purpose of investments in the Fund, or unless they are held by the Fund after a realisation event but prior to a distribution. The Fund will maintain a system of accounts that will enable identification of the amounts invested in Israeli resident companies, Israeli-related companies and foreign companies, and the details of the investments in which intellectual property is owned by Israeli resident companies. The Fund will provide certain financial statements to Israeli tax authorities as required by the Ruling.
SPiCE GP believes that the investment requirements set forth above are consistent with the investment strategy of the Fund. Additional requirements may be imposed by the ITA in order to adjust the typical venture capital ruling to the case herein. Effects of Qualifying for Benefits of Ruling If all of the conditions to the Ruling are met, the Fund and its non-Israeli investors (except SPiCE GP) will be exempt from incomes derived from the Fund's investment in Qualifying Investment in venture capital and capital gain derived from the realisation of Qualifying Investments. Likewise, such investors will not be required to file income tax returns in Israel as a result of their investments in the Fund. With respect to other income derived from Qualifying Investments, non-Israeli corporate investors which are generally nonexempt entities, will be subject to tax on dividend and interest at the corporate tax rate (currently 24 per cent.), whereas individuals will be subject to 15 per cent. tax rate with respect to dividend and 25 per cent. tax rate applicable for interest income (interest income from financial instruments not linked to the CPI or foreign currency is taxed at a rate of 15 per cent.). Furthermore, Sale of a part or all of an interest in the Fund by an investor will not be deemed to be subject to Israeli tax. SPiCE GP may determine to proceed with any Closing without a Ruling, or to proceed with any Closing based on a ruling that differs from the Ruling application to be submitted.
53
SPiCE GP believes that the investment requirements under the Ruling to be requested are consistent with the investment strategy of the Fund. However, there is no assurance that the ITA will issue a Ruling granting the Fund the requested relief as submitted. Each prospective investor is urged to consult its tax advisers with respect to the Israeli tax consequences arising from the purchase, ownership and disposition of Interests in the Fund. Tax Returns and Filing. Taxpayers are required to report on a calendar year basis. The ITA requires the use of Israeli generally accepted accounting principles in the computation of taxable income. The Ruling to be requested will require the Fund to file with the ITA returns of the income and gains of the Fund’s non -Israeli investors. If such a ruling is issued, non-Israeli investors in the Fund will not be subject to reporting to the ITA solely by virtue of their investment in the Fund. Value Added Tax. Under Israeli law, Value Added Tax ( VAT) at the rate of 17 per cent. is imposed on sales of products and the provision of services by Israeli businesses to residents of Israel or in connection with assets located in Israel. In addition, profits from interest or from the sale of securities may be subject to VAT. The Fund may apply for a ruling from the ITA to the effect that the Fund's income and the management fee payable by the Fund, or at least certain parts thereof, will not be subject to VAT which would otherwise apply. However, there can be no assurance that such a ruling would in fact be issued. If such ruling is not issued, parts of the Fund's income as well as all fees for services rendered by SPiCE GP will be subject to VAT. Requests for Information
The SPiCE Manager and SPiCE GP, or any of its or their directors or agents domiciled in the Cayman Islands, may be compelled to provide information subject to a request for information made by a regulatory or governmental authority or agency under applicable law; for example, by the Cayman Islands Monetary Authority, either for itself or for a recognised overseas regulatory authority, under the Monetary Authority Law (2016 Revision), or by the Tax Information Authority, under the Tax Information Authority Law (2017 Revision) or Reporting of Savings Income Information (European Union) Law (2014 Revision) and associated regulations, agreements, arrangements and memoranda of understanding. Disclosure of confidential information under such laws shall not be regarded as a breach of any duty of confidentiality and, in certain circumstances, SPiCE Manager, SPiCE GP and any of its or their directors or agents, may be prohibited from disclosing that the request has been made. Handling of mail
Mail addressed to SPiCE Manager or SPiCE GP and received at its registered office will be forwarded unopened to the forwarding address supplied by SPiCE VC to be dealt with. None of SPiCE Manager, SPiCE GP, or their respective directors, officers, advisers or service providers (including the organisation which provides registered office services in the Cayman Islands) will bear any responsibility for any delay howsoever caused in mail reaching the forwarding address. In particular the relevant directors will only receive, open or deal directly with mail which is addressed to them personally (as opposed to mail which is addressed just to SPiCE Manager or SPiCE GP, as the case may be).
This Information Memorandum is dated 30 November 2017.
54
DEFINITIONS
The following definitions apply throughout this Information Memorandum unless the context requires otherwise: Accounts ....................................................... the Fiat Account and the Digital Wallet; Additional SPiCE Tokens
the SPiCE Tokens issued by SPiCE VC after the closing of the Offering;
Advisers Act ................................................. the U.S. Investment Advisers Act of 1940, as amended; AIF ................................................................ alternative investment funds; AIFM ............................................................ alternative investment fund managers; AIFM Directive ............................................ the EU Alternative Investment Fund Managers Directive; Bitcoin or BTC.............................................. the value token of the Bitcoin blockchain, which can be traded on cryptocurrency exchanges or used to pay for transaction fees and services on the Bitcoin network; Blocked SPiCE Token ................................. a SPiCE Token that SPiCE VC has determined, on account of either failing to meet the SPiCE Tokenholder Checks to the satisfaction of SPiCE VC or, giving rise to other legal, regulatory or compliance issues, in its absolute discretion, should be prohibited from participating in any Realisation Buyback and from being transferred; CBR ............................................................... the Central Bank of Russia; CFTC ............................................................ the U.S. Commodity Futures Trading Commission; CoC ............................................................... cash on cash; Code .............................................................. the U.S. Internal Revenue Code; Conversion Rate ........................................... the prevailing exchange rates to be applied to non-USD amounts (i.e. EUR,
BTC and ETH) when determining the number of SPiCE Tokens to be issued , being those available to SPiCE VC at the time of the conversion at cryptocompare.com
through
their
application
programming
interface
platform; CRS ............................................................... the Common Reporting Standard developed by the Organisation for Economic Co-operation and Development; CWUMPO .................................................... the Companies (Winding Up and Miscellaneous Provisions Ordinance (Cap. 32) of Hong Kong; Digital Wallet ............................................... the digital wallet held with Vo1t to which a Pre-Sale Subscriber or a Main Sale Subscriber shall transfer any Subscription Amount in BTC or ETH pursuant to the Offering; EEA ............................................................... the European Economic Area; Ether or ETH ................................................ the value token of the Ethereum blockchain, which can be traded on cryptocurrency exchanges or used to pay for transaction fees and services on the Ethereum network; European Union or EU ................................ the European Union comprising the 28 member states; Exchange Act ...................... ..................... ..... the U.S. Securities and Exchange Act of 1934, as amended; FATCA ......................................................... the Foreign Account Tax Compliance Act;
55
Fiat Account ................................................. the account held with North Capital to which a Pre-Sale Subscriber or a Main Sale Subscriber shall transfer any Subscription Amount in USD or EUR pursuant to the Offering; Final Realisation Buyback .......................... the Realisation Buyback in respect of the Realisation of the last asset held by SPiCE VC or SPiCE Investments LP; Founders ....................................................... Tal Elyashiv, Amihay Ben David and Carlos Domingo; GST ............................................................... the Goods and Services Tax; ICO ............................................................... an initial coin offering; Information Memorandum ......................... this private information memorandum relating to the Offering; Investment Company Act .................... ........ the U.S. Investment Company Act of 1940, as amended; IRAS.............................................................. the Inland Revenue Authority of Singapore; IRR ................................................................ the internal rate of return; Inactive SPiCE Tokens ................................ any SPiCE Tokens which are held in the Reserve or by SPiCE VC; Israeli Securities Law .................................. the Israeli Securities Law of 1968; Issued SPiCE Tokens .................... ............... all SPiCE Tokens issued and outstanding at the date and time of the Realisation Buyback, including any Blocked SPiCE Tokens but excluding any Inactive SPiCE Tokens; ITA ................................................................ the Israeli Tax Authority; Liquid IRR ................................................... the liquid internal rate of return; Liquidity Buyback ....................................... a buyback on the open market in exchange for ETH (or such other currency as SPiCE VC may choose in its sole discretion) by SPiCE VC of a SPiCE Token in the event that the market price of a SPiCE Token (determined to be the average price at 8:00 p.m. (London time) over the three largest cryptocurrency exchanges trading the SPiCE Token by volume) on any particular day drops below 70 per cent. of the NAV per SPiCE Token based on SPiCE VC’s most recent NAV Report; Main Sale ...................................................... the offering of SPiCE Tokens to selected investors, which will commence immediately following the closing of the Pre-Sale;
the maximum Main Sale Subscription Amount in USD, EUR, ETH or BTC Main Sale Maximum Subscription Amount ......................................................... that a Main Sale Subscriber states on a Main Sale Subscription Form that it is willing to commit to in the Main Sale; Main Sale Subscriber................................... a prospective investor in the Main Sale; Main Sale Subscription Amount ................. the Subscription Amount received in USD, EUR, ETH or BTC from a Main Sale Subscriber during the Main Sale; Main Sale Subscription Form ..................... the subscription form by which a Main Sale Subscriber may request to subscribe to the Main Sale; Management Fee .......................................... the fee totalling an amount equal to, on average over the seven years of the fund, 2.5 per cent. of the total proceeds of the Offering per annum to be paid by SPiCE VC and SPiCE Investments LP to SPiCE Manager and SPiCE GP respectively; MAS .............................................................. the Monetary Association of Singapore;
56
Multiplier ...................................................... the multiple applied to the number of rights to a number of SPiCE Tokens a prospective investor is to be awarded pursuant to the Pre-Sale, which shall be determined as follows:
(a)
1.3, if the USD Subscription Amount is greater USD 5 million;
(b)
1.25, if the USD Subscription Amount is the greater than or equal to USD 500,000 but less than or equal to USD 5 million; or
(c)
1.2, if the USD Subscription Amount is less than USD 500,000, with the exception that if, following the payment of the Pre-Sale Subscription Amount to SPiCE VC by the Pre-Sale Subscriber, the value of the Pre-Sale Subscription Amount in USD falls due to changes in the exchange rate, with the result that the Multiplier that applies, as calculated on the day after the closing of the Offering, is lower than the Original Multiplier, then the Original Multiplier shall be the Multiplier when determining the allocation of the number of rights to SPiCE Tokens to be issued.
NAV .............................................................. net asset value, as described in the section of this Information Memorandum entitled “About SPiCE VC — Fund Net Asset Value (NAV)”; NAV per SPiCE Token ..................... ........... is the NAV divided by the number of Issued SPiCE Tokens, other than in the context of a Realisation Buyback, where it is the Updated NAV divided by the number of Issued SPiCE Tokens; NAV Report .................... ..................... ......... the report setting out the NAV for SPiCE VC’s portfolio, which is prepared and published by SPiCE VC on the SPiCE VC website quarterly on 31 March, 30 June, 30 September and 31 December of each calendar year; Net Realisation Proceeds ............................. the proceeds from a Realisation less any applicable fees and expenses; Non-U.S. Persons ......................................... any person not meeting the definition of a “U.S. person” set forth in Rule 902 of Regulation S under the Securities Act; Offering ........................................................ the offering of the SPiCE Tokens by SPiCE VC in the Pre-Sale and the Main Sale; Offering Price ............................................... USD 1 (inclusive, in the case of Singapore, of any GST) per SPiCE Token; Order ............................................................ the UK Financial Services and Markets Act 2000 (Financial Promotion) Order 2005; PBGC ............................................................ the U.S. Pension Benefit Guaranty Corporation; Preliminary Total ...................... ................... the total number of SPiCE Tokens issued following the Offering, subject to a cap of 130,000,000 SPiCE Tokens; Pre-Sale ......................................................... the offering of SPiCE Tokens to selected investors which commenced on 19 October 2017 and is expected to close at the earlier of: (1) 7:00 a.m. (London time) on 1 February 2018; and (2) the time and date on which the Pre-Sale is closed or otherwise terminated by SPiCE VC in its sole discretion; Pre-Sale Lock-Up ......................................... The restriction on transferring the SPiCE Tokens that applies to a proportion of the SPiCE Tokens issued to a Pre-Sale Subscriber as determined by the paragraph entitled “The Offering – Pre-Sale Lock-Up”; Pre-Sale Subscriber ..................................... a prospective investor in the Pre-Sale;
the maximum Pre-Sale Subscription Amount in USD, EUR, ETH or BTC that Pre-Sale Maximum Subscription Amount ......................................................... a Pre-Sale Subscriber states on a Pre-Sale Subscription Form that it is willing to commit to in the Pre-Sale; Pre-Sale Subscription Amount ................... the Subscription Amount received in USD, EUR, ETH or BTC from a Pre-
57
Sale Subscriber pursuant to the P re-Sale; Pre-Sale Subscription Form .................... .... the subscription form by which a Pre-Sale Subscriber may request to subscribe to the Pre-Sale; Prospectus Directive .................................... EU Directive 2003/71/EC, and amendments thereto, including EU Directive 2010/73/EC; Realisation .................................................... a realisation of any of the investments made by either SPiCE VC or SPiCE Investments LP resulting in cash or other liquid proceeds being received by SPiCE VC; Realisation Amount ..................................... the total amount in USD to be distributed among all the SPiCE Tokenholders in a Realisation Buyback following a Realisation; Realisation Buyback .................................... the mandatory buyback of a portion of the issued SPiCE Tokens from all SPiCE Tokenholders following a Realisation; Realisation Buyback Notice ........................ the notice to be published by SPiCE VC on the SPiCE Token Platform to inform SPiCE Tokenholders of the Realisation Buyback; Redemption Date ......................................... the date on which the Regulatory Redemption occurs; Redemption Price ...................... ................... the price at which SPiCE VC may redeem all or some of the SPiCE Tokens on a Regulatory Redemption according to the conditions set out in the paragraph entitled “Description of the SPiCE Tokens – Regulatory Redemption”; Regulatory Redemption .............................. the redemption of any SPiCE Token by SPiCE VC upon receipt by SPiCE VC of information that the status of the relevant SPiCE Tokenholder may cause regulatory concern for SP iCE VC; Relevant Member State ............................... any member state of the EEA which has implemented the Prospectus Directive; Repurchase Price ......................................... the price per SPiCE Token on a Realisation Buyback; Reserve .......................................................... the reserve to which SPiCE VC allocates five per cent. of the total proceeds received, calculated in USD, from the Offering for at least the first three years
following the closing of the Offering; Ruling............................................................ a tax ruling from the ITA; SEC ............................................................... the U.S. Securities and Exchange Commission; Securities Act ...................... ..................... ..... the U.S. Securities Act of 1933, as amended; SFA ............................................................... the Singapore Securities and Futures Act; SFO ............................................................... the Securities and Futures Ordinance (Cap. 571) of Hong Kong; SIBL .............................................................. the Securities Investment Business Law (2015 Revision) of the Cayman Islands; Smart Contract ............................................ the ERC20 smart contract standard consisting of software code, existing on the Ethereum blockchain; SPiCE GP ..................................................... a limited liability company to be incorporated in the Cayman Islands after the date of this Information Memorandum; SPiCE Investments LP ................................ a limited partnership that SPiCE VC intends to form after the date of this Information Memorandum, with SPiCE GP as the general partner and SPiCE VC as a limited partner, which will be used to invest in Israel-based
58
companies and may also be used to invest in non-Israel based companies; SPiCE VC Management Agreement .......... the English law governed management agreement to be entered into between SPiCE VC and SPiCE Manager, as more fully described in the section of this Information Memorandum entitled “Additional Information — Material Agreements — Management Agreement”; SPiCE Manager ........................................... Spice Funds Management Limited, a limited liability company formed in the Cayman Islands; SPiCE Tokenholder ..................................... a holder of SPiCE Tokens; SPiCE Tokenholder Checks .................... .... the legal, regulatory and compliance requirements and checks including, but not limited to: (i) anti-money laundering and sanctions compliance checks; (ii) providing any information requested by SPiCE VC in SPiCE VC’s absolute discretion in order for SPiCE VC to comply with its reporting obligations under the US Foreign Account Tax Compliance Act and the OECD Common Reporting Standard, under the laws and regulations of Singapore (or any other applicable jurisdiction) implementing, any intergovernmental agreement entered into by Singapore (or any other applicable jurisdiction) relating to, any agreement entered into by SPiCE VC with respect to, such reporting regimes; (iii) confirmations regarding that Pre-Sale Su bscriber’s tax status in Israel; and (iv) where applicable, confirmations regarding the ownership of the digital wallet, either by sending a message with a unique identifier to SPiCE or by complying with any other processes requested by SPiCE VC, that a Subscriber must complete before the SPiCE Tokens can be issued or that a SPiCE Tokenholder must complete before any Regulatory Redemption, Realisation Buyback, Liquidity Buyback or any other process involving the distribution of cash or SPiCE Tokens to a SPiCE Tokenholder can occur; SPiCE Tokens .............................................. a new series of Ethereum-based smart contract digital tokens issued by SPiCE VC; SPiCE Token Platform ................................ the platform developed by SPiCE VC for the SPiCE Tokens and available at https://www.spicevc.com; SPiCE Token Transferee ..................... ........ the recipient of a SPiCE Token upon a transfer by a SPiCE Tokenholder in the secondary market; SPiCE VC ..................................................... SPiCE Venture Capital Pte. Ltd., a private limited company incorporated in Singapore; Subscriber..................................................... a Pre-Sale Subscriber or a Main Sale Subscriber, as applicable; Subscription Amount .................... ............... the Pre-Sale Subscription Amount or the Main Sale Subscription Amount, as applicable; Term.............................................................. the fixed period of seven years from the date of the closing of the Offering to the termination of SPiCE VC, which can be extended by a further two years, if agreed by SPiCE VC, SPiCE Manager, SPiCE GP and SPiCE Investments LP (if formed), if it is in the best interests of the SPiCE Tokenholders; Term Liquidation ...................... ................... a liquidation at the end of the Term; Total Issued SPiCE Tokens ..................... .... the aggregate of the Preliminary Total plus the SPiCE Tokens issued to the Founders and SPiCE VC’s partners, advisers and service pr oviders in accordance with the paragraph entitled “ The Offering – Closing of the Offering”; Total Tranched SPiCE Tokens ................... the number of rights to SPiCE Tokens issued to a Tranche Spice Tokenholder calculated in accordance with the formula set out in the paragraph entitled “The Offering – Number of SPiCE Tokens to be issued in the Pre- Sale” or “The Offering – Number of SPiCE Tokens to be issued in the Main Sale”;
59
