Btcs corporate presentation february 11 2016 (redchip)

Btcs corporate presentation february 11 2016 (redchip)

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  1 Corporate Presentation BTCS Inc.(OTCQB: BTCS) February 2016 A Blockchain Technology Company
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  2 Safe Harbor The followingpresentation is an outline of matters for informational purposes only. This document does not constitute an offer to sell or a solicitation of an offer to buy any securities of BTCS Inc. (“BTCS”, “we” or “us”). While we believe the information provided herein is reliable, as of the date hereof, neither BTCS nor any of its affiliates, subsidiaries, directors, officers, employees, agents or consultants (i) makes any representation or warranty as to the accuracy or completeness of the information contained in this document, (ii) undertakes any obligation to update any information contained herein, except to the extent required by applicable law, or (iii) takes any responsibility under any circumstances for any loss or damage suffered as a result of any omission, inadequacy, or inaccuracy in this document, except to the extent required by applicable law. The following presentation is intended as a summary only, contains selected information and does not purport to be all-inclusive or to contain all of the information that may be relevant to a decision to invest in our securities. You should not rely upon this document in evaluating the merits of investing in our securities. Any decision with respect to an investment in our securities should be made based solely upon appropriate examination of our business, including an examination of our filings with the Securities and Exchange Commission (“SEC”) and the “Risk Factors” contained therein. The following presentation contains statements, estimates, forecasts and projections with respect to future performance and events, which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Those statements include statements regarding the intent and belief or current expectations of BTCS and its affiliates and subsidiaries and their respective management teams. These statements may be identified by the use of words like “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “plan”, “will”, “should”, “seek” and similar expressions and include any financial projections or estimates or pro forma financial information set forth herein. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from our expectations include, without limitation, those detailed in our filings with the SEC. Neither BTCS nor any of its affiliates undertakes any obligation to update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. This document does not constitute and should not be interpreted as either a recommendation or advice, including investment, financial, legal, tax, regulatory or accounting advice. You should conduct your own independent investigation as to the economic, financial, regulatory, tax and accounting implications of an investment in BTCS’ securities, and you should consult your own attorney, business advisor, accounting and tax advisor for legal, business, accounting, regulatory or tax advice regarding an investment in BTCS. BTCS files annual, quarterly and current reports, and other information with the SEC. Our filings with the SEC contain important information regarding BTCS, its business, financial condition, results of operations and prospects. You should assume that information contained in any of our filings with the SEC is only accurate as of the date specified in such filings. Our business, financial condition, results of operations and prospects may have changed materially since any such date. You are advised to carefully review the description of our business and the “Risk Factors” set forth in our Annual Report filed on Form 10-K filed with the SEC on April 15, 2015. Summaries of documents contained herein and in our filings with the SEC may not be complete and are qualified in their entirety by reference to the complete text of such document. In making an investment decision, you must rely on your own examination of these documents and such additional due diligence as you deem appropriate. We have not authorized any other person to provide you with information that is different from the information contained in our filings with the SEC. If anyone provides you with different or inconsistent information, you should not rely on it. Our filings with the SEC are available to the public on, and may be reviewed at, the SEC’s website http://www.sec.gov and on BTCS’ web site (www.btcs.com). You may also read and copy any document that BTCS files with the SEC at the SEC’s Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549.
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  3 Table of Contents SectionPage Investment Highlights 4 Industry Overview 5 Corporate Overview 13 Summary 25
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  4 • BTCS Inc.(“BTCS”) is an early mover in the blockchain and digital currency ecosystems and the first “Pure Play” U.S. public company focused on blockchain technologies • The blockchain is a distributed public ledger that has the ability to fundamentally impact all industries globally that require trust and rely on or utilize record keeping • Tremendous long term opportunity as disruptive Blockchain applications emerge • We secure the blockchain through our transaction verification services business and plan to build a broader ecosystem to capitalize on opportunities in this fast-growing multi-billion dollar industry • We are rapidly scaling our low cost transaction verification services business and believe this will provide revenue growth as we evaluate and build additional solutions that leverage blockchain technology • Our management team offers the right combination of capital markets experience, industry expertise, business leadership, and dedication • Approximately $4.25 million in 2015 financings led by prominent investors, institutions, and management Investment Highlights
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  5 Industry Overview
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  6 The Blockchain Explained “Theblockchain is a distributed public ledger” DISTRIBUTED TRUSTED Transactions are verified and confirmed by nodes around the world before being added to the blockchain PUBLIC What is it? Why it matters? All transactions are publically available on the blockchain The blockchain is secured and maintained by a network of specialized servers (nodes) around the world “More than just the foundational basis for digital currency, the blockchain has the ability to impact all industries on a global basis that require trust and rely on or utilize record keeping” How it fits?
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  7 Blockchain Potential Applications& Disruption The blockchain is radically changing the future of transaction based industries BTCS powers the ecosystem and touches every blockchain transaction
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  8 Discerning the BlockchainHype and Buzz • Single point of failure • Requires trusted party • No fault-tolerance • Susceptible to manipulation and corruption DISTRIBUTED MODELS CENTRALIZED MODELS Private Blockchains • Closed source model • Progressive innovation • Private blockchains are closed loop systems where only invited participants have access and provide control and trust Industry Initiatives: Historical Parallel: Resembles the closed source environment of AOL in 1995 • Open source model • Revolutionary technology shift • Bitcoin’s blockchain provides an open source layer to build distributed applications on Historical Parallel: Industry Initiatives: Public Blockchain (Bitcoin) Resembles the open source environment that the internet was built on * The views above reflect solely the opinions of BTCS and its management.
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  9 Bitcoin - MostProminent Blockchain Use Case Traits Barter (Before 600BC) Gold/Silver (600BC - present) Fiat (C. 806 - present) Bitcoin (C. 2009 - present) Highly Divisible Globally Transferable Durable Secure (counterfeiting) Acceptable Scarce (Predictable Supply) Not Sovereign (Government Issued) Distributed** Smart (Programmable)** * The above data was prepared by BTCS and reflects solely the opinion of BTCS and its management. ** New traits made possible by the invention of the blockchain. Poor ExcellentThe Traditional Traits of Money*
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  10 Bitcoin Ranking/Acceptance Notable Companies AcceptingBitcoin Revenue (billions) Microsoft $88 Dell $58 DISH $14 Expedia $5.9 Time Inc. $3.1 Systemax Inc. (Tiger Direct) $3.3 Overstock $1.5 1-800-FLOWERS $1.1 Zynga $0.7 Total $181 Source: Yahoo Finance, as of 6/25/2015. M1 Rank Country Money Supply (billions) 1 European Union $6,736 2 China $5,667 3 Japan $4,896 4 United States $2,807 5 Germany $1,841 6 Italy $999 ≈ ≈ ≈ ≈ 90 Trinidad and Tobago $6.91 91 Afghanistan $6.64 92 Bitcoin $6.52 93 Ghana $5.64 94 Syria $5.53 Source: U.S. Central Intelligence Agency, Blockchain.info, as of 12/31/2015.
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  11 - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Bitcoin Adoption isRapidly Accelerating Source: 1. blockchain.info, bitcoinpulse.com, CoinDesk.com; 2. bitcoinity.com; 3. blockchain.info, CoinDesk.com, Bitpay, IB Times; 4. bitcoinity.com, as of 9/26/2015. Cumulative Trading Volume (2) # of Transactions on Blockchain (4) User Wallets (1) Est. Merchants Accepting Bitcoins (3) 0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000 9000000 - 20,000 40,000 60,000 80,000 100,000 120,000 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 0 20,000,000 40,000,000 60,000,000 80,000,000 100,000,000 120,000,000 140,000,000 160,000,000 180,000,000 200,000,000
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  12 Venture Capital Landscape EarlyInternet VC Investment vs. Blockchain (millions) Source: CoinDesk.com, as of 2/2/2016. $250 $639 $96 $362 $490 $0 $100 $200 $300 $400 $500 $600 $700 1995 Internet 1996 Internet 2013 Bitcoin 2014 Bitcoin 2015 Bitcoin Sector Distribution of Top 15 Funded Companies (millions) Active Investors $210 $182 $105 $64 $53 $37 $28 $0 $50 $100 $150 $200 $250 Transaction Verification Services Universal Platforms Digital Wallets Infrustructure Payment Processor Financial Services Exchange • Over $210 million of venture capital funds invested to secure the blockchain, bitcoin’s key innovation • BTCS is the first U.S. public company focused on securing the blockchain with a fully integrated solution
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  13 Corporate Overview
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  14 0.1 0.65 0.95 176 891 1800 0 200 400 600 800 1000 1200 1400 1600 1800 2000 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Th/smw Estimated Electric Consumption(mw) ฿52 ฿1,797 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2014 2015 3,389% Growth Breakout Growth Across Key Metrics BTCS Bitcoins Earned* As of 1/31/2016* Bitcoins earned are a non-GAAP financial measure, as of 12/31/2015. BTCS Electric Consumption & Hashing Power 2014 2015 2016Q1 Hashing Power (Th/s) * Based on 9 months ended September 30, 2015 Key Facts: • BTCS cost to earn a bitcoin $135* • BTCS currently operating at 0.95mw (of 3mw capacity) • 3mw should power an estimated 20,000 Th/s of 3rd generation ASIC servers • 83,000 square foot – repurposed manufacturing building with option to buy for $705,000 (less up to $66,750 of future rent payments)
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  15 Securing and Buildingon the Blockchain • BTCS secures the blockchain through transaction verification and touches every transaction • Initial and early focus areas centered on digital currencies • Refine focus over time to reduce risk and capitalize on disruptive potential of blockchain across all industries INITIAL FOCUS BROADENED FOCUS IMMEDIATE FOCUS FUTURE FOCUS DISTRIBUTED APPLICATIONS
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  16 Principals of TransactionVerification Fees Time Newly Issued Bitcoins User Transaction Fees Bob sends Kate 3 bitcoins Kate receives 3 bitcoins Bob Anna Transaction Fees Over TimeTransaction Details • The network is currently programmed to only issue 21 million bitcoins • Over time the reward for securing the blockchain will be 100% comprised of transaction fees paid by users and fees paid by services that utilize the blockchain (distributed applications) Miner verifies the transaction and receives a fee from Bob and newly issued bitcoins from the network Distributed Applications Secured by the Blockchain Bitcoin Transaction Trust
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  17 Revenue and GrossProfit Example * Source: Bitcoin Wikipedia https://en.bitcoin.it/wiki/Controlled_supply Revenue Formula* Key Assumptions: • Server power usage is based on SP50 target specifications and 3mw NC facility capacity • Bitcoin exchange rate and network difficulty are as of 1/31/2016 and are subject to change • Network difficulty adjusts on a bi-weekly basis Notes: Example is for illustrative purposes only. BTCS is currently running 1.8Ph/s and using approximately 950kw of electricity. There are substantial uncertainties inherent in this example. You must make your own evaluation of the adequacy and accuracy of all projections and forecasts. Power and Mining Expense Formula P * E * H Monthly Power Usage Cost = Monthly revenue = $957,529 Power and mining expense = $125,870 Gross profit = $831,658 Profit margin = 87% Cost to earn 1 bitcoin = $48.26 Gross Profit Example Per Month = Revenue - Power and Mining Expense H * B * N * S * X D * 232 Monthly Revenue = = 20,900,000*10*25*30.41*84,600*430 103 * 232 = $957,529 3,135 * 0.055 * 730= $125,870= Definitions: H = Hashrate (Gh/s) D = Network difficulty (units) B = Reward per block (bitcoins) N = Average number of days per month S = Number of seconds per day X = Bitcoin exchange rate (USD/bitcoin) Assumptions : 20,900,000 120 25 30.41 84,600 $367 Definitions: P = Server power usage (kw) E = Facility electric cost ($/kwh) H = Average hours in a month (hr) Assumptions: 3,135 $0.055 730
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  18 Pending Merger with SpondooliesHighlights • Spondoolies founded in August 2013 develops, builds and sells world class ASIC servers • $28.1 million in revenue for 2014 • Received $10m in funding from prominent Israeli VC’s • Well respected technology team with proven track record of innovation and execution Merger Highlights • Shared vision of building leading blockchain company; complementary teams with no overlap in roles • BTCS has invested $2.25m in Spondoolies for a 9.6% equity interest • Definitive merger agreement signed September 21, 2015, working on satisfying closing conditions Time Deployment Revenue Server Sales Revenue Server Sales Server Sales Server Sales Revenue Server Development Server Development Low Cost Operations: 3mw North Carolina facility expandable up to 10mw. First pure-play U.S. public company with the experience to execute in a rapidly evolving industry. Click on image above to view the most recent facility video tour Intellectual Property: Proven track record of designing cutting edge servers. Spondoolies has successfully designed and built what are generally recognized as some of the best products on the market. Vertical Integration Competitive Advantage Vertical integration should provide continued revenue during server development cycle Vertical Integration + +
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  19 BTCS Facility MarginExpansion & Growth Strategy Preliminary Comparison Current Solar Est. On-Peak Energy Charge per month, per kwh $ 0.0631 $ 0.0631 Off-Peak Energy Charge per month, per kwh $ 0.0340 $ 0.0340 On-Peak Hours per Month 160 50 Off-Peak Hours per Month 512 457 Sun Hours per Month 0 165 Total Hours per Month 672 672 Weighted Average Energy Charge $ 0.0409 $ 0.0368 Estimated Demand Charge per kwh (2) $ 0.0141 $ - Estimated Total Electric Charge per kwh $ 0.0550 $ 0.0368 Competitiveness Determined by Two Factors Build-Out Cost per Megawatt Industry Average vs. BTCS NC Industry Average (1) BTCS Parts (PDUs, wiring, racks etc.) Details Not Provided $ 55,000 Contractor Labor Details Not Provided $ 40,000 Building Cost (2) Details Not Provided $ 255,000 Total $ 6,000,000 $ 350,000 Team: • Seasoned team capable of expanding NC facility • The building has the capacity to support build-out up to 10mw • Target quality refurbished data center equipment at below market prices North Carolina Electric Cost (1)North Carolina Strategically Selected: • North Carolina is the only state who’s Money Transmitter Act specifically excludes regulation of Transaction Verification Services (i.e. mining) (1) • The NC Datacenter Corridor serves Facebook, Apple, Google, Disney, AT&T, and others (2) • In 2015, NC was the 10th largest state for electricity production (3) Evaluate Solar Installation to Increase Margin: • NC facility purchase option includes 10 acres of suitable land adjacent to the building • 30% Federal Tax Credit recently extended until 2019 (4) • Solar Renewable Energy Credits (“SRECs”) may partially offset installation costs Sources: 1. http://www.nccob.gov, 2. https://gigaom.com, 3. http://www.eia.gov, 4. http://energy.gov 1 2 Experienced team capable of expanding current operations and evaluating and deploying in other low cost regions to diversify operations 1. Microsoft Cloud Global Foundation Services http://www.datacenterknowledge.com/archives/2011/03/16/how-big-is-the-data-center- construction-market/ 2. $765,000 NC facility purchase option allocated across 3mw capacity. 1. Electric Cost table excludes tax and is a simplification of a complex rate schedule and may not be indicative of the actual price of electricity paid by BTCS. There are substantial uncertainties inherent in both the current and solar estimates. You must make your own evaluation of the adequacy and accuracy of all projections, forecasts and estimates. 2. Demand Charges in practice are based on peak usage per kw per month not per kwh. This representation serves to simplify a best estimate on a per kwh basis.
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  20 Spondoolies Technology Roadmap/ Sales Model Well Financed Industrial Operators: • Containerized data center solution • Smaller customer base due to high price point • Likely efficient and cost effective Experienced Operators: • Traditional data center deployments • Cost effective solution • Manageable customer service model SP20 SP35 SP30/31 SP50 Form Factor SP10 Time Efficiency(J/Gh) • Replaceable modular circuit boards (similar to blade servers) for quick upgrades and repairs • Reoccurring revenue potential through selling upgraded boards • High customer switching cost • Easily replaceable built-in power supply units • Design foundation for future generation chips Technology Roadmap* Target Market Large Addressable Market Small Retail Customers: • Well suited for home use • High customer service cost resulting from larger customer base • Retail customers typically have high cost electricity and may be unable to compete * The above data was prepared by BTCS with input from Spondoolies and reflects solely the opinion of BTCS and its management.
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  21 16% 15% 0.5%4% 58% Competition to Securethe Blockchain Company Strategy Country Cumulativ e Capital Raised Technology and Deployment Bitmain Tech Ltd Develop Build Deploy China unknown • Tech: 28nm (TSMC) • Efficiency: 0.25 J/Gh Bitfury Holding B.V. Develop Build Deploy Netherlands $60m • Tech: 16nm • Efficiency: 0.10 J/Gh 21 Inc Develop Build Deploy US $121m • Tech: 22nm (Intel) • Efficiency: 0.22 J/Gh (estimated) KnCMiner AB Develop Build Deploy Sweden $29m • Tech: 16nm • Efficiency: Unknown Spondoolies-Tech LTD Develop Build Israel $16m • Tech: 16nm (roadmap in development) • Efficiency: 0.09 J/Gh (target) BTCS Inc. Deploy US Source: Bitfury.com, Bitmain.com, Spondoolies-tech.com, Kncminer.com, CoinDesk.com, as of 2/2/2016. Others Pro-FormaMerged Source: Blocktrail.com/BTC, as of 2/4/2016 (Pool)
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  22 Blockchain Investment andAcquisition Potential Strong pipeline of investment opportunities and acquisition targets in both Israeli and the U.S. Experienced team with a proven track record of negotiating and closing favorable deals Ability to identify investment themes in complex and emerging blockchain industry Select Investments • GoCoin provides online merchants with a suite of software to better engage their consumers and to accept not only credit cards, but also bitcoin and other digital currencies • December 2015, GoCoin successfully processed its one millionth transaction on the platform and, completed a merger with Ziftr LLC • Notable brands using GoCoin platform: • Gem enables companies that might not otherwise have an advanced understanding of blockchain technology to easily deploy it with a modular platform that scales • In January 2016, Gem completed a $7m Series B investment led by Pelion Venture Partners, KEC Ventures, Blockchain Capital, Digital Currency Group, RRE Ventures, and others Lead Investor in Series A Financing (March 2014) Only Strategic Investor in Series A Financing (September 2014)
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  23 BTCS Management Charles Allen ChiefExecutive Officer, Chief Financial Officer, and Chairman of the Board • Responsible for overall corporate strategy and direction as well as managing corporate finances • Extensive experience in business strategy, investment banking, investing and capital markets transactions • Strong engineering background with experience in the compound semiconductor field • B.S. in Mechanical Engineering, Lehigh University, M.B.A. Mason School of Business at the College of William & Mary Guy Corem Chief Executive Officer & Founder • Expert in leading open source development teams in the areas of ASIC, drivers and firmware • Previously software architect at Intel and Voltaire Michal Handerhan Chief Operating Officer, Co-Founder and Director • Supports business and R&D strategy across the management team • Team leader for the National Aeronautics and Space Administration (“NASA”) in their Peer Review Services group and web 2.0 developer at NASA’s Goddard Space Flight Center • President and CEO of Meesha Media Group, LLC, delivering high-definition video services, web development, and database management Yuval Rosen Chief Financial Officer • 20 years of experience in leading finance for international technology companies • Previously CFO at Cheetah Medical and Discretix Kobi Levin Chief Operating Officer & Founder • 20 years of experience in leading hardware and system design • Previously VP R&D at Voltaire and COO at Solaredge Spondoolies Management
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  24 Growth Strategy andPath Forward • Vertically integrate through merger with Spondoolies • Drive revenue growth through expansion in North Carolina facility • Evaluate other low-cost data centers to expand and diversify our transaction verification services business • Evaluate and build additional consumer solutions that leverage blockchain technology • Identify additional acquisition opportunities in the blockchain space • Pursue uplisting to NASDAQ or NYSE MKT in 2016
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  25 • Early moverin the blockchain and digital currency ecosystems and the first “Pure Play” U.S. public company focused on blockchain technologies • The blockchain is a distributed public ledger that has the ability to fundamentally impact all industries globally that require trust and rely on or utilize record keeping • Tremendous long term opportunity as disruptive Blockchain applications emerge • We secure the blockchain through our transaction verification services business and plan to build a broader ecosystem to capitalize on opportunities in this fast-growing multi-billion dollar industry • We are rapidly scaling our low cost transaction verification services business and believe this will provide revenue growth as we evaluate and build additional solutions that leverage blockchain technology • Our management team offers the right combination of capital markets experience, industry expertise, business leadership, and dedication • Approximately $4.25 million in 2015 financings led by prominent investors, institutions, and management Summary
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  26 Contact Info Charles Allen ChiefExecutive Officer Investor Contact Info ir@btcs.com (202) 430-6576