PRIVATE PLACEMENT MEMORANDUM 17 JULY 2018 - RSN ENTERTAINMENT LTD SECURITY TOKEN OFFERING ("STO") - CryptoMillionsLotto
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PRIVATE PLACEMENT MEMORANDUM 17 JULY 2018 RSN ENTERTAINMENT LTD (A Limited Liability Company incorporated in England & Wales with Company Number 10373664) SECURITY TOKEN OFFERING (“STO”) 1
30,000,000 CryptoMillionsLotto tokens of which 25,000,000 tokens (“CML Tokens”) are for sale each for the equivalent reference price of USD 2.50. However, sales may be concluded at such prices as might be agreed between RSN Entertainment Ltd and the Investor). The remaining 5,000,000 tokens ("Reward Tokens") are for incentives and bonuses, and not for sale. Both tokens carry quarterly dividend rights representing 15% of the Gross Gaming Revenue of CryptoMillionsLotto. Purchasers of CML Tokens ("Purchasers") receive an entitlement to issued shares of Ofertas365 Limited ("Ofertas Shares"). Reward Tokens do not carry entitlements rights to Ofertas Shares. This is a private sale of CML Tokens issued under a STO of RSN Entertainment Ltd, a limited liability company incorporated in England & Wales on 13 September 2016 with Company Number 10373664 (“RSN” or “Company”). RSN is a wholly owned subsidiary of Ofertas365 Limited, a company incorporated in England & Wales with Company Number 10551144 (“Ofertas”) and whose shares are publicly listed on the Dutch Caribbean Securities Exchange, Curaçao (“DCSX”). RSN is offering US Accredited Investors CML Tokens, which constitute securities, in a private STO exempt from registration under federal securities laws upon the terms and conditions set forth in this memorandum (“Memorandum”). The Minimum Subscription is payable in a variety of cryptocurrencies, Pounds Sterling or Euros, although Company may accept an investment of a lesser minimum amount at its sole discretion. Company will use more than 95% of the proceeds of the STO for the marketing of CryptoMillionsLotto, operations, support and hosting; and less than 5% for technology upgrades, security and compliance. RSN's staff and advisors will not have any entitlement to CML Tokens as they have already been rewarded with Ofertas Shares. CML Token holders will be entitled to quarterly distributions based on 15% of the Gross Gaming Revenues of CryptoMillionsLotto, defined as total sales of CryptoMillionsLotto after deductions for prizes paid out and prize insurance costs. Therefore, CML Tokens constitute security tokens and not utility/usage tokens. Distributions will be payable quarterly in 2
cryptocurrency via the Blockchain to the wallets of CML Token holders as registered with RSN at the end of each calendar quarter: 31 March, 30 June, 30 September and 31 December. In addition, CML Token holders participating in the STO shall receive Ofertas Shares which carry rights to annual dividends as declared by the Board of Directors of Ofertas. Such shares are listed on the DCSX and are restricted for trading until 3 December 2018. After such date, they shall become unrestricted and freely tradable on the DCSX or any stock exchange that RSN lists them on. CML Tokens will be issued and listed on cryptocurrency exchanges and shall be freely tradable without restriction upon listing. CML Tokens will be sent to Investor’s cryptocurrency wallets within 10 days of the end of the STO. In order to receive Ofertas Shares, each Investor is required to open a Brokerage and Custody Account with Ofertas' appointed DCSX authorised Listing Advisor and Broker, Amergeris Global Listing and Exchange Services N.V. (“Amergeris”). Ofertas shall provide full assistance with the Amergeris account opening process and for the lodging of Ofertas Shares in the respective Investor accounts. Ofertas Shares comprise a single class of 100,000,000 issued shares with a nominal value of USD 1.00 per share, all ranking fully pari passu and each carrying one vote per share. 70,000,000 shares are restricted for trading until 3 December 2018. Ofertas Shares subject to this STO are issued and held in Treasury. Ofertas has more than 110 registered shareholders as at the time of this Memorandum. None has a controlling interest or holding of 25% or more. AN INVESTMENT IN CML TOKENS AND OFERTAS SHARES IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. SEE “SPECIAL CONSIDERATIONS & RISK FACTORS” FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH ANY PURCHASE OF CML TOKENS AND RECEIPT OF OFERTAS SHARES. CML TOKENS WILL BE LISTED ON CRYPTOCURRENCY EXCHANGES AND OFERTAS SHARES ARE ALREADY LISTED ON THE DCSX, WHICH IS A SELF-REGULATED INTERNATIONAL EXCHANGE FOR THE LISTING AND TRADING OF BOTH DOMESTIC AND INTERNATIONAL SECURITIES. DCSX IS LICENSED BY THE CURACAO MINISTER OF FINANCE AND SUPERVISED BY THE CENTRAL BANK OF CURACAO AND SINT MAARTEN. CML TOKENS AND OFERTAS SHARES COULD SUFFER FROM VERY LIMITED LIQUIDITY FOLLOWING THE 3
PLACEMENT OF CML TOKENS. YOU SHOULD BE PREPARED TO BEAR THE ECONOMIC RISK OF YOUR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME AND BE ABLE TO WITHSTAND A TOTAL LOSS OF YOUR INVESTMENT. NEITHER CML TOKENS NOR OFERTAS SHARES HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR UNDER ANY STATE OR OTHER SECURITIES LAW, AND NEITHER THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) NOR ANY STATE OR OTHER REGULATORY AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM OR APPROVED OR ENDORSED THE TERMS OR MERITS OF CML TOKENS OR OFERTAS SHARES OR THIS STO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. COMPANY HAS SUBMITTED A FILING OF FORM D WITH THE SEC FOR A PRIVATE PLACEMENT UNDER RULE 506 (c) OF REGULATION D OF THE SECURITIES ACT. WARNING: PROSPECTIVE PURCHASERS SHOULD NOT PURCHASE CML TOKENS UNLESS THEY ARE FAMILIAR WITH DEALING WITH CRYPTOGRAPHIC TOKENS AND BLOCKCHAIN-BASED SOFTWARE SYSTEMS. Purchases of CML Tokens should only be undertaken by persons (individual or corporate) that have significant experience with, and understanding of, the usage and intricacies of cryptographic tokens, such as Bitcoin (“BTC”), Ethereum (“ETH”), Smart Contracts and Blockchain-based software systems. Purchasers should have a functional understanding of storage and transmission mechanisms associated with other cryptographic tokens. While RSN will be available to assist Purchasers of CML Tokens during the STO, RSN will not be responsible for lost BTC, ETH, CML Tokens or any other cryptocurrency or fiat currency resulting from actions taken by, or omitted by Purchasers. Note, in particular, that CML Token Purchasers should take great care to write down their wallet password and not lose it so as to be sure that they will be able to access their CML Tokens once they become available during the STO. Prospective purchasers who do not have such experience, knowledge or expertise should not purchase CML Tokens or participate in the STO. 4
IMPORTANT NOTICE REGARDING CML TOKENS Ownership of CML Tokens carries the right of holders to receive quarterly dividends as set in this Memorandum. They are neither used nor usable for playing or participating in lotto or any other games offered by CrytptoMillionsLotto. Other than the quarterly dividend entitlement, CML Tokens carry no other rights express or implied. Purchasers should be aware that the purchase of CML Tokens constitutes a purchase of unregistered securities. Purchases of CML Tokens are non-refundable. Purchasers should have no expectation of influence over governance of CrytptoMillionsLotto or RSN. By participating in the STO, Purchasers expressly acknowledge and represent that they have carefully reviewed the Terms & Conditions at www.cryptomillionslotto.io and fully understand the risks, costs, and benefits of acquiring CML Tokens and Ofertas Shares and agree to be bound by these terms. As set forth below, Purchasers further represent and warrant that, to the extent permitted by law, Purchasers are permitted and authorized to purchase and own CML Tokens and Ofertas Shares in their respective jurisdictions, are solely responsible for the obligations with regard to any filings, reporting or declarations to any tax authority or such other competent authorities in their respective jurisdictions, are of a legal age to be bound by the terms, and will not hold RSN, its parent and affiliates, its officers, directors, agents, employees and suppliers of CML Tokens now or in the future liable for any losses or any special, incidental, or consequential damages arising out of, or in any way connected to the sale of CML Tokens. Company will act as the placement agent in connection with the STO. Please direct all inquiries regarding Company and the STO to: RSN Entertainment Ltd Attn: Sulim Malook 71-75 Shelton Street, London WC2H 9JQ, United Kingdom Tel: +44 7578 066 616 Email: info@cryptomillionslotto.io 5
TABLE OF CONTENTS NOTICE TO PROSPECTIVE INVESTORS 8 NOTICE TO NON-US INVESTORS 10 SECURITIES LAWS AND RESTRICTIONS 11 CONFIDENTIALITY AND RECIPIENT’S UNDERTAKINGS 12 NOTE ON FORWARD-LOOKING STATEMENTS 12 DEFINITIONS 13 DIRECTORS AND ADVISORY BOARDS 16 PROFESSIONAL ADVISORS 17 STO MEMORANDUM SUMMARY 18 INTRODUCTION TO THE BUSINESS 19 INVESTMENT HIGHLIGHTS 20 THE LOTTO INDUSTRY AND COMPETITION 23 THE PROBLEMS OF THE LOTTO INDUSTY 25 CRYPTOMILLIONSLOTTO – BUSINESS PROPOSITION 27 CRYPTOMILLIONSLOTTO PLATFORM FEATURES 29 PROGRESS TO DATE AND IMPLEMENTATION PLAN 29 MARKETING PLAN - CRYPTOMILLIONSLOTTO 29 SUMMARY OF THE STO 34 STO STATISTICS 36 CML TOKENS AND OFERTAS SHARES FEATURES 37 HOW TO SUBSCRIBE FOR CML TOKENS 38 HOW TO RECEIVE OFERTAS SHARES 39 HOW TO SELL CML TOKENS AND OFERTAS SHARES 39 USE OF PROCEEDS 40 MANAGEMENT OF COMPANY 40 FINANCIAL INFORMATION ON COMPANY AND FINANCIAL PROJECTIONS 47 3 YEAR ILLUSTRATIVE FINANCIAL PROJECTIONS – RSN ENTERTAINMENT LTD 50 3 YEAR FINANCIAL PROJECTIONS – OFERTAS365 LIMITED 50 INVESTOR SUITABILITY STANDARDS 51 6
PERSONAL INFORMATION 54 ANTI-MONEY LAUNDERING CONSIDERATION 55 AVAILABLE INFORMATION 55 TAXATION & MATERIAL US FEDERAL TAX CONSIDERATIONS 56 SPECIAL CONSIDERATIONS AND RISK FACTORS 56 STATE NOTICE REQUIREMENTS 63 EXHIBIT A – TERMS & CONDIITONS OF APPLICATION 65 EXHIBIT B – SUBSCRIPTION AGREEMENT FORM 68 EXHIBIT C – STATE JURISDICTIONAL LEGENDS 71 EXHIBIT D – ACCREDITED INVESTOR SUITABILITY QUESTIONNAIRE 87 7
NOTICE TO PROSPECTIVE INVESTORS This Memorandum is being furnished solely for the purpose of enabling only prospective Accredited Investors (as defined under Rule 501 of Regulation D promulgated under the Securities Act of 1933) to determine whether they wish to proceed with further investigation of Company and making an investment in the CML Tokens and receive Ofertas Shares. This Memorandum is not intended to form the basis of any investment decision and does not attempt to present all the information that prospective Investors may require for purposes of making an investment decision. Company anticipates providing prospective Investors with the opportunity to ask questions, receive answers, obtain additional information and complete their own due diligence review concerning Company, the STO, CML Tokens and Ofertas Shares prior to entering into any agreement to purchase CML Tokens and to receive Ofertas Shares. By accepting delivery of this Memorandum, you agree to undertake and rely on your own independent investigation and analysis and consult with your own attorneys, accountants and other professional advisors regarding Company and the merits and risks of an investment in CML Tokens and Ofertas Shares, including all related legal, investment, financial, tax and other matters. All information included in this Memorandum and otherwise furnished in connection with this STO is submitted to you on a strictly and permanently confidential basis, except as indicated below or otherwise expressly agreed in writing by Company. Any reproduction or further distribution of this Memorandum or any such information is prohibited. By accepting delivery of this Memorandum, you agree that neither you nor any of your employees, agents or advisors will use this Memorandum or any such information for any purpose other than evaluating Company and the STO of CML Tokens and Ofertas Shares. Except as indicated below or otherwise expressly agreed by Company, you also agree not to disclose to any person the fact that you have received this Memorandum or any such information or any terms, conditions or other information with respect to Company. If you decide not to participate in this STO, or if Company so requests, you agree promptly to return this Memorandum and all other materials received in connection therewith without retaining any copies thereof. Neither Company nor any of their respective affiliates shall have any 8
liability for any information included in this Memorandum or otherwise made available in connection with the STO, except for liabilities expressly assumed by Company in the definitive subscription agreement, the form of which is attached as Exhibit B to this Memorandum, and related documentation for each purchase of CML Tokens and receipt of Ofertas Shares. Without limitation of the foregoing, Company makes no representation or warranty as to the accuracy or completeness of any information included in this Memorandum or any other information, written or oral, or any document made available in connection with the STO. Until the execution of definitive purchase documentation for the purchase of the CML Tokens and receipt of Ofertas Shares, Company reserves the right, in its sole discretion and for any reason, to modify or amend the terms of the CML Tokens, to approve or disapprove any prospective investor, to accept or reject, in whole or in part, any subscription, to allot to any investor fewer CML Tokens and Ofertas Shares than the number sought by such investor and to withdraw from any further discussions, negotiations or transactions. Neither Company, Ofertas nor any of their respective affiliates will have any liability or obligation whatsoever to any prospective investor in the event of any of the foregoing. This Memorandum speaks as at the date hereof. Neither the delivery of this Memorandum nor any eventual sale of the CML Tokens shall, under any circumstances, imply that the information contained herein is correct as of any future date or that there has been no change in Company’s affairs or those of Ofertas after the date hereof. Nothing contained herein is, or should be relied upon as, a promise or representation as to future performance. Neither Company, Ofertas nor any of their affiliates undertake any obligation to update or revise the Memorandum. This Memorandum is intended solely for the use of the prospective investor to whom this Memorandum is initially provided. This Memorandum does not constitute an offer to sell to, or solicitation of, an offer to purchase from any investor or in any jurisdiction in which such an offer or solicitation is not authorized or would be unlawful. Each investor must comply with all legal requirements in each jurisdiction in which it purchases, offers or sells the CML Tokens and/or Ofertas Shares or possesses this Memorandum, and must obtain any consent, approval or permission required by it in connection with CML Tokens and Ofertas Shares or the STO. Neither Company, Ofertas 9
nor any of their respective affiliates make any representation or warranty regarding, or shall have any responsibility for, the legality of an investment in CML Tokens and receipt of Ofertas Shares under any securities or similar laws. Prospective Investors are not to construe the contents of this Memorandum as investment, legal, business or tax advice of any kind. This Memorandum may contain descriptions of CML Tokens and Ofertas Shares and certain other documents relevant to this STO that do not set forth all the information that is included in, or may be derived from, those documents. You should read the complete text of the documents, carefully and in their entirety, prior to making any investment decision. You may request copies of the documents from RSN. Any financial projections and other statements of anticipated future performance that are included in this Memorandum or otherwise furnished in connection with the STO are for illustrative purposes only and are based on assumptions by Company’s and/or Ofertas' management and may be subject to significant risks and uncertainties and may prove to be incomplete or inaccurate. Actual results achieved may vary from the Illustrative Financial Projections and the variations may be material. Variations in the assumptions underlying the projections may also significantly affect projected results. The Illustrative Financial Projections contained in this Memorandum were not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants or generally accepted accounting principles and have not been examined, reviewed or compiled by Company’s independent certified accountants. NOTICE TO NON-US INVESTORS This Memorandum is produced solely for US ‘Accredited Investors’. Any non-US Investors who are interested in receiving information on CML Tokens or the STO should visit our website at www.cryptomillionslotto.io where they can get read the Whitepaper and the CryptoMillionsLotto Offer Document. Any applications made for CML Tokens by persons who are unable to certify non-US status, for example, to provide an address or telephone number outside the US, will be rejected. 10
SECURITIES LAWS AND RESTRICTIONS Securities acquired in a Regulation D of the Securities Act transaction such as the present STO are “restricted securities” that cannot freely be resold without registration at the SEC or an exemption from registration. Purchasers whom Company reasonably believes to be statutory underwriters or otherwise engaged in a distribution of the securities, shall not be accepted by Company to participate in this STO. Section 4(a)(2) of the Securities Act of 1933 (the “Act”) exempts from registration transactions by an issuer not involving any public offering. Section 4(a)(2) permits an issuer to sell securities in a "private placement" without registration under the Act. In accordance with Section 4(a)(2), this exemption is only available to the issuer, and not to persons who have acquired securities from the issuer and who want to resell the securities. Section 4(a)(1) of the Act exempts from registration "transactions by any person other than an issuer, underwriter, or dealer." A holder of securities who is not an issuer or a dealer can therefore sell his securities in a private sale without registration if the holder is not an underwriter as "underwriter" is defined in Section 2(a)(11). A holder of restricted securities who wishes to resell them privately under section 4(a)(1) therefore must sell in a transaction that is sufficiently “private”. Such private resale should comply with the following conditions as a minimum: • it should be to a limited number of purchasers (less than 25 purchasers); • the securities should be offered without public advertising or general solicitation; • the seller should provide the purchaser with such information about the issuer as is available to the seller, although a seller that is not affiliated with the issuer may not be able to provide anything like the disclosures that would be made in a private placement by the issuer; • if the seller is affiliated with the issuer, purchasers generally should be limited to those who are sophisticated enough to be able to evaluate the risks of the investment; • although no specific holding period is required before the resale of the securities, the seller must not have purchased the securities with a view to resale, and it generally is considered by the SEC that a holding period of six months or more will evidence the seller’s original investment intent; 11
• the purchaser should represent that it is acquiring the securities for investment and not for resale. CONFIDENTIALITY AND RECIPIENT’S UNDERTAKINGS By receiving and accepting this Memorandum the recipient agrees to keep permanently confidential the information contained herein or sent herewith or made available in connection with further enquiries. This Memorandum and all other information supplied may be made available to the recipient’s financial, investment and legal advisors and members of staff directly involved in their appraisal, but shall not be copied, reproduced, distributed or otherwise made available to any other party in any circumstance without the prior written consent of RSN. Any persons considering making an investment under this STO on the basis of the information contained herein should make their own investigations and form their own opinion on the business and its prospects in consultation with their independent professional financial, legal and taxation advisers. The information disclosed in this Memorandum regarding the taxation of Investors is for information only. Investors should obtain advice from their own personal taxation advisors. NOTE ON FORWARD-LOOKING STATEMENTS This Memorandum includes forward-looking statements. The Directors have based these forward-looking statements largely on their current expectations and projections about future events and financial trends affecting the financial condition of Company and Ofertas, including the STO contemplated in this Memorandum. Forward-looking statements should not be read as a guarantee or assurance of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or Company and Ofertas' management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in, or suggested by, the forward-looking statements. 12
The Directors do not consider it appropriate to make a profit forecast at this time. However, the Directors make reference throughout the Memorandum to their Illustrative Financial Projections and the anticipated impact of the STO on certain key financial indicators for RSN and Ofertas such as contribution to Revenues, Cash Flow, EBITDA, Earnings Per Share and Market Value. Any financial projections cannot be regarded as forecasts and no representation or warranty is given, or is to be implied by, or on behalf of Company, Ofertas, the Directors or any other person that these Illustrative Financial Projections will be or are likely to be achieved. In addition, in this Memorandum, the words "believe”, “could”, "may", "will", "estimate", "continue", "anticipate", "intend", "expect", "potential" and similar expressions, as they relate to Company, Ofertas, its business and its management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this Memorandum may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. Forward-looking statements speak only as of the date of this Memorandum. Undue reliance should not be placed on any forward-looking statements. The Directors assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws. If the Directors update one or more forward-looking statements, no inference should be drawn that the Directors will make additional updates with respect to those or other forward-looking statements. DEFINITIONS “AfroMillionsLotto” The lotto betting platform operated by Ofertas. “Amergeris” Amergeris Global Listing & Exchange Services N.V. is the DCSX authorised Broker and Listing Adviser of Ofertas. “Blockchain” A digital ledger in which transactions made in BTC and other cryptocurrencies are recorded chronologically and publicly. “Board” or “Directors” The directors of RSN Entertainment Ltd and the directors of Ofertas365 Limited. 13
“CML STO Platform” The platform used to purchase and take delivery of CML Tokens via Smart Contracts. “CML Tokens” The cryptocurrency tokens subject to offer under this Memorandum. These are security tokens. “Company” RSN Entertainment Ltd. “Cryptocurrency” A cryptocurrency is a digital or virtual currency that uses cryptography for security. It is not issued by any central authority, rendering it theoretically immune to government interference or manipulation. The best known examples are Bitcoin ("BTC"), Ethereum ("ETH") and Bitcoin Cash ("BCH"). "CryptoMillionsLotto The CryptoMillionsLotto online cryptocurrency lotto platform. Platform" “CryptoMillionsLotto The private placement Memorandum under the terms of which Offer Document” Non-US investors may apply to purchase CML Tokens. “DCSX” Dutch Caribbean Securities Exchange N.V. The DCSX is a self- regulated securities exchange, licensed by the Ministry of Finance and supervised by the Central Bank of Curaçao and St. Maarten. “EBITDA” Earnings before interest, tax, depreciation and amortisation. “eGaming License” eGaming license number 1668/JAZ issued to Ofertas365 (Curaçao) N.V. by the Curaçao eGaming Authority and under which Ofertas operates AfroMillionsLotto, and under which, “Euro” or “EUR” CryptoMillionsLotto will operate. The currency of the Eurozone. “GBP” Pounds Sterling. “Gross Proceeds” Gross proceeds from the STO . "Gross Gaming Revenue" Revenue generated from sales of CryptoMillionsLotto less payouts and insurance cover. “Investors” or Subscribers for CML Tokens pursuant to this STO and recipients “Purchasers” of shares of Ofertas365 Limited. “Intellectual Property” or Intellectual Property belonging to Ofertas and its subsidiaries, “IP” being defined for the purposes of this Memorandum as patents, 14
trademarks, service marks, registered designs, utility models, design rights, URLs, brands and similar, databases, trade names, rights in or to regulatory approvals and authorizations, whether any of the foregoing rights are registered or not or capable of registration or not and including the right to apply for and all applications for any of the foregoing rights. “Memorandum” This present Private Placement Memorandum. “Minimum Subscription” The minimum individual subscription for CML Tokens per investor of the equivalent of USD 10,000. “Ofertas” Ofertas365 Limited., a company incorporated in the United Kingdom with company number 1055114, and publicly listed on the DCSX. It is the 100% owner of RSN Entertainment Ltd and its Financial Year End is to 30 June. “Ofertas365 (Curaçao) The wholly owned subsidiary of Ofertas, incorporated in Curaçao N.V. under Company Number 143000 and holder of Curaçao eGaming license number 1668/JAZ. “Ofertas Shares” The 100,000,000 Ordinary Shares of USD 1.00 par value issued and listed on the DCSX at the date of this Memorandum. “Paper Wallet” A physical wallet that allows an individual to make electronic transactions in cryptocurrencies. “Shareholders” Holders of Ordinary Shares in the capital of Ofertas. “Smart Contract” Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized Blockchain network. “Start Date” 9.00am GMT on 2 July 2018. “Security Token Offering” An unregulated means by which funds are raised for a new or “STO” cryptocurrency venture through the issue of new tokens carrying benefits and entitlements. “STO Price” The price for CML Tokens (payable at the equivalent in cryptocurrency, GBP or EUR). “Subscribers” Those individuals and organizations subscribing for CML Tokens under this Memorandum. 15
“Terms” The complete terms and conditions pertaining to this STO – available at www.cryptomillionslotto.io. “Treasury” The Ofertas Shares held in a Treasury account by Ofertas. “United Kingdom” or The United Kingdom of Great Britain & Northern Ireland. “UK” “United States” or “US” or The United States of America, its territories and possessions, any “USA” state of the United States and the District of Columbia and all other areas subject to its jurisdiction. “USD” United States Dollars. “Wallet" A digital e-wallet that allows an individual to make electronic transactions and store tokens and cryptocurrencies. DIRECTORS & ADVISORY BOARD OF RSN ENTERTAINMENT LTD Mr Sulim Malook Director Mr Thomas James Leppard Director Mr Nick Ayton Advisor to the Board Mr Michael Jones Advisor to the Board Mr Daymon Ruttenberg Advisor to the Board Mr Simon Cocking Advisor to the Board Mr Paul Ash Advisor to the Board Mr Kenneth Bodnar Advisor to the Board Mr Andrew Jarrett Advisor to the Board Mr Jason Stratford Advisor to the Board Mr Elmar Malikov Advisor to the Board Mr Evgeny Alekhin Advisor to the Board Mr Miles Carroll Advisor to the Board Dr Nick Almond Advisor to the Board DIRECTORS & ADVISORY BOARD OF OFERTAS365 LIMITED Mr Sulim Malook Director Mr James leppard Director 16
Mr David Andres Eduardo Director Mr Okey Obi Advisor to the Board Mr Nwankwo Kanu Advisor to the Board Mr Shehu Dikko Advisor to the Board PROFESSIONAL ADVISORS DCSX LISTING ADVISOR & BROKER Amergeris Global Listing & Exchange Services N.V. Pareraweg 45, P.O. Box 4917, Willemstad, Curaçao CUSTODIAN BANK Vidanova Bank N.V Schottengatweg Oost 44 P.O. Box 707 Willemstad, Curaçao BANKERS SAI Bank N.V. Plasa Smeets 6, Willemstad, Curaçao 17
STO MEMORANDUM SUMMARY RSN & Ofertas Group RSN is a wholly owned subsidiary of Ofertas365 Limited. The structure of the group is set out as follows: The principal activity of the group is the operation and marketing of online lotto based on the outcome of the twice weekly German National Lottery ‘6aus49’. Prior to the forthcoming launch of CryptoMillionsLottto, RSN has not been engaged in any business activity. The operation of CryptoMillionsLotto will constitute its principal business. The proceeds received from this STO will be used for the global marketing, operation, support, hosting, technical upgrading, security and compliance aspects of CrytoMillionsLotto. Company will reimburse all legal, accounting, and directors’ and officers’ insurance costs and expenses reasonably incurred by Company. 18
INTRODUCTION TO THE BUSINESS CryptoMillionsLotto is based on a platform that is already up-and-running, AfroMillionsLotto (www.afromillionslotto.com), operated by Ofertas and launched across Africa. The only difference between these platforms will be that players of CryptoMillionsLotto will use cryptocurrency rather than fiat currency to play and win. Tickets and prizes will be denominated in cryptocurrency. The lotto platform is provided under a license from Twelve40 Limited, a Jersey incorporated company with Company Number 115403. Twelve40 holds a B2B Platform Providers Permit by virtue of Part 2, Article 12 of the Gambling (Jersey) Law 2012 Permit # PP-002-16. Ofertas launched AfroMillionsLotto in October 2017. It currently operates branded lottos for 20 Nigerian Premier League and 4 National League soccer clubs under a 5-year exclusive agreement with the Nigerian soccer governing body, League Management Company (LMC), complemented by a range of Instant Win games, which serve to engage players between the twice weekly lotto draws and generate incremental revenue. Furthermore, Ofertas has concluded similar 5-year exclusive deals with several leading African charities in Nigeria, Cameroon and Kenya. Players register online and deposit funds into their accounts. All payments are channelled through regulated merchant payment providers who ensure that payments are not affected by persons resident in jurisdictions where we are not permitted to operate under our Curaçao eGaming license. Ofertas recently concluded an agreement with Nigerian Central Bank licensed payment provider Pagatech Limited to enable the purchase of tickets to play AfroMillionsLotto to be made in local Nigerian currency, Naira. This will involve Ofertas in assuming a degree of Nigerian country and currency risk in relation to the conversion and remittance of funds in EUR to Ofertas. The Board of Ofertas has assessed these risks and considers them to be manageable and will make conversion and remittance on a frequent basis. RSN's strategy for entering new "grey" markets using an offshore license is not new; several large gaming companies such as Bet365, Lottoland, Pokerstars and Dafabet operate in the exact same manner. 19
Prior to marketing to a specific territory, RSN will seek legal opinions to the effect that online gambling and cryptocurrency are not prohibited in the relevant territory. CryptoMillionsLotto prizes will be payable in the same cryptocurrency players used to play. However, jackpot prizes will be payable in USD and will be fully insured by PIMS-SCA Limited (owned by US based SCA Promotions Inc.), a Financial Conduct Authority regulated Lloyd's registered insurance broker. Ofertas' AfroMillionsLotto jackpot prizes are currently insured with PIMS-SCA Limited. As a condition of the jackpot insurance, winners will be required to provide personal identification, proof of residence and bank account details in order to receive such prizes. If they want ot be paid in cryptocurrency instead of USD, they will bear any conversion costs. CryptoMillionsLotto will be conducted under the eGaming license number 1668/JAZ granted to Ofertas365 (Curaçao) N.V. by the Curaçao eGaming Authority, which has already approved the undertaking of CryptoMillionsLotto by RSN under the said license. INVESTMENT HIGHLIGHTS Significant Market Opportunity Company believes that its innovative cryptocurrency based platform presents a substantial market opportunity given the growing interest in and adoption of cryptocurrencies worldwide. Furthermore, basing it on an established and well-known product, lotto will have appeal beyond the cryptocurrency market. Our business is based on a proven and tested model, and could enable us to open up a large global audience, and spur a wider adoption of cryptocurrency usage beyond the confines of the present crypto community through a familiar lotto format. Our proposition is based on harnessing two major areas of global growth: lotto and cryptocurrency adoption, and applying it in countries where online lotto and cryptocurrency are either permitted or not restricted, and where local lotto jackpots are relatively small or lotto play has not been exploited. Cryptocurrency is the only way to rollout a truly global, borderless lotto, using a single currency and offering bigger jackpots than those of local lottery operators, allowing payments and prize pay-outs to be made seamlessly between player and operator wallets without relieance or dependence on expensive card and payment processors, and banks. 20
i) Lotto Lotto is a huge industry and one that continues to grow. Today, an estimated one fifth of the world’s population plays and, according to La Fleur’s 2015 Almanac, global lotto sales were close to USD 300 billion (1). Lotto offers huge rewards for minimal outlay which is the essence of its appeal. A report by Research and Markets (2) forecasts that the global lotto market will grow at a compound annual growth rate (“CAGR”) of 8.85% over the period 2014-2019, whilst another report by Technavio (3) predicts the CAGR for lottery at 9.44% from 2017 to 2021. ii) Cryptocurrency An informative report entitled ‘Global Cryptocurrency Benchmarking Study’ published in 2017 by the University of Cambridge - Centre for Alternative Finance, UK concludes that the user adoption of various cryptocurrencies has really taken off, with billions in market capitalisation and millions of wallets becoming ‘active’. In fact, the total cryptocurrency market capitalisation reportedly increased more than 3x between early 2016 reaching nearly $25 billion in March 2017 and has continued to grow unabated. Secondly, although BTC remains the predominant cryptocurrency, it has lost overall market share to the plethora of new cryptocurrencies, and represented 72% as at March 2017; down from 86% as at March 2015. Thirdly, the cryptocurrency industry is both globalised and localised, with borderless exchange operations, as well as geographically clustered mining activities. Fourthly, the industry is becoming more fluid, as the lines between exchanges and wallets are increasingly ‘blurred’ and a multitude of cryptocurrencies, not just BTC, are now supported by a growing ecosystem, fulfilling an array of functions. Issues of security and regulatory compliance are likely to remain prevalent for years to come. One of the features of CryptoMillionsLotto is that it aligns with the two forecast growth trends in both lotto and cryptocurrency, presenting what Company considers to be a unique opportunity. Many Initial Coin Offerings (“ICOs”) and STOs are based on the premise of an untested and undeveloped concept and a protracted lead time from product development until revenue generation. In contrast, CryptoMillionsLotto is based on a tested and proven model, is fully transparent – based on the published winning numbers of the German National Lottery 21
(6aus49), has its platform virtually ready, is already licensed and has prize insurance agreed. Therefore, our roadmap for launch and revenue generation is comparatively very short. By offering life-changing jackpots and a familiar lotto format, Company believes CryptoMillionsLotto can make cryptocurrency accessible to the mass market, encouraging people, new to cryptocurrency, to become part of the growing community. For those who already own cryptocurrency, CryptoMillionsLotto represents an opportunity to diversify investments into a regular, income generating, security asset through the 15% of revenues distributed as a quarterly dividend to CML Token holders. Succinctly, our mission is for CryptoMillionsLotto to become a driving force in creating a new and vast market, dramatically expanding the cryptocurrency universe. It will be a borderless, fully-transparent lotto based on cryptocurrency and benefiting in part from Blockchain. Players over 18 from anywhere in the world where gambling is not prohibited will be able to play to win life-changing jackpots – larger than any other cryptocurrency lotto and comparable to the major national and state lotteries across Europe and the US and significantly higher than most offered in the emerging markets of Africa, Asia, Latin America and Eastern Europe. 1. http://prn.to/2cSMSf 2. http://prn.to/2cQBtxG 3. http://bit.ly/2iYZDY4 Substantial Growth Opportunities CryptoMillionsLotto will be Company’s principal source of revenue, and Company believes that this will be the primary growth driver of its business over the next three years. Company believes that there is an untapped market for its product based upon market research into the lotto industry and competitor analysis. Company believes that it can generate significant revenue from CryptoMillionsLotto deploying the proceeds of this STO for the global marketing of CryptoMillionsLotto. There is evidence to suggest that successful lottery operators can generate high market valuations. Examples are Zeal which operates in the UK and is listed on the Deutsche Borse 22
with a market capitalisiation of EUR 226 million and Jumbo Interactive, which operates in Australia and is listed on ASX with a market capitalisation AUD 253 million. Favourable Projected Statistics The following table shows certain projected credit statistics based upon Company’s current business plan and assuming that the transactions contemplated by this Memorandum have been completed: Summary Of Projected Results (USD) Year 1 Year 2 Year 3 Revenues 17,381,399 97,583,788 143,447,148 EBITDA (35,897)) 49,413,005 95,837,992 Net Profit/Loss (35,897) 48,424,745 93,921,232 Revenue Model The core revenue stream for CryptoMillionsLotto will derive from lotto ticket sales or prices paid to play Instant Win games. However, players’ will only be able to withdraw winnings from their CryptoMillionsLotto accounts, which are in line with industry standards. Withdrawals of winnings will be a minimum of the equivalent of USD 50.00 for payments back to wallets and USD 75.00 for bank transfers. Inactive player accounts are subject to closure (subject to prior notice) after 90 days and subject to an administration charge equal to the balance in their CryptoMillionsLotto account. Players wishing to close their accounts may only withdraw the amounts that relate to winnings; the remaining balance is similarly subject to an administration charge equal to the remaining balance in their accounts. THE LOTTO INDUSTRY AND COMPETITION Although lotto rules are essentially the same the world over, several different types of operator exist: 23
National And State Lotteries Most countries operate their own lottos, where proceeds (after operating costs and prize payouts have been deducted) are spread amongst charities and other good causes. For example, the UK National Lottery was cited as a significant contributor to the British Olympic and Paralympic sporting successes at the 2016 Rio de Janeiro Olympic Games. Lotto Betting Providers This is a relatively new and innovative concept where players bet on the outcome of a lotto draw in another country. The operators in this space are flourishing and attracting customers away from national and state lotteries in their droves. The best-known ones - Zeal and Lottoland - have seen prolific growth in recent years. Sports And Charity Lottos These are privately-operated lottos, run for the benefit of various sports organisations and good causes. Famous organisations such as Arsenal, Leicester City, Swansea City and West Bromwich Albion, English soccer clubs; Glamorgan, Durham and Hampshire cricket clubs; Gloucester, Sale Sharks and Wasps rugby clubs; and the RSPCA and Cancer Research UK, promote their own lottos. AfroMillionsLotto is another example of this model. Lotto Messengers These companies provide concierge services, i.e. buying tickets on behalf of non-residents. However, because tickets are bought in the company's name, or their agents’ names, this constitutes a high level of risk for players who have no legal ownership rights. Lotto Affiliates The lotto industry is dominated by affiliates, which include convenience stores, petrol stations and supermarkets that sell physical tickets on behalf of national and state lotteries, and web marketing and promotion companies which sell tickets online on behalf of operators, see http://gaffg.com/affiliate-programs/lottery/ Cryptocurrency Based Lottos Cryptocurrency based lottos are very new. There are a few companies who have recently completed ICOs, offering utility as opposed to security tokens. The table below compares their business proposition with that of CryptoMillionsLotto. None of these potential competitors 24
combines all the features of our proposition: a readymade and tested platform; prize insurance; a fully transparent lotto basis and significantly – attaining the critical entry price/jackpot prize equation. Recently, Lottoland has launched a lotto with BTC equivalent prizes. However, this is not a genuine cryptocurrency lotto as ticket prices and prize payouts are denominated in GBP, with BTC used as a reference for prize pay-outs. CryptoMillionsLotto will be a lotto betting platform, which with its comparative competitive advantages and ‘first mover’ status should be strategically placed to surmount the problems that afflict the existing lotto industry. THE PROBLEMS OF THE LOTTO INDUSTRY Unlike most industries, lotto has not transitioned online owing to its complicated ecosystem. The vast majority of tickets of most official lottos are still paper-based and sold using outdated technology. There are several problems with lotto in its current format: • In most countries, lotto is controlled by national and state governments, which means they are replete with excessive rules and regulations. 25
• A network of affiliates with vested interests against innovation, such as a range of retail outlets, regularly lobby governments to ensure lotto sales remain within their premises. This inefficient distribution and sales system for paper tickets is costly. • There is a lack of transparency with regards to: (i) the formation of prize pools and distribution of prizes - hence, the concept “Provably Fair” - https://en.wikipedia.org/wiki/Provably_fair, and (ii) the commissions earned by affiliates who often wait weeks or months to be paid. • There are territorial limits, which exclude non-resident players, meaning that the target audience is restricted and winners from outside the country cannot claim their winnings. Powerball and Megamillions in the US and Euromillions in Europe are notable exceptions but they still have restrictions; Powerball to 44 states and Euromillions to 13 countries. Both are extremely popular because the aggregation of players across borders results in huge jackpots. However, in most of our target markets across LATAM, Asia, Africa or Eastern Europe, there is no comparable aggregated lottery. • The games are unattractive to players who prefer to protect their anonymity and privacy. • The inconvenient and antiquated ways to buy tickets make the games unappealing to the internet-savvy younger generation. • Even when played online, there are high charges imposed on operators by card, wallet and voucher payment providers, and banks often place restrictions or outright bans on payments for gambling activites. • Even if cross-border restrictions were removed, the whole issue of local currencies remains, so a Brazilain has to receive prize payments in Real, a Hungarian in Forint, etc. a highly cumbersome, impractical and expensive barrier. • There are delays in paying out jackpot winners, who are often subject to high levels of local taxation, depending on the jurisdiction. In this context, RSN believes that the market is set for a fundamental change, particularly in markets where gambling is legal, lotto is popular, where jackpot prizes are relatively modest and cryptocurrency use is growing, e.g. Canada, India, Brazil, Russia, China, Argentina, Vietnam, Thailand, etc. In fact, our research indicates that we can expect to be able to operate in more than 100 national jurisdictions. 26
Cryptocurrency is ideal as a single global currency for lotto, standardising payments and prize pay-outs seamlessly across borders, to both winners and affiliates and appealing to the younger generation. Blockchain will be used to track sales and commissions clearly and in a timely manner, providing full transparency to Investors and affiliates with regards to their dividends/commissions. It will also remove the reliance on banks, card providers and payment processors, assigning issues of chargebacks and payments to the past. Cryptocurrency and lotto can be catalysts to propel players to play online as an attractive alternative to existing lotto formats whilst fomenting adoption of cryptocurrency. CRYPTOMILLIONSLOTTO – BUSINESS PROPOSITION CryptoMillionsLotto is based on the outcome of the twice-weekly German National Lottery (6aus49), where players select 6 numbers from 1-49 plus a bonus number between 0-9. There is no possibility of manipulating the results. Prizes are awarded for matching 2, 3, 4, 5 or 6 of the winning numbers with the jackpot awarded for picking all 6 winning numbers together with that of the bonus number. Winnings will be paid out instantly to players’ cryptocurrency wallets (except insured prizes, e.g. the jackpot, which require greater verification by the Insurer), and to any affiliate or referrer, without third-party intervention. All prize payments will be shown in the open Blockchain ledger, so that any player or affiliate can verify instantly that prizes have been made in accordance with CryptoMillionsLotto's rules and terms and conditions. The existence of Lloyd's of London prize insurance brings significant credibility for players and ensures that jackpots are assured irrespective of the number of lotto tickets sold. As with AfroMillionsLotto, the CryptoMillionsLotto platform will be complemented with a number of entertaining, Instant Win games that constitute an additional revenue stream and foster player retention. CryptoMillionsLotto will be fully operational within days from the end of the STO, as minimal changes to the existing platform are required to handle ticket sales, prize pay-outs and withdrawals using cryptocurrency as well as reporting on the Blockchain. The platform has been designed to integrate payments using ShapeShift so that players can play using a variety of altcoins and cryptocurrencies. 27
In June 2018, RSN entered into an agreement with US-based Cashbet. Cashbet undertook an ICO earlier in 2018 and sold approximately 143 million utility Cashbet Coins, raising around USD 38 million. Under the terms of the agreement, Cashbet Coin holders will also be able to play CryptoMillionsLotto paying with Cashbet Coins. CryptoMillionsLotto seeks to achieve the correct balance between the price to play (the affordability) versus the size of the jackpot, which must be large enough to be considered ‘life- changing’. Tickets will cost the cryptocurrency equivalent USD 3.35 and prizes, based on the publicly announced winning numbers of the twice weekly German National Lottery (with jackpot prizes fully insured) will be as follows: Rollovers of jackpots will occur after each lotto draw in the event that the jackpot is not won, either by a player of CryptoMillionsLotto or by a player in the German National Lottery. In the event of a jackpot winner in either of these lottos, the jackpot will revert to the minimum of USD 20,000,000, otherwise it increases in increments to a maximum of approximately USD 40,000,000. By offering fixed prizes, we ensure full transparency and overcome the problem of ‘prize pool formation’ which is an issue for many existing private and official lotteries. As mentioned previously, for prize insurance purposes, jackpot prizes will be paid out in US dollars or the equivalent in cryptocurrency with winners bearing any conversion costs. 28
CRYPTOMILLIONSLOTTO PLATFORM FEATURES Our games are simple and intuitive and run directly in the browser of any desktop or mobile device without requiring an app to be downloaded, thereby completely eliminating one of the major pain points for player on-boarding. The registration process is quick and easy, and open to anybody with Internet access. The best possible game experience is delivered through a global Content Delivery Network, which places our content at the leading edge of the internet to optimise performance. PROGRESS TO DATE AND IMPLEMENTATION PLAN Our roadmap is comparatively short as shown below: MARKETING PLAN – CRYPTOMILLIONSLOTTO We will launch disruptive marketing campaigns to ensure that CyptoMillionsLotto's brand is top of the mind. 29
Getting People To Play The problem with cryptocurrency is that the majority of people don’t understand it and think it’s beyond their ability to get involved. CryptoMillionsLotto plans to change that with a global marketing campaign to make cryptocurrency a mass-market product through the easy-to- understand concept of lotto, encouraging new players to open a wallet and become familiar with cryptocurrency. Research And Education Extensive research has been undertaken to determine what needs to be done to make it accessible, and more comprehensible to everyone, especially with regards to CryptoMillionsLotto. We will develop marketing campaigns based on our findings, tailored to the needs of the different markets to educate players about cryptocurrency. This will include: • Sponsorship alliances with professional sports clubs emulating the successful models deployed in the English Premier League with soccer clubs and also working to replicate the model with the Indian Premier League for their highly popular cricket clubs. These are both examples where the mass followings these entities enjoy is a fast and effective route to large audiences. • Brand Ambassadors/Influencers – alignment with high-profile celebrities, from sports, entertainment, music and media sectors to involve them in both cryptocurrency and CryptoMillionsLotto. • Worldwide targeted PR campaign across a wide range of media beyond the cryptocurrency focus. • Social media advertising, particularly via Facebook and Telegram, but also on country/regional local social media sites. • ‘Paper Wallet’ promotions setting up cryptocurrency paper wallets and distributing these free to potential players. They will receive their wallet address directly, and as soon as they undertake the simple online registration process with CryptoMillionsLotto they will access free tickets to play. Rollout Plans We have chosen territories by cross-referencing gambling legislation with cryptocurrency 30
legislation and populrity. We will rollout CryptoMillionsLotto as follows: Phase 1 - Q3, 2018 Phase 1 rollout will target English speaking customers in countries such as India, Canada and Malaysia. Others countries where English is widely used such as Sweden, Netherlands and Switzerland will also be targeted together with China. Phase 2 - Q4, 2018 Phase 2 will target Portuguese and Spanish speaking countries, which includes more than 500 million potential customers across Europe, Latin America and Africa. Phase 3 - Q1, 2019 Phase 3 will target the more complex countries which will require us to employ not only operational staff but full acquisition and management teams. This includes countries such as Russia, Korea, Vietnam and Japan with a staggered launch. Hearts And Minds Campaign Initially, we would work with global charities to educate them on the benefits cryptocurrency could offer them, whilst also donating a percentage of revenues to different projects. Over time, this would follow the AfroMillionsLotto model of supporting reputable charities on a country- by-country basis. Not only does this enhance the standing of a brand and cryptocurrencies amongst its target audience, it also provides ongoing PR opportunities to inform the world. Major Launch And Ongoing Marketing We will hold a huge launch and marketing campaign aimed at cryptocurrency-savvy and non- savvy sectors. The marketing campaign will be broken down into acquisition and retention marketing both online and offline. Where possible, we will align our campaigns with high- profile celebrities, media and influencers. Acquisition Marketing – Online Social Media Typically, social media does not deliver depositing players. However we plan to formulate a cost effective results driven strategy with our agency partner. We intend to concentrate on Facebook and Telegram ads. Our campaigns will be measured and focused on converting new 31
traffic to depositing players and extending player lifetime value via a proactive retention strategy. Our social media partner has developed technology which can automate social media across all platforms combining performance data, customer data and insights into players' betting habits enabling it to personalise propositions based on player data. Stimulation alerts that trigger players to make buying decisions are delivered instantaneously to enhance the customer experience. The technology driving all this can be configured to send alerts in real time based on specific parameters. It is cloud based, fast and scalable. Content will include: • Aspirational daily posts via CryptoMillionsLotto’s own social media platforms. • Advertising and boosted posts to key target audiences. Competitions and cross-promotions with major brands. • Seasonally-driven campaigns to encourage people to enter and win big for Christmas, Summer holidays, etc. • Posts reflecting the positive contribution that CryptoMillionsLotto donations have made to charities around the world. • Posts to support our ongoing ‘Paper Wallet’ sign up promotions with free plays upon registration. Content Marketing • Paid-for editorial across on and offline media, providing relevant content about cryptocurrency to each media platform. • Work with leading Blockchain/Cryptocurrency media influencers across a range of platforms and geographies, based on our target markets. Influencer And Affiliate Marketing Influencer marketing will focus on using key leaders in specific geographical locations to drive our brand message to a larger market. As opposed to marketing directly to a large group of consumers, we will instead use “influencers” to promote CryptoMillionsLotto. This, we expect, will be especially effective when used on social media such as Instagram, Facebook, Twitter and others. In addition, we will plug into known affiliate networks aimed at the public and cryptocurrency community, and work with media partners who can offer ‘paid on results’ (CPA & revenue share deals). 32
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