APPENDIX A - FINANCIALS

BitGate Financial Projections

Revision Date: 2018-11-26

This Appendix gives an insight into the cost and revenue model for BitGate, and forms the basis
of the financial section of the BitGate Executive Summary.

Index
Page 1: Overview and Disclaimer
Page 2: User Base Growth
Page 3: Costs
Page 4: Revenue
Page 5: Profit Projections
Page 6: Source Data Spreadsheet

Disclaimer
This information has been prepared by BitGate AS and from information in the public domain about the Company.
This document contains certain forward-looking statements relating to the business, financial performance and
results of the Company and/or the industry in which it operates. Forward-looking statements concern future
circumstances and results and other statements that are not historical facts, sometimes identified by the words
“believes”, "expects”, “predicts”, “intends”, “projects”, “plans”, “estimates”, “aims”, “foresees”, “anticipates”,
“targets”, and similar expressions. The forward-looking statements contained in this information, including
assumptions, opinions and views of the Company or cited from third party sources are solely opinions and
forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ
materially from any anticipated development. None of the Company or any of such person’s officers or
employees, nor any of the Company’s advisors provides any assurance that the assumptions underlying such
forward-looking statements are free from errors nor do any of them accept any responsibility for the future
accuracy of the opinions expressed in this information or the actual occurrence of the forecasted developments.
The Company assumes no obligation, except as required by law, to update any forward-looking statements or to
conform these forward-looking statements to our actual results. An investment in the Company should be
considered as a high-risk investment. An investment in the Company is only suitable if you have sufficient
knowledge, sophistication and experience in financial and business matters to be capable of evaluating the merits
and risks of an investment decision relating to the Company's shares, and if you are able to bear the economic risk,
and to withstand a complete loss of your investment. Several factors could cause the actual results, performance
or achievements of the Company to be materially different from any future results, performance or achievements
that may be expressed or implied by information in this document.

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APPENDIX A - FINANCIALS

User Base Growth

BitGate is currently in the process of a soft launch, with around 100 users signed up for private
beta testing. Beginning January 2019, BitGate’s user base is estimated to grow according to the
projections below.

The potential user base is derived from a recent poll showing that approximately 3.8% of
Norwegians currently own Bitcoin or other cryptocurrencies (see ​study​ by Norstat for Menon
Economics). We assume a similar market penetration in Sweden and Denmark. Together, these
three Scandinavian countries total a population of 21 million, which means that about 800 000
people currently own Bitcoin or other cryptocurrencies in these countries.

From this potential user base, we make two estimates on user base growth during the first year
of operation, the Low Case and the High Case (see Figure below). The Low Case estimates
capturing approximately 2% of the market (16 000 users) during the first year, and the High
Case estimates 5% of the market (40 000 users). The growth is modelled in the following way:

Low Case
The growth rate in the user base
per month increases by 200
every month, from 100 users at
launch, to 15 700 users after 12
months.

High Case
The growth rate in the user base
per month increases by 500
every month, from 100 users at
launch, to 39 100 users after 12
months.

The above estimates are based

on the current Scandinavian
market with zero growth. It
should be noted that current
cryptocurrency solutions are difficult to use and therefore exclude a significant portion of the
potential market. BitGate’s onboarding and user experience is comparable to that of Vipps, a
mobile payment service in Norway that onboarded 1.2 million users (>20 % of the Norwegian
population) in ​12 months​.

COPYRIGHT BITGATE AS 2
APPENDIX A - FINANCIALS

Costs
BitGate currently operates with total costs of approximately 22 000 USD per month. Founding
company and largest shareholder BitSpace AS provides BitGate AS with flexible office, legal,
design, marketing and development resources at a very low margin on cost price. In addition,
BitGate was recently approved for the tax break grant SkatteFUNN, giving BitGate AS a 20 %
tax break for R&D costs until the end of 2020.

The Low Case Cost Scenario is based on the Low Case Estimate for User Base Growth, where
BitGate acquires 15 700 users during the first 12 months of operation. The cost is estimated to
increase from 22 000 USD up to 44 000 USD during that period. This is based mainly on
increased resource requirements related to development and support. If BitGate experiences
lack of market demand or delays, the monthly cost could be structured to about 10 000 USD per
month to await business opportunities at a later stage.

The High Case Cost Scenario is based on the High Case Estimate for User Base Growth, where
BitGate acquires 39 100 users during the first 12 months of operation. In this scenario,
estimated costs would increase at a fast initial rate and then slowly plateau. The rapid
expansion in number of users is reflected in the cost estimates, but the added costs per user
decreases due to increased automation, efficiency and economies of scale.

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APPENDIX A - FINANCIALS

Revenue
The projected revenue from BitGate is based on two main revenue streams: 1. A fee on the
Bitcoin exchange volume and 2. A fee on the premium custodial service. The projections do not
take into account other fees and services BitGate may offer in the medium and long term.

The main basis for the revenue estimate is data from Coinbase, one of the world’s largest
Cryptocurrency wallet and exchange services, showing 5 billion USD of monthly volume and 20
million users (summer 2018). This gives an average user a volume of 250 USD per month.
Coinbase charges 1.49% fee for purchases from deposited funds and 3.99% for debit/credit
card purchases, so we assume BitGate to operate with at least 2% fee.

The basis for the assumed revenue of custodial services are an analysis by Norstat performed
on behalf of Menon economics in January 2018, which estimated that 5 % of norwegians above
18 years of age owned cryptocurrency. On an average, the estimated value of such holdings
was $ 4200 per person. If we assume that the average user of BitGate will store approximately
one third of their holdings at Bitgate, that amounts to ~1500 USD.

Our underlying assumption is, therefore, that an average custodial amount of BitGate users will
be 1500 USD. Because the BitGate custody service will be a light-weight service for the users,
without high startup-fee and limits, we can charge a higher percentage than the high-volume
services offered by PrimeTrust and Coinbase. We therefore assume a net profit of 0.2% per
month for the custodial service. 0.2% of 1500 USD makes $3 per user per month.

Estimated Exchange
Revenue
A 2.0 % fee on a
volume of 250 USD per
month gives 5 USD per
user per month in
revenue.

Estimated Custody
Revenue
A 0.2 % fee on an
average holding of 1
500 USD gives 3 USD
per month per user in
revenue.

COPYRIGHT BITGATE AS 4
APPENDIX A - FINANCIALS

Profit Projections
The profit projections are based on the estimates in the preceding sections. The figures below
show the Low Case and High Case profit projections, which are based on the Low and High
cases for Revenue and Cost, respectively.

Low Case
In this scenario, with
an estimated 15 700
users after 12 months
and cost structure
from 22 000 USD to
44 000 USD, BitGate
would break even in 6
months, and make an
undiscounted profit
before tax of
approximately 160
000 USD in the first
year of operation.

High Case
In this scenario, with
an estimated 39 100
users after 12 months
and cost structure
from 22 000 USD to
60 000 USD, BitGate
would break even in 4
months, and make an
undiscounted profit
before tax of
approximately 900
000 USD in the first
year of operation.

COPYRIGHT BITGATE AS 5
APPENDIX A - FINANCIALS

Source Data Spreadsheet

COPYRIGHT BITGATE AS 6