Evans & Evans Report by LODE-Community

THE LODE ASSOCIATION OF LIECHTENSTEIN

OCT.28 // 2019

P R E PA R E D F O R :

DUE DILIGENCE & ESTIMATE PRICING REPORT

V3.0

Due Diligence & Estimate Pricing Report LODE Association October 28, 2019

LODE-AGX COMMUNITY ASSOCIATION

Evans & Evans, Inc.

CONTENTS

1.0 // INTRODUCTION & ASSIGNMENT

2.0 // INTRODUCTION TO BLOCKCHAIN & CRYPTOCURRENCIES

3.0 // LODE ASSOCIATION

4.0 // BLOCKCHAIN MARKET

5.0 // PRICING METHODOLOGIES

6.0 // PRICING METHODOLOGIES USED - LODE TOKENS AND AGX COINS

7.0 // PRICING OF LODE TOKEN

8.0 // PRICING OF AGX COIN

9.0 // CONCLUSIONS

10.0 // APPENDIXES

11.0 // EXHIBITS -

Appendix 1 – Terms & Conditions Appendix 2 – Assumptions of the Report Appendix 3 – Scope of the Report Appendix 4 – Qualifications

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The LODE Community is in the process of launching its business model, which is an ecosystem that utilizes blockchain technology to synchronize the properties of investment-grade silver to create a new form of digital asset-secured borderless, redeemable silver-money.

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INTRODUCTION & ASSIGNMENT 1.1 Assignment Evans & Evans, Inc. (“Evans & Evans” or the “authors of the Report”) was engaged by the LODE Association (“LODE” or the “Association”), a Liechtenstein Establishment, to prepare a Due Diligence & Estimate Pricing Report (the “Report”). We understand the LODE Project is a collectively organized community of like-minded individuals (the “LODE Community”) who recognize that silver can serve as an affordable, verifiable medium of exchange for trade and commerce. The LODE Community is in the process of launching its business model, which is an ecosystem that utilizes blockchain technology to synchronize the properties of investment-grade silver to create a new form of digital asset-secured borderless, redeemable silver-money. There are two assets within the LODE System, that are intended to work in tandem; the LODE Token and AGX Coin. LODE has requested Evans & Evans to prepare the Report to provide certain members of the LODE Community (“Community Ambassadors”) with an estimate of the potential price or market value of the LODE Token and AGX Coin as at October 24, 2019 (the “Pricing Date”). The Report is an update to the Diligence & Estimate Pricing Report prepared by Evans & Evans and dated August 10, 2018 (the “Prior Report”).

As Evans & Evans is relying on information, materials and representations provided to us by the Community Ambassadors and associated service providers, the authors of the Report will require that Community Ambassadors confirm to Evans & Evans in writing that they have reviewed the Report in detail and that, to the best of their knowledge, the information and representations contained in the Report are accurate, correct and complete, and that there are no material omissions of information that would affect the conclusions contained in the Report. Evans & Evans, or its staff and associates, will not assume any legal and financial responsibility or liability for losses incurred by the LODE Community, Community Ambassadors, and/or service providers and / or any other parties as a result of the circulation, publication, reproduction, or use of the Report, or any excerpts thereto as well as such use contrary to the provisions of this section of the Report. Evans & Evans reserves the right to review all calculations included or referred to in the Report and, if Evans & Evans considers it necessary, to revise the Report in light of any information existing at the Date of Review which becomes known to Evans & Evans after the date of the Report. Unless otherwise indicated, all monetary amounts are stated in United States dollars.

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INTRODUCTION TO BLOCKCHAIN & CRYPTOCURRENCIES (Left) This is an example of a Central Ledger

(Below) Decentralized Ledger

2.1 Overview of Blockchain Technology 2.1.1 What is a Blockchain? Globalization of commerce has been one of the biggest drivers of growth over the past century and the blockchain is emerging as a technology which has the ability to accelerate the pace of globalization. Blockchain technology has the potential to remove much of the remaining market friction — the speed bumps that throttle the pace of business across a variety of sectors. Blockchain technology can facilitate recording transactions and tracking assets in a network in an efficient manner amongst parties that may not share trust. An asset can be tangible — a house, a car, cash, gold, silver, commodities, land — or intangible like intellectual property, such as patents, trademarks, copyrights, digital rights or branding. Virtually anything of value can be tracked on a blockchain network, reducing risk, creating efficiencies, removing duplication and reducing costs of facilitating transactions. Applications can be layered on top of the blockchain, which acts as the foundation or platform. Such applications enable additional functionality such as public or private keys, or self-executing mechanics (e.g. smart contracts), but this isn't the core functionality of blockchain technology. Blockchain technology is a distributed and immutable (write once and read only) record of digital events or records (referred to as blocks) that is shared peer-to-peer between different parties (networked database systems). Each block in the chain contains a hash (a digital fingerprint

or unique identifier), time-stamped batches of recent valid transactions, and the hash of the previous block. A hash function is a type of mathematical function which turns data into a fingerprint of that data called a hash. It’s like a formula or algorithm which takes the input data (any data, whether it’s the entire Encyclopedia Britannica, or just the number ‘1’) and turns it into an output of a fixed length, which represents the fingerprint of the data. There are many types of hash functions, and a common robust one is called SHA256 (which stands for Secure Hash Algorithm – 256 bit).

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Two relevant properties of a good hash function are: (1) it’s hard to back-calculate the original data from the hash; and, (2) if the input data changes in the slightest, the hash changes in an unpredictable way.

hence adding entries to the ledger. Additionally, all parties have the choice of running a node on the system or employing the mining protocols to help verify transactions.

The previous block hash links the blocks together and prevents any block from being altered or a block being inserted between two existing blocks. In this way, each subsequent block strengthens the verification of the previous block and hence the entire blockchain. The method renders the blockchain tamper-evident, lending to the key attribute of immutability.

With blockchain, participants share a ledger that is updated, through peer-to-peer replication, every time a transaction occurs. Each participant (node) in the network acts as both a publisher and a subscriber and each node can receive or send transactions to other nodes. Lastly, the data is synchronized across the network as it is transferred. All information is publicly transparent; any user owns a copy of the proof of the time-stamped data.

Immutable is used to denote something which can never be modified or changed. In a blockchain, it refers to the global log of transactions, which is created by consensus between the chain’s participants. The basic notion is once a blockchain transaction has received a sufficient level of validation, it can never be replaced or reversed. This marks blockchains as different from regular files or databases, in which information can be edited and deleted at will. Events in a blockchain can be updated by only the collective consensus of a majority of users and information cannot be erased. The datastore is owned by no one, is controlled by users and is not ruled by any trusted third party or central regulatory institution. Trust is encoded in the protocol and maintained by the community of users. The fundamental strengths of a blockchain system lie in its data integrity and networked data sharing. There are two types of blockchains - permissioned and permissionless. In a permissioned blockchain, each participant has a unique identity, which enables the use of policies to constrain network participation and access to transaction details. Permissioned blockchains control network participation, i.e., users are restricted, and the consistency of the data that gets appended to the blockchain. In a permissionless blockchain, anyone can join the network and participate in the process of block verification to create consensus and also create smart contracts (if smart contracts are built into the blockchain). Permissionless blockchains allow every user to create a personal address and begin interacting with the network, by submitting transactions, and

The key to the operation of a distributed ledger is ensuring the entire network collectively agrees with the contents of the ledger; this is the job of the consensus mechanism. The purpose of a consensus mechanism is to verify that information being added to the ledger is valid i.e. the network is in consensus. This ensures that the next block being added represents the most current transactions on the network, preventing double spending and other invalid data from being appended to the blockchain. Each blockchain network can establish the conditions under which a transaction or asset exchange can occur. Participants cannot alter an event or transaction (i.e., a block) once it has been added to the chain. If a transaction occurs in error a new block is added to the chain to reverse the transaction so there is visibility of both transactions. If a party in the network were able to alter a block, their ledger would not match the ledgers of other participants in the network and as such the fraudulent blocks would be evident and rejected by other nodes. There are two main schemes by which miners can prove the existence of a new coin: proof-of-work (“PoW”) and proof-of-stake (“PoS”). In PoW systems, validators validate transactions by running an algorithm to solve a cryptographic puzzle, known as mining. PoW is, particularly for cryptocurrencies, the most utilized system of all. PoW is the validation of the work that happened and proving it is

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correct. Bitcoin and many alternative coins use a PoW consensus mechanism to make sure the authenticity of the chain is good. In blockchains using a PoW consensus mechanism, the network challenges every machine that stores a copy of the ledger to solve a complex puzzle based on its version of the ledger. Machines with identical copies of the ledger “team up” to solve the puzzle they’ve been given. The first team to solve the puzzle wins, and all other machines update their ledgers to match that of the winning team. The idea is that the majority wins because it has the most computing power to solve its puzzle first. Proof of work is useful on a public blockchain, such as the one used for Bitcoin, but it consumes considerable computing power and electricity, making it an expensive way to reach consensus. In a PoS system, validators validate transactions by staking (“depositing”) cryptocurrencies, no new coins are (usually) created and validators are rewarded with transaction fees. With a PoS consensus mechanism, to validate transactions, validators must hold a certain percentage of the network’s total value. PoS might provide increased protection from a malicious attack on the network by reducing incentives for attack and making it very expensive to execute attacks. Ethereum is also moving towards PoS with its new “Casper” protocol. 2.1.2 Bitcoin Network Established in 2009 with the publication of a white paper, Bitcoin is the oldest cryptocurrency and the first example of the blockchain. Bitcoin is a decentralized digital currency that enables instant transfers to anyone, anywhere in the world. Managing transactions in Bitcoins occurs via an open source, cryptographic protocol platform known as the Bitcoin Network, an online, end-user-to-end-user network that hosts the public transaction ledger and the open source code that comprises the basis for the cryptographic and algorithmic protocols governing the Bitcoin Network. The currency unit “Bitcoin”, commonly denoted as “BTC” (alternately, sometimes XBT, or the symbol included in Unicode 10.0 in 2017), is equivalent to (and can be divided into) 100 million “satoshi”. Transactions as small as 5430 satoshis (equivalent to 1/18,416 BTC)

are possible on the Bitcoin Network. When transactions occur, a transaction message is broadcast to the Bitcoin Network, where it is received by Bitcoin miners who (with high-performance computers running specialized automatic Bitcoin mining software) verify the transaction, group it with others into a transaction block, and compete to solve the proof-of-work cryptographic puzzle that links the new block to the blockchain. 2.1.3 Ethereum The cryptocurrency Ether, denoted as “ETH” and its corresponding platform Ethereum has been gaining favour as it presents significant technological improvements over Bitcoin, including the ability to build applications and code smart contracts directly into the blockchain. Ethereum goes beyond the peer-to-peer currency transfer abilities of Bitcoin into other functionality such as global decentralized computing and smart contracts infrastructure. Whereas Bitcoin was originally designed to be a secure digital cash system, the goal for Ethereum was to create a fully-programmable blockchain. First proposed by its inventor, Vitalik Buterin in 2013, Ethereum is a blockchain platform that runs smart contracts and distributed applications (“dapps”), using its integrated cryptocurrency Ether. The primary programming language for Ethereum is Solidity, a high-level contract-oriented language that facilitates the programming of smart contracts and dapps that run on the Ethereum Virtual Machine. Developers can also write programs for the Ethereum platform that integrate as blockchain-based components of more complex web applications.

2.2 Smart Contracts For business networks, smart contracts are an import function that can be built into the blockchain. A smart contract is an agreement or set of rules that govern a business transaction; it’s stored on the blockchain and is executed automatically as part of a transaction. Smart contracts may have many contractual clauses that could be made partially or fully self-executing, self-enforcing, or both. Their purpose is to provide se-

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curity superior to traditional contract law while reducing the costs and delays associated with traditional contracts.

2.3 Cryptocurrencies Cryptocurrencies, virtual currencies, electronic coins, digital coins, digital tokens and blockchain tokens have become increasingly popular since Bitcoin was first introduced in 2009 by an unknown individual or group using the alias Satoshi Nakamoto. Coin is a cryptocurrency type which operates independently of any other platform. In other words, a coin has its own platform which is called blockchain. Cyrptocurrency is a form of money that exists as encrypted, digital information. Operating independently of any banks, a cryptocurrency uses sophisticated mathematics to regulate the creation and transfer of funds between entities. Digital commodity is an intangible, hard to get asset that is transferred electronically, and has a certain value. Digital currency is another name for a digital commodity. Token is the digital code defining each fraction, which can be owned, bought and sold. Tokens require another platform such as Ethereum or Omni to exist and operate. Tokens provide a way not only to define a protocol, but to fund the operating expenses required to host it as a service. The attributes of cryptocurrencies that are driving their increasing popularity are safety, anonymity, and their decentralized nature. Unlike fiat currency1, cryptocurrencies are not controlled or regulated by a singular authority, their flow is determined entirely by market demand. Cryptocurrencies are also effectively impossible to counterfeit given the complicated code system that encrypts each and every transfer, ensuring anonymity and safety to each and every user.

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Unlike traditional currencies, which are issued by central banks, cryptocurrencies have no central monetary authority. The most popular cryptocurrencies aren’t printed like dollars or euros; they are “mined” by people and increasingly by businesses, running computers all around the world, using software that solves mathematical puzzles. As of October 24, 2019, Coinmarketcap lists 858 coins, of which 533 are mineable. Bitcoin and Ether are both mined, however Ethereum is planning to move to a non-mining model with its new Casper protocol. Once mined, cryptocurrencies can be traded, sold or used to purchase goods and services. A peerto-peer network of computers monitors and approves all transactions involving cryptocurrencies. As noted above, cryptocurrencies are impossible to counterfeit as they use cryptographic protocols, or extremely complex code systems that encrypt sensitive data transfers, to secure their units of exchange. Cryptocurrency developers build these protocols on advanced mathematics and computer engineering principles that render them virtually impossible to break. These protocols also mask the identities of cryptocurrency users, making transactions and fund flows very difficult to attribute to specific individuals or groups. With no central government or monetary authority to set policy to inflate or deflate value, the “price” or value of cryptocurrencies are driven by demand and highly complex protocols built into their governing codes. Most, but not all, cryptocurrencies are characterized by finite supply. Their source codes contain instructions outlining the precise number of units that can and will ever exist. Over time, it becomes more difficult for miners to produce cryptocurrency units, until the upper limit is reached and new currency ceases to be minted altogether. For those cryptocurrencies that have a finite supply, this attribute makes them inherently deflationary2, more akin to gold and other precious metals – of which there are finite supplies – than fiat currencies, which central banks can, in theory, produce unlimited supplies. The activities of miners are critical to most cryptocurrencies. Miners use huge, and in 2019 increasing, amounts of computing power and electrical energy to

(1) Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material that the money is made of. (2) Inflation reduces the value of currency over time, but deflation increases it. This allows one to buy more goods and services than before with the same amount of currency.

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mine new coins and record transactions. Transaction fees may be paid by individuals sending cryptocurrency to incentivize miners to work on that particular transaction, increasing likelihood of a quickly processed transaction, and rewarding the miner(s) for their role in ensuring the smooth operation of the system. For those cryptocurrencies using PoW that have a finite supply, miners receive fewer new units as ‘Block rewards’ per new block chain as time goes on. Eventually, miners will only receive transaction fees for their work. Cryptocurrencies are transferred from one owner to another by adding a transaction to the blockchain and blockchains are kept secure from hacking through the work of validators, who validate transactions. Validators are given cryptocurrencies as reward/payment every time they validate a transaction (i.e., cryptocurrencies provide the economic incentive for people to become validators). Validators may also be awarded transaction fees paid by the sender. As of October 24, 2019, there were more than 3,047 cryptocurrencies trading, up from 800 in July of 20173, with a total market capitalization for all of $249.0 billion, down from the high of $813.9 billion on January 7, 2018. Generally, only the most popular cryptocurrencies – those with the highest market capitalization, in dollar terms – have dedicated online exchanges that permit direct exchange for fiat currency. Those cryptocurrencies that do not have dedicated online exchanges are generally exchanged for more commonly used cryptocurrencies, before fiat currency conversion. The lack of liquidity of some cryptocurrencies suppresses demand and as a result their value.

2.4 Exchanges Cryptocurrency exchanges play an important role in creating liquid markets for popular cryptocurrencies and setting their value relative to fiat currencies. However, exchange pricing can still be extremely volatile with valuations seeing double and triple digit increases and decreases in relatively short periods of time. (3) Coinmarketcap.com

As most cryptocurrencies are not widely accepted worldwide in business-to-business (“B2B”) or business-to-consumer (“B2C”) transactions, there is a need for matching platforms where supply and demand of traders is matched against each other when pre-specified conditions are met. As noted above, more popular cryptocurrencies trade on special secondary exchanges similar to forex exchanges for fiat currencies. Cryptocurrency exchanges allow holders to exchange their cryptocurrency holdings for major fiat currencies, such as the U.S. dollar and euro, and other cryptocurrencies (including less-popular currencies). In return for their services, exchanges charge a transaction fee. However, innovation is ongoing in the market and the size of the opportunity continues to attract new users and merchants. Coinpayments.net is an example of an enabling platform that accepts over 1,655 “alt coins”. Coinpayments.net is a proprietary payment gateway for merchants wishing to accept cryptocurrencies and have the tokens converted into several fiat and other cryptocurrencies. Similar to cryptocurrencies themselves, the number of exchanges also continues to grow. Users look to exchanges for liquidity and the best price, which requires large amounts of users and an active order book. As a result, most people gravitate toward a few core exchanges. Coinbase, founded in 2012, is considered by many as the best exchange for cryptocurrencies like Bitcoin, Ethereum, and Litecoin. Coinbase reports it has more than 30 million users and has traded more than $150 billion in cryptocurrencies. Other major exchanges include Kraken, Poloniex, Bittrex, Shapeshift, Bitbuy, ChangeNOW, Linkcoin, Binance, Gemini, Bitstamp, and Cex.io. As exchanges grow in size, they are more exposed to hacks and there have been several high-profile exchange hacks which have resulted in significant losses. The most famous hack is generally considered the December 2011 hack of Mt. Geox which was the largest Bitcoin exchange at that time and it was estimated the losses were $350 million in Bitcoins. Despite increased cybersecurity, hacks continued into 2017 and as cryp-

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tocurrencies continue to increase in popularity and price, it is expected there will be an increase in attempts by hackers to target popular exchanges. In 2017, the Seoul-based Youbit exchange filed for bankruptcy after cyber-thieves stole nearly a fifth of its clients' holdings in an attack, the second attack on the exchange in 2017. Earlier in 2017, hackers stole more than $70 million worth of Bitcoins from digital currency platform Nicehash and in 2016, the Hong Kong-based exchange Bitfinex was briefly shut down after hackers stole more than $60 million in Bitcoins. In 2018, hackers stole $927 million from various cryptocurrency exchanges and other platforms, according to a report from blockchain security firm, CipherTrace. On January 26, 2018 hackers compromised user accounts of Coincheck, a Japan-based cryptocurrency exchange. A total of 560 million NEM tokens worth around $530 million at that time was stolen, making Coincheck’s hack one of the biggest the industry has ever seen. There were more hacking attacks in the first seven months of 2019 than in all of last year according to Coindesk. Top 2019 hacks as of October 24, 2019 include $32 million stolen in July from Bitpoint Japan and $41 million hack in May of Binance.

2.5 Wallets Units of a cryptocurrency (coins and tokens) are actually stored in the blockchain ledger associated with that particular cryptocurrency. “Wallets” are means of securely storing and allowing retrieval of unique information (the private and public keys, defined below) that confirms the holder as the owners of their crypto coins and/or tokens. A popular form of cryptocurrency wallet is a software program (running on one’s own PC) that stores private and public keys and interacts with various blockchains to enable users to send and receive digital currency and monitor their balance. Many people also choose to use “online wallets”, such as that provided by exchanges, e.g., Coinbase. Users of online wallets must exercise caution in ensuring that the service provider is trustworthy and stable, as the service provider holds the private key(s) for the user’s online wallet. Cryptocurrency funds held in an online wallet provided by an unscrupulous, incompetent, or insolvent company could potentially be stolen, lost, or otherwise not immediately accessible to the user.

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Wallets come in many types and it is expected in 2018 competition among providers of wallet services to earn users’ trust will increase dramatically. When cryptocurrencies are transferred from one individual to another, they are essentially approving a transfer of ownership from one wallet address to another. In order to access the coins in a wallet, the private key stored in the wallet must match the public address the currency is assigned to. If the public and private keys match, the balance in the digital wallet will increase, and the sender’s will decrease accordingly. There is no actual “exchange” of crypto coins, per se; the transaction is signified merely by a transaction record on the blockchain and a change in balance of the respective wallets. The safest way to store cryptocurrencies is in an offline environment, this is referred to as a “cold” wallet or “cold storage”. Cold wallets, or hardware wallets, are a tamper-proof means to store private keys of coins in an offline setting. Two popular types of cold wallets are dedicated electronic hardware wallets, and paper wallets (basically paper printed with the public and private keys, often in QR code format that can be scanned by a phone’s camera). The private keys and digital signatures needed to spend the coins are generated via these wallets. There have been no reported thefts of cryptocurrencies from cold wallets, however, the device itself can be lost or stolen. Mobile wallets are applications which are installable on mobile phones and there are multiple applications for iOS, Android, Windows, and Blackberry devices. Data with respect to mobile wallets is generally stored in the cloud. Desktop wallets are wallets which are installable on different desktops, and as per the user’s needs, are compatible with Windows, Mac, and Linux. Desktop wallets are only accessible from the single computer in which they are downloaded and as such offer one of the highest levels of security. However, desktop wallets are susceptible to hacks and viruses which may result in a loss of funds. Online wallets run on the cloud and are accessible from any computing device in any location. While online wa-

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llets are easy to access, the private keys are stored online and controlled by a third party which makes them more vulnerable to hacking attacks and theft.

2.6 Accessing Cryptocurrencies Given their relatively early stage, purchasing cryptocurrency is confusing and challenging for a lot of people. Cryptocurrencies are not a stock or a typical “investment”. As noted above, cryptocurrencies are digital coins or tokens that are stored in wallets. Some cryptocurrencies require proprietary wallets meaning a user might require multiple wallets. Account verification requires a name, phone number and address. Users may also need a valid government-issued photo ID and proof of residence to withdraw money from the exchange, depending on their location. The entire registration process can take several days, or even weeks, depending on the country of origin and the payment methodology. To “purchase” a cryptocurrency, most users must open an account with an exchange and provide some form of payment - credit or debit cards, U.S. bank accounts, or even wire transfers of funds. Most exchanges require a verification process because once the cryptocurrency exchange occurs, the transaction cannot be reversed. Beyond, Bitcoin, Ethereum and Litecoin, many other cryptocurrencies can only be bought using Bitcoin, making the process even more difficult for new users to acquire these coins / tokens. As noted above, CoinBase is one of the most popular exchanges and can be used to acquire the better-known cryptocurrencies. Other lesser-used cryptocurrencies are more difficult to acquire. Kraken, Coinsquare, Binance, Poloniex, Bittrex, Shapeshift, and Bitbuy are examples of other exchanges that enable users to acquire a broader range of cryptocurrencies.

2.7 Traditional Payment Systems The existing incumbent global payment system is based on ATMs and point of sale terminals which are connected to the banking system and the VISA /

Mastercard payment network. The ubiquitous nature of the payment system in the developed world is what has led to mass adoption. While the number of crypto ATMs worldwide has been growing, the infrastructure for the “payment” network for cryptocurrencies is not as widespread as that of the traditional financial system.

2.8 Cryptocurrency Risks While cryptocurrencies offer many benefits, there are also inherent risks and concerns, some of which are outlined below.

Less popular cryptocurrencies can be illiquid as they cannot be exchanged directly for fiat currencies. Many lesser-used cryptocurrencies can only be exchanged through private, peer-to-peer transfers, meaning they are hard to value relative to other currencies – both crypto and fiat. Anonymity makes cryptocurrencies popular, but it also increases their risk. As cryptocurrencies are frequently used to facilitate gray and black-market transactions, many countries view them with distrust or outright animosity. Although there has been a slow-down in 2019, during 2018, $11.4 billion was raised through initial coin offerings (“ICOs”), an unregulated means by which funds are raised for a new cryptocurrency venture. An ICO is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists, banks or securities regulators. In an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies. The lack of regulation means they are susceptible to fraud and the underlying investment thesis can be flawed. One of the biggest risks of cryptocurrencies is their perceived lack of inherent value. Cryptocurrencies are essentially financial assets whose monetary value is entirely derived from people’s perception, by computer power, solving complex mathematical equations, hydroelectric power, strict adherence to issuance rules/scarcity, governance. Conversely, fiat currencies have central bank reserves backing and ultimately there is no limit on the prin-

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ting of fiat currency outside government controls. The perceived lack of inherent value, investor speculation and governmental regulatory restrictions have contributed to volatility for cryptocurrencies. The processing speed of most cryptocurrency networks lags behind that of established payment networks. Bitcoin’s framework can only make seven transactions per second, according to a study form Cornell University. Comparatively, VISA’s credit card network can handle 65,000 transactions per second. Volatility is one of the biggest concerns with cryptocurrencies. In 2017, Bitcoin’s price increased by more than 1000% and Ethereum by more than 2000%. In 2018, both currencies saw significant price declines and the prices rose again significantly in July 2019. Prices might continue to rise, or they could fall significantly. Unlike commodities or equity indexes, cryptocurrencies have no economic function, beyond being mediums for an exchange of value, stores of value and units of account. Unlike commodities which are used in industry or fiat currencies, and there is often no apparent or fundamental reason for cryptocurrency price movements. Related to the point above is the concern with momentum pricing. Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for anticipated future appreciation in value. Cryptocurrency market prices are determined primarily using data from various exchanges, over-the-counter markets, and derivative platforms. Momentum pricing may have resulted, and may continue to result, in speculation regarding future appreciation in the value of cryptocurrencies, inflating and making their market prices more volatile. As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently, with certain governments deeming them illegal while others have allowed their use and trade. Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade cryptocurrencies or to exchange cryptocurrencies for fiat currency.

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Cryptocurrency market prices depend, directly or indirectly, on the prices set on exchanges and other trading venues, which are new and, in most cases, largely unregulated as compared to established, regulated exchanges for securities, derivatives and other currencies.

10. Currently, there is relatively small (but growing) use of cryptocurrencies in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility.

11. The current success rate so far for crypto projects is low, which makes projecting cash flows and earnings into the future very difficult, because the going concern assumption may not be valid for many crypto ventures.

12. The

value of cryptocurrency is usually based on

risk, volatility, and scarcity – making many behave like stocks. Therefore, many people hold the currency because they know the value will soon increase, so the majority of those who buy cryptocurrencies are traders and investors.

13. One

of the challenges with valuing most crypto-

currencies is that holders are not “investing” in these assets as they are not backed or tracked by anything in particular. Conversely if an individual purchases stock in a company, he/she gains partial ownership of that company, no matter how small the stake. There are no balance sheets, earnings reports, and filings with the Securities and Exchange Commission that investors can use to help determine an appropriate value for that cryptocurrency.

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LODE ASSOCIATION 3.1 LODE Project Overview Reader Note: Evans & Evans has provided below a brief summary overview of the Association, the LODE Token and the AGX Coin which was provided by the Association. The reader is advised to refer to the Association’s materials for more detailed descriptions of the Interfix and the manner in which the LODE Digital Silver-Money System operates. Evans & Evans has reviewed such information, including, but not limited to the financial model.

The LODE Digital Silver-Money System (“DSMS”) presented is an idea, an abstract of what certain LODE Community members have designed and scaled to fit the needs of a global society of sound money advocates who recognize that silver can serve as an affordable, verifiable, safe, and secure store of value, and that when “tokenized” upon the blockchain networks, may become a superior medium of exchange, one that returns to the economic system a fungible, private, resilient, and autonomous unit of account. The Lode Community believes it is possible to structure two tokenized assets upon high value blockchain networks including Syscoin, Ethereum, and other potential options with technical specification standards that result in each maintaining a special relationship to the reserved silver bullion. The first asset, referred to as LODE Token (“LT”), will reflect a contributor’s stake in the DSMS and a right to a growing and valuable rewards which are named AGXPay. The second asset, referred to as AGX Coin (“AGX”), will

serve individuals, merchants and speculators seeking a private and sound utility for commerce and speculation, and include a right of claim (exchange) to the reserved silver bullion. The entire model is based upon the anchoring of reserved and vaulted silver bullion to two cryptographic assets, each underwriting the other. LODE Token – How it Works Participants contribute investment-grade silver bullion (or gold equivalent) to the LODE INTERFIX vault(s). This silver will be assayed, certified 99.9% pure, and then reserved and insured by the INTERFIX with oversight from the LODE Community Vault Master. A corresponding contributor’s certificate is generated by way of a smart contract for the exact gram weight of each contribution, triggering a digital LODE Token issuance. Phase 1(closed), Phase 2 (closed), at an exchange rate of 1.18 grams and 1.85 grams of silver, respectively, for each 1 LT, Phase 3 the exchange rate may be 3.70 grams of Silver of each 1 LT. Subsequent phases of LODE Tokens will be issued in accordance with a scarcity rule, thus decreasing the exchange rate per gram of silver contributed. The terms of service can be reviewed online at www.lode.one. The LODE Tokens will be delivered to the contributor’s private wallet, leaving a verifiable and immutable receipt upon a unique dual-asset blockchain protocol, which will be commonly known in the LODE Community as the LODE CHAIN. Each 1 gram of silver bullion secured to the LODE vault(s) will enable the “INTERFIX ENGINE” to create and

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issue 1-AGX Coin, which will be offered to speculators, merchants, bullion dealers and users at the retail selling price of silver grams, which will be determined via the AGX price oracle application programming interface. The inflows realized from this initial sale will be deployed towards the purchase of additional silver bullion to secure and issue a second tranche of AGX Coins, again at a margin, which ensures the reserved silver bullion exceeds the number of new AGX Coins outstanding. The bullion purchases and corresponding AGX Coin sales “cycles” can continue for as long as silver bullion remains available for purchase, regardless of the fiat price. LODE Tokens are currently not listed on a regulated or non-regulated market and can only be sold and purchased on a bilateral basis. Additionally, all Lode Tokens need to be deposited at the Association to earn rewards. Transferability may therefore be restricted. LODE Token represents a derivative security with features of a structured bond without a fixed maturity date (perpetual bond). Payments of interests/ dividends are fully linked to the performance of the sale of silver/AGX Coins. Specifically, 5.25% of all AGX Coins that get minted will be set aside for interest payments to LODE Tokens. The effective interest rate will change based on sales LODE Tokens and will be diluted as more LODE Tokens are sold. AGX Coin – How it Works Each new cycle adds to the ‘marginal’ stack of silver, allowing for a growing and valuable return to flow to LODE Token holders in the form of AGX Coins. Rewards are issued from the AGXPay INTERFIX engine. It is important that the contributed silver bullion from participants will be utilized for the creation of AGX Coins. Contributors will receive LODE Tokens in exchange for the contributed silver bullion. With every cycle of this (above-ground) mining machine, an ever increasing marginal supply of AGX Coins are returned to the LODE Token holders in the form of AGXPay rewards.

evans & evans

AGX Coins may be exchanged or redeemed for investment grade bullion, through participating precious metals dealers (subject to the vendor’s terms and conditions), and through participating retailers via payment gateway service providers. (i.e.: visa, debit, POS, ATM). AGX Coins may also be used for the direct purchase of goods and services at participating merchants who accept AGX Coins as payment. It should also be noted that merchants and users participating in the LODE System will pay a small fee per transaction. AGX Coins will have a tiered transaction fee, so that large transactions will pay a smaller percentage. The fees are mostly used to cover the cost of vaulting and other ongoing expenses, it's not currently expected that the transaction fees will bring in enough revenue to purchase additional silver. INTERFIX Engine The INTERFIX engine is the “linking element” which synchronizes LODE Tokens, the vaulted bullion reserve, and the AGX Coin operations. The INTERFIX will function in a synchronized, consistent, disciplined and transparent manner similar to the movements of a clock. Each sales cycle of LODE Token and AGX Coin is referred to as a “cycle” of the INTERFIX clock. The INTERFIX engine will rotate for as long as silver bullion is transacted to/from the vault(s). With each cycle of the INTERFIX, the reserved weight of silver bullion will grow beyond the number of LODE Tokens outstanding. This marginal silver bullion will be utilized for the operation of the INTERFIX and for flowing rewards as AGXPay to the LODE Token holders. Wallet LODE and AGX Wallets are built with an infrastructure of public and private keys, creating a virtual cryptographic address. Users will use their virtual wallets to manage their private keys and account balances. There will be a variety of wallets available to choose from. Users will be able to create their own wallets using standard wallet generator algorithms, which will enable them to create cold storage wallets (paper wallets), mobile and desktop wallets, and dedicated hardware wallets.

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Due Diligence & Estimate Pricing Report // LODE Association

AGX Ominbus Wallet will provide members with a seamless experience for using all systems that support the AGX Coin. This will eliminate the need for multiple blockchain wallets.

3.2 Why Silver? For thousands of years, humans have traded valuable commodities as forms of value to facilitate the exchange of goods. While any material that has scarcity, desirability and that can be divided into small amounts works as a unit of exchange, gold and silver were used near universally. A number of materials over the millennia have served after a fashion as "money" - essentially functioning as a store of value and as a medium of exchange. However only two, and occasionally a third, copper, - gold and silver - have stood the test of time, because they maintain the attributes which Aristotle listed in the 4th century BC as being essential for good money. It must be: (1) durable - essentially indestructible; (2) divisible - able to be converted into smaller or larger pieces without losing its value; (3) consistent - each piece of a certain size and purity is identical ("fungible"); (4) convenient - considerable value in a "small package"; and, (5) intrinsically valuable - something that many people want or can use. A sixth attribute is that "good money" should have a certain scarcity - unlike fiat (unbacked) paper money

Silver is invaluable in today’s industry

which can - and historically sooner or later always has - been created in practically unlimited quantities. Silver has the advantage of being rare (although not as rare as gold) and can be easily formed into coins, bars and jewellery. While silver still plays its role against the problem of devaluation (inherent in virtually all fiat currencies), it does not offer as convenient alternative means of exchange as it has in the past. An important advantage that silver has today is that governments can do little to control its price as they no longer hold sizeable stockpiles. Silver retains its inherent value and relative scarcity. Silver is recognized everywhere as having value, even when it is not readily accepted as a direct medium of exchange. Investors view silver as “insurance” against socio-political-economic stress or collapse. It is unlikely that silver will ever completely lose its value. Further, the holder of the silver has the sole claim to value, there is no offsetting liability. Silver offers protection against inflation, fraud and economic collapse. Silver is invaluable in today’s industry: batteries, LED chips, glass and mirror coatings, medicine, water purification, nuclear reactors, solar energy, RFID chips, semiconductors and touch screens are just some of its more than 10,000 industrial uses, which continue to grow in number and scope. Demand for silver is expected to continue to increase in line with industry growth.

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global silver demand hit a three-year high in 2018 Silver’s three primary users are industry, luxury goods (jewelry and silverware) and investments (bars, coins and exchange traded funds (“ETFs”)). The ETF aspect of demand can be a major swing factor in silver’s supply and demand balance because when ETF redemptions outpace buying, ETFs become a factor of supply and not demand. According to the latest research from the Silver Institute and as shown in the graphic above, global silver demand hit a three-year high in 2018, surpassing more than one billion ounces, an increase of 4% from 2017. At the same time, global silver mine production fell for the third straight year, dropping 2% in 2018 to 855.7 million ounces.

However, despite strong demand and falling mine supply, silver prices struggled in 2018, averaging the year at $15.71 an ounce, a drop of nearly 8% from 2017. The price of silver in 2019 has been very volatile, with upward spikes seen in June, July and August. The low was in late May at $14.28 /oz. Using a market price of $18.0 /oz to $20.0 / oz of silver, the total addressable market for the AGX Coin is in the range of $18.6 billion to $20.7 billion.

3.3 Advantages of LODE and AGX Coins Evans & Evans identified several advantages of the LODE Token and AGX Coin as summarized below.

The DSMS is not merely a mechanism for creating cryptocurrencies, it is a digital mechanism through which individuals can purchase investment-grade silver in a simple, secure and inexpensive manner with full know-your-client and anti-money laundering protection.

The AGX Coin should have less volatility than non-asset backed cryptocurrencies because the downside risk is limited to the underlying value of the silver for which AGX Coins can be redeemed from the vaulted silver. AGX Coins are backed by one gram of silver. The price of silver increasing or decreasing may cause them to appreciate or depreciate in value. Overall the DSMS is designed such that 94% of the silver in the DSMS is working to create and vault more silver. Increasing the amount of silver in the vault will increase the rewards available for LODE Token holders. Silver is a recognized commodity which trades worldwide on regulated exchanges. As a silver-backed coin, AGX Coins is backed by an asset that has clear benchmarks to regulate its value. As such the risk should be reduced, and regulators should have more comfort as to the coins as a store of value. More and more asset-backed coins have been entering the market to deal with these risks of inherent value. Bitcoin, Ether, and Litecoins are non-physical assets, which do not represent any contractual claims and are not a liability of any entity or person. Conversely both the AGX Coin and the LODE Token maintain a unique relationship to the vaulted silver. As of October 24, 2019, 16.3 million grams of silver have been vaulted in seven locations. The vaulted silver has been contributed to the DSMS by members from 84 counties. The DSMS acts as the connection between the blockchain and the international silver market and as such may ultimately become a large, decentralized platform for trading silver bullion. Without blockchain, the complexity of the DSMS could not be managed in an efficient and immutable manner. LODE Tokens and AGX Coins can trade with the speed and security that Hyperledger’s blockchain can offer. AGX Coins also have the added stability

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that comes with precious metals and will also trade on Syscoin platform. 8. The value of the AGX Coin goes beyond a mathematical limitation and scarcity creating value, its value comes from the specific quantity of silver that backs each coin. 9. At a minimum, the price of the LODE Token could fall to zero. The only silver that backs a LODE Token is the excess silver in the vault, and if the system is running efficiently, all excess silver will be promptly turned into AGX Coins, and will no longer be counted as excess. If the AGX Coin becomes popular, which in turn creates more rewards for LODE Token holders, then the price of the LODE Token can potentially increase. Conversely, if the DSMS does not cycle as anticipated by the Community Ambassadors, and AGX Coins do not gain traction in the market, the value of the LODE Token may suffer as the rewards decrease. 10. AGX Coins and LODE Tokens are a market-based alternative to mining. As AGX Coins are created by the DSMS, they allow for the flexibility and utility of cryptocurrencies without the disadvantages of running machinery and wasting energy. AGX Coins may also serve to reduce certain inefficiencies that currently limit the use of silver as “money” in the broader merchant marketplace. 11. Each AGX Coin is anchored to one-gram weight of reserved silver bullion in the vaults and then tethered to it cryptographically by blockchain architecture. The value of one gram weight of silver (i.e. one AGX Coin) will, in the future, be posted live on the LODE website in multiple fiat currencies to provide merchants and speculators with a baseline for price discovery when settling commerce. 12. LODE Tokens, if the DSMS cycles as anticipated by Community Ambassadors, represent a source of regular and steady rewards through the issuance of AGX Coins. LODE Tokens enable individuals to make their silver work for them and participate in the cryptocurrency market. 13. LODE Token represents a derivative security with features of a structured bond without a fixed maturity date (perpetual bond). Payments of interests/ dividends are fully linked to the performance of the sale of silver/AGX Coins. Specifically, 5.25% of all AGX Coins that get minted will be set aside for interest payments to Lode Tokens. The effective interest rate will change based on sales LODE Tokens and will be diluted as more Lode Tokens are sold.

14. A LODE Token is a speculator’s asset that has a unique relationship to silver. Crypto traders can purchase a LODE Token if they wish to invest physical silver into the system and speculate on a blockchain enabled digital silver-money-system. Crypto traders and/or fund managers of cryptocurrencies and blockchain assets can position LODE Tokens as a means to diversify their portfolios. 15. There will be minimal human intervention in the INTERFIX once it begins operating as it will continue to operate under the pre-set rules. However, while there are no shareholders, there is a Board of Directors with unlimited control. 16. LODE Token holders are the members of the DSMS, there is no ICO and no stock is sold in the INTERFIX. LODE Token holders collectively earn 5.25% of all new AGX Coins minted. 17. The Association stores all silver contributed to DSMS in vaults worldwide in the form it is contributed. The storage of actual silver in vaults is important, as there have been concerns in the past that financial institutions claiming to hold gold or silver, had actually converted the gold or silver to paper or electronic claims to physical gold or silver. Vaulting of the physical silver is important as it needs to be available to any participating, authorized bullion dealers who wish to exchange/redeem their AGX Coin for the vaulted physical silver. 18. The existing global financial system is based on a combination of cash, ATM’s, credit and debit cards, and point of sale devices. In many western nations, cash is being used less and less, with credit cards, debit cards, and direct deposits becoming the de facto standard. The LODE Project will enable AGX Coin to function in the same manner by partnering with cryptocurrency exchanges such as Coinbase, Binance, BitMex, and Kraken; CoinPayments; point of sale; and cryptocurrency ATM providers; and by issuing crypto backed debit cards, and developing merchant and barter networks. 19. LODE Barter Network operators will coordinate trades and facilitate commerce amongst private members of the B2B Community. Barter Networks provide a platform for trade-settlement across all of the exchanges in the network. AGX Coin may be utilized within the Barter Network Marketplace to provide leverage and reciprocal trade settlement across all networks.

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2019

How the LODE System Works Investors

Could be a 3rd-party crypto wallet

Invest Silver

Personal Crypto Wallet Receive Lode Token Bonds

Interest on the bond is paid when new AGX are minted

IN TE RF IX

The Lode Association

INTERFIX

Vaults (SWP)

Redeem AGX for Silver

Mint AGX backed by new silver

AGX is sold to Interﬁx for distribution

Interﬁx Fiat Reserve

Redemption Fees

Veriﬁed AGX Holders

Managed Payment Rails

Managed ATM’s

Managed AGX Visa/Mastercard

Due Diligence & Estimate Pricing Report // LODE Association

Purchase AGX

Matters to Lode Token Holders (On Hyperledger)

Dealing with AGX

Directly managed and funded by InterďŹ x

Matter to both AGX & Lode (On Hyperledger)

(Could be on Hyperledger or other public blockchains)

Receive Silver

Personal Wallet

Customers

Buy Silver Send Silver

Transaction Fees

// 19

Exchangeability Merchants

Regulated Exchanges

Transaction Fees

Banks

Regulated ATMâ&#x20AC;&#x2122;s

Regulated AGX Visa/Mastercard

Bullion Dealers

20 //

evans & evans

4.0

BLOCKCHAIN MARKET 4.1 Cryptocurrencies According to coinmarketcap.com, as of October 2019, there were a total of 3,047 cryptocurrencies active around the world, each touting its own advantages. Bitcoin and Ether dominate the cryptocurrency marketplace with market capitalizations of $169.4 billion and $19.7 billion, respectively, as of October 24, 2019. As of October 24, 2019, the remaining of top five cryptocurrencies in terms of market capitalization are Ripple ($12.8 billion), Bitcoin Cash ($4.9 billion) and Litecoin ($3.7 billion). Bitcoin is often seen as the ‘reserve currency’ of the cryptocurrency world as increases and decreases in the price of Bitcoin often has a knock-on effect with other cryptocurrencies.

5, 2009) for BTC was 1 BTC = $0.000764. Due to its first mover advantage, Bitcoin has remained the number one cryptocurrency in terms of market capitalization. However, cryptocurrency users have noted BTC’s current disadvantages, including high transaction fees and delayed settlement, and have therefore moved on to the many alternatives available. Bitcoin prices were extremely volatile in 2017 as prices rose to over $20,000 per BTC in December 2017, only to fall to less than $14,000 by the middle of January 2018 and to just over $6,000 in June 2018. The price of BTC fell further to just over $3,200 in December 2018, representative of August 2017 price levels before the run-up in December of 2017. The prices of BTC rallied again from a low of just over $4,000 in April 2019 to over $12,000 in July 2019 before falling to under $10,000 in September 2019 and under $8,000 in October.

Cryptocurrencies first surfaced in 2009 with the debut of Bitcoin as the world’s first decentralized cryptocurrency. The initial exchange rate (recorded on October

Currently ranked as the currency with the second highest market capitalization, Ethereum has 107.8 mi-

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Due Diligence & Estimate Pricing Report // LODE Association

llion ETHs circulating. Ethereum has increased in popularity in recent years due to its smart contract abilities and flexibility in creating new applications. Cryptocurrency users no longer focus on just the peer-to-peer currency transfer abilities of BTC but look for other functionalities, such as global decentralized computing or smart contracts infrastructure. The rise of BTC prices in the last quarter of 2017 had a positive impact on Ether as well, which saw its price rise to over $1,300. As noted above, there has been an increase in asset-backed cryptocurrencies. In addition to asset-backed cryptocurrencies, there has been the emergence of “Stable coins”. Stable coins are cryptocurrencies whose values are kept stable by pegging them to another asset. Evans & Evans has highlighted certain asset-backed cryptocurrencies and stable coins below. DigixDAO is the Digix Decentralized Autonomous Organization, a decentralized group of participants making decisions about how to grow the Digix Global Ecosystem. Participants purchased DGD tokens in the a crowd sale on the Ethereum blockchain. The DGD (4) London Bullion Market Association

token holders make decisions related to any proposals submitted to DigixDAO. As a reward for voting and decision making in the growth of Digix, DGD holders receive rewards related to DGX, a token that represents 1 gram 99.99% LBMA4-standard gold, which is kept in a custodial vault in Singapore. DGX token holders can redeem their gold by mail or pick it up personally in Singapore if they so choose. DGX is one of two tokens associated with Digix Global, the other of which – DGD – is currently one of the top Ethereum tokens and is used to cast votes in the DigixDAO governance system that allocates funding for other blockchain projects. As of October 24, 2019, the market capitalization of DGX was approximately $5.6 million and the price was 0.2267 ETH ($46.67) and based on the estimated over 100 kilograms of gold that had been vaulted, DGX was trading in-line with the value of the vaulted gold. OneGram Gold Tokens were developed by OneGram. OneGram is a Dubai-based startup which is unique for being the first ever Shari’ah (Islamic Law)-compliant cryptocurrency. Followers of the Muslim faith who observe Shari’ah Law can only invest in real-world, physical assets and are forbidden from speculative investments. One key difference between Digix and OneGram is that the OGC tokens are designed to grow in value (in terms of gold), while the DGX token value stays constant. Like DGX, every OGC token is backed

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by one gram of physical gold when the cryptocurrency launches. However, 70% of the transaction fees accumulated by OneGram will be reinvested back into gold while the supply of OGC is held constant, meaning that the amount of gold backing each token will increase over time. The number of emitted coins is 12,400,786. OneGram Gold Tokens are based on a PoS blockchain.

create asset- backed tokens that you can easily buy and sell around the world. For example, gold to gold tokens or dollar to dollar tokens. TrueUSD is currently listed on Binance, Bittrex, Upbit, and a number of other exchanges. As of October 24, 2019, TrueUSD has a market capitalization of $180 million and a circulating supply of 190,570,552 coins.

TARCO International, Gmbh of Zug, Switzerland is in the process of launching AgAu, which will issue two stable coins, AgAu Gold and AgAu Silver. AgAu tokens represent direct ownership of 1 gram of 99.99% quality gold for AgAu.GLD and 1 gram of 99.99% quality silver for AgAu.SLV. All precious metals will be held in the form of LBMA Good Delivery bars in secure private vaults in Switzerland and Liechtenstein. Both tokens are pegged to the price of their respective precious metals. AgAu is planning to launch its tokens in 2019 and investors will be able to buy the cryptocurrency launches. However, 70% of the transaction fees accumulated by OneGram will be reinvested back into gold while the supply of OGC is held constant, meaning that the amount of gold backing each token will increase over time. The number of emitted coins is 12,400,786. OneGram Gold Tokens are based on a PoS blockchain.

Founded by Russian entrepreneur Valentin Preobrazhenskiy, the LAToken platform (short for “Liquid Asset Token”) tokenizes virtually anything from real estate, to bank loans, to works of arts or even antiques. LAToken is a blockchain platform for creating and trading asset tokens. It allows cryptoholders to diversify their portfolio by getting access to tokens linked to the price of real assets. LAToken enables asset owners to unlock the value of assets by creating and selling their asset tokens. The LAT platform is already operational: asset tokens can be created, listed for sale and traded on the LAT platform. Tokens linked to the price of shares (e.g. Apple, Amazon, Tesla), commodities (oil, gold, silver) and real estate ETF are already traded on the LAT platform. The LAToken is trading on several and exchanges and as of October 24, 2019, the price was $0.070319 per Coinmarketcap.com, with a market capitalization of $26.7 million. As of October 24, 2019, there were 380,104,462 LATokens circulating of a total supply of 400 million and a maximum of 1.0 trillion. TrueUSD is a U.S. dollar-backed ERC-20 stable coin with a fully collateralized underlying asset pool that's held in custody by partner banks. TrueUSD is the first asset token by TrustToken. TrustToken reports it plans to introduce additional asset-backed tokens such as TrueEuro, TrueBond, etc. TrustToken is a platform to

Facebook is planning to introduce its Libra coin which will be backed by U.S. dollars to maintain a stable value and is aimed at making it easier to transfer money around the world, without having to go through financial intermediaries like banks. The digital currency is being developed by Facebook and a Switzerland-based consortium known as the Libra Association, which includes such companies as Visa, Uber and Coinbase. It would be backed by a digital ledger different to Bitcoin’s and, also unlike Bitcoin, asset-backed in order to maintain a stable value. Founded by Russian entrepreneur Valentin Preobrazhenskiy, the LAToken platform (short for “Liquid Asset Token”) tokenizes virtually anything from real estate, to bank loans, to works of arts or even antiques. LAToken is a blockchain platform for creating and trading asset tokens. It allows cryptoholders to diversify their portfolio by getting access to tokens linked to the price of real assets. LAToken enables asset owners to unlock the value of assets by creating and selling their

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Due Diligence & Estimate Pricing Report // LODE Association

Stable coins are cryptocurrencies whose values are kept stable by pegging them to another asset. asset tokens. The LAT platform is already operational: asset tokens can be created, listed for sale and traded on the LAT platform. Tokens linked to the price of shares (e.g. Apple, Amazon, Tesla), commodities (oil, gold, silver) and real estate ETF are already traded on the LAT platform. The LAToken is trading on several and exchanges and as of October 24, 2019, the price was $0.070319 per Coinmarketcap.com, with a market capitalization of $26.7 million. As of October 24, 2019, there were 380,104,462 LATokens circulating of a total supply of 400 million and a maximum of 1.0 trillion. TrueUSD is a U.S. dollar-backed ERC-20 stable coin with a fully collateralized underlying asset pool that's held in custody by partner banks. TrueUSD is the first asset token by TrustToken. TrustToken reports it plans to introduce additional asset-backed tokens such as TrueEuro, TrueBond, etc. TrustToken is a platform to create asset-backed tokens that you can easily buy and sell around the world. For example, gold to gold tokens or dollar to dollar tokens. TrueUSD is currently listed on Binance, Bittrex, Upbit, and a number of other exchanges. As of October 24, 2019, TrueUSD has a market capitalization of $180 million and a circulating supply of 190,570,552 coins. TARCO International, Gmbh of Zug, Switzerland is in the process of launching AgAu, which will issue two stable coins, AgAu Gold and AgAu Silver. AgAu tokens represent direct ownership of 1 gram of 99.99% quality gold for AgAu.GLD and 1 gram of 99.99% quality silver for AgAu.SLV. All precious metals will be held in

the form of LBMA Good Delivery bars in secure private vaults in Switzerland and Liechtenstein. Both tokens are pegged to the price of their respective precious metals. AgAu is planning to launch its tokens in 2019 and investors will be able to buy the tokens on major crypto exchanges. AgAu aims to offer possible redemption anytime to AgAu token holders in different secured locations and through different mechanisms. AgAu is currently exploring different partnerships to offer more options to AgAu token holders. Silvertoken (SLVT) is a digital currency backed by silver, which utilizes the Ethereum blockchain, allowing users to purchase and transact with physical silver. Each Silvertoken represents 1 troy ounce of 99.9% pure investment grade silver bullion. Silvertoken is in a Master Vaulting Agreement with Strategic Wealth Preservation (SWP), a fully-integrated precious metals dealer and vaulting facility located in the Cayman Islands, to oversee the secure storage of the silver reserve for our community. All SLVT is fully redeemable for the silver they represent. Silvertoken runs on the Ethereum Network and is ERC20 compliant. Tether is 100% backed by fiat currency assets in a reserve account. The conversion rate is 1 tether USDT equals $1 USD. The Tether Platform is considered to be fully backed if all tethers in circulation is less than or equal to all fiat that is held in the bank account. As of October 24, 2019 Tether had a market capitalization of $4,100,663,770 and a circulating supply of 4,108,044,456. Kinesis offers currencies that are representative of real physical gold and silver bullion on a 1:1 allocation, made easy to spend with the Kinesis debit card giving users the ability to send, spend and transact at convenience. Kinesis closed its ICO on September 7, 2019 raising $194 million. Maker is a decentralized autonomous organization that is pegged against the U.S. dollar, but is completely backed by ETH. Their stable coin is Dai and each one is worth $1 USD. Stability is maintained through an autonomous system of smart contracts. To receive Dai, you send your tokens to the Maker platform to lock those tokens up.

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Havven’s structure provides stability by building a system that backs itself with two coins. The first coin is called Nomins which is the stable coin. This what you would use for everyday transactions. The tokens sitting in reserve are called Havvens. A fee for each transaction completed with Nomins will go back to the company. The fees are then distributed back to the Havven token holders who are rewarded for maintaining the system that backs itself. Basecoin also pegs their price to $1 USD. However, their approaches use consensus to contract and expand supply of their coin. When coins are trading for less than $1, coins are contracted by allowing coin holders to buy bonds. Coins used to buy bonds are destroyed. Supply decreases and price increases. They do the opposite to expand supply.

4.2 Demand for Cryptocurrencies Central banks around the world, including China, Japan and Sweden, are developing their own digital currencies. China's central bank announced in January 2017 that it had completed a successful trial run of transacting digital currencies among banks. In September 2017, Japan, Sweden and Estonia all announced similar digital currency projects: J-coin for Japan, E-krona for Sweden and Estcoin for Estonia. The United Kingdom, Uruguay and Kazakhstan have all announced plans to create digital fiat currencies. The investment in digital fiat currencies is driven by the move to a cashless society. A report published in March 2019 by Access to Cash in the United Kingdom suggests that cash transactions could fall to just 10% of all payments within the next 15 years. Currently only 13% of the total population in Sweden relies on cash transactions and Sweden is expected to become the world’s first cashless economy by 2023. Sweden plans to introduce its own digital currency in 2021. Despite the growing governmental interest in cryptocurrencies, the demand for cryptocurrencies that are free of control from any person and institution is not expected to change. “With government cryptocurrencies, you have one institution that controls it, and they

evans & evans

Central banks around the world, including China, Japan and Sweden, are developing their own digital currencies. can change the rules when they want; they can prevent certain transactions from happening if they don't trust the party involved. It's not that that's bad, but that's not a cryptocurrency. That's just a currency that happens to run on a computer.5” Cryptocurrencies exist because individuals are looking for decentralized, peer-to-peer digital cash, which is not managed by a central intermediary and is beyond the control of a government. Regardless of whether governments begin to introduce their own fiat digital currencies, demand is expected to continue for nonfiat cryptocurrencies which are governed purely by market forces, not government intervention. According to CoinMarketCap, the total market capitalization as at October 24, 2019 for all cryptocurrencies is approximately $248.2 billion. By 2025, total market capitalization could exceed $5 trillion, as crypto wallet penetration is expected to exceed 5% of the world’s population and asset-backed cryptocurrencies give rise to trading asset tokens6. According to calculations by Chainalysis Inc., which tracks cryptocurrency data, consumers used bitcoin

(5) Jacob Eliosoff, Investment Manager of Trevi Digital Assets Fund (6) https://medium.com/@xchangeraterobot.io/the-significant-growth-of-the-cryptocurrency-and-a-look-ahead-1b5e10cac6a9 - Retrieved July 20, 2018

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on merchant services for a monthly average of $427 million in September 2018, compared with just $9.8 million a month in 2013. Financial technology companies and incumbent financial services players have increasingly been investigating how to boost their clients' access to cryptocurrencies as most institutional investors have yet to participate in the asset class. Most analysts believe there are large sums of money from institutions and high net worth individuals about to enter the market through new hedge funds. The demand for cryptocurrencies is driven by market penetration. Some estimates indicate there are three million cryptocurrency users, which represents 0.14% of the 2.1 billion people in the world between 14 and 65 who have internet access. If market penetration were to increase to only 5% within five years, that would mean 105 million users. A 2017 study conducted by the Cambridge Center for Alternative Finance has set the number of active cryptocurrency users

Funds raised in 2019 Total raised: $366,709,025 Number of ICOs: 94

across the world at 3.0 million. It includes people who use either one or more cryptocurrencies that are currently available in the market. According to Chainalysis as of August 2018 2.3 million people used bitcoin to make payments. As noted earlier, globalization is one of the driving forces of cryptocurrencies. Interbank transactions can potentially take days for clearing and final settlement, especially outside of working hours. Blockchain transactions can reduce transaction times to minutes and are processed 24/7. Because cryptocurrencies/digital currencies are completely digital, they can be used in ways that ordinary currencies can't; primarily, they are used like the digital equivalent of cash. Unlike credit or debit cards that are issued by banks, consumers don't need an account or good credit to use digital currencies. Further, digital currencies are becoming increasingly accepted globally by retailers and institutions.

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Funds raised in 2018 Total raised: $7,812,150,041 Number of ICOs: 1,253

One of the potential applications for cryptocurrencies, is banking the “unbanked”. According to The World Bank, globally, only 69% of adults, 3.8 billion people, have an account at a bank or mobile money provider. According to the whitepaper issued by the newly formed Facebook subsidiary company, Calibra, which is responsible for the Libra coin, 1.7 billion adults globally remain outside of the financial system with no access

There is an immediate opportunity to provide a much-needed alternative to the existing payment systems.

to a traditional bank. This is despite the fact that one billion have a mobile phone and nearly half a billion

llet, and specialty platforms such as ApplePay® and

have internet access. High mobile phone penetration

AmazonPay®. Existing payment systems have seve-

in developing nations combined with a high rate of un-

ral layers of fees built into them, do not happen on an

banked individuals is a significant opportunity for the

immediate basis in the case of international payments

cryptocurrency market as individuals could become

and are not accessible to many individuals and busi-

their own bank.

nesses who do not have bank accounts.

The global payments industry is $1.56 trillion and

There is an immediate opportunity to provide a

growing. Global payments revenue are forecast to

much-needed alternative to the existing payment sys-

grow to $2.4 trillion in 2027. The market is domina-

tems. New systems will democratize global payments,

ted by bank payment methods of transfer and to a

provide increased efficiency, reduced counterparty risk,

lesser extent by alternative peer-to-peer payments like

decreased completion times and diminish or eliminate

PayPal®, mobile wallet transactions such as Hyperwa-

fees attached to the payments.

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An additional driver of the cryptocurrency market is the growth in emerging markets. In developing countries in Asia, South America and Africa large portions of the population do not deal with banks for everyday business and therefore the digital/cryptocurrency market does not present the same barriers to entry as conventional international banking and money transfers.

4.3 Initial Coin Offerings (“ICOs”) Services such as www.icoalert.com, now track the hundreds of ongoing and closed ICOs. August 2017 saw the first ICO unicorns, when both OmiseGO and Qtum passed a $1 billion market capitalization. In 2018, unicorns Telegram and EOS, raised $1.7 billion and $4.2 billion, respectively, on their ICOs. In 2019, BITFINEX raised $1.0 billion and Kinesis raised $194 million.

in 2018 a total of over $7.8 billion were raised through 1,253 ICOs According to PWC’s ICO report, throughout the first five months in 2019, over 250 token offerings have been successfully completed managing to raise $3.3 billion. Largest conducted crypto offerings were Bitfinex $1 billion and GCBIB $143 million, jointly accounting for 35% of total raised funding volume. Below chart from the PWC’s ICO report shows the 15 biggest token offerings overall since 2016.

4.4 Cryptocurrency Returns

According to data from ICODATA.IO in 2018 a total of over $7.8 billion were raised through 1,253 ICOs. For the period January 1, 2019 to October 24, 2019, approximaltely $366.7 million was raised in a total of 94 ICOs.

Evans & Evans has conducted an analysis of several of the most recognized cryptocurrencies in order to provide the reader of the Report with an understanding of the types of returns that can be realized by investing in cryptocurrencies. Evans & Evans reviewed three-year (where available) data on the following cryptocurrencies: Bitcoin; Ether; XRP, Litecoin, Dash, Cardano, EOS and Digix.

PricewaterhouseCoopers LLP (“PWC”) Switzerland released a report noting in 2017 there were a total of 552 ICOs with a volume of just over $7.0 billion. The report further noted that the average size of an ICO has almost doubled from $12.8 million in 2017 to over $25.5 million in 2018.

Bitcoin is the oldest cryptocurrency having launched on July 18, 2010 at a price of $0.09 per coin. As of the Pricing Date, BTC was trading at $9,356.33 per BTC. As can be seen from the table below, BTC increased significantly in its first 24 months of trading and saw quadruple digit increases in 2017.

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Ether launched on August 7, 2015 and also increased materially in value in its first 24 months of trading. Ether’s initial price of $3.00 increased to over $1,300, in early 2018. Ether did not see the same increases as Bitcoin in 2017, but its declines were also not as material. As at the Pricing Date, ETH was priced at $181.66. XRP launched on August 4, 2013 and increased in value by 40% in its first 24 months of trading. XRP’s initial price of $0.01 increased to over $3.65, in early 2018. As at the Pricing Date, XRP was priced at $0.30. Dash is another well-known cryptocurrency that launched in 2015 and since its price has increased from $10 to $72.42 as at the Pricing Date. Dash saw price increases similar to Ether in 2017 and early 2018, rising to over $900. Litecoin launched in late 2016 and since that time has seen its price increase by over 17x. Litecoin also saw a significant increase in its first 12 months of trading of over 1200%. Litecoin was trading at $57.98 as at the Pricing Date, down from highs of over $200 in February of 2018. Cardano is a new entrant to the cryptocurrency space but as at the Pricing Date was in the top 12 in terms of market capitalization, falling from the top five in early 2018. Cardano’s initial trading price was in the range of $0.12 but that had increased by more than 6.5x to over $0.75 in early 2018 before settling back down to $0.04 as at the Pricing Date. EOS was launched on July 27, 2017 with an initial price of $1.95. Prices spiked to over $12 in December of 2017 but were in the range of $3.29 as of the Pricing Date.

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DGX is a gold-back token launched on May 15, 2018 with a price of $44.37 at a time when gold’s price was approximately $45.68 / gram. As of the Pricing Date, DGX was trading at $46.63 with gold trading at $47.98 per gram. DGD launched on August 10, 2017 at $77.04 and as at the Pricing Date was trading at $12.54. Cardano is a new entrant to the cryptocurrency space but as at the Pricing Date was in the top ten in terms of market capitalization, falling from the top five in early 2018. Cardano’s initial trading price was in the range of $0.12 but that had increased by more than 6.5x to over $0.75 in early 2018 before settling back down to $0.14 as at the Pricing Date. EOS was launched on July 27, 2017 with an initial price of $1.95. Prices spiked to over $12 in December of 2017 but were in the range of $7.26 as of the Pricing Date. DGX is a gold-back token launched on May 15, 2018 with a price of $44.37 at a time when gold’s price was approximately $45.68 / gram. As of the Pricing Date, DGX was trading at $41.03 with gold trading at $42.83 per gram. DGD launched on August 10, 2017 at $77.04 and as at the Pricing Date was trading at $83.54. As can be seen from the following table, in their first 12 months of operations, the selected cryptocurrencies saw triple, and sometimes quadruple, digit increases in value. It is important to differentiate, that the following currencies are not directly comparable to the LODE Coin or the AGX Coin (token) because they are not asset-backed. There are not currently any asset-backed cryptocurrencies with long-term operating histories.

The reader is advised to refer to Schedule 2.0 – Cryptocurrency Charts.

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5.0

PRICING METHODOLOGIES 5.1 Overview In valuing an asset and/or a business, there is no single or specific mathematical formula. The particular approach and the factors to consider will vary in each case. Where there is evidence of open market transactions having occurred involving the shares, or operating assets, of a business interest, those transactions may often form the basis for establishing the value of the company. In the absence of open market transactions, the three basic, generally-accepted approaches for valuing a business interest are:

The Cost Approach is based upon the economic principle of substitution. This basic economic principle asserts that an informed, prudent purchaser will pay no more for an asset than the cost to obtain an opportunity of equal utility (that is, either purchase or construct a similar asset). From an economic perspective, a purchaser will consider the costs that they will avoid and use this as a basis for value. The Cost Approach typically includes a comprehensive and all-inclusive definition of the cost to recreate an asset. Typically, the

(a) The Income / Cash Flow Approach; (b) The Market Approach; and (c) The Cost or Asset-Based Approach. A summary of these generally-accepted valuation approaches is provided below.

definition of cost includes the direct material, labor and overhead costs, indirect administrative costs, and all forms of obsolescence applicable to the asset. The Asset-Based Approach is adopted where either: (a) liquidation is contemplated because the business

The Income/Cash Flow Approach is a general way of determining a value indication of a business (or its underlying assets), using one or more methods wherein a value is determined by capitalizing or discounting anticipated future benefits. This approach contemplates the continuation of the operations, as if the business is a “going concern”.

is not viable as an ongoing operation; (b) the nature of

The Market Approach to valuation is a general way of determining a value indication of a business or an equity interest therein using one or more methods that compare the subject entity to similar businesses, business ownership interests and securities (investments) that have been sold. Examples of methods applied under this approach include, as appropriate: (a) the “Guideline Public Company Method”, (b) the “Merger and Acquisition Method”; and (c) analyses of prior transactions of ownership interests in the subject entity.

Asset-Based Approach is applicable, the method to

the business is such that asset values constitute the prime determinant of corporate worth (e.g., vacant land, a portfolio of real estate, marketable securities, or investment holding company, etc.); or (c) there are no indicated earnings/cash flows to be capitalized. If consideration of all relevant facts establishes that the be employed will be either a going-concern scenario (“Adjusted Net Asset Method”) or a liquidation scenario (on either a forced or an orderly basis), depending on the facts. Lastly, a combination of the above approaches may be necessary to consider the various elements that are often found within specialized companies and/or are associated with various forms of intellectual property.

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As the LODE Silver Reserves grow, new silver allows for the minting of new AGX Coins, to be utilized in daily trade and commerce.

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6.0

PRICING METHODOLOGIES USED LODE TOKENS AND AGX COINS

6.1 Factors Influencing the Pricing of the LODE Tokens and AGX Coins

payments to LODE Token holders will be made every 52 days or seven times in one year. Interest payments will be based on AGX Coins minted and sold since the last payment and could have very high variability. There will be a freezing period of 77 days for LODE Token holders to be eligible for the payments. The value of the Lode Token will be based on the sales or expected sales of new AGX Coins as the interest payments are dependent on the sales of new AGX Coins.

Evans & Evans notes that potential value of LODE Tokens and AGX Coins is dependent on a number of factors which include: 1.

The number of cycles of the DSMS. As the number of cycles increase the volume of silver and the number of AGX Coins increases which creates more opportunity for INTERFIX fees and the generation of transaction fees which can be used to purchase more silver. In addition to transactions and exchange fees, 94% of the inflows from the sale of AGX Coins are utilized to purchase additional physical silver. The purchase of additional silver creates more AGX Coins. There are currently no plans to fix the number of cycles. As of the Pricing Date, the Community has vaulted 16.31 million grams of pure silver bullion. The first cycle of the AGX Coin cryptographic silver monetary system will occur shortly after the completion of the construction of the silver monetary-mass period end occurs. It is anticipated that the commencement of the cycles will begin in October 2019. The length of each cycle. For each cycle of the DSMS, the value of the LODE Token increases. Accordingly, the shorter the time period between cycles, the faster the LODE Tokens appreciate in value. The length of the cycle could range from a few weeks to years as it depends on the time it would take to sell 100% turnover. The interest

The market acceptance of AGX Coins. As with any new product / service, market acceptance will be determined over time. As more AGX Coins enter the market and the Association is able to expand the number of exchanges which trade AGX Coins and more transactions occur the inherent value of LODE Tokens increases as a limited number of LODE Tokens shares in the marginal extra volume of silver created from the operations of the DSMS. The amount of silver contributed to the creation of monetary mass to-date does provide some support for the proposed market acceptance of AGX Coins.

Utility value. A key factor in the price of any cryptocurrency is its utility. If you cannot use it for something, be it an investment or for payments, then it would have no or little perceived value. Underlying assets also contribute to the utility value as there is the potential to redeem the coin/token for some value. Accordingly, as AGX Coins are able to be used in more B2B and B2C transactions, their utility increases, which should increase the inherent utility value. An increase in

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the utility of AGX Coins increases both their value and the value of the LODE Tokens subject to the increase in sales of new AGX Coins. 5.

Liquidity. Currently, there is no active effort to position the LODE Project assets on any exchanges. This does not preclude LODE and AGX being listed, but it will not be pursued in the near term as a means of liquidity. In the future, the LODE Project may explore listing options for the LODE Tokens and AGX Coins if there is significant market demand. Although exchanges are not a primary focus, exchangeability for the LODE Community is a primary goal, meaning that liquidity will come initially by means of other internalized mechanisms such as: peer-to-peer trading, card programs and crypto-to-fiat off ramps. Internal to the LODE Ecosystem, tools such as the Price Oracle and algorithmic curve protocols may offer internal network supervised exchangeability.

Rewards. The rewards earned by the holders of LODE Tokens which are paid in the form of AGX Coins through the AGXPay System. LODE Token owners can register their assets and obtain rewards in the form of AGX Coins at 5.25% of the minting of new AGX Coins. AGX Coins can in turn be redeemed for silver.

Financial Modeling. LODE Tokens represent a contributorâ&#x20AC;&#x2122;s investment in the LODE Project. The LODE Token provides a unique opportunity for owners of investment-grade silver bullion to divest their physical silver holdings into a perpetual bond. A portion of the contributed silver is then used to fund the LODE System, with a portion of the vaulted grams becoming AGX Coins, ready for circulation. LODE Token Holders will receive variable interest payouts in the form of AGX Coins, with each minting of silver-secured AGX Coins. The issuance of LODE Tokens is based on an abundance model. As the project evolves, the number of grams required to purchase a LODE Token increases so as to reduce dilution without entirely preventing new tokens from being issued. At launch, three phases were introduced, using an exchange rate ranging from 1 gram to 3.7 grams of silver per one (1) LODE Token. As the LODE Project continues, the exchange rate will

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be based on an algorithmic formula and will create automatic tranches at ever-increasing prices. As the LODE Silver Reserves grow, new silver allows for the minting of new AGX Coins, to be utilized in daily trade and commerce. With each issuance of AGX Coins, 5.25% of newly minted assets are distributed to LODE Token Holders as micro-payouts as recognition for building the community. Retail Model AGX Coins are sold on a retail model to customers who wish to purchase digital silver for one of a variety of reasons. By selling AGX with a retail markup, the resulting revenue can be used to purchase more silver, which can be tokenized into more AGX Coins and sold, continuing the cycle. This is a standard retail sales cycle, selling a physically-backed digital product. As such, AGX sales and the creation of new AGX Coins can continue almost indefinitely, provided customers continue to demand the product. LODE Algorithmic Pricing Curve LODE has chosen to price the issuance of new LODE Tokens on an algorithmic price curve (previously referred to as Bonded Curve). The LODE curve sets the issue price of new tokens by following an N squared curve, then breaking it into price tranches. As the number of LODE Tokens increases, the issue price for new tokens also increases. Using the algorithmic price curve ensures against excessive dilution of the tokens, protecting the value of the contributions in each tranche by making it more expensive for new tokens to be issued. The curve also allows for the possibility of new issuance as not all individuals will be able to access secondary markets. In this model, the issue price of LODE Tokens will increase as the token supply increases, reducing and discouraging dilution. The sale price of new LODE Tokens is based on the number of tokens currently in circulation. It is designed as a step function, increasing in tranches of approximately 5 million grams of silver each. As the price increases with each tranche, the number of tokens sold in a tranche goes down. The sale price increases exponentially, based on the beginning of each tranche, and rounding to the nearest 0.05, as shown by the blue line on the graph. The

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equation used is P = 1+ N2 * 1.47E-14, which aligns closely with the original three phases. LODE Tokens were originally sold in a series of three phases, with a price of 3.7 grams in the final phase. The algorithmic price curve has been aligned with the final phase. As silver has already been contributed to the system, the algorithm begins after the adjustment phase. 8.

Public perception. The most well-known cryptocurrencies tend to have the greatest value. Given the number of new cryptocurrencies being released daily, the ability of a new cryptocurrency to differentiate itself from others in some way may bring about an increase in value.

Scarcity of cryptocurrencies. While individually most cryptocurrencies have built in scarcity, there is no scarcity at all when it comes to the total number of all cryptocurrencies that can exist. Such lack of overall scarcity is evidenced by the existence of over 2,373 cryptocurrencies as of the Pricing Date.

10. Market Share. The appreciation in the value of LODE Token is dependent on the ability of AGX Coins to increase their market share. Cryptocurrencies continue to appreciate over the long term if they take off as a method of spending and a handful of cryptocurrencies continue to make up most of the market share, rather than all cryptocurrencies becoming extremely diluted.

6.2 Pricing Methodology Selected There are currently multiple methods of attempting to “price” cryptocurrencies in order to provide investors with information as to whether each cryptocurrency is either under- or over-priced in the market. Industry analysts have used macro-financial indicators and cost-of-production models to value existing cryptocurrencies, however, no economic or financial model has been shown to be a reliable indicator of a cryptocurrency’s value in the economy. Further no models developed to-date have been reliable in predicting currency values to the market. Lastly, given the relative early stage of cryptocurrencies, no one valuation model is accepted by the market participants.

Most buyers and sellers of cryptocurrencies are speculating, meaning they are looking at price charts and guessing that it may go up or down with technical analysis as a means of making investing and de-vesting decisions. The challenge with cryptocurrencies is to find the appropriate fundamentals to use to develop value indications. The LODE Token is a rewards token that derives its value from: (1) participation, i.e., enabling the creation of the monetary mass; (2) participation in the growing ecosystem (exchanging and transacting); (3) scarcity/ limited supply; (4) changing exchange rates; (5) market speculation, and, (6) reward (at 5.25% of the gross inflows realized from AGX Coin operations). Considering the above factors as well as the approaches of valuation outlined above, it is the view of the author of the Report that the most appropriate method in determining the range of the potential market value of LODE Token at the Pricing Date were two methods, (1) The Gordon Growth Model (the “GGM”) and (2) Dividend Capitalization Model under the Income Approach. The GGM relates the value of a stock to its expected dividends in the next time period, the cost of equity and the expected growth rate in dividends. DPS1 Value of Stock = ke – g where: DPS1 = Expected Dividends one year from now (next period) Ke = Required rate of return for equity investors g = Growth rate in dividends

Under the Dividend Capitalization Model expected dividends are capitalized at a market capitalization rate to calculate the value of the stock/asset. Evans & Evans considered a Rule-of-Thumb, Market Approach to arrive at the potential value of the AGX Coin. A cryptocurrency is made up of its utility value (“UV”) and its speculative value (“SV”). The utility value could be considered the inherent or underlying value that the currency would have if all the hype were stripped away. For the majority of cryptocurrencies, the UV is very low. UV can be impacted by its acceptance

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as a store of value and the cost to mine. In the case of the AGX Coin, the UV would be tied to the value of silver exchanged for one AGX Coin i.e. one gram of silver. Since the AGX Coin is an asset backed currency and is backed by one gram of silver, it not likely to have any speculative value. However, the AGX Coin will have a value greater than the spot price of one gram of silver due to the premium for retail price of silver as compared to the whole sale spot price, and the premium for its higher liquidity as a currency as compared to one gram of silver.

6.3 Methods Considered but Not Utilized The reader should note that Evans & Evans also attempted to use a variety of other traditional valuation approaches. In this regard, Evans & Evans examined and considered the following approaches, but were unable to use any of them for the reasons outlined below: (1) Asset Approach. The Asset-Based Approach is generally utilized where either: (i) the nature of the business is such that asset values represent the largest portion of the company’s worth (e.g., real estate holding companies); and, (ii) there are no earnings or cash flow to be capitalized. In the case of the LODE Token there are projected rewards/ earnings that can be capitalized. Further, given the AGX Coin has not yet been launched, there is no current asset value to attribute to it. Therefore, an Asset-Based Approach was not considered appropriate. (2) Cost Approach. The Cost Approach is generally appropriate under certain circumstances where an asset is still under development, there is no history of generating cash flows, and future cash flows are so uncertain as to be speculative. A weakness of the Cost Approach is that the cost of the opportunity may bear little relationship to the economic benefits that a purchaser might anticipate to derive from such opportunity upon commercial exploitation of the asset. In the case of cryptocurrencies, the Cost Approach considers the costs of mining new coins or the cost of production. In the case of the LODE Tokens and AGX Coins, new tokens and

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coins are issued when silver is contributed, not by solving a complex mathematical problem, as such the Cost Approach was not deemed appropriate. (3) Market Approach - Network Value to Transactions (“NVT”) Method. The NVT ratio measures the dollar value of cryptoasset transaction activity relative to network value. This is a simple way to compare how the market prices one unit of on-chain transactions across different networks. Generally speaking, a “low” market to transaction value denotes an asset which is more cheaply valued per unit of on-chain transaction volume. Network value consists of the total market value of all tokens in circulation. The transaction element is an estimate of the value of on-chain transaction activity drawn from block explorers and blockchains. As the AGX Coin has not yet been launched, the NTV Method is not appropriate.

the AGX Coin will have a value greater than the spot price of one gram of silver

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as AGX Coins are able to be used in more B2B and B2C transactions, their utility increases, which should increase the inherent utility value.

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7.0

PRICING OF THE LODE TOKEN 7.1 Gordon Growth Model Exhibit 3.0 calculates the potential market value range of LODE Tokens using a Gordon Growth Method. The result is a potential market value range of $4.84 per token to $6.67 per token with a midpoint of $5.76. As a starting point for the Gordon Growth Method, Evans & Evans reviewed the LODE Token’s dividend and growth projections for Q4 2019 to Q3, 2024 as outlined in Exhibit 1.0 - LODE Token Dividend and Growth Projections. Capitalizing dividends at a capitalization rate (equal to the discount rate minus the growth rate) provides the net present value of the asset. Derivation of a Discount Rate In assessing discount rates to management’s projections, Evans & Evans selected discount rates in the range of 18.5%. A discount rate is used to convert a future stream of cash flows into value, whereas a capitalization rate (equal to the discount rate minus the cash flow growth rate) is utilized to convert a single period’s cash flow into value. When utilizing debt-affected cash flow, the most appropriate discount rate is the Company’s cost of equity. The cost of equity, was derived using the “build-up” method. The method constructs a discount rate by “building up” the components of such a rate. Starting with the risk-free rate prevalent at the Pricing Date, a generic equity risk premium, size premium, industry risk premium and a company-specific risk premium is then added.

An equity risk premium (“ERP”) of 6.04% was utilized based on the Long Horizon expected ERP (supply side) as document in Duff & Phelps 2018 Valuation Handbook – International Guide to Cost of Capital. The build-up method also incorporates a small that an investment in the Association is riskier than an investment in the market. These factors include the risk associated with the stage and scale of operations, the rate of growth and the competitive nature of the market, as well as risk inherent in the industry due to cyclicality and fluctuating crude oil prices. It is our view that an investor would require at least 450 to 700 basis points to compensate for the additional risk to attract investors to the Association’s tokens. Combining the variables (long-term government bond yield, equity risk premium, and an allowance for size and the risks unique to the Company and its industry) discussed above indicates the required rates of return on equity of 17.0% to 20.0% with a midpoint of 18.5%. The computation is outlined in Exhibit 6.0. Thereafter, Evans & Evans capitalized the annualized forecast dividends ranging from $0.05 to $8.00 at different capitalization rates calculated using a discount rate of 18.5% and growth rates ranging from 0.5% to 6.5%. Evans & Evans then considered the potential market value range of $3.13 per token to $6.67 per token with a midpoint of $4.84 for LODE Tokens based on most likely scenarios of future dividends, ranging from $0.50 to $1.00, and growth, ranging from 2.5% to 3.5%. The concluded potential market value range for LODE Token is $4.84 to $6.67 with a midpoint of $5.76. stock premium of 5.37% based on the 10th decile (market capitalization between US$2.5 million and US$299.3 million) small stock premium as document

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in 2018 Valuation Handbook â&#x20AC;&#x201C; International Guide to Cost of Capital.

7.2 Dividend Capitalization Method

Combining the current long-term government bond yield and the equity-risk and small stock premia provides an estimate of the potential return that investors, in the May of 2019 interest rate environment, require for investing in a diversified portfolio of equities. With Canadian bond yields at 1.42% as of the Pricing Date, the implied return requirement for investing in a market basket of publicly traded equities is 12.83%.

Exhibit 4.0 calculates the potential market value range of LODE Tokens using a Dividend Capitalization Method. The result is a potential market value range of $5.36 per token to $7.69 per token with a midpoint of $6.53. Under the Dividend Capitalization Method, Evans & Evans estimated forward dividend yields for LODE

This estimated required return captures only systematic or market risk and does not address the risk specific to the Association. For this reason, a notional purchaser of the Company would require a premium to induce investment. A number of factors indicate that an investment in the Association is riskier than an investment in the market. These factors include the risk associated with the stage and scale of operations, the rate of growth and the competitive nature of the market, as well as risk inherent in the industry due to cyclicality and fluctuating crude oil prices. It is our view that an investor would require at least 450 to 700 basis points to compensate for the additional risk to attract investors to the Associationâ&#x20AC;&#x2122;s tokens.

Tokens ranging from 5.0% to 17.0% based on the forward dividend yields of the guideline public companies. Evans & Evans notes that LODE Token is significantly riskier than the equity in the guideline public companies and hence would warrant a significantly higher dividend yield. Refer to Exhibit 5.0 - Guideline Public Companies Forward Dividend Yields. Evans & Evans capitalized the forecast dividends ranging from $0.05 to $8.00 at estimated forward dividend yields for LODE Tokens ranging from 5.0% to 17.0%. Evans & Evans then considered the potential market value range of $3.33 per token to $7.69 per token with

Combining the variables (long-term government bond yield, equity risk premium, and an allowance for size and the risks unique to the Company and its industry) discussed above indicates the required rates of return on equity of 17.0% to 20.0% with a midpoint of 18.5%. The computation is outlined in Exhibit 6.0.

a midpoint of $5.36 for LODE Tokens based on most likely scenarios of future dividends, ranging from $0.50 to $1.00, and forward dividend yields, ranging from 13.0% to 15.0%. The concluded potential market value range for LODE

Thereafter, Evans & Evans capitalized the annualized forecast dividends ranging from $0.05 to $8.00 at different capitalization rates calculated using a discount rate of 18.5% and growth rates ranging from 0.5% to 6.5%. Evans & Evans then considered the potential market value range of $3.13 per token to $6.67 per token with a midpoint of $4.84 for LODE Tokens based on most likely scenarios of future dividends, ranging from $0.50 to $1.00, and growth, ranging from 2.5% to 3.5%. The concluded potential market value range for LODE Token is $4.84 to $6.67 with a midpoint of $5.76.

Token is $5.36 to $7.69 with a midpoint of $6.53.

The concluded potential market value range for LODE Token is $5.36 to $7.69 with a midpoint of $6.53.

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8.0

PRICING OF AGX COIN 8.1 Utility Value, Retail Price Premium and Liquidity Premium

Evans & Evans found in its research that the retail price

The Rules-of-Thumb Method is based on the assump-

higher liquidity as compared to one-gram silver bullion

tion that the potential market capitalization of AGX Coin

bars, rounds and coins. Considering the average

is equal to its future utility value (UV) plus a retail price

discounts for lack of marketability in various restricted

premium and liquidity premium.

stock studies, a liquidity premium in the range of 30.0%

of silver includes a premium, ranging from 9.0% to 12.0%, over the current spot price. AGX Coins would warrant a liquidity premium as AGX Coins will have

to 35.0% is deemed reasonable for AGX Coins. The UV of AGX Coin is the value of the silver underlying the coin i.e. one gram of silver. In determining the future

Based on the forecast silver spot prices of $0.63 to

utility value Evans & Evans used a range of the forecast

$0.71 per gram, retail price premium of 9.0% to 12.0%

trading band of silver prices which is generally

and the liquidity premium of 30.0% to 35.0%, the

considered to be $18.00 /oz to $20.00 / oz or $0.63 to

potential value of AGX Coins is in the range of $0.88

$0.71 per gram.

to $1.04.

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9.0

CONCLUSIONS It is the view of Evans & Evans, Inc., given the scope of its engagement and with reference to its engagement letter, the potential market value of the LODE Token is in the range of $4.84 to $7.69. The initial cost of a LODE Token, based on the current silver spot price is in the range of $2.15. Accordingly, the potential increase in value of the LODE Token is in the range of 125% to 258%. As outlined in section 4.4 of the Report and in Exhibit 2.0, cryptocurrency prices can increase materially in their first 12 to 24 months of trading. Given the nature of the DSMS, the increase in the value of the LODE Token is not linear, it is exponential, as more silver is added, more AGX Coins are circulated, more trading occurs, and more rewards are earned by LODE Token holders in the form of AGX Coins. Accordingly, there is the potential for the LODE Token to see significant price increases. Over the long-term as the DSMS continues to operate and more silver is vaulted, the potential returns to LODE Token holders could increase exponentially. Based on the Associationâ&#x20AC;&#x2122;s operating model and the appreciation of existing non-asset backed cryptocurrencies, significant increases in value are achievable in the market.

Based on the forecast silver spot prices, retail premium for silver and the liquidity premium, the potential value of AGX Coins is in the range of $0.88 to $1.04. This conclusion as to potential market value as well as the entire Report is subject to the scope of the work conducted as well as the assumptions made and to all of the other sections of the Report. Yours Truly,

EVANS & EVANS, INC.

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10.0

APPENDIXES

Appendix 1 – Terms & Conditions Appendix 2 – Assumptions of the Report Appendix 3 – Scope of the Report Appendix 4 - Qualifications

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Due Diligence & Estimate Pricing Report // LODE Association

APPENDIX 1 – TERMS & CONDITIONS RESTRICTIONS & CONDITIONS OF THE REPORT • This Report is intended for the purpose stated in section 1.0 hereof and, in particular, is based on the scope of work and assumptions as to results that could reasonably be expected at the date of the Report. • The authors of the Report advise the reader to carefully review the Assumptions of the Report to understand the critical assumptions that the Report is based on. It is not to be the basis of any valuation and is not to be reproduced or used other than for the purpose of this Report without prior written permission in each specific instance. • Evans & Evans reserves the right to review all information and calculations included or referred to in this Report and, if it considers necessary, to revise its views in the light of any information which becomes known to it during or after the date of this Report. The authors of the Report disclaim any responsibility or liability for losses occasioned by the Association, its participants and all other related and other parties including potential investors as a result of the circulation, publication, reproduction or use of this Report or its use contrary to the provisions of this paragraph. • The Report is intended for internal purposes may be submitted to existing and potential investors in the Association. • The Report cannot be submitted to any stock exchange or security commission. • The Report may not be submitted to any regulatory or tax authority or relied upon in any legal proceedings. • Any use beyond that defined above is done so without the consent of Evans & Evans and readers are advised of such restricted use as set out above. • Evans & Evans will rely upon a letter of representation obtained from the officers and management of the Association wherein they confirm certain representations and warranties that they made to the authors of the Report, including a general representation that they have no information or knowledge of any material facts or information not specifically noted in this Report, which, in their view, would reasonably be expected to affect the assessments expressed herein.

• Evans & Evans makes no recommendations, either expressed or implied, as to the suitability of the LODE Tokens or AGX Coins as described herein as rewards token/utility tokens. • Evans & Evans has not verified the status of any of the Association’s respective officers and directors and shareholders’ potential legal affairs and/or matters and can, therefore, provide the reader no comfort or make any comments as to whether there are any off-balance sheet or contingencies, claims, possible claims, substantial commitments, or litigation pending or threatened against the Association and/or any of the Directors/Officers of the Association. • Evans & Evans did rely only on the information, materials and representations provided to it by the Association. • The Report, and more specifically the assessments and views contained therein, is meant as an independent review of the LODE Tokens and AGX Coins as at October 24, 2019, respecting the date of the Report. The authors of the Report make no representations, conclusions, or assessments, expressed or implied, regarding the LODE Tokens or AGX Coins or events after the Pricing Date. • The information and assessments contained in the Report pertain only to the conditions prevailing at the time the Report was substantially completed in September of 2019. • Evans & Evans has not carried out any audit procedures on historical expenditures or financial statements nor have the authors of the Report examined the financial accounts of the Association. • The Report is also not in any manner a tax opinion or a fairness opinion. • Evans & Evans as well as all of its Principal’s, Partner’s, staff or associates’ total liability for any errors, omissions or negligent acts, whether they are in contract or in tort or in breach of fiduciary duty or otherwise, arising from any professional services performed or not performed by Evans & Evans, its Principal, Partner, any of its directors, officers, shareholders or employees, shall be limited to the fees charged and paid for the Report. No claim shall be brought against any of the above parties, in contract or in tort, more than two years after the date of the Report.

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APPENDIX 2 – ASSUMPTIONS OF THE REPORT ASSUMPTIONS OF THE REPORT In undertaking the review of the LODE Token and AGX Coin and in preparing this Report Evans & Evans have made certain critical assumptions: (a)

The Association has satisfactory title to all of its tangible and intangible assets and there are no liens or encumbrances on such assets nor have any assets been pledged in any way unless noted in the Report.

(b)

The DSMS operates as indicated by management in its financial forecast.

(c)

Management’s representations as to the amount of silver committed to the DSMS are accurate.

(d)

The Association is successful in completing the initial offering of LODE Token and AGX Coins based on the assumptions outlined in its financial model. This is a critical assumption of the Report.

(e)

The financial forecast provided by management of LODE represents management’s best estimate of the future economic performance of the DSMS as at the Pricing Date.

(f)

The Association and all of its related parties and their principals had no contingent

liabilities, unusual contractual arrangements, or substantial commitments, other than in the ordinary course of business, nor litigation pending or threatened, nor judgments rendered against, other than those disclosed by management and included in the Report that would affect the evaluation or comment. The above-noted assumptions are the critical assumptions upon which the conclusions in the Report were based. Evans & Evans reserves the right to review all information and calculations included or referred to in this Report and, if it considers it necessary, to revise its views in the light of any information which becomes known to it during or after the date of this Report.

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Due Diligence & Estimate Pricing Report // LODE Association

APPENDIX 3 – SCOPE OF THE REPORT SCOPE OF THE REPORT The authors of the Report have reached the assessments contained here within by relying onthe following: • Reviewed the Diligence & Estimate Pricing Report prepared for LODE by Evans & Evans and dated August 10, 2018. • Interviewed management of LODE on numerous occasions to gain an understanding of the development of LODE to-date and the plans going forward. • Reviewed the Association’s updated management-prepared financial forecast outlining the intended structure of the DSMS, the INTERFIX Engine and the assumptions with respect to the issuance of LODE Tokens and AGX Coins. • Reviewed the document “How the Lode System Works” outlining the flowchart of the complete system of the DSMS. • Reviewed the Association’s version 5.19 and V3.1 dated June 21, 2019 of the White Papers. • Reviewed the draft prospectus dated July 21, 2019. • Reviewed the website www.lode.one. • Reviewed the “Measuring the Discount for Lack of Mar-

ketability for Noncontrolling, Nonmarketable Ownership Interests - 2016” report from Willamette Management Associates. • Reviewed information on modelling the value of cryptocurrencies from a variety of sources. • Reviewed the market data of the guideline public companies including Fresnillo PLC, KGHM Polska Mied S.A., Glencore PLC, Polymetal International PLC, Compañía de Minas Buenaventura S.A.A., Pan American Silver Corp, Hochschild Mining PLC, Wheaton Precious Metals Corp, First Majestic Silver Corp., and Hecla Mining Co. • Reviewed information on the blockchain and cryptocurrency markets from such sources as: The Economist; Forbes; Deloitte Consulting LLP; IBM; Huffington Post; Statista; Wired Magazine; CB Insights; www.ethereum. org; IBM; CNBC; Business Insider; BI Intelligence; Bloomberg; OakTree Capital Management L.P.; Cambridge Center for Alternative Finance; Pricewaterhouse Coopers, LLP, News BTC; Ethereum.Link; Bitcoin Hub; ZeroHedge; 24gold.com; and, Fortune Magazine. • Reviewed financial and stock market trading data on the following companies with blockchain related service / product offerings or plans to develop blockchain-based solutions: 360 Blockchain Inc., Hut 8 Mining Corp., Global Blockchain Technologies Corp., Hive Blockchain Technologies Ltd., HashChain Technology Inc., Atlas Cloud Enterprises Inc., DMG Blockchain Solutions Inc., HashChain Technology Inc., and Blockchain Power Trust.

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APPENDIX 4 – QUALIFICATIONS QUALIFICATIONS

Institute of Chartered Business Valuators (“CICBV”) and the American Society of Appraisers (“ASA”).

The Report preparation, and related fieldwork and due diligence investigations, were carried out by Jennifer Lucas and thereafter reviewed by Michael A. Evans.

Ms. Jennifer Lucas, MBA, CBV, ASA, Partner, joined Evans & Evans in 1997. Ms. Lucas possesses several years of relevant experience as an analyst in the public and private sector in British Columbia and Saskatchewan. Her background includes working for the Office of the Superintendent of Financial Institutions of British Columbia as a Financial Analyst. Ms. Lucas has also gained experience in the Personal Security and Telecommunications industries. Since joining Evans & Evans Ms. Lucas has been involved in writing and reviewing over 1,500 valuation and due diligence reports for public and private transactions.

Mr. Michael A. Evans, MBA, CFA, CBV, ASA, Principal, founded Evans & Evans, Inc. in 1989. For the past 32 years, he has been extensively involved in the financial services and management consulting fields in Nanaimo, where he was a Vice-President of two firms, The Genesis Group (19861989) and Western Venture Development Corporation (1989-1990). Over this period, he has been involved in the preparation of over 2,500 technical and assessment reports, business plans, business valuations, and feasibility studies for submission to various Canadian stock exchanges and securities commissions as well as for private purposes. Formerly, he spent three years in the computer industry in Western Canada with Wang Canada Limited (1983-1986) where he worked in the areas of marketing and sales. Mr. Michael A. Evans holds: a Bachelor of Business Administration degree from Simon Fraser University, British Columbia (1981); a Master’s degree in Business Administration from the University of Portland, Oregon (1983) where he graduated with honors; the professional designations of Chartered Financial Analyst (CFA), Chartered Business Valuator (CBV) and Accredited Senior Appraiser. Mr. Evans is a member of the CFA Institute, the Canadian

Ms. Lucas holds: a Bachelor of Commerce degree from the University of Saskatchewan (1993), a Masters in Business Administration degree from the University of British Columbia (1995). Ms. Lucas holds the professional designations of Chartered Business Valuator and Accredited Senior Appraiser. She is a member of the CICBV and the ASA. Certification The fee established for the Report has not been contingent upon any opinions presented. The authors of the Report have no present or prospective interest in LODE or the DSMS, or any entity that is the subject of this Report, and we have no personal interest with respect to the parties involved. We confirm we are independent to LODE.

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Due Diligence & Estimate Pricing Report // LODE Association

11.0

EXHIBITS

Dividend and Growth Projections

1.0

Change in Price of Key Cryptocurrencies

2.0

Pricing of LODE Token - Gordon Growth Method

3.0

Pricing of LODE Token - Dividend Capitalization Method

4.0

Guideline Public Companies Forward Dividend Yields

5.0

Cost of Equity

6.0

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Exhibit 1.0 Estimate Pricing Report LODE Token Dividend and Growth Projections Pricing as of October 24, 2019

Notes: (1) Provided by management.

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Due Diligence & Estimate Pricing Report // LODE Association

Exhibit 2.0 Estimate Pricing Report Change in Price of Key Cryptocurrencies Pricing as of October 24, 2019

Source: Coinmarketcap.com

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Exhibit 3.0 Estimate Pricing Report Pricing of LODE Token - Gordon Growth Method Pricing as of October 24, 2019

Notes: (1) See Exhibit 6.0. (2) Based on management provided projections.

evans & evans

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Due Diligence & Estimate Pricing Report // LODE Association

Exhibit 4.0 Estimate Pricing Report Pricing of LODE Token - Dividend Capitalization Method Pricing as of October 24, 2019

Notes: (1) Based on management provided projections. (2) Based on the forward dividend yield of the guideline public companies.

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Exhibit 5.0 Estimate Pricing Report Guideline Public Companies Forward Dividend Yields Pricing as of October 24, 2019

Source: Yahoo Finance

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Due Diligence & Estimate Pricing Report // LODE Association

Exhibit 6.0 Estimate Pricing Report Cost of Equity Pricing as of October 24, 2019

Notes: (1) Government of Canada Benchmark Long-Term Bond Yield as of the Valuation Date. (2) Long Horizon expected ERP (supply side), Source: Duff & Phelps 2018 Valuation Handbook â&#x20AC;&#x201C; International Guide to Cost of Capital. (3) 10th decile Small Stock Premium. Source: 2018 Valuation Handbook â&#x20AC;&#x201C; International Guide to Cost of Capital. (4) Represents the additional risk faced by companies by virtue of operating in the cryptocurrency industry. (5) Company specific risk relates to projection risks faced by the company related to revenue growth and margin expansion.

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DUE DILIGENCE & ESTIMATE PRICING REPORT AUGUST 10 // 2018

LODE Association BergstraÃ&#x;e 10 9490 Vaduz Principality of Liechtenstein