An Initial Coin Offering, or ICO, is a fundraising mechanism in which new projects sell their crypto tokens in exchange for fiat currency, or for cryptocurrency such as Bitcoin and Eethereum. It’s somewhat similar to an Initial Public Offering of stock, except that is an option also available to newer startup companies. An ICO typically involves selling a new digital token at a discount as a way for a company to raise capital. 2017 saw ICOs raise more than $2 Billion in investment capital for new companies. When the Company does well and the tokens appreciate in value — just as stocks do in the public market — the investors make a profit. Some tokens, ours included, also offer dividends.
NASDAQ has published an excellent article that explains the ICO concept in greater detail. Our ICO will be fully SEC-compliant and will honor all anti-money laundering laws and other pertinent regulations. We are not using Blockchain technology as a way to circumvent any security laws or regulations and we are based in the United States.
No. Well, not exactly. While Asset-class Security Tokens use the same underlying technology as cryptocurrencies like Bitcoin and Ether, they are not spendable currencies. Stock certificates and dollar bills use the same technology (ink on paper), but are different financial instruments made for different purposes. Like a stock, Security Tokens are expected to gain value of time, and be sold or traded on accredited exchanges at a profit for investors.
Gramarye Media, Inc. is the sole owner and promoter of the Lumiere token. While we intend to use proceeds from the sale of the tokens to help fund other partner companies and projects in order to help grow a thriving entertainment ecosystem, Gramarye Media will be the entity making the investments, and owners of the tokens will benefit from additional activity to potentially help the tokens grow in value and via additional opportunities for dividends. This also helps to further diversify the investment risk.
In any year Gramarye Media or the partner companies in which it invests recognize a net profit, token holders will have the right to vote (one vote per token) themselves a dividend of 15 percent of net profit or to reinvest it. The dividend is paid in the form of bonus tokens, which can be held or traded on accredited exchanges for crypto or fiat currencies. If a simple majority of token owners elect to receive a dividend, they will benefit by increasing the number of tradable tokens they hold. If a simple majority decides instead to reinvest into Gramarye’s operations, they would do so in the hope that such a reinvestment will help their tokens increase in value more rapidly. The principle benefit of token ownership is an expectation that, like a stock, the tokens will appreciate in value over time.
While the tokens must be held for a year from the original purchase/investment (to comply with SEC Rule 144), they can be sold or traded after that time for fiat or cryptocurrency on accredited exchanges. Tokens will be placed on as many exchanges as possible to ensure maximum value and tradability. Gramarye Media will cooperate with all broker-dealers and platforms officially registered to trade tokens when investors are able to resell Lumiere tokens on the open market. Sufficient Ethereum gas will be added to the smart contracts to ensure smooth operations and rapid transactions.
Ethereum is an open-source, public, blockchain-based distributed computing platform and operating system. It is the core technology upon which Gramarye Media’s Lumiere token is built. Like Bitcoin, Ethereum is a distributed public blockchain network. Although there are some significant technical differences between the two, the most important distinction to note is that Bitcoin and Ethereum differ substantially in purpose and capability. Bitcoin offers one particular application of blockchain technology, a peer to peer electronic cash system that enables online Bitcoin payments.
While the Bitcoin blockchain is used to track ownership of digital currency (bitcoins), the Ethereum blockchain focuses on running the programming code of any decentralized application. Put another way, Ethereum can function both as a contract and a security — and can allow privileged access to content and other rights.
The key advantage of Ethereum is its ability to encode a smart contract into the blockchain. Smart contracts are computer code that can facilitate the exchange of money, content, property, shares, or anything of value. When running on the blockchain, a smart contract becomes a self-operating computer program that automatically executes when specific conditions are met. Because smart contracts run on the blockchain, they run exactly as programmed without any possibility of censorship, downtime, fraud, or third-party interference.
Ethereum gas is the internal pricing for running a transaction or contract in Ethereum.
One Billion Lumiere tokens will be minted, of which 175 million will be released in year one, with additional tokens released according to project development needs, over a 10-year period. At present, we intend to release another $175 million worth of tokens in year two, although since we expect the value to increase by then, it might take a smaller number of tokens to generate that much capital. The remaining tokens shall be held in reserve to fund future prestige tentpole productions discovered through the content incubation process. This allows us to fund more of our own work rather than having to raise additional funds and risk diluting the returns to token holders. Gramarye Media and its board will make every good faith effort to ensure that additional tokens are released only when we have confidence that the new productions will raise the value of the existing tokens sufficiently to offset any potential dilution effects.
It’s pretty much exactly what it sounds like. An ICO Presale, or Pre-ICO, is the token sale event that enterprises like ours run before the official crowd sale or ICO campaign goes live. The fund-raising targets for Pre-ICOs are often lower as compared to that of the main ICO and tokens are usually sold with a substantial bonus, meaning that investors receive more tokens for their money. In our case, we are opening a presale at a 30 percent bonus (at least 10 percent more than later investors will receive). We are beginning with a sale to Georgia residents only, followed by a sale to accredited investors around the world. The actual tokens are targeted to be delivered in July of 2018. Most pre-ICOs use what’s called a Simple Agreement for Future Tokens (SAFT) or a simple convertible note — a form of short-term debt that converts into tokens; in effect, the investor is loaning money to Gramarye Media, Inc. and instead of a return in the form of principal plus interest, the investor will receive tokens.
Simply put, a fully-compliant ICO is expensive. To ensure that we comply fully with all potentially-applicable laws and regulations, the legal work alone can exceed $250,000. The presale enables us to do the legal, programming, and auditing work without exhausting our present resources, which are going into product development. In return, investors receive a larger discount, as described below.
Basically, investors receive more tokens for their money. Investors who buy tokens during the presale will receive a 30 percent discount, rather than a bonus, so if they were to invest $1000, they would receive 1,429 tokens — the issue price is $1 per token, so the discount price is 70¢ per token. If investors hold the tokens just for the year required by law and sell on an exchange at the issue price, they could recognize a 30 percent return on their money. Of course, if they hold the tokens longer they could see a much greater return. After the pre-sale, investors will receive a bonus rather than a discount. For example, a 15 percent bonus means that a $1,000 investment would net 1,150 tokens. For a schedule of bonuses after the pre-sale, please see the white paper.
Since Lumiere Tokens will be SEC Regulation D-Compliant, only accredited investors will be able to purchase in all rounds except for the presale. Thanks to the Invest Georgia Exemption, unaccredited Investors who live in the state of Georgia can invest up to $10,000 in Gramarye Media’s Lumiere Tokens in the presale round only. There is no limit for accredited investors in the presale or any subsequent round. The presale round is capped at $5 million.
Last year, Georgia saw a $9.5 billion impact from film and television production, thanks largely to some of the most generous tax incentive packages in the world. So far, most of the beneficiaries have been on the west coast. We feel that it’s time for everyday Georgians to get a seat at the table.
The Invest Georgia Exemption (IGE) allows unaccredited investors who live in the state of Georgia to invest up to $10,0000 in Georgia-based companies.
For more information on the IGE, please see:
http://sos.ga.gov/admin/files/UnderstandingtheIGESS-FINAL.pdf
http://sos.ga.gov/index.php/securities/invest_georgia_exemption
For information on Gramarye Media’s IGE Pre-Sale, please visit this page.
The presale will go live in June 2018. We’ll announce the exact date and time here and on the main ICO page as soon as a final date is set. Please sign up if you’d like to receive notifications. There will be a link on the main ICO page for unaccredited investors to follow to a third-party e-commerce platform created exclusively for the IGE. Investors will receive a convertible note contract and will receive their actual tokens in August of 2018.
Accredited Investors should contact us directly.
In general, ICOs have performed better than cryptocurrencies like Bitcoin, and compare favorably to traditional stocks, both in terms of asset value growth and volatility. This article offers historical data as of April 2018. Like a stock, however, ICOs are meant to gain value over time, and the while the data here shows positive trends, the sample size in terms of time is very small. Also, the gains shown do not take discounts into account. Of course, past performance is not an indication of future performance.
A digital wallet is an electronic device that allows an individual to make electronic transactions and to store digital security and cryptocurrency tokens. This can include purchasing items online with a computer or using a smartphone to purchase something at a store. An individual’s bank account can also be linked to the digital wallet. When Gramarye Media’s Lumiere Tokens are delivered, we will provide digital wallet instructions to ensure a safe transfer.
A blockchain is a publicly accessible and decentralized database that is distributed over the Internet. It maintains transaction records publicly in cryptographic form. Transactions can be computed, verified, and recorded using automated methods across a peer-to-peer network of computers, eliminating the need for an intermediary or third party to manage information.
As the blockchain grows, tampering or takeover is virtually impossible, creating an immutable chain of records. Blockchain transactions become permanent records that are placed into a secured “block” in the system —basically an encoded list of records of transactions. When a particular block reaches its capacity of data, it is marked with a digital signature called a “hash” which encrypts the data in the block, securing it and adding it to the chain of blocks.
Cryptocurrency is an encrypted decentralized digital currency transferred between peers and confirmed in a distributed public ledger across a network of computers (or nodes). A distributed ledger is a database held and updated independently by the node in a large network. The distribution is unique as records are not communicated to individual nodes controlled by a central authority but are instead independently constructed and held by every node — thus being decentralized rather than managed by one entity.
All confirmed transactions from the beginning of a cryptocurrency’s creation are stored in a distributed public ledger. The identities of the coin owners are encrypted, so anonymous, and the system uses other cryptographic techniques to ensure the legitimacy of the record keeping. The ledger ensures that the corresponding “digital wallets” can calculate an accurate spendable balance. Also, new transactions can be checked to ensure that each transaction uses only coins currently owned by the spender. This distributed public ledger is called a “transaction blockchain.”
The transfer of funds between two digital wallets is called a transaction. The transaction gets submitted to the distributed public ledger and awaits validation by the network. When a transaction is made, wallets use an encrypted electronic signature to provide mathematical proof that the transaction is coming from the owner of the wallet.
Utility tokens, also called user tokens or app coins, represent future access to a company’s product or service. The defining characteristic of utility tokens is that they are not designed as investments; if properly structured, this feature exempts utility tokens them from federal laws governing securities.
By creating utility tokens, a startup can sell “digital coupons” for the service it is developing, much as electronics retailers accept pre-orders for video games that might not be released for several months. Some companies attempt to use Utility Tokens to avoid SEC Compliance. Gramarye is not going this route.
If a crypto token derives its value from an external, tradable asset, it is classified as a security token and becomes subject to federal securities regulations. Gramarye’s Lumiere tokens will be fully SEC-compliant, asset-class Security Tokens.
Gramarye is also creating a utility token that fans will earn through their actions by participating in games, forums, and by sharing with their friends to help with the viral spread of brand awareness. Those tokens will grant privileges that can be used within the Gramarye ecosystem. In other words, it’s a way for us to give meaningful and valuable rewards to fans. However, these utility tokens are not the same as the Lumiere security tokens.
We were afraid you were going to ask that. In short … we don’t know. We recommend asking your attorney or accountant. The fact that after exhaustive research we still aren’t sure exactly how to answer is one of the reasons we are allowing token holders to vote on when to give themselves a dividend.
In short, the token should be treated as stock for tax purposes. The proceeds from a sale of stock should only be taxable on the capital gains. But seriously, we are not lawyers or accountants.
CoinDesk has published a terrific article on this topic.