Hello All!
It has been quite a while since my last [major] update to everyone, so I figured it may be good to get this going again…though admittedly there is another reason for this update, but we’ll get to that shortly.
The past 3 months have been quite a ride for Bitcoin, but for two pertinent reasons:
• Butterfly Labs has yet again delayed (surprise there, I know) even though they
should be shipping soon, and in the meantime Avalon has proven to be a worthy ASIC contender as they finish up shipping their first batch (with more batches on the horizon).
• On top of that, we’ve seen a monstrous rise (and fall so far) in the value of Bitcoin to fiat.
What this is all alluding to is
another contractual amendment, and unfortunately this is one that I am
forced to make
without exception. The reasoning for this change stems from the changes that have taken place over the past 3 months.
As we all know by now, Butterfly Labs hasn’t ever stuck to their deadlines. In January (when I ordered the hardware) I figured this would probably be the case, hence the first Contractual Amendment extending the buyback timeframe by 3 months. As we’ve all seen, 3 months has come and gone...and even though Butterfly Labs has made progress,
we still don’t have anything to show for it.
How This Relates: The update to the contract will not simply extend the period again, but will create more of an indefinite timeframe instead; one that is contingent on when the equipment is received. In hindsight, this is how the contracts should have been created to start, but I suppose I had more faith in Butterfly Labs than was warranted. The contractual overview at the end of this update will go into more detail.
The second part to all this is the vast Bitcoin valuation increase. It has increased so much that it is
impossible for me to continue converting my personal [real-life] savings into Bitcoin to cover interest on a monthly basis.
HOWEVER – I had enough funds stocked up prior to the increase to cover us for another several months, and a number of other personal investments have turned out quite well. Naturally if the price corrects to a much lower value, I will buy up as many as I can to help extend this timeframe (something I’ve already started to do).
How This Relates: The minimum interest rate has been decreased from 1% to 0.5%.
Though I do not foresee a need to actually implement the change (everything is still the same 1% per month), it does give me more flexibility should any unforeseen financial events take place in the Bitcoin community or in my personal life.
Similar to before, an Investor is
required to agree to the Contract before it is fully implemented. The same process will occur, with a survey being released shortly to gather information from investors. The link to all this will go out through the KCIM updates section on Havelock. It is absolutely imperative that all Investors reply, otherwise
your presumed response is “
Agree” (just like before).
Should
ALL Investors choose
NOT to accept the terms of the contract, the result will be company
insolvency as I will
not be able to make the currently agreed payment schedule. If this were to occur, all ASIC equipment orders purchased with company funds will be refunded from Butterfly Labs, Inc for their USD amount and then converted into Bitcoin at whatever the market rate is at the time, as well as accounting for any exchange fees during the process. From there, all Bitcoins under the KCIM ticker (company reserves, personal investments, and equipment refunds) will be distributed based on the number of Notes held per Investor out of all outstanding Notes.
For example, if there were 1000 Notes outstanding and you owned 100 of them, then you would be entitled to 10% of all remaining funds. If there were only 200 Bitcoins after a full liquidation, you would receive
20.0 BTC (your 10% share).
If you
CHOOSE not accept this contract update (but the
majority of others
do accept the change) then
YOUR Notes will be purchased back
as if the entire company went insolvent in
NEARLY the same scenario above. Meaning if you choose not to accept the contract you will be paid based on your percentage of ownership in the equipment.
The difference here is that the payment to you would not only be out of the company reserves and my personal funds, but you’d also receive a
PART of what would be received had I gone the route of a full refund from Butterfly Labs.
In other words, if you owned 100 Notes out of the 1000 outstanding, you would still be entitled to 10% of company funds on hand. If 900 Bitcoins (out of the 1000) were used to buy equipment, then your contribution is 90 Bitcoins (10% of the total equipment cost). Assuming 200 Bitcoins remain after a partial liquidation, you would receive 10% of the total reserves
MINUS your difference on the contribution…200 * 10% = 20.0 BTC – ([100-90] * 10%) =
19.0 BTCUse this equation to help determine how much you would receive:
[
# of shares you own / 907] =
X[
# of shares you own – [
# of shares you own * (750.4684 / 907)]] =
Y200
X –
XY =
Your Return. Round to 3 decimal places.
In this case, the 200 may vary as it comes from what I have on hand during buybacks.
The reason for this is because we’re essentially liquidating your contribution to the equipment, while keeping everyone else’s investment intact, even if it means selling off part of the total equipment purchases (as opposed to all of it).
In the end,
this isn’t something I want to do. Ideally, we’re going to keep chugging along, fighting through Butterfly Labs’ nonsense along the way.
Here is the current link to the contract:
https://docs.google.com/file/d/0BxnW49twNMNbX01vV0ZmSVN0N0k/edit?usp=sharingAs always, I strongly urge all Investors to read it.
Here’s a breakdown by Section for an easier read:
Section #:
1. States that this is the second amendment to the original contract and overrules the first amendment. I briefly describe the purpose and reason for the change, noting Third Party influences (delays) and current financial infeasibility.
2. Here is where I describe the changes I propose, which focuses on the second and third sections of the original contract, but changes are also made to the fourth and sixth sections (which should have been changed before to make sense with the later Amendments).
a. Interest at 1% has been extended indefinitely, essentially meaning I will keep paying it until we receive our equipment or I choose to buy back the Notes early. Interest is at 2% starting 2 months after receiving the equipment. Interest is increased to 4% 10 months from the receive date. Interest is increased one last time to 6% for the final months, concluding 14 months after receiving the equipment.
b. The minimum Interest rate has been lowered from 1% to 0.5% to grant the Borrower flexibility during extreme financial pressure or other unforeseen events.
c. Principal payments no longer begin in June 2013. Instead, they have been pushed back indefinitely, being 100% contingent on when the equipment is received. Two months after receiving the equipment, the previous schedule resumes, where they start at the normal 1.10BTC per month for 7 months. After which starts the purchase at 1.15BTC per Note lasting for 3 months, and the next two months after that marks the final purchase of 1.20BTC per Note.
d. The fourth section has been updated, specifically to reflect the change in the Principal payment schedule.
e. The sixth section has been updated to reflect the change in End date.
3. The Amendment is valid as of May 1st, 2013, which marks greater than seven [7] days after I give notice (as per the original contract).
4. In the event of a conflict between the original document and the Amendment, the Amendment governs.
5. The other unchanged parts of the original contract are still valid.
6. The original document and the included Amendment now constitute the Final Agreement.
7. This Amendment may be modified after agreeing with both parties.
8. In the event of illegality, unenforceability, invalidity, etc, the remainder of the contract and its Amendments are still valid.
9. Electronic communication (or other forms of communication) is valid statements of agreement, recognized in the same effect as a signature.
10. You confirm you have the power to agree and bind to the contracts outlined.
11. [Self Explanatory]
As always, feel free to express any comments / questions / suggestions you may have. There will always be something I’ve overlooked, and I’m more than happy to hear other ideas put on the table. Thank you to those that stick with it, as you'll understand this is just a rough patch in an otherwise successful venture. We've made it this far, and I don't see why we can't make it all the way.
Cheers,
-Andrew
