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MORIA TOKEN UPDATE


Dear Moria Token Holder,

I am writing to you today to discuss the status of the Moria Tokens.

This morning I received an email from one of our token holders asking about the status of Moria tokens and whether they are going to be listed on a platform so that they could be traded and monetized. In responding to that email, I’ve come to the conclusion that the possible listing of Moria is highly unlikely if not impossible.

Last year I wrote to the community to bring everyone up to date on the situation with IDEX, the platform that we were once trading on but from which we were cancelled. In that letter I said that we would continue to monitor the situation. For months there was not much happening and not much to monitor – and then on July 26 the SEC struck.

The SEC announced that it was investigating Coinbase and commencing an enforcement action. Coinbase is the largest US crypto trading platform. According to the SEC, nine of the tokens Coinbase is trading are equity and not utility coins and such trading is prohibited. The SEC, based on what it says is relevant precedent, has determined that if the money from purchasers of tokens is used to fund a company with the intention of making a profit, then for registration purposes an investment in Moria is the same as an investment in a public company. The distinction can best be expressed as the difference between Moria and Bitcoin. Bitcoin purchases have nothing to do with any company profit and can be freely traded. Moria is purchased specifically for company profit which makes it an equity token and not available for listing or trading by any current US platform.

The token world has changed quite a bit since our ICO in 2018. Of note is that subsequent to the ICO, our tokens were sold by a Wall Street brokerage whose marketing materials were approved by FINRA (the Financial Services Regulatory Agency). We were in complete regulatory compliance. It appears those days are over.

As a token holder myself, I take no joy in sending this letter. However, I do want to point out that the Company will continue to support the Tokens and that when we are in revenue, we will pay royalties exactly as we have promised. But I, and I’m sure many of you, acquired Moria tokens with the expectation that they could be traded and monetized on US registered token exchanges. That’s not going to happen, at least anytime in the foreseeable future. And so, the purpose of this letter is to offer an option which I believe provides an opportunity for a better return on investment (enhanced by favorable tax treatment described below), especially if, as I hope, the company ultimately makes a public offering or is acquired.

When I wrote last November about the IDEX delisting, I presented the community with a plan to convert tokens to equity Units The holders of almost four million tokens participated. I never expected to revisit that offer. However, I want to make sure that in this changed regulatory world the most likely path to a healthy return on investment is available to anyone who wants it. As a result, I am re-offering last year’s proposal on the exact same terms so that no one who previously obtained an option to convert is at any disadvantage.

Please consider the following two options

1. To summarize, in exchange for a payment of 10% of the cost of your Moria Token purchase(s), you will have the right to convert those tokens into GS Mining Company B Units. The Units will be priced at their current sales of $200,000 each and your Tokens will be priced at your purchase price. For example, if you have 100,000 tokens which you purchased at $2.00 each, you can convert those Tokens into one Unit. Tokens which were not purchased but were received as gifts, inheritances, or royalties will be valued at $5.00 each. We will also issue fractional or multiple Units, so that if you purchased 50,000 tokens for $1.00 each you can convert for a quarter of a Unit. Once purchased the option may be exercise at any time. The only temporal restriction is that if the Company is sold, merged, acquired or makes a public offering, the conversion must be made prior to any of those events.

Please note that B Units share in the equity, profits and losses of the Company pro-rata with the A Units. As to profits, both A and B Units share in mandatory distributions of no less than 80% of the Company’s annual net profits. The only difference is that B Units do not vote. As an owner of B Units, you are eligible for certain federal tax benefits (see discussion below in section 2). The only limit on fractional ownership is that a quarter Unit is the minimum amount available. The quarter Unit is priced at $50,000. If you want to take advantage of this proposal and own Tokens purchased worth less than $50,000 you can “top up” by paying the difference from your current value and $50,000. The 10% fee would then be $5,000.00. You can also top up to a half, three quarters or full Units.

2. As a second alternative for those token holders who do not want to top up to meet the quarter Unit minimum, we have created a Class C Unit. Under this proposal, in exchange for a payment of 7% of the purchase price of your Tokens (or any portion thereof you wish to exchange) you will have the option to exchange tokens for Units – one for one. The C Units share pro-rata in 10% of the Company’s gross revenue just like the tokens, adjusted only by deducting royalties paid to token holders who did not convert. Payments are made to the C Unit holders in cash only. In the event of a sale, merger, or public offering the C Units will share pro-rata in 10% of the consideration in the same form in which consideration is received, i.e. cash, stock, notes, bonds, etc. adjusted only by deducting any amounts paid to token holders, if any, as a consequence of any of those events.

Though the B and C Units are not tradable on an open market, they do offer their holders certain federal tax benefits available to owners of units in limited liability companies. These may include a 20% federal tax exemption on LLC distributions. An additional advantage for B Unit holders (which does not exist for token holders or C Units) is the opportunity to share pro-rata in the distributed losses and 15% mineral depletion allowance, which could be of significant value depending upon your personal income and tax circumstances.

We are opening up these two Options to all Moria Token holders despite any existing lock period. Once either option has been purchased it can be exercised at any time with the only limitation being that if the Company is sold, merged, acquired or makes a public offering, the conversion must be made within thirty days of notice of any of those events (unless such event is to occur less than thirty days after notice, in which case the option must be exercised within three days.

Purchasing an option to convert does not mean you need to convert at purchase. I am pretty pessimistic about any future ability to list Moria on a US platform. If, by some stroke of remarkable good luck we are able to list Moria under new regulations and trading commences in the United States, you may not want to convert. However, if it looks like crypto tokens are overly regulated or even banned, then you might want to exchange them for Units. We previously described this as a win-win situation. The choice will be yours.

To take advantage of this offer, simply respond to this email, let me know how many tokens you want to put into the program, and I will send you the appropriate paperwork. If you have any questions, please contact me at Franklin@gsminingcompany.com. When this offer was made last year, we put a two week time limit on it. To remain consistent and fair to previous purchasers, this offer will remain open until August 25, 2022, and will be limited to 40 B Units (that was the previous offer), first come first served.

Though the SEC news is certainly not good, we remain optimistic about our core business and thank you all for your support.

Best wishes,

Franklin


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CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

 

This report may be deemed to contain “forward-looking” statements. We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and we are including this statement for the express purpose of availing ourselves of the protections of such safe harbor with respect to all of such forward-looking statements. Examples of forward-looking statements include, but are not limited to (i) projections of revenues, income or loss, earnings or loss per share, capital expenditures, growth prospects, dividends, capital structure and other financial items, (ii) statements of plans and objectives of ours or our management or Board of Directors, including the introduction of new products or services, or estimates or predictions of actions by customers, suppliers, competitors or regulating authorities, (iii) statements of future economic performance and (iv) statements of assumptions underlying other statements and statements about us or our business.

 

Our ability to predict projected results or to predict the effect of any legislation or other pending events on our operating results is inherently uncertain. Therefore, we wish to caution each reader of the report to carefully consider specific factors, including competition for products, services and technology; the uncertainty of developing or obtaining rights to new products, services or technologies that will be accepted by the market; the effects of government regulations and other factors discussed herein because such factors in some cases have affected; and in the future (together with other factors) could affect, our ability to achieve our projected results and may cause actual results to differ materially from those expressed herein.

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