Bitcoin Well Inc., is pleased to confirm that it has closed the previously announced acquisition of Ghostlab Inc., a software company that designs and develops software to improve the functionality and accessibility of modern financial technology and services, including Bitcoin ATM machines. Total consideration for the Acquisition was based on an enterprise value of up to $3.2 million, satisfied through the issuance of 2,758,621 common shares of Ghostlab at a price of $0.29 per common share, the closing price on the 11th trading day of the issuer, the assumption of debt of $1.8 million and the provision of an earn-out, all as more particularly described in the Company’s August 11, 2021 press release. The common shares are subject to a statutory four month hold period.
“Bringing Ghostlab fully in-house, positions Bitcoin Well to further expand our products and services, and affords the potential to create incremental revenue streams without the high capital requirements associated with buying, branding and deploying new machines,” said Adam O’Brien, CEO of Bitcoin Well. “Given there is a natural timing difference between the capital investment into machines and the revenue returns, being able to deploy Ghostlab onto existing cash ATMs means we have the opportunity for revenue without high capital costs. In addition, our Ghostlab division is constantly engaged in R&D to provide long-term, innovative solutions to support an increasingly digital economy.”
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Strategic Importance of Ghostlab
Deploying Ghostlab software allows an ATM operator’s customers to access bitcoin, thereby benefitting from additional functionality within existing businesses, hardware, and platforms. Ghostlab’s proprietary ATM software enables bitcoin to be more accessible to the average person, and more importantly, makes it easier for operators to manage their businesses. Bitcoin Well believes that Ghostlab has sufficiently de-risked the software to the point where it can now directly contribute to the service offerings provided by Bitcoin Well. In addition, the Ghostlab software has utility and benefit for other, third-party ATM operators, representing an incremental revenue stream and valuable data source for Bitcoin Well with limited capital outlay.
While retrofitting existing cash ATMs with Ghostlab software to support bitcoin transaction capabilities requires much less capital than deploying new machines, both require time to establish the ATM as a revenue generator. For context, the top ten performing ATM machines in the Bitcoin Well portfolio have been in operation for at least 20 months, with half of those coming from acquisitions and half from organic deployment. Based on the revenue growth of Bitcoin Well to date, it is estimated that realizing a return on invested capital from machine deployment is typically approximately ten months, which further supports our model of finding and completing accretive acquisitions to support our continued growth. Applying the established processes and operating procedures developed by Bitcoin Well onto acquired ATMs has historically increased the average monthly sales volume in only four weeks. Given our third-party research study, conducted by Ipsos on behalf of Bitcoin Well in 2021, we know that 78% of Bitcoin ATM users frequent the same machine on a regular basis, and as a result, establishing trust within the local community is key.
Related Party Disclosure
Each of Adam O’Brien, Chief Executive Officer of Bitcoin Well and Dave Bradley, Chief Revenue Officer of Bitcoin Well, previously owned 100% of the common shares of Ghostlab. As such, the Acquisition was a related party transaction under Multilateral Instrument 61-101. Bitcoin Well relied on the exemptions contained in sections 5.5(a) and 5.7(a), respectively, of Multilateral Instrument 61-101 from the valuation and minority shareholder requirements of that instrument as they apply to related party transactions, since the fair market value of the Acquisition was significantly less than 25% of the market capitalization of Bitcoin Well. The Acquisition was approved by the board upon recommendation of an independent special committee in accordance with the Company’s related-party transaction policy.
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