OSTK ex. 4

To: Patrick Byrne

From: Michael Markowski

Re: Hybrid SIC

Date: November 4, 2018

The hybrid SIC (HSIC) is a wholly owned subsidiary of a public (fully reporting penny stock) company. HSIC, which is a global network marketing company produced $17 million of revenue for its 2018 FY year. Sixty percent of its revenue is derived from its 15,000+ distributors who are located in 100+ countries. Revenue for its first quarter of fiscal 2019 was $7.5 million. Additionally, HSIC recently acquired another network marketing digital game company which has 19,000 subscribers and a data base of 2 million leads.

  1. HSIC is a multi-national and multi-lingual digital provider of proprietary:
  • Financial education courseware
  • Research coverage of markets
  • Digital solutions to enable individuals to increase their financial well-being.
  1. Primary segments covered by HSIC’s products and solutions:
  • Basic financial educational
  • Expense and debt reduction tools
  • Research and trading signals alerts
  • Startups (I am their startups’ expert and they now have a base which invests $250,000 in every startup that I recommend).
  • Crypto mining (Ethereum 10/2017-8/2018) (Bitcoin 11/08/2018 ...)
  1. HSIC’s growth over its last 12 months has been attributable to crypto mining.

However; due to the price of Ethereum declining, they recently suspended mining operations until the price increases. They will be launching a Bitcoin mining product by the end of November 2018. Unlike Ethereum, Bitcoin mining will continue to be profitable even if the price should decline to $3,000.

  1. HSIC is a showcase strategic partner for these reasons:
  2. a) it has a growing startups’ investing crowd. b) it has distributors and customers who are investing in crypto.

c) the company is willing to sell a minority stake in HSIC to finance and grow

it.

  1. Because HSIC will remain private, it’s a showcase company for the SICs. Since

tZERO will be able to list its crypto securities tokens:

  1. a) a growing base of distributors would be natural buyers of crypto

securities tokens in the secondary market.

  1. b) it will become a textbook case study for how a small penny stock

company utilized crypto securities tokens to increase shareholder value from private capital markets.

  1. The problem that HSIC has is a $500,000 shortfall when paying their 11/15/18

commissions. After they suspended their Ethereum mining product, their sales declined by $700,000 to $2.3 million for September and by $1.3 million to $1.7 million for October. This compared to their $3 million in revenue for August. This resulted in a $1.1 million gap which was caused by HSIC’s necessary increase in overhead when they launched their Ethereum mining product a year ago. After the suspension of the Ethereum mining product it was still necessary to maintain this overhead because the infrastructure would be needed for the launch of the Bitcoin mining product later in November 2018.