SCIARC FAQ
What is a Sponsor?
The established institution looking to raise capital through SCIARC’s issuance. It will make payments to SCIARC in exchange for initial capital
What is an Initial Investor?
A provider of initial funds for digital assets in a transaction
What is a T-Share™?
Digital asset issued by SCIARC in exchange for initial capital, and representative of fractionalized interest in a Tokenized Income Sharing Agreement (a “TISA”™) funded by third-party income streams.
What is a Tokenized Income Sharing Agreement (“TISA™”)?
Contract between SCIARC and investors that provides for payments by SCIARC to the holders of contractual rights memorialized as T-Shares.
What is an Underlying Income Sharing Agreement (“UISA™”)?
Contract between SCIARC and Sponsor that grants the Sponsor initial investor funds in exchange for rights to its third-party income stream which will fund payments to holders of T-Shares.
What is Issuance as a Service (“IaaS™”)?
Issuance as a Service is the model through which SCIARC executes its transactions. The institution in need of capital no longer issues a security to raise capital. SCIARC issues a digital security and handles its administration, while the Sponsor receives investor funds in exchange for the rights to an income stream.
Terminology
What is SCIARC?
The Smart Contract Issue Administration Reporting Company. Its mission is to facilitate access to capital through issue and administration of customized digital assets.
What services does the company offer?
SCIARC provides established institutions with a faster, less costly process for raising capital. SCIARC does this by becoming the “issuer” of digital assets on the Sponsor’s behalf, and handles each of the following: 1) due diligence for an issuance of T-Shares; 2) automated tax and Exchange Act reporting; 3) general administration and servicing of both the UISA and the T-Shares
What differentiates SCIARC?
SCIARC is the first company to offer issuance as a service (“IaaS”™). SCIARC’s participation solves several issues inherent in current securities offering and trading paradigms, which are (i) built upon inefficient legacy concepts tied to “paper” securities; and (ii) dependent upon the continuing performance of regulatory obligations by issuers who may not be capable or prepared for the rigors of being public or providing tax reporting relating to distributions of returns. Currently, SCIARC has no competition in the normal sense, though we do expect that other Companies may come into the space. The securities issue and trading market is truly massive; we encourage “competitors” in the space as a sure sign of validation and adoption of SCIARC’s new conceptual framework.
How does SCIARC earn revenue?
SCIARC’s sources of revenue can be broken down into four main areas:
- SCIARC receives an issue fee from a Sponsor for its issuance of T-Shares to fund capital formation for the Sponsor;
- SCIARC will receive revenue from basis point fees of income received from Sponsor’s revenue stream prior to distribution to holders of T-Shares;
- SCIARC will receive administrative and other fees for services such as tax and financial reporting, contract administration and dispute resolution;
- SCIARC may structure TISAs to allow SCIARC to maintain possession Sponsor income prior to distribution to holders of T-Shares, allowing SCIARC to benefit from the time value of money;
- SCIARC will monetize its primary source data collected from TISA and UISA contract administration, potentially by acting as a primary source via a Chainlink oracle partnership.
T-Shares
What is a T-Share?
Every T-Share is (i) a digital representation of a fractional interest in income derived from an income sharing agreement between SCIARC and the Sponsor; (ii) a configuration of software code designed to facilitate rapid distribution of funds to the holders of T-Shares at the time of distribution and legal transfers of T-Shares by peer-to-peer, distributed exchange or centralized exchange on both regulated and unregulated platforms.
Is a T-Share a Security?
Yes. Under US law, each T-Share is both a share of stock (with extremely limited rights) and an investment contract; subject to regulation under the Securities Act of 1933, the Securities Exchange Act of 1934 and other applicable regulations governing financial products.
Where can I see the actual terms of the specific TISA that govern a T-Share?
The terms of each TISA will be available for public viewing on SCIARC’s website.
Can I see the history of transfers of a T-Share?
Yes, the T-Shares will be a distributed application on a public blockchain – open to public inspection and immutable.
Can SCIARC administer the transfer of T-Shares?
Yes, T-Shares are contracts and each underlying TISA will include terms to facilitate SCIARC’s anti-money laundering and anti-fraud functions, financial characteristics and general legal compliance.
Does SCIARC work with securities broker-dealers?
Yes! Broker-dealers are immediate and integral collaborators with SCIARC. Although SCIARC is the legal “issuer” of all T-Shares, from a practical perspective, it is still the “Sponsor” (formerly considered an issuer) who is exchanging their future revenue for receipt of near-term capital. Likewise, the purchasers of T-Shares are the same investors who otherwise would purchase securities issued by the Sponsor if SCIARC were not involved. In short, the role of the broker-dealer has not changed, however, it is the broker-dealer who determines what types of securities to suggest to their clients to purchase and sell. SCIARC looks forward to close collaboration with FINRA licensed broker-dealers.
Do T-Shares have the same characteristics as shares of stock?
A T-Share has a specific proprietary legal structure designed for optimal use as a liquid tradable digital asset. The investment terms are contractual in nature and can simulate any type of known security, be it stock, bonds, royalty interest, annuities or any other type of securitized assets; the only limits are legal compliance. We expect that initially most T-Shares will be similar to interests in royalty streams.
How does SCIARC send payments to holders of T-Shares?
When SCIARC enters into an agreement with a Sponsor, part of that agreement requires that the Sponsor direct the sources of pledged income to pay that income directly to an account maintained by SCIARC. SCIARC implements a simple blockchain oracle to verify receipt of funds into the account and triggers the distribution of a stable digital asset (like USDC or Tether) to the wallets holding T-Shares in appropriate amounts. The holders of the T-Shares can exchange the digital asset distributed for fiat currency through the normal channels.
Do T-Shares ever expire?
SCIARC can set expiration or redemption terms into a TISA in the same manner that those terms may be included in traditional securities.
How does SCIARC facilitate liquid trading markets for T-Shares?
For each series of T-Shares SCIARC will perform the essential functions of (i) administration of continued compliance with SCIARC’s agreement with the Sponsor, (ii) if applicable, public financial reporting required for listing on regulated exchanges and alternative trading systems and (iii) tracking of distributions of funds to holders of T-Shares and provision of required tax forms. While this will not by itself create a marketplace, it does allow for brokers and market makers to facilitate trading. At that point, the amount of investor interest in particular T-Shares would determine whether a robust trading market develops (in the same way as markets for particular stocks and bonds develop currently).
Will SCIARC create an exchange for trading T-Shares?
SCIARC currently has no plans to create an exchange; we anticipate working with alternative trading systems (ATS) and quotation systems.
Sponsor FAQs
Why would a Sponsor use SCIARC to facilitate their capital raise?
By working with SCIARC, a Sponsor (i) decreases their up-front expenses of capital formation; (ii) simplifies the offer process; (iii) limits their continuing regulatory obligations; (iv) raises funds without creating shareholder fiduciary duties or lender recourse; (v) accesses capital markets with SCIARC’s approval of the accuracy of relevant investor disclosures; and (vi) accesses SCIARC’s industry knowledge and scalability to achieve efficiency.
How will SCIARC determine the amount of capital that a Sponsor receives?
The maximum amount of capital a Sponsor receives pursuant to a UISA will be calculated based upon the magnitude and risk profile of the income streams that you pledge to SCIARC to fund the TISA offering. The calculation is not unlike the current valuation process. The actual amount of capital you ultimately receive will depend on what percentage of the offered T-Shares your broker sells to investors. As it would in a typical offering.
How does SCIARC determine the price of T-Shares?
The price of a Sponsor’s T-Shares will be determined by the Sponsor’s broker based upon what the Sponsor’s broker believes to be in the best interest of achieving complete sale of offered T-Shares. The price at which a T-Share is offered has no direct financial impact on the Sponsor.
What are the basic negotiable terms of a UISA?
The terms that may be included in a UISA are literally bounded only by what the parties can imagine, and a broker-dealer can sell. Some of the basic terms and conditions that will always be in a UISA include:
- The sources of income that will be directed to SCIARC to fund payments by SCIARC pursuant to the related TISA;
- The amount of capital that the Sponsor will receive upon completion of the offering measured in fiat currency per T-Share sold to an investor;
- The payment of any previously unpaid expenses of the offering (including a direction to pay any commission for the broker facilitating the offering and payment of SCIARC’s issuance fees and expenses);
- Representations and warranties of the Sponsor in respect of their legal power and authority to enter into the UISA and the accuracy of disclosers to investors and absence of undisclosed material adverse conditions;
- Sponsor’s covenant to provide SCIARC on an ongoing basis with any information that SCIARC requires for performance of SCIARC’s disclosure and reporting obligations;
- Sponsor’s covenant not to purchase or sell T-Shares funded by the UISA other than as may be included in the terms of the UISA;
- In certain cases, a covenant to continue the activities upon which the income streams pledged in the UISA depend;
- In certain circumstances particular insurance coverage;
- Other ordinary miscellaneous terms
What is the minimum and maximum contract term?
The term of a UISA can be defined or perpetual; we would not expect the term of a UISA would be less than one year; other than that, it is subject to negotiation based on circumstances and the broker-dealer’s ability to sell.
Will Sponsors have to make monthly/quarterly/annual payments?
Payments may be at whatever rate is appropriate based on facts and circumstances and the broker-dealer’s ability to sell.
Who is the third-party income provider and what role does it play?
When you enter into a UISA, you will execute a document irrevocably directing your source of income to pay the allocated portion of that income directly to SCIARC as if it were your bank account. SCIARC will require that the third-party income sources acknowledge and accept that obligation. It is similar to many agency contract payment structures.
How will sponsors receive funds from investors?
Upon an offering of T-Shares, the broker will receive the funds as they ordinarily would and SCIARC will instruct the broker to pay the applicable funds to the Sponsor.
Will sponsors be able to tokenize other forms of assets?
There are no limits to what can be tokenized; there are some assets that would not be attractive for purchasers of T-Shares.
What are the minimum requirements necessary for an issuance?
SCIARC will perform significant due diligence on all Sponsors to verify the integrity of the Sponsor and the pledged revenue streams. For the foreseeable future, SCIARC will require that all Sponsors work with a broker acceptable to SCIARC and provide auditable financial statements. Where appropriate, SCIARC will perform background checks on Sponsor principles, as well as designated third-party income sources. All proposed transactions will be evaluated on their merits.
Can I engage in multiple Underlying Income Sharing Agreements?
Yes, so long as there is no double pledging of the same interest in a revenue stream.
What costs can a Sponsor expect to pay in connection with capital raise with SCIARC?
Your costs will fall loosely into three categories: (i) costs for lawyers, accountants and other service providers (including your broker) that would also be associated with a traditional offering; (ii) a fee and reimbursement of costs paid to SCIARC for conducting the process; and (iii) some fees associated with providing SCIARC with information required for the ongoing administration of the T-Shares, including preparation of securities disclosures and tax forms on an ongoing basis. Our goal at SCIARC is to continually decrease the up-front expense of raising capital.
Will SCIARC save Sponsors money?
Our goal at SCIARC is to make sure that the cost to the Sponsor is no greater (and ultimately significantly less) than traditional securities offerings. Using our standardized documents should save you substantial legal costs, more importantly, you are much more likely to have a successful offering on a timely basis if investors have confidence because of SCIARC’s participation. Finally, although not eliminated completely, the ongoing costs of financial reporting and disclosure and tax compliance will be greatly reduced. You will also save substantial time of your executive staff that you otherwise would have spent performing compliance and disclosure functions.
When does a Sponsor pay SCIARC?
SCIARC will require an up-front payment to cover its costs and a portion of fees followed by payment of the remainder of the issue fee from the capital raised through sale of the T-Shares. Costs of ongoing administration will be payable from income received by SCIARC prior to SCIARC’s distribution of income to the holders of T-Shares.
Investor FAQs
How long can I expect to wait until I receive T-Shares from the moment I invest?
Generally, you will receive T-Shares following (i) SCIARC’s completion of relevant anti-money laundering procedures; (ii) your establishment and verification of a digital asset wallet configured to hold the T-Shares; (iii) SCIARC’s receipt and entitlement to disburse your investment funds; and (iv) satisfaction of any contingencies on the closing of the sale of the T-Shares (which might include verification of a sale of a minimum number of T-Shares in that offering).
If I own T-Shares, will I be able to resell them to other investors?
SCIARC’s goal is to create conditions to support a liquid trading market for T-Shares. In respect of any particular T-Shares, SCIARC will restrict resales until SCIARC is certain that such resale will not violate any applicable laws. A private placement by SCIARC is still a private placement requiring investment intent and a minimum hold period. We expect that for other types of offerings peer to peer resales will be rapidly available.
How will investors receive a portion of the income stream in the future?
SCIARC plans to leverage as much automation as possible in the process of receipt of income pursuant to a UISA and subsequent release of value to the holders of the T-Shares. Frequency of distribution of value will depend on many factors, including frequency of SCIARC’s receipt of the underlying funds from the Sponsor, SCIARC’s contractual rights and obligations, transaction costs that may be associated with the distribution of value to the T-Share holders.
What will happen to my T-Shares when the duration of the UISA is exceeded?
The terms of each TISA will specify conditions of expiration or redemption based upon the terms of the UISA. We intend that when a T-Share no longer has value, SCIARC will redeem the T-Share for cancellation.
Are there any onboarding processes that I must adhere to as an investor?
Investors will need to provide the broker-dealer with sufficient information for the broker-dealer to perform applicable know-your-customer procedures and for SCIARC to maintain such information as needed to comply with Wyoming corporate law in respect of identifying the holders of the T-Shares, as well as for purposes of issuing tax forms associated with distributions of value to the holders of the T-Shares.
Do investors pay SCIARC fees associated with T-Shares?
Investors may pay transaction costs associated with blockchain transactions. Such fees will be disclosed in relevant offering materials. SCIARC will strive to adopt technology that minimizes transaction costs. Most other fees of SCIARC will be funded by the income SCIARC receives pursuant to the UISA. These fees would be an expense of the Sponsor, not of the Investor.
