THIS MACHINE READABLE WHITE PAPER IS A SAMPLE OF A MICA COMPLIANT CRYPTO ASSET DISCLOSURE. FINAL REGULATORY DISCLOSURE SPECIFICATIONS FOR CRYPTO ASSETS HAVE NOT YET BEEN ADOPTED IN THE EU. THIS CRYPTO ASSET WHITE PAPER HAS NOT BEEN FILED WITH ANY REGULATOR IN ANY JURISDICTION. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.  YOU SHOULD NOT RELY ON THIS WHITE PAPER TO MAKE INVESTMENT DECISIONS ABOUT THE CRYPTO ASSET DESCRIBED HEREIN. 

GENERAL INFORMATION

Auditchain Labs AG, (referred to throughout this white paper as the “Issuer” "we" “us” “our” or the “Company”) is an Aktiengesellshaft (company limited by shares) organized under the laws of Switzerland. We develop web3 and artificial intelligence based disclosure infrastructure and assurance components for traditional asset and crypto asset issuers, service providers, regulators and investors.

Why we prepared this white paper

Machine readable white paper disclosures are being specified under the Markets in Crypto Asset regulations, ("MiCA") in the European Union and also under the Virtual Assets Regulatory Authority, ("VARA") in Dubai. 

We developed products that make machine readable disclosure requirements for crypto assets easy to comply with. Certain members of our management and product teams who are disclosed in Annex I Part A of this white paper, participated in the development of the MiCA disclosure model, which is a taxonomy template for the creation of MiCA compliant, machine readable white papers. We created the MiCA disclosure model and this white paper using the Luca Suite^TM which is one of our disclosure automation products described in more detail in Annex I Part D of this white paper. 

Luca Suite^TM is the basis for and is the first implementation of the forthcoming Standard Business Report Model specification ("SBRM") by Object Management Group®, ("OMG"). OMG is a global technical standard setter in 27 countries with over 230 member organizations. We are the main contributors to the SBRM specification with additional contributions from EDM Council, a consortium of over 350 organizations who are global advocates for data and analytics management. SBRM is a technical specification designed to improve business and regulatory reporting. SBRM enhances usability and interoperability by specifying “model based” structured data exchange, automation, and consistency using a variety of machine-readable formats like XBRL, JSON and RDF​​​​.   

We prepared the MiCA disclosure model and this white paper using Luca Suite^TM in anticipation of the formal adoption of final MiCA technical disclosure specifications which are expected to be delivered by the European Securities and Markets Authority, ("ESMA") and the European Banking Commission, ("EBA") to the European Union Commission, (the "Union") by 30 June, 2024. In addition, the MiCA disclosure model and this white paper were prepared as a measure to demonstrate to crypto asset issuers, crypto asset service providers, regulators and investors how our products work and to demonstrate what a machine readable white paper looks, feels and functions like. 

We believe that this white paper is the first machine readable white paper ever to be published in response to emerging crypto asset regulatory specifications. We prepared this white paper as a measure to raise awareness about our products and to show the crypto asset industry how easy it is to comply with emerging regulatory specifications using our products. We plan to immediately update the MiCA disclosure model as well as this white paper upon formal adoption by the European Union of final regulatory disclosure specifications for crypto assets and service providers.

THIS CRYPTO ASSET WHITE PAPER HAS NOT BEEN APPROVED BY ANY COMPETENT AUTHORITY IN ANY MEMBER STATE OF THE EUROPEAN UNION. THE “OFFERER” OF THE CRYPTO ASSET IS SOLEY RESPONSIBLE FOR THE CONTENT OF THIS CRYPTO ASSET WHITEPAPER.

THE CRYPTO ASSETS OFFERED IN THIS WHITE PAPER INVOLVE A HIGH DEGREE OF RISK AND SHOULD ONLY BE CONSIDERED BY PERSONS WHO HAVE NO NEED FOR LIQUIDITY AND CAN WITHSTAND THE LOSS OF THEIR ENTIRE PURCHASE. THE CRYPTO ASSET OFFERED HEREBY MAY LOSE ITS VALUE IN PART OR IN FULL. THE CRYPTO ASSET OFFERED HEREBY MAY NOT ALWAYS BE TRANSFERABLE. THE CRYPTO ASSET MAY NOT BE LIQUID. THE CRYPTO ASSET OFFERED HEREBY MAY NOT BE EXCHANGEABLE AGAINST THE GOOD OR SERVICE PROMISED IN THIS CRYPTO ASSET WHITE PAPER, ESPECIALLY IN THE CASE OF A FAILURE OR DISCONTINUATION OF THE CRYPTO-ASSET PROJECT. THE CRYPTO-ASSET IS NOT COVERED BY THE INVESTOR COMPENSATION SCHEMES UNDER DIRECTIVE 97/9/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL. THE CRYPTO ASSET IS NOT COVERED BY THE DEPOSIT GUARANTEE SCHEMES UNDER DIRECTIVE 2014/49/EU.

This crypto asset white paper complies with Title II Article 6 of the Markets in Crypto Assets ("MiCA") and that, to the best of the knowledge of the management, the information presented in this crypto asset white paper is fair, clear and not misleading and makes no omissions of facts or makes any statements that make the statements made in this white paper misleading.

Summary of Initial Node Offering

We are making an initial node offering, ("INO") of up to a maximum of 2,200 Pacioli AI Validating Nodes, ("Pacioli Nodes") in five phases, ("Maximum Offering"). This INO is being made pursuant to TITLE II of the Markets in Crypto Assets Regulation. A minimum of one Pacioli Node may be purchased in the INO through a licensing agreement, ("License"). Assuming all 2,200 Pacioli Nodes are sold, the gross proceeds will be $5,310,000.

We are making this INO on our own behalf without a third party crypto asset service provider or intermediary. 

Each Pacioli Node includes 7,000 AUDT Tokens ("AUDT" or the “Tokens”). A total of 15,400,000 AUDT are included with all 2,200 Pacioli Nodes assuming the Maximum Offering is reached. An additional 7,000 AUDT are needed to activate each Pacioli Node upon mainnet deployment. A total of an additional 15,400,000 AUDT is required from purchasers to activate all Pacioli Nodes, assuming the Maximum Offering is reached. Each purchaser of a Pacioli Node must provide the additional 7,000 AUDT for each Pacioli Node purchased. We may enter into separate transactions with prospective holders to sell AUDT held in treasury or otherwise allocable to our treasury in order to satisfy Pacioli Node activation requirements or otherwise enable users to use Pacioli.ai. 

Each Pacioli Node is represented by a non-fungible token, ("NFT"). Upon completion of the purchase, one NFT for each Pacioli Node purchased is minted to the wallet address of the purchaser. See Annex I Part E

There is no minimum number of Pacioli Nodes being sold in this Offering. Purchasers of the earlier phases will pay less for each Pacioli Node but will bear a higher degree of risk if the remaining phases are unsold. See “Risk Factors Associated With This Offering”.

Summary of Pacioli.ai

Pacioli.ai is a web3 crypto asset disclosure and AI based external validation DePIN (decentralized physical infrastructure) protocol. Pacioli.ai was developed by the Company.

Pacioli.ai enables crypto asset issuers and service providers to collaborate and create machine readable white papers as well as financial and sustainability disclosure documents pursuant to emerging crypto asset regulatory requirements and technical specifications. 

Pacioli.ai includes the Luca Suite^TM which is a web3 enabled disclosure automation infrastructure for collaborative machine readable crypto asset white paper, financial, and sustainability disclosure creation. The Pacioli Node is a logic and reasoning engine that is installed in physical locations and used by non affiliate licensees. The Pacioli Node reads, understands and verifies that machine readable disclosures are complete, accurate and compliant. 

All disclosure models and crypto asset white papers that are created in Luca Suite^TM are submitted to the network of Pacioli Nodes which verify that each disclosure model is functionally sound and that each disclosure is complete, accurate and compliant.

Summary of AUDT Tokens

AUDT is the base utility token of Pacioli.ai. AUDT is an ERC20 compliant crypto asset on Ethereum and Polygon which features the following main utilities: 

• Settlement of payment obligations on Pacioli.ai
• Staking by users of Luca Suite^TM who create crypto-asset white papers as well as financial and sustainability disclosures in machine readable format
• Staking by Pacioli Node operators who verify that machine readable disclosures are compliant 
• Governance of Pacioli.ai

Users who create crypto asset white papers as well as financial and sustainability disclosures in Luca Suite^TM must stake AUDT and pay for services with AUDT or pay a higher cost to use other forms of payment. Users who operate Pacioli Nodes must stake an initial amount of 14,000 AUDT to act as validators and earn rewards. Staking requirements are subject to governance. All users may participate in governance. See Annex I, Part D. 

We may enter into separate transactions with prospective holders to sell AUDT held in treasury or otherwise allocable to us in order to satisfy Pacioli Node activation requirements or otherwise enable users to use Pacioli.ai.

GLOSSARY OF TERMS

The following are defined terms listed in alphabetical order that are used throughout this white paper. Capitalized words shall have the meanings defined below for the purposes of this white paper and such meanings shall be equally applicable to both the singular and plural forms of the defined terms.

AUDT - means the ERC20 compliant settlement, staking and governance utility on Pacioli.ai.

Cohort - means a private encrypted group of Licensees on Pacioli.ai who are professionally qualified to provide a variety of levels of opinions and assurance, each of whom are bound to the EVC. 

Crypto asset white paper - means a white paper created pursuant to the MiCA and VARA regulations and technical specifications.

DePIN - means a decentralized physical infrastructure.

Disclosure Model - means individual controls and control sets that constrain standardized financial and non financial reporting processes and reporting schemes. 

EBA - means the European Banking Authority.

ESMA - means the European Securities Markets Authority.

EVC- means an ERC20 external validation contract that facilitates a private group of Licensees who act as validators. 

Licensee - means a person who licenses a Pacioli Node.

Licensor - means Auditchain Labs AG

Luca Suite^TM - means the web3 enabled financial and non-financial disclosure automation software for collaborative machine readable disclosure model and disclosure creation.

MiCA - Means the Markets in Crypto Assets regulation in the European Union. 

NFT - means a non-fungible token representing each Pacioli Node.

Pacioli AI Agent - means the utility that enables Pacioli Nodes to hunt for and detect requests for validation on Pacioli.ai.

Pacioli.ai - means the disclosure automation and decentralized external validation infrastructure that consists of Luca Suite^TM and Pacioli Nodes.

Pacioli AI Validating Node - means the declarative artificial intelligence-based logic and reasoning engine that reads, understands, and detects inconsistencies in machine-readable disclosure models and financial and non-financial disclosure statements prepared in accordance with MiCA, International Financial Reporting Standards, United States Generally Accepted Accounting Principles, and other recognized financial and non-financial reporting schemes.

SBRM - means the forthcoming Standard Business Report Model specification by Object Management Group®

Validator - means a Licensee who is an independent unaffiliated operator of a Pacioli Node and provides validation services on Pacioli.ai.

VARA - means the Virtual Asset Regulatory Authority and regulations, as amended and published by the Government of Dubai. 

XBRL - means the extensible business reporting language, a global standard data format adopted by 200 regulators across 60 jurisdictions for the communication of business and financial information.

Management Team

Below are the members of our management team as of the date of this white paper. The business address for each of the members of our management team is c/o Auditchain Labs AG, Dammstrasse 16, 6300 Zug, Switzerland. 

Guido Schmitz- Krummacher, President of the Board - Guido serves as president of the board of Auditchain Labs. Guido served as a Swiss Board Member for several projects. He served on the board of Shape Shift, Cardano, Wings, Golem, Nimiq, Interchain, Tezos, Particl Foundation and several others. Guido is educated as a lawyer (International law, corporate law, economist (EMBA for Finance & International Management) and a certified Swiss Board Member. Before entering the Blockchain space, he worked for 25 years at Management level in Banking, Chemicals and HR and also supported start-up companies during the first and second internet wave. 

Guido currently serves as a Managing Director for Lisk Foundation and also Board member/director at the Bancor (Bprotocol Foundation), Liquidapps, Collider AG and Bank ten31. He also is a cofounder of Alpha Foundation.

His passion is to serve the Blockchain Ecosystem with innovative approaches and painful questions – also as a speaker at several international conferences.

Thomas Egan, CPA, Director, Chairman of the Audit Committee - Tom is the former Industry Accounting Technical Expert at the International Air Transport Association in Geneva, Switzerland. He previously was the Global Head of Accounting Advisory at Standard Chartered and Technical Accounting Director at Deloitte where he focused on IFRS and US GAAP.

He is the former Vice-Chair of the IASB’s Taxonomy Consultative Group and has been actively involved in XBRL, the global standard machine readable language for business and financial reporting for over 20 years. Tom has served on several global forums and committees on financial reporting. He is a licensed CPA in the US, and is a member of ACCA, CPA Australia and ISCA (Singapore).

Tom holds a bachelor’s degree in accounting from Marquette University, a master’s degree in accounting, information systems and international business from the University of Wisconsin – Madison and a postgraduate diploma in strategic finance from the University of Oxford.

Jason Meyers, Lead Architect, Operations - Jason serves as lead architect for Auditchain Labs AG. Jason has broad based investment banking and venture capital experience. Having served for 30 years on the sell side, buy side and the issuer side, Jason brings a significant amount of real-world use case and business experience to the Blockchain space. Jason led hundreds of initial public offerings, secondary offerings, and private placements in a broad range of industries including biotech and healthcare, technology, software and financial services.

Jason is the founder of Matreya.io LLC which focuses exclusively on the incubation and acceleration of Blockchain and Distributed Ledger Technologies. Jason founded ICM Capital Markets Ltd., one of the first FinTech investment banks in 2008. He built the world’s first regulatory compliant multi-jurisdictional automated equity compensation plan administration infrastructure platform. His clients included Facebook, Kayak, Steve Madden, Rowan Cos and SIMS Metal Management. Jason also led the development of one of the first automated quantitative XBRL based fundamental research platforms which provided actionable research on over 11,000 public companies around the world.

Jason has chaired audit committees for private and public companies. His experience lends a substantial amount of insight into the architecture of Auditchain. Jason conceived the idea for a decentralized financial disclosure protocol as the result of a regulatory conflict with FINRA in 2014 relating to the accounting of the use of proceeds of a private financing of ICM Capital Markets in 2009. The proceeding led to a settlement in which he consented, without admitting or denying any wrongdoing, to the entry of a bar from affiliating with any FINRA member firm.

Jason began incubating the Auditchain Protocol in April 2017 after a long and extensive observation of what he believed to be significant deficiencies in traditional audit standards and financial reporting practices. Jason believed that the field of accounting, audit and financial reporting was ripe for disruption when he first read Ian Grigg’s theory of triple entry accounting. Jason spends a significant amount of his time examining the complexities, dislocations and time lag between transaction occurrence, recording, treatment and reporting. His findings led him to the preliminary conclusion that current regulatory disclosure frameworks are not sufficient for digital assets. His work is shaping the architecture of solutions that he believes will lead to new standards of transparency and frequency of reporting in the field of accounting, audit and disclosure.

David Blaszkowsky, Head of Strategic Policy - David is a recognized expert on financial sector data, standards, and strategy. David was the founding Director of the Office of Interactive Disclosure at the US Securities & Exchange Commission in 2007, where he initiated and ran the SEC’s pioneering development, enactment, and implementation of XBRL as the standard for financial reporting for United States companies. He engaged with dozens of jurisdictions, including the EU to develop their own digital reporting regimes. At the SEC Office of Financial Research, David was involved in some of the earliest evaluations of crypto currencies and blockchain.

David helped stand up the US’ first financial data agency, the Office of Financial Research at the US Treasury and led the creation of other critical financial sector standards, including the Legal Entity Identifier (ISO 17442), and chaired the US Financial Sector Oversight Committee’s Data Committee. Mr. Blaszkowsky also has deep experience as a strategist, having served at McKinsey & Co., Gemini, and PwC. David served as Director, FinTech and Innovation at the Division of Banks, Commonwealth of Massachusetts. He also served as the data strategy and governance executive in publishing at McGraw-Hill and S&P as well as similar roles at State Street., and has been involved with industry consortia. 

David holds a BA in economics from the University of Chicago, an MBA from Northwestern University.

Pete Rivett, Lead Ontologist - Pete Rivett is a seasoned technology executive, knowledge engineer, and a technology standard setter for over 20 years. He has been heavily involved in many ontology and knowledge graph standards, both enterprise-specific and industry-wide including the Financial Industry Business Ontology (FIBO) and the Global Legal Entity Identifier Foundation (GLEIF) LEI ontology. He was founding director of Enterprise Knowledge Graph Foundation (EKGF) and for many years sat on the Architecture Board of Object Management Group (OMG), active in most OMG modeling and ontology standards, including the OMG Standard Business Report Model specification. 

In his career Pete worked with Golden, an a16z funded Web3 startup as their Ontologist. For many years, Pete was Chief Technology Officer for Adaptive, a leading metadata management vendor which was recognized as a "cool vendor” by Gartner.

Pete has spent his career in data management, metadata management and knowledge graphs; working on both sides of the Atlantic for large multinational corporates, startups, product vendors and standard setters. He's helped create many standard and organizational specific ontologies, coupled with scalable data. 

Pete is highly pragmatic and is driven by the specification and application of standards to real world use cases that deliver business value, rather than theoretical purity. 

Pete holds a BSc Honors in Computing and Information Systems from the University of Manchester.

Nina Kilbride, Legal Product Manager - Nina is the MiCA and VARA product manager for Auditchain Labs AG. Nina has eight years of experience as a blockchain LegalTech developer with particular expertise in web3 ecosystem applications and regulatory frameworks. She has worked with teams developing applications on all layers of the crypto stack, passing the FINRA Series 65 to more deeply understand their needs. Prior to becoming a web3 legal engineer, Nina was a commercial litigation attorney with expertise in finance, banking, and insurance. Nina graduated from Wake Forest University School of Law with a JD. 

Auditchain Labs AG, (referred to throughout this whitepaper as “we" “us” “our” the “Issuer” or the “Company”) is a developer of global standards based web3 and artificial intelligence based financial and operational disclosure infrastructure for issuers of crypto assets, traditional assets and regulators.

Auditchain Labs AG, (referred to throughout this whitepaper as “we" “us” “our” the “Issuer” or the “Company”) is a developer of global standards based web3 and artificial intelligence based financial and operational disclosure infrastructure for issuers of crypto assets, traditional assets and regulators.

Management Team

Below are the members of our management team as of the date of this white paper. The business address for each of the members of our management team is c/o Auditchain Labs AG, Dammstrasse 16, 6300 Zug, Switzerland. 

Guido Schmitz- Krummacher, President of the Board - Guido serves as president of the board of Auditchain Labs AG. Guido served as a Swiss Board Member for several projects. He served on the board of Shape Shift, Cardano, Wings, Golem, Nimiq, Interchain, Tezos, Particl Foundation and several others. Guido is educated as a lawyer (International law, corporate law, economist (EMBA for Finance & International Management) and a certified Swiss Board Member. Before entering the Blockchain space, he worked for 25 years at Management level in Banking, Chemicals and HR and also supported start-up companies during the first and second internet wave. 

Guido currently serves as a Managing Director for On Chain Foundation, (formerly Lisk Foundation) and also Board member/director at the Bancor (Bprotocol Foundation), Liquidapps, Collider AG and Bank ten31. He also is a cofounder of Alpha Foundation.

His passion is to serve the Blockchain Ecosystem with innovative approaches and painful questions – also as a speaker at several international conferences.

Thomas Egan, CPA, Director, Chairman of the Audit Committee - Tom serves as a director of Auditchain Labs AG and is Chair of the Audit Committee. Tom is the former Industry Accounting Technical Expert at the International Air Transport Association in Geneva, Switzerland. He previously was the Global Head of Accounting Advisory at Standard Chartered and Technical Accounting Director at Deloitte where he focused on IFRS and US GAAP.

He is the former Vice-Chair of the IASB’s Taxonomy Consultative Group and has been actively involved in XBRL, the global standard machine readable language for business and financial reporting for over 20 years. Tom has served on several global forums and committees on financial reporting. He is a licensed CPA in the US, and is a member of ACCA, CPA Australia and ISCA (Singapore).

Tom holds a bachelor’s degree in accounting from Marquette University, a master’s degree in accounting, information systems and international business from the University of Wisconsin – Madison and a postgraduate diploma in strategic finance from the University of Oxford.

Jason Meyers, Lead Architect, Operations - Jason serves as lead architect for Auditchain Labs AG. Jason has broad based investment banking and venture capital experience. Having served for 30 years on the sell side, buy side and the issuer side, Jason brings a significant amount of real-world use case and business experience to the Blockchain space. Jason led hundreds of initial public offerings, secondary offerings, and private placements in a broad range of industries including biotech and healthcare, technology, software and financial services.

Jason is the founder of Matreya.io LLC which focuses exclusively on the incubation and acceleration of Blockchain and Distributed Ledger Technologies. Jason founded ICM Capital Markets Ltd., one of the first FinTech investment banks in 2008. He built the world’s first regulatory compliant multi-jurisdictional automated equity compensation plan administration infrastructure platform. His clients included Facebook, Kayak, Steve Madden, Rowan Cos and SIMS Metal Management. Jason also led the development of one of the first automated quantitative XBRL based fundamental research platforms which provided actionable research on over 11,000 public companies around the world.

Jason has chaired audit committees for private and public companies. His experience lends a substantial amount of insight into the architecture of Auditchain. Jason conceived the idea for a decentralized financial disclosure protocol as the result of a regulatory conflict with FINRA in 2014 relating to the accounting of the use of proceeds of a private financing of ICM Capital Markets in 2009. The proceeding led to a settlement in which he consented, without admitting or denying any wrongdoing, to the entry of a bar from affiliating with any FINRA member firm.

Jason began incubating the Auditchain Protocol in April 2017 after a long and extensive observation of what he believed to be significant deficiencies in traditional audit standards and financial reporting practices. Jason believed that the field of accounting, audit and financial reporting was ripe for disruption when he first read Ian Grigg’s theory of triple entry accounting. Jason spends a significant amount of his time examining the complexities, dislocations and time lag between transaction occurrence, recording, treatment and reporting. His findings led him to the preliminary conclusion that current regulatory disclosure frameworks are not sufficient for digital assets. His work is shaping the architecture of solutions that he believes will lead to new standards of transparency and frequency of reporting in the field of accounting, audit and disclosure.

David Blaszkowsky, Head of Strategic Policy - David acts as Head of Strategic Policy for Auditchain Labs AG. David is a recognized expert on financial sector data, standards, and strategy. David was the founding Director of the Office of Interactive Disclosure at the US Securities & Exchange Commission in 2007, where he initiated and ran the SEC’s pioneering development, enactment, and implementation of XBRL as the standard for financial reporting for United States companies. He engaged with dozens of jurisdictions, including the EU to develop their own digital reporting regimes. At the SEC Office of Financial Research, David was involved in some of the earliest evaluations of crypto currencies and blockchain.

David helped stand up the US’ first financial data agency, the Office of Financial Research at the US Treasury and led the creation of other critical financial sector standards, including the Legal Entity Identifier (ISO 17442), and chaired the US Financial Sector Oversight Committee’s Data Committee. Mr. Blaszkowsky also has deep experience as a strategist, having served at McKinsey & Co., Gemini, and PwC. David served as Director, FinTech and Innovation at the Division of Banks, Commonwealth of Massachusetts. He also served as the data strategy and governance executive in publishing at McGraw-Hill and S&P as well as similar roles at State Street., and has been involved with industry consortia. 

David holds a BA in economics from the University of Chicago, an MBA from Northwestern University.

Pete Rivett, Lead Ontologist - Pete acts as Lead Ontologist for Auditchain Labs AG. Pete is a seasoned technology executive, knowledge engineer, and a technology standard setter for over 20 years. He has been heavily involved in many ontology and knowledge graph standards, both enterprise-specific and industry-wide including the Financial Industry Business Ontology (FIBO) and the Global Legal Entity Identifier Foundation (GLEIF) LEI ontology. He was founding director of Enterprise Knowledge Graph Foundation (EKGF) and for many years sat on the Architecture Board of Object Management Group (OMG), active in most OMG modeling and ontology standards, including the OMG Standard Business Report Model specification. 

In his career Pete worked with Golden, an a16z funded Web3 startup as their Ontologist. For many years, Pete was Chief Technology Officer for Adaptive, a leading metadata management vendor which was recognized as a "cool vendor” by Gartner.

Pete has spent his career in data management, metadata management and knowledge graphs; working on both sides of the Atlantic for large multinational corporates, startups, product vendors and standard setters. He's helped create many standard and organizational specific ontologies, coupled with scalable data. 

Pete is highly pragmatic and is driven by the specification and application of standards to real world use cases that deliver business value, rather than theoretical purity. 

Pete holds a BSc Honors in Computing and Information Systems from the University of Manchester.

Nina Kilbride, Legal Product Manager - Nina is the MiCA and VARA product manager for Auditchain Labs AG. Nina has eight years of experience as a blockchain LegalTech developer with particular expertise in web3 ecosystem applications and regulatory frameworks. She has worked with teams developing applications on all layers of the crypto stack, passing the FINRA Series 65 to more deeply understand their needs. Prior to becoming a web3 legal engineer, Nina was a commercial litigation attorney with expertise in finance, banking, and insurance. Nina graduated from Wake Forest University School of Law with a JD. 

Auditchain Labs AG, (referred to throughout this white paper as the “Issuer” "we" “us” “our” or the “Company”) is an Aktiengesellshaft (company limited by shares) organized under the laws of Switzerland. We develop web3 and artificial intelligence based disclosure infrastructure and assurance components for traditional asset and crypto asset issuers, service providers, regulators and investors. 

Auditchain Labs AG, (referred to throughout this white paper as the “Issuer” "we" “us” “our” or the “Company”) is an Aktiengesellshaft (company limited by shares) organized under the laws of Switzerland. We develop web3 and artificial intelligence based disclosure infrastructure and assurance components for traditional asset and crypto asset issuers, service providers, regulators and investors. 

Executive Summary

Pacioli.ai is a web3 crypto asset disclosure and AI based external validation DePIN (decentralized physical infrastructure) protocol. Pacioli.ai enables crypto asset issuers and service providers to collaborate and create machine readable white paper disclosures pursuant to emerging crypto asset regulatory requirements and technical specifications. 

Pacioli.ai features two main components; Luca Suite^TM for disclosure automation infrastructure, ("Luca") and the Pacioli AI Validating Node for external validation, ("Pacioli Node" or "Pacioli Nodes").

Luca Suite^TM

Luca is a web3 enabled disclosure automation infrastructure for collaborative disclosure model creation and machine readable crypto asset white paper, financial statement and sustainability disclosure creation. 

Luca is the basis for, and is the first implementation of the forthcoming Standard Business Report Model specification ("SBRM") by Object Management Group®, ("OMG"). OMG is a global technical standard setter in 27 countries with over 230 member organizations. We are the main contributors to the SBRM specification with additional contributions from EDM Council, a consortium of over 350 organizations who are global advocates for data and analytics management. SBRM is a technical specification designed to improve business and regulatory reporting. SBRM enhances usability and interoperability by specifying “model based” structured data exchange, automation, and consistency using a variety of machine-readable formats like XBRL, JSON and RDF​​​​.   

Pacioli AI Validating Node

The Pacioli Node is a logic and reasoning engine that is installed in physical locations and used by non affiliate licensees. The Pacioli Node is a logic and reasoning engine that reads, understands and detects inconsistencies in disclosure models created in Luca as well as machine readable crypto asset white papers, financial statements and sustainability reports. 

Disclosure models and disclosure instances are created in Luca and then submitted to the network of Pacioli Nodes which verify that each disclosure is complete, accurate and compliant.

Pacioli Nodes feature rules based artificial intelligence that is capable of detecting inconsistencies in a variety of machine readable disclosures created in Luca which include:

• Crypto Asset White Papers prepared in accordance with MiCA and VARA specifications.
• Financial Statements prepared in accordance with International Financial Reporting Standards, ("IFRS"), United States Generally Accepted Accounting Principles, ("USGAAP") and other standardized financial reporting schemes. 
• ESG and sustainability reports prepared in accordance with the European Financial Reporting Advisory Group, ("EFRAG").

Pacioli.ai Smart Contract Layer

Pacioli.ai also features a smart contract layer that enables users who create crypto asset disclosures to engage the open network of Pacioli Nodes to validate crypto asset whitepapers, or engage a selection of Pacioli Nodes to be part of a private cohort populated by professionals for premium crypto asset white paper validation.  

Pacioli Explorer

Pacioli.ai features the Pacioli Explorer, a public explorer that allows open access to all disclosures for analysis by anyone. Each disclosure is color coded based on the state of compliance of the project and featured on the map of the Pacioli Explorer following external validation. 

Pacioli.ai aims to become a popular destination for investors in web3 for public access and analysis of crypto assets, issuers and service providers.

AUDT Token Utility

Pacioli.ai is integrated with the AUDT Token, an ERC20 compliant crypto asset, ("AUDT") which features the following main utilities: 

• Settlement of payment obligations on Pacioli.ai
• Staking by users of Luca Suite^TM who create crypto-asset white papers as well as financial and sustainability disclosures in machine readable format
• Staking by Pacioli Node operators who verify that machine readable disclosures are compliant 
• Governance of Pacioli.ai

Users who create disclosures in Luca must stake AUDT and pay for services with AUDT or pay a higher cost to use other forms of payment. 

Users who operate Pacioli Nodes must stake an initial amount of 14,000 AUDT to act as validators of machine readable disclosure instances and earn rewards. Staking requirements are subject to governance.

All users may participate in governance. Governance includes the ability to vote to invoke changes to the following features: 

• Changes to the maximum number of Pacioli Nodes operating on Pacioli.ai 
• Changes to the minimum Pacioli Node staking requirements
• Changes to the amount of rewards paid to Pacioli Nodes through subsidies
• Changes to the amount of AUDT paid by the user requesting the validation
• Changes to the allocation of proceeds from data subscriptions between reporting entities and Pacioli Nodes in a cohort
• Changes to the minimum staked balance required for users to continue reporting compliance by a reporting entity (fair warning) 
• Changes to the minimum number of Pacioli Nodes in a cohort 
• Changes to the minimum percentage of Pacioli Nodes in a cohort required to achieve consensus

As Pacioli.ai evolves, additional AUDT Token utility may be introduced. Upgrades and feature enhancements will be additionally disclosed by Auditchain Labs AG in subsequent Pacioli.ai whitepapers, pursuant to MiCA Article 12. 

Past Milestones

Auditchain Labs AG was formed on 23 December, 2020. In May 2021, the Company acquired all of the assets and intellectual property related to Auditchain from from Matreya.io LLC, a Delaware, USA limited liability company controlled by Jason Meyers, our Lead Architect.

The earliest contributions to SBRM began in 2018. In November, 2023, we submitted the written SBRM specification to OMG. In June 2024, an amended and merged submission was made by the Company that included contributions from EDM Council. A final vote on the amended and merged SBRM specification is expected to be held in September, 2024 at the OMG Q3 Technical Meeting. 

Pacioli.ai includes Luca for creating machine readable disclosures and the Pacioli Node for external validation of disclosures. Development of a commercially viable version of the Pacioli Node was completed in March 2023. 

Development of a commercially viable version of Luca was completed in May of 2024. 

As of May 2024 over 20 financial and non financial reporting schemes were imported in Luca. 

In May 2024, development of the MiCA machine readable disclosure model was completed as a prototype pending final MiCA technical disclosure taxonomy specifications. 

This iXBRL white paper and the MiCA disclosure model was created using Luca. The MiCA disclosure model used to create this whitepaper is based on the MiCA proof of concept and taxonomy published by the European Securities and Markets Authority in December of 2023. 

Future Milestones

Final specifications for the MiCA taxonomy are expected to be delivered by ESMA and EBA to the EU Commission by 30 June, 2024. We expect to update the MiCA disclosure model as soon as the final MiCA taxonomy is adopted and published.

It is expected that SBRM will be adopted by OMG as a global technical standard in the fourth quarter of 2024. 

It is expected that Luca will formally launch in July, 2024.

It is expected that Pacioli Nodes will be deployed in September, 2024.

It is expected that the AUDT Token will be integrated in October, 2024. 

Assuming the Maximum Offering is completed, Auditchain Labs AG plans to use the proceeds of the sale of 2,200 Pacioli Nodes in the following manner: 

See also Annex I Part E 

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Summary of Initial Node Offering

We are making an initial node offering, ("INO") of up to a maximum of 2,200 Pacioli AI Validating Nodes, ("Pacioli Nodes") in five phases, ("Maximum Offering"). A minimum of one Pacioli Node may be purchased in the INO through a licensing agreement, ("License"). Assuming all 2,200 Pacioli Nodes are sold, the gross proceeds will be $5,310,000.

This INO is being made pursuant to TITLE II of the Markets in Crypto Assets Regulation on our own behalf without a third party crypto asset service provider or intermediary. 

Each Pacioli Node includes 7,000 AUDT Tokens ("AUDT" or the “Tokens”). A total of 15,400,000 AUDT are included with all 2,200 Pacioli Nodes assuming the Maximum Offering is reached. An additional 7,000 AUDT are needed to activate each Pacioli Node upon mainnet deployment. A total of an additional 15,400,000 AUDT is required from purchasers to activate all Pacioli Nodes, assuming the Maximum Offering is reached. 

Each purchaser of a Pacioli Node must provide the additional 7,000 AUDT for each Pacioli Node purchased. We may enter into separate transactions with prospective holders to sell AUDT held in treasury or otherwise allocable to our treasury in order to satisfy Pacioli Node activation requirements or otherwise enable users to use Pacioli.ai. 

Each Pacioli Node is represented by a non-fungible token, ("NFT"). Upon completion of the purchase, one NFT for each Pacioli Node purchased is minted to the wallet address of the purchaser. See Annex I Part E

There is no minimum number of Pacioli Nodes being sold in this Offering. Purchasers of the earlier phases will pay less for each Pacioli Node but will bear a higher degree of risk if the remaining phases are unsold. See “Risk Factors Associated With This Offering”.

Purposes of Offering

The Offering is made for the purposes of (i) promoting adoption of Pacioli.ai, (ii) enabling Pacioli Node operators to compete for validation requests on Pacioli.ai, (iii) enable crypto asset issuers and service providers to come into compliance with emerging crypto asset regulations, (iv) funding the operating expenses of the Issuer, (v) paying marketing and business development expenses and (vi), providing liquidity for the purposes of stabilizing the market for AUDT and reducing volatility for users of Pacioli.ai. 

Total Amount to be Raised

Assuming the Maximum Offering is reached, the total proceeds of the Offering will be $5,310,000 prior to deducting expenses in connection with the INO.

Offering Price

The following table illustrates the price for one Pacioli Node in each phase of the INO. There are no minimum number of Pacioli Nodes being sold. Purchasers in the earlier phases will pay less for each Pacioli Node but will bear a higher degree of risk if the remaining phases are unsold. See “Risk Factors associated with offer”. 

Offering Amount

A total of 2,200 Pacioli Nodes are being offered which includes a total of 15,400,000 AUDT Tokens. An additional 15,400,000 AUDT Tokens must be purchased by all purchasers in order to activate all 2,200 Pacioli Nodes purchased assuming the Maximum Offering is completed. We may, in our sole discretion, decide to sell separately, at prevailing market prices on a negotiated basis, all or a portion of the additional AUDT needed by purchasers to activate and run Pacioli Nodes.   

Prospective Purchasers

The INO is being made to individuals and organizations who are issuers of crypto assets, operators of crypto assets and other crypto asset service providers who will act as users of Pacioli.ai and run Pacioli Nodes on Pacioli.ai for the purposes of promoting adoption and achieving compliance with emerging crypto asset regulations. Any individual or organization may participate in the INO and operate a Pacioli Node. 

No Reimbursement 

There is no minimum number of Pacioli Nodes being sold in the INO, therefore no reimbursement will be made to purchasers. Purchasers of the earlier phases will pay less for each Pacioli Node but will bear a higher degree of risk if the remaining phases are unsold. See “Risk Factors associated with offer”. 

Offering Phases

The table below illustrates each of the five phases being offered in the INO. 

Offering Period

The INO is being made by the Issuer on a first come first serve basis. The Offering shall commence on ____ and shall terminate at the earlier of the completion of the INO or one year from the date of this white paper pursuant to MiCA Article 4(6). The Offering may otherwise be terminated by the Issuer at any time for any reason.

AUDT Safeguard and Key Custody

The AUDT purchased by purchasers in this Offering or otherwise delivered to purchasers does not exist as of the date of this whitepaper. All AUDT Tokens to be delivered in connection with this Offering will be minted at such time that Pacioli.ai is deployed to mainnet. AUDT token contract and all other contract deployer keys as well as AUDT contract minting keys are kept offline on hardware wallets and safeguarded by the Issuer. 

Methods of Payment

The Issuer is accepting USDC and USDT on the Ethereum and Polygon Networks as payment methods in the INO. We may elect to accept additional payment methods at our sole discretion based on certain preferences of certain purchasers. 

Right of Withdrawal

The INO is being made pursuant to a licensing agreement with a right of withdrawal of 14 days following the date of the purchase by purchasers.

INO Procedures 

The INO is being made through a whitelist application in compliance with Directive (EU) 2015/849 covering KYC and AML. All applications must include a copy of the prospective purchasers' passport or driver license. Purchasers are also asked to provide professional accreditation certificates or licenses if the purchaser intends to operate Pacioli Nodes in their capacity of such accreditation or professional designation. In addition, each purchaser is required to provide an Ethereum based wallet address. 

An additional set of questions are required to be answered by each purchaser relating to any pending civil or criminal litigation or regulatory enforcement actions relating to financial statement or securities fraud or if the purchaser is the subject of an action potentially having his or her professional license revoked. Upon the completion of the questionnaire and after passing KYC and AML checks, the purchaser is directed to a user interface provided and managed by the Issuer that allows purchasers in this Offering to complete their purchase. All purchasers are required to execute a software licensing agreement for Pacioli Nodes in connection with this Offering.

Interested persons may apply by clicking here. 

Delivery of NFT, Pacioli Nodes and AUDT

Each Pacioli Node is represented by a NFT. Upon completion of the purchase, one NFT for each Pacioli Node purchased will be minted to the wallet address of the purchaser. Delivery of Pacioli Nodes and AUDT shall occur at such time that Pacioli.ai is deployed to mainnet. The number of AUDT included with each Pacioli Node will be minted to the smart contract upon the surrender of each NFT representing each Pacioli Node purchased by each purchaser.

Purchaser Technical Requirements 

All purchasers must use a Metamask wallet in order to connect their whitelisted wallet address to the application and complete their purchase. We recommend that a hardware wallet be integrated with Metamask for user safety and security of crypto assets but it is not required.  

No Service Provider

We are making this INO on our own behalf with no crypto asset service provider. No crypto asset service provider or intermediary is being used to place or complete this Offering.  

Trading Platforms

On 8 February 2022, the Issuer entered into a token listing agreement with Bittrex Global GmbH which operates as “Bittrex Global”. In connection with the token listing agreement, the Issuer paid a total of 107,700 USDT. On 20 November 2023, Bittrex Global announced that it was discontinuing its operations as a crypto asset exchange.

On 25 March 2022, the Issuer entered into a token listing agreement with GBM Global Holding Company Limited which operates as “Bitmart”. In connection with the token listing agreement, the Issuer paid a total of 50,000 USDT. On 7 April, 2022, AUDT became available to exchange for USDT on Bitmart and is accessible at https://www.bitmart.com/trade/en-US?symbol=AUDT_USDT  

We expect to engage other exchanges to provide support for AUDT when this INO is completed.

Offering Expenses

It is expected that the expenses in connection with the completion of this Offering will not exceed $200,000.

Potential conflicts of interest related to this Offering

Assuming the Maximum Offering is reached, the total proceeds received by the Issuer will be $5,310,000 before expenses. The Issuer intends to use the proceeds of the INO in the manner described in Annex I Part D. There is no assurance that the Maximum Offering will be reached. If the Maximum Offering is not reached, the Issuer will allocate the use of the proceeds at its discretion based on its business judgment to support its operations until the Issuer can achieve profitability which cannot be assured. This may pose a potential conflict of interest with the purchasers in the INO who may have differences of opinions about how the proceeds should be used.  

Furthermore, certain purchasers may posses a tendency to think of their purchase as an investment or an investment contract which the Issuer believes it is not. This may eventually pose conflicts with the interests of the Issuer. The INO is being made by the Issuer in the form of individual licensing agreements between the purchaser and the Issuer. Pursuant to the licensing agreement, the Company is defined as, and is acting as the Licensor and is granting to each purchaser, which are defined as Licensees, a license to operate the software on a decentralized network, not engage in speculation. In other words, in our case, the purchaser is purchasing the ability to provide an independent service on Pacioli.ai using the software. 

Delivery of the software and the utilities to operate the software is being made by the Issuer, acting as the Licensor pursuant to the license agreement. The Issuer believes that the license agreement does not represent an investment or an investment contract. The license agreement specifically contains representations by the purchaser defined as and acting as the Licensee that the utilities to be delivered, specifically the AUDT tokens, will not be used by the Licensee for speculation, that the use of AUDT will be confined to operating the Pacioli Nodes. These conditions set up a potential conflict of interest between the Issuer and the purchasers in the INO.

Under IFRS rules, we may be forced to treat the proceeds received in connection with the sale of Pacioli Nodes for accounting purposes as pre paid revenue with an offsetting liability until Pacioli.ai is deployed and the Pacioli Nodes are able to perform their specified functional objectives pursuant to the licensing agreement. Furthermore, the proceeds received in the INO will be treated for tax purposes as as taxable income excluding adjustments. The nature of the accounting and tax treatment of the proceeds of the INO conflict with how the proceeds of debt and/or equity are treated for accounting purposes which are a normal and required disclosure in financial statements and the explanatory footnotes prepared in accordance to IFRS that are periodically furnished to investors. The presentation of disclosures of crypto assets pursuant to new disclosure frameworks may cause confusion to purchasers in the INO or give rise to new questions to which declaratory relief may not satisfy the interests of purchasers who may be accustomed to traditional accounting treatment and financial statement disclosure. 

Historically, a lack of education about how the proceeds from crypto asset sales are treated for financial reporting and tax purposes has caused financial difficulties for issuers of crypto assets. This may continue for the foreseeable future which may pose risks that cause a direct conflict with purchasers of the crypto assets, especially if the crypto asset issuers fail to deliver the product or network to which the crypto asset grants access to.    

Finally, the Issuer believes that this whitepaper may be the first machine readable crypto asset disclosure published under MiCA specifications and regulations. As a competitive measure, we intend to publish this whitepaper prior to 30 June which is the date that technical standards, which establish the standard forms, formats, and templates for machine-readable whitepapers, must be submitted to the European Commission by the European Securities and Markets Authority ("ESMA") and the European Banking Authority ("EBA")​​. We cannot afford to wait for other crypto asset service providers, many of which are belligerent about regulation in general, to get compliant with MiCA and agree to contribute their required disclosures in other sections and Annexes of this whitepaper. This is one of the main reasons why we are not retaining a crypto asset service provider to place the INO. We also intend to use this whitepaper as a single source of truth as a marketing tool to show actors in the crypto space what a machine readable iXBRL compliant crypto asset whitepaper looks, feels and functions like. 

In other words, we are using what we believe to be a first mover advantage to disclose the INO in this iXBRL whitepaper and attempt to dominate the market for the creation and external validation of machine readable crypto asset whitepapers as a decentralized service. Conducting the INO in this manner may pose a potential conflict with pending regulations.  

Venue and Disputes

This Offering and the licensing agreement shall be governed by and construed in accordance with the laws of Switzerland. Any dispute arising out of or in connection with this Offering and the licensing agreement shall be exclusively submitted to the courts of the Canton of Zurich, Switzerland.  

AUDT is a Utility Token

We believe that AUDT is a crypto asset that fits within the definition stated in TITLE II of MiCA. AUDT is a crypto-asset that is intended to provide access to Pacioli.ai, a web3 application that requires the use of AUDT as stated further in Annex I Part D and in this Annex I Part F.

Functionality of AUDT

AUDT is the base utility token of Pacioli.ai. AUDT is an ERC20 compliant crypto asset on Ethereum and Polygon which features the following main utilities: 

Pacioli.ai is integrated with the AUDT Token, an ERC20 compliant crypto asset, ("AUDT") which features the following main utilities: 

• Settlement of payment obligations on Pacioli.ai
• Staking by users of Luca Suite^TM who create crypto-asset white papers as well as financial and sustainability disclosures in machine readable format
• Staking by Pacioli Node operators who verify that machine readable disclosures are compliant 
• Governance of Pacioli.ai

Users who create disclosures in Luca must stake AUDT and pay for services with AUDT or pay a higher cost to use other forms of payment. 

Users who operate Pacioli Nodes must stake an initial amount of 14,000 AUDT to act as validators of machine readable disclosure instances and earn rewards. Staking requirements are subject to governance.

All users may participate in governance. Governance includes the ability to vote directly, or delegate votes to other users to vote on changes to the following features: 

• Changes to the maximum number of Pacioli Nodes operating on Pacioli.ai 
• Changes to the number of AUDT required to stake to operate a Pacioli Node 
• Changes to the amount of rewards paid to Pacioli Nodes through subsidies
• Changes to the amount of AUDT paid by the user requesting the validation of disclosure instances
• Changes to the allocation of proceeds from data subscriptions between reporting entities and Pacioli Nodes in a cohort
• Changes to the minimum staked balance required for users to continue reporting compliance by a reporting entity (fair warning) 
• Changes to the minimum number of Pacioli Nodes in a cohort 
• Changes to the minimum percentage of Pacioli Nodes in a cohort required to achieve consensus

As Pacioli.ai evolves, additional AUDT Token utility may be introduced. Upgrades and feature enhancements will be additionally disclosed in subsequent Pacioli.ai whitepapers, pursuant to MiCA Article 12. 

Rights and Obligations of Purchaser

Each purchaser is required to enter into a licensing agreement with the Issuer. In addition to and separate from the terms of the licensing agreement, the purchaser is entitled to the right to one vote for each AUDT held on matters relating to changes to the functionality of features on Pacioli.ai described below. See “Crypto-asset modification of rights and obligations”. 

The following are the terms, conditions, rights and obligations of the purchaser pursuant to the licensing agreement:

Licensing Agreement 

Description of Software

Pacioli is a declarative artificial intelligence-based logic and reasoning engine that reads, understands, and detects inconsistencies in machine-readable crypto asset whitepapers prepared in accordance with MiCA and VARA as well as financial statements prepared in accordance with International Financial Reporting Standards, United States Generally Accepted Accounting Principles, and other recognized financial reporting schemes.

Software License 

Licensor hereby grants Licensee a perpetual, non-exclusive, non-transferable license to use the Software in accordance with the terms and conditions of this Agreement. Licensee may not modify the Software except as permitted by the specifications set by Licensor.

License Fee

In consideration for the license granted herein, Licensee shall pay Licensor an initial license fee for each instance of the Software stated in Appendix B to this Agreement. 

Delivery of Software

Licensor shall deliver the Software and all required Utilities to operate the Software to Licensee upon activation of the Auditchain Protocol. Delivery shall be deemed to have occurred when the Software is made available to Licensee for download. See Appendix A

Restrictions and Responsibilities

Licensee shall be responsible for obtaining and maintaining any equipment and ancillary services needed to host, connect to, access, or otherwise use the Software, including, without limitation, modems, hardware, servers, software, operating systems, networking, web servers and the like (collectively, “Equipment”). Licensee shall also be solely responsible for maintaining the security of the Equipment, access credentials (including but not limited to administrative and user passwords and private keys) and files, and for all uses of the Equipment with or without Licensee’s knowledge or consent.

The Utilities required to operate the Software are described in Appendix A. The Utilities are subject to restrictions and may not be used for any purpose other than in accordance with this Agreement.

Licensee acknowledges and agrees that the Software may not be deactivated for a period of 1 (one) year following activation and deployment, (“Lock Period”). In the event Licensee deactivates the Software following the Lock Period, the Utilities included in the Software will be released to Licensee equally once each month for a period of 14 months following deactivation. See Appendix A 

Licensee represents and warrants that it is not a resident, legal entity or government domiciled in the United States, or any jurisdiction designated as a sanctioned country, is not listed as a sanctioned individual, legal entity, sovereign government, or an agency of a sovereign government subject to sanctions. A list of sanctioned jurisdictions individuals and legal entities may be viewed here: https://ofac.treasury.gov/sanctions-programs-and-country-information

Licensee understands that the Licensor will subject Licensee to verification under KYC/AML regulations. Licensee shall cooperate with Licensor and provide all required documentation in order for verification to be completed. Licensor may revoke the license under this Agreement at any time in the event that Licensor becomes the subject of any violation of laws in any jurisdiction. 

Licensee may use the Software only in accordance with the terms of this Agreement and for no other purpose. This license is non-transferable. 

Licensor shall have the right to collect and analyze data and other information relating to the provision, use and performance of various aspects of the Software and related systems and technologies (including, without limitation, information concerning customer data and data derived therefrom), and  Licensor will be free (during and after the term hereof) to (i) use such information and data to improve and enhance the Software and for other development, diagnostic and corrective purposes in connection with the Software and other offerings of the Licensor, and (ii) disclose such data solely in aggregate or other de-identified form in connection with its business.

Proprietary Rights

Licensee acknowledges that the Software is proprietary and subject to Intellectual Property owned by the Licensor. Access to the source code of the Software is not granted or allowed at present. This restriction is imposed due to global audit standards which restrict the use of open-source software when acting within the scope of audit engagements. 

Representations of the Licensee

Licensee represents and warrants that:

1. Licensee agrees to take full and sole responsibility for the deployment, activation, and operation of the Software.
2. Licensee has not had its credentials as a Certified Public Accountant, or Chartered Accountant revoked in any jurisdiction.
3. Licensee has not been the subject of disciplinary proceedings by any regulatory agency in any jurisdiction relating to violations of accounting and/or audit standards.
4. Licensee has not been the subject of a civil or criminal investigation by any government or law enforcement agency for accounting fraud that has not been resolved.
5. Licensee is not now, nor has ever been, subject to violations of securities laws in any jurisdiction.
6. Licensee has not been the subject of a civil or criminal violation of regulations regarding theft of property.
7. Licensee is not now, nor has ever been, the subject of any regulatory proceedings that may lead to having any professional accreditation revoked.
8. Licensee is not, nor is acting on behalf of a resident, legal entity or government domiciled in the United States, or any jurisdiction designated as a sanctioned country, is not listed as a sanctioned individual, legal entity, sovereign government or an agency of a sovereign government subject to sanctions.

Warranty Disclaimer and Limitation of Liability

THE SOFTWARE IS PROVIDED "AS IS," WITH ALL FAULTS, DEFECTS, AND ERRORS, AND WITHOUT WARRANTY OF ANY KIND. LICENSOR HEREBY DISCLAIMS ALL WARRANTIES AND CONDITIONS, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, OR NON-INFRINGEMENT.

NOTWITHSTANDING ANYTHING TO THE CONTRARY, EXCEPT FOR BODILY INJURY OF A PERSON, COMPANY AND ITS SUPPLIERS (INCLUDING BUT NOT LIMITED TO ALL EQUIPMENT AND TECHNOLOGY SUPPLIERS), OFFICERS, AFFILIATES, REPRESENTATIVES, CONTRACTORS AND EMPLOYEES SHALL NOT BE RESPONSIBLE OR LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT OR TERMS AND CONDITIONS RELATED THERETO UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY: (A) FOR ERROR OR INTERRUPTION OF USE OR FOR LOSS OR INACCURACY OR CORRUPTION OF DATA OR COST OF PROCUREMENT OF SUBSTITUTE GOODS, SERVICES OR TECHNOLOGY OR LOSS OF BUSINESS; (B) FOR ANY INDIRECT, EXEMPLARY, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES; (C) FOR ANY MATTER BEYOND LICENSOR’S REASONABLE CONTROL; OR (D) FOR ANY AMOUNTS THAT, TOGETHER WITH AMOUNTS ASSOCIATED WITH ALL OTHER CLAIMS, EXCEED THE FEES PAID BY LICENSEE TO LICENSOR FOR THE SOFTWARE UNDER THIS AGREEMENT IN THE 12 MONTHS PRIOR TO THE ACT THAT GAVE RISE TO THE LIABILITY, IN EACH CASE, WHETHER OR NOT LICENSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

Indemnification

Licensee shall indemnify, defend, and hold harmless Licensor from and against any and all claims, damages, liabilities, costs, and expenses arising out of or in connection with any breach of this Agreement by Licensee. Licensee agrees to indemnify and hold harmless Licensor against any damages, losses, liabilities, settlements, and expenses (including without limitation costs and attorneys’ fees) in connection with any claim or action that arises from an alleged violation of the foregoing or otherwise from Licensee’s use of the Software.

Confidentiality

Both Parties agree to keep confidential all information exchanged under this Agreement, including but not limited to the terms and conditions of this Agreement.

Miscellaneous

If any provision of this Agreement is found to be unenforceable or invalid, that provision will be limited or eliminated to the minimum extent necessary so that this Agreement will otherwise remain in full force and effect and enforceable.  This Agreement is not assignable, transferable or sublicensable by Licensee. Licensor may transfer and assign any of its rights and obligations under this Agreement without consent.  This Agreement is the complete and exclusive statement of the mutual understanding of the Parties and supersedes and cancels all previous written and oral agreements, communications and other understandings relating to the subject matter of this Agreement, and that all waivers and modifications must be in a writing signed by both Parties, except as otherwise provided herein.  No agency, partnership, joint venture, or employment is created as a result of this Agreement and Licensee does not have any authority of any kind to bind Licensor in any respect whatsoever. 

Termination

This Agreement may be terminated by Licensor if Licensee breaches any material term or condition of this Agreement and fails to cure such breach within 30 days after receipt of written notice thereof.

Governing Law and Jurisdiction

This Agreement shall be governed by and construed in accordance with the laws of Switzerland. Any dispute arising out of or in connection with this Agreement shall be exclusively submitted to the courts of the Canton of Zurich, Switzerland.

APPENDIX A

Summary of Software Functionality 

Licensor has developed and is preparing to release the Software, which enables the activation and deployment of the Auditchain Protocol; a web3 enabled disclosure automation and artificial intelligence-based validation and analysis infrastructure that is designed to make crypto asset whitepapers, financial statements, financial reporting, and related Process Controls more reliable, accurate and truthful.

Licensor is dependent on the Licensee to act with other Licensees as independent operators of its Pacioli AI Node Software to license, activate, and provide validation services on the Auditchain Protocol. 

The Software is designed to read, understand, and detect inconsistencies in machine-readable crypto asset whitepapers prepared in accordance with MiCA and VARA regulations and technical specifications. In addition, the Software is designed to read, understand and detect inconsistencies in financial statements prepared by enterprises and their accountants in accordance with International Financial Reporting Standards, United States Generally Accepted Accounting Principles, and other standardized financial reporting schemes in over 60 jurisdictions across approximately 200 regulatory agencies.

Summary of Functionality of Utilities

The Software includes the Pacioli AI Agent which is designed to enable the Software to hunt for and detect requests for validation on the open Auditchain Protocol and within private encrypted Cohorts. 

Cohort participation is limited to Licensors who are qualified accountants and can provide a variety of assurance levels. Cohort participation occurs through the transmission of invitations to a unique EVC by users who create crypto asset whitepapers and financial statements. 

Licensors who operate the Software on the open Auditchain Protocol can activate or deactivate the Software to accept invitations to an EVC. 

The AUDT Token is the staking, settlement, and governance Utility on the Auditchain Protocol. The number of AUDT Tokens required to activate and deploy the Software is initially set at 14,000. Licensee acknowledges and agrees to deliver 7,000 AUDT Tokens to complete activation and deployment of the Software. 

Delivery of Software 

Licensee agrees to cooperate with Licensor to accept delivery of the Software. Licensor will include the following components and Utilities to activate, deploy and to enable Licensee to provide validation services on the Auditchain Protocol: 

• Software Images 
  • Containerized image of the Software 
  • Containerized image of a private key pair management system for interacting with the Software and claiming rewards.
• Utilities
  • Pacioli AI Agent – a validation detection component
  • 7,000 AUDT Tokens delivered by Licensor and 7,000 AUDT Tokens by Licensee.

Exclusions and Additional Restrictions 

Hosting facilities and Equipment are the sole responsibility of Licensee and are not included as part of this Agreement.

Licensee acknowledges and agrees that the Software may not be deactivated for a period of 1 (one) year following activation and deployment, (“Lock Period”). In the event Licensee deactivates the Software following the Lock Period, the Utilities included in the Software will be released to Licensee equally once each month for a period of 14 months following deactivation. 

Licensee acknowledges and agrees that following the activation and deployment of the Software, the rewards and staking requirements will be subject to governance. Licensee acknowledges that the AUDT Tokens subject to the Lock Period may not be used to participate in governance.   

Modifications of Rights and Obligations

The licensing agreement summarized above does not contain modification rights. In addition to and separate from the terms of the licensing agreement, the purchaser is entitled to the right to one vote for each AUDT held on matters relating to changes to the functionality of features on Pacioli.ai. 

Governance features include the ability to vote directly, or delegate votes to other users to vote on their behalf relating to changes to the following features: 

• Changes to the maximum number of Pacioli Nodes operating on Pacioli.ai 
• Changes to the number of AUDT required to stake to operate a Pacioli Node 
• Changes to the amount of rewards paid to Pacioli Nodes through subsidies
• Changes to the amount of AUDT paid by the user requesting the validation of disclosure instances
• Changes to the allocation of proceeds from data subscriptions between reporting entities and Pacioli Nodes in a cohort
• Changes to the minimum staked balance required for users to continue reporting compliance by a reporting entity (fair warning) 
• Changes to the minimum number of Pacioli Nodes in a cohort 
• Changes to the minimum percentage of Pacioli Nodes in a cohort required to achieve consensus

As Pacioli.ai evolves, additional AUDT Token utility may be introduced. Upgrades and feature enhancements will be additionally disclosed in subsequent Pacioli.ai whitepapers, pursuant to MiCA Article 12. 

Tokens Eligible for Future Sale  

During the INO or following the completion or termination of the INO, the Issuer may, from time to time, make sales of AUDT in the open market or engage in direct sales between one or more purchasers on a negotiated basis.

Token Supply, Allocation and Qualitative Attributes

Qualitative Attributes

AUDT meets the ERC20 standard and is compatible with each of the smart contracts that AUDT is called by with respect to each of the functions of Pacioli.ai. Unit testing has verified each of these functions. A formal verification and security penetration audit will be performed when the INO is completed.  

The maximum AUDT supply is 250,000,000. The table below illustrates the allocation.

Redemption Features

Users may remove their staked amounts subject to the following conditions:

Users of Luca

AUDT may be removed from the account of creators of disclosure instances in Luca at any time. Removing, or “unstaking” AUDT will result in the inability to obtain reduced settlement costs for creating and submitting disclosure instances for validation to Pacioli Nodes. As a result, the user will be required to settle Luca user costs in other forms of payment and at a higher cost. Furthermore, the user will be required to settle disclosure validation costs in other forms of payment and at a higher cost. 

Pacioli Node Operators

As per the license agreement, a summary of which is disclosed in this Annex I Part G under “Crypto-asset purchaser rights and obligations”, "Licensee acknowledges and agrees that the Software may not be deactivated for a period of 1 (one) year following activation and deployment, (“Lock Period”). In the event Licensee deactivates the Software following the Lock Period, the Utilities [AUDT] included in the Software will be released to Licensee equally once each month for a period of 14 months following deactivation. 

Multi Jurisdictional Offer

The Issuer making this offer in the European Union and in other jurisdictions where it may not intend to request admission for trading. AUDT is currently available to exchange for USDT on Bitmart and can be accessed at https://www.bitmart.com/trade/en-US?symbol=AUDT_USDT 

Restrictions on Transferability in this Offering

As per the license agreement, a summary of which is disclosed in this Annex I Part G under “Crypto-asset purchaser rights and obligations”, "Licensee acknowledges and agrees that the Software may not be deactivated for a period of 1 (one) year following activation and deployment, (“Lock Period”). In the event Licensee deactivates the Software following the Lock Period, the Utilities [AUDT] included in the Software will be released to Licensee equally once each month for a period of 14 months following deactivation. 

Deflationary Token Economy

Assuming a price of $.075, an average of 5% of the maximum supply is removed from circulation each year as the result of the allocation of validation rewards which are summarized below. The illustration below is subject to price fluctuation and the results of governance which may adjust how the rewards are allocated. 

Open Protocol Allocation

Validation rewards are subject to governance and are initially allocated on the open protocol as follows:

Cohort Allocation

Validation rewards are subject to governance and are initially allocated within cohorts as follows:

No Protection or Compensation

All users are responsible for protecting their assets. The Issuer recommends the use of hardware wallets by all users. We do not provide custody services for users, not do we have any control over assets held by users of Pacioli.ai. We do not intend to offer any such services in the foreseeable future. We cannot control the safeguarding of assets that are not within our custody or control. We do not currently offer crypto asset protection and no compensation will be paid to users who lose access or control of their crypto assets.

Governing Law and Jurisdiction

This Agreement shall be governed by and construed in accordance with the laws of Switzerland. Any dispute arising out of or in connection with this Agreement shall be exclusively submitted to the courts of the Canton of Zurich, Switzerland.

Ethereum Based 

Pacioli.ai is an Ethereum based web3 application. The AUDT Token is an ERC20 compatible utility token. The smart contracts are developed in Solidity and can be deployed to any Ethereum based blockchain.

We intend to develop our smart contracts in other languages so they can be deployed to other blockchains.

Consensus Mechanism

The AUDT token and related Pacioli.ai smart contracts are subject to the Ethereum consensus mechanism. 

Pacioli Agent - Hunting and Request Detection

The Pacioli AI Agent uses an algorithm designed to hunt for, detect and fulfill requests for validation of machine readable crypto asset whitepapers and financial statements. Each Pacioli AI Node is constantly scanning the network for requests for validation. Upon detection, the Pacioli Agent initiates a race with other Pacioli Nodes to compete for fulfillment of validation requests.

Consensus Algorithm

The Pacioli AI Agent also governs how consensus is reached by other Pacioli Nodes. The Pacioli Agent allocates the rewards to the winning validator and to other Pacioli Nodes that reach consensus and corroboration with the winning Pacioli Node.

Incentive Mechanism

Validators earn rewards on the open protocol and as members of cohorts invited by creators of crypto asset whitepapers, Process Controls and financial statements.

Validators are rewarded for validating crypto asset whitepapers, financial statements and "Tokenized Process Controls" that are created by the community.

Rewards are derived from three sources: direct payments, subsidies and royalties. All are subject to governance.

The tables below illustrate how the percentage of rewards are allocated across the token economy based on each role. Royalties are a separate source of income.

Open Protocol Allocation

Validation rewards are subject to governance and are initially allocated on the open protocol as follows:

Cohort Allocation

Validation rewards are subject to governance and are initially allocated within cohorts as follows:

Royalties

In addition to the validation rewards, we propose a separate royalty system for Process Controls created by users to train Pacioli to do it’s work. Process Controls are disclosure models and individual reporting elements used in Luca to constrain logic and data. This whitepaper is created using the MiCA disclosure model. The MiCA disclosure model is a Process Control. Process Controls are represented by NFTs. The creator claims them after they are validated and proven to work correctly. The validators who validate them receive royalties each time they are used.

There are 4 types of Process Controls:

• Crypto Asset Disclosure Controls (models)
• Financial Statement Controls (models)
• Audit Controls (models)
• Analysis Controls (models)

The number of Process Controls that can be created is theoretically unlimited.

NOTE: Deactivation of a Pacioli Node results in the loss of the perpetual royalties on Process Controls validated by that specific Pacioli Node.

Every time a Process Control is used, the royalties are allocated as follows:

Ethereum Based

The AUDT Token and the smart contracts integrated with Pacioli.ai are Ethereum based and are developed in Solidity. Pacioli.ai will be deployed to the Ethereum and Polygon networks.  

Security and Formal Verification Audit

We intend to submit the entire code base to a security and formal verification audit prior to deployment to the main Ethereum and Polygon networks. In addition, we plan to also submit to SOC and ISAE audits as soon as the Offering is completed. This whitepaper will be updated pursuant to MiCA Article 12 when such audits are completed. 

THE CRYPTO ASSETS OFFERED IN THIS WHITEPAPER INOLVE A HIGH DEGREE OF RISK AND SHOULD ONLY BE CONSIDERED BY PERSONS WHO HAVE EXPERIENCE PURCHASING, HOLDING CUSTODY OF, AND HAVE THE INTELLECTUAL AND TECHNICAL KNOWLEDGE ISSUING, OPERATING AND OTHERWISE DEALING IN CRYPTO ASSETS. 

THIS OFFERING SHOULD ONLY BE CONSIDERED BY PERSONS WHO HAVE NO NEED FOR LIQUIDITY AND CAN WITHSTAND THE LOSS OF THEIR ENTIRE PURCHASE. THE CRYPTO ASSET OFFERED HEREBY MAY LOSE ITS VALUE IN PART OR IN FULL. THE CRYPTO ASSET OFFERED HEREBY MAY NOT ALWAYS BE TRANSFERABLE. THE CRYPTO ASSET MAY NOT BE LIQUID. THE CRYPTO ASSET OFFERED HEREBY MAY NOT BE EXCHANGEABLE AGAINST THE GOOD OR SERVICE PROMISED IN THIS CRYPTO ASSET WHITE PAPER, ESPECIALLY IN THE CASE OF A FAILURE OR DISCONTINUATION OF THE CRYPTO ASSET PROJECT. THE CRYPTO ASSET IS NOT COVERED BY THE INVESTOR COMPENSATION SCHEMES UNDER DIRECTIVE 97/9/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL. THE CRYPTO ASSET IS NOT COVERED BY THE DEPOSIT GUARANTEE SCHEMES UNDER DIRECTIVE 2014/49/EU.

CRYPTO ASSETS ARE A NEW FORM OF ASSET CLASS THAT COMBINES COMPUTER SCIENCE, FINANCE, ECONOMICS AND USER COMMUNITY COOPERATION AND COORDINATION. WE ARE STATING IN THIS SECTION OF THE WHITE PAPER WHAT WE BELIEVE TO BE A COMPREHENSIVE STATEMENT OF RISKS. THERE ARE RISKS WE FACE NOW AND WILL FACE IN THE FUTURE THAT WE CANNOT POSSIBLY IDENTIFY AT THIS TIME. THE SURVIVAL AND SUCCESS OF THE CRYPTO ASSET OFFERED HEREBY AND THE CRYPTO ASSET PROJECT DESCRIBED IN DETAIL IN THIS WHITE PAPER DEPENDS ON OUR ABILITY TO IDENTIFY AND OVERCOME UNFORESEEN RISKS WHEN AND AS THEY ARISE. IF WE ARE UNABLE TO OVERCOME ANY OF THE RISKS STATED HEREIN OR THE ONES WE CANNOT IDENTIFY AT THIS TIME, THE CRYPTO ASSET AND THE PROJECT WILL FAIL AND YOU WILL LIKELY LOSE THE ENTIRE COST OF YOUR PURCHASE.

RISKS RELATED TO THIS OFFERING  

The concept of an Initial Node Offering is without precedent.

We are conducting what we refer to as an Initial Node Offering or “INO”. This type of offering is unprecedented and involves a high degree of technical complexity, community coordination as well as risk management during and after the INO is completed. There can be no assurance that persons who purchased the Pacioli Nodes in the INO will deploy them. The failure to deploy Pacioli Nodes following this INO could result in a difficulty or failure to launch Pacioli.ai. Extensive testing is required after the sale which requires the cooperation and coordination of each purchaser. There can be no assurance that any such tests will be successful. 

Purchasers in earlier phases of the INO will bear a higher risk.

The proceeds in this Offering will be used upon receipt. There is no assurance that the maximum offering will be reached. Therefore, persons who purchase the earlier phases will bear higher risk in this Offering. We will use the proceeds from the earlier phases to pay for continued development and fees relating to a SOC, ISAE and security audits. In addition, proceeds from the earlier phases will be used to pay marketing expenses to create public awareness. If we do not raise the maximum amount in this Offering, we may not be able to launch Pacioli.ai. We may be forced to reallocate how the proceeds from earlier phases are used if the Maximum Offering is not reached. If we reallocate how the proceeds are used, it may pose additional risks to earlier purchasers that we cannot foresee. In any event, early purchasers will bear the highest risk of losing their entire investment if we are not able to raise the Maximum Offering.

Pacioli.ai requires substantial additional funding.

The Maximum Offering is 2,200 Pacioli Nodes which includes a total of 15,400,000 AUDT. The total proceeds will be $5,310,000 assuming the Maximum Offering is reached. The Maximum Offering is required in order to achieve an optimal launch. We need substantial additional funding to achieve our objectives. If we do not raise substantial additional funding, we may not succeed and you may lose some or all of the cost of your purchase. 

This INO uses smart contracts which are vulnerable to hacks.

We will conduct phase 2 of this INO using smart contracts on the Polygon network. Smart contracts are Turing complete and subject to infinite feedback loops and hacks which may cause the smart contracts to fail or even cause the loss of funds we collect in the INO. Hackers may cause the infinite feedback loops to steal funds from us. Wallet addresses are used by purchasers to purchase the INO. Wallet addresses are vulnerable to phishing attacks resulting from airdrops that can cause hacks when a user interacts with the airdropped tokens which can cause the loss of all funds from users' wallets. If a smart contract we use on the INO can become vulnerable as the result of a new method of attack, we can lose all funds we collect from the INO and we will have no way to reimburse you. 

We do not carry insurance for the INO and there are no viable cost effective insurance policies that cover the loss of the funds as the result of a hack.

We do not carry insurance to cover claims for the loss of funds as the result of a hack. If any vulnerabilities exist in any of our smart contracts we use for the INO, they could be subject to attack. If we suffer an attack, we will not be able to reimburse you and you will lose the entire cost of your purchase.  

RISKS RELATED TO THE CRYPTO ASSET ISSUER

We are a startup with a limited operating history.

We were formed in January 2021 and have a limited operating history. There is no assurance that we will generate enough revenue to cover operating expenses. We are subject to all the risks inherent in the establishment of a new business venture. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications, uncertainties and delays frequently encountered with the formation of any new business. A significant amount of activities are focused on raising capital and developing Pacioli.ai. Because the company is new, with limited operating history, there is no assurance that we will succeed.

We may not attract users.

Our success as a company depends on our ability to attract new users. To do so, we must continue to innovate and ensure that our services are secure, reliable, and engaging. We must also expand our products and services, and constantly evolve. There is no assurance that we will be able to do so. Any number of factors can negatively affect customer retention, growth, and engagement, including if there are changes in sentiment about the quality or usefulness of our products and services or concerns related to privacy, security, or other factors; we fail to introduce new and improved products and services, or if we introduce new products or services that are not adopted; there are adverse changes that are mandated by legislation, regulatory authorities, or litigation.

Pacioli.ai is not yet commercialized.

We are considered a development stage company. We are dependent upon the proceeds in the INO to launch Pacioli.ai. Because of the novelty of Pacioli.ai, there is no way to accurately predict adoption, if any by users and identify all of the risks of launching Pacioli.ai. 

Management may allocate their time to other activities causing conflicts of interest. 

Management of the Company as well as its development personnel may be engaged in other projects and business endeavors and are not obligated to contribute any specific number of hours per week to our affairs. If the other business affairs of our management require them to devote more substantial amounts of time to such affairs, it could limit their ability to devote time to us which could have a negative impact on our ability to operate efficiently.

We may face intellectual property infringement claims.

Although we are not aware of any potential violations of others’ intellectual property rights, we may face claims, including from direct competitors, other companies, scientists or research universities, asserting that our technology or the commercial use of such technology infringes or otherwise violates the intellectual property rights of others.

We cannot be certain that our technologies and processes do not violate the intellectual property rights of others. If we are successful in developing technologies that allow us to earn revenues and our market profile grows, we could become increasingly subject to such claims. We may also face infringement claims from the employees, consultants, agents and outside organizations we have engaged to develop our technology. While we have sought to protect ourselves against such claims through contractual means, we cannot provide any assurance that such contractual provisions are adequate, and any of these parties might claim full or partial ownership of the intellectual property in our technology that they were engaged to develop. If we were found to be infringing or otherwise violating the intellectual property rights of others, we could face significant costs to implement work-around methods, and we cannot provide any assurance that any such work-around would be available or technically equivalent to our potential technology. In such cases, we might need to license a third-party’s intellectual property.  Any required license might not be available on acceptable terms, or at all. If we are unable to work around such infringement or obtain a license on acceptable terms, we might face substantial monetary judgments against us or an injunction against continuing to use or license such technology, which might cause us to cease operations. In addition, even if we are not infringing or otherwise violating the intellectual property rights of others, we could nonetheless incur substantial costs in defending ourselves in suits brought against us for alleged infringement. Also, if we are to enter into a license agreement in the future and it provides that we will defend and indemnify our customer licensees for claims against them relating to any alleged infringement of the intellectual property rights of third-parties in connection with such customer licensees’ use of such technologies, we may incur substantial costs defending and indemnifying any customer licensees to the extent they are subject to these types of claims. Such suits, even if without merit, would likely require our management team to dedicate substantial time to addressing the issues presented. Any party bringing claims might have greater resources than we do, which could potentially lead to us settling claims against which we might otherwise prevail on the merits. Any claims brought against us or any customer licensees alleging that we have violated the intellectual property of others could have negative consequences for our financial condition, results of operations and business, each of which could be materially adversely affected as a result. If any of these risks materialize, you may lose your investment.

We expect our operating expenses to increase significantly in the foreseeable future.  

We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to hire additional employees, expand our business development and marketing efforts and develop additional products and services. Moreover, we expect to incur significant legal, accounting, and other expenses, including substantially higher costs to obtain and maintain director and officer liability insurance. This may prove more expensive than we currently anticipate, and we may not generate revenue sufficiently to offset these higher expenses. Our revenue growth may slow, or decline for a number of other reasons, including reduced demand for our products, increased competition, a decrease in the growth or size of the crypto economy, or any failure to capitalize on growth opportunities. Any failure to increase our revenue could prevent us from promoting adoption. If we are unable to effectively manage these risks and difficulties as we encounter them, our business, operating results, and financial condition may suffer and you may lose the cost of your purchase.

RISKS RELATED TO THE AUDT TOKEN

We depend on the health of the market for crypto assets. 

Crypto assets are extremely volatile. The total value of all cryptocurrencies has experienced substantial volatility. In 2021 the market experienced an upward spike followed by a significant decline in the first half of 2022 caused by the failure of FTX as well as a few large lenders and crypto investment funds. The decline had a negative impact on overall confidence and many projects are experiencing failure, with new projects unable to receive funding. Furthermore, a significant level of fraud in cryptocurrencies and digital assets has occurred. If such fraud is deemed prevalent, it could jeopardize the potential for overall digital asset innovation and cause additional declines in prices and overall confidence. We face a substantially higher risk of failure if the market for cryptocurrencies and digital assets experiences significant future declines. Such volatility and possible fraud may prevent adoption of Pacioli.ai by issuers of crypto assets and crypto asset service providers. If the market suffers a substantial decline, you may lose all or part of the cost of your purchase.

The value of AUDT is entirely dependent on the completion of the development, launch and adoption of Pacioli.ai.

AUDT is currently not liquid and a market has yet to develop. Until Pacioli.ai is launched, and utilization occurs, AUDT is not expected to have any value. The value of AUDT is dependent upon the launch and adoption of Pacioli.ai. Furthermore, there can be no assurance that Pacioli.ai will be launched. Any third party or parties having influence over the development and/or the launch of Pacioli.ai may disagree with the use of AUDT as the base utility. 

 Our ability to support development and marketing is dependent on the adoption of AUDT as the base payment and utility of Pacioli.ai. 

AUDT is expected to be the base currency of Pacioli.ai. AUDT currently has very little value and a market has not developed. The Company plans to generate revenue from Pacioli.ai in the form of AUDT. If AUDT is not adopted by users, it will become worthless, and we will not be able to exchange AUDT into cash or other crypto assets that can be convertible into cash. If adoption does not occur for the AUDT token, it will become worthless we may be forced to discontinue operations and you may lose the entire cost of your purchase.

The value of AUDT cannot be determined at this point. 

The amount of AUDT required to be staked by users has been initially set by the Company. Although this can be changed by a vote of the community of actors who hold AUDT, there can be no assurance that actors will accept the level of AUDT required to be staked. The value of the AUDT received in connection with this Offering could be adversely affected if required staking amounts is high. Demand for AUDT will initially come from staking by potential actors on Pacioli.ai. We do not know if a staking model will be accepted by actors. There can be no assurance that a market for AUDT will develop.

Certain crypto market participants have unrealistic expectations and they can spread fear, uncertainty and doubt that could impact the value of AUDT.

Although crypto asset regulatory frameworks are emerging that govern the flow of information and impose consequences for manipulative activities, certain participants in the crypto asset space have developed unrealistic expectations relating to access to information, rates of return and the time frame of the returns on crypto assets due to a number of factors that include the historical performance of the crypto assets they currently hold or have held in the past. Furthermore, these participants may be influential with a substantial following by other participants in crypto assets.  If any of these persons hold AUDT and publicly express unrealistic opinions, or they decide to publicly spread fear, uncertainty and doubt about any aspect of our project it could cause a substantial decline in the value of AUDT and you may be negatively affected. 

RISKS RELATED TO THE IMPLEMENTATION OF PACIOLI.AI

Development of the Project will need substantial additional capital. 

Development is a highly complex and costly effort that requires substantial capital and support from third parties. To continue development, substantial additional capital must be raised, or there must be substantial contributions made by third parties without cost to us. There can be no assurance that additional capital may be raised, or such contributions will be provided on reasonable terms, if at all.  If substantial additional capital is not raised, we may have to reduce or discontinue development and you may lose all or part of your investment. Depending upon the type and terms of financing and the party providing the financing, the value of AUDT if sold could be adversely affected.

Dependence on Developers 

We are dependent on the services of the development team. In addition, the Company may engage third parties for aspects of development, management or other functions. There is no assurance that we will be able to maintain a team that is capable of developing the project and launching Pacioli.ai successfully. Such inability may have a material negative effect on development and implementation. If we are not able to implement Pacioli.ai, you may lose all of part of the cost of your purchase.

Pacioli.ai is a complex project that is without precedent.

Pacioli.ai is unprecedented and involves a high degree of technical complexity, community coordination as well as risk management during and after the INO is completed. If we face unexpected complexity or delays with the implementation, we will not be able to launch in a timely manner and it may have a material negative effect on operations and you may lose all or part of the cost of your purchase.

Dependence on Third Parties 

During the course of development, we will rely on third parties to develop or provide components in order to complete development of certain aspects of Pacioli.ai. If these third parties experience delays or an inability to deliver products pursuant to specifications, or if there is an inability to bear the costs to continue retaining any third party, it could have a material negative effect on development. If these risks materialize, you may lose all or part of the cost of your purchase.

RISKS RELATED TO TECHNOLOGY 

We face risks related to theft and hacking. 

Hackers or other groups or organizations or countries may attempt to interfere with the development, testing, deployment and operation of the project and the AUDT in any number of ways, including denial of service attacks, sybil attacks, spoofing, smurfing, malware attacks, or consensus-based attacks. We may not be able to recover from any such attack which will have a material negative impact on the project. If we cannot recover from any attack, you may lose all or part of the cost of your purchase.

There are risks related to mining attacks. 

As with other decentralized cryptographic tokens and cryptocurrencies, certain blockchains used for our applications and networks are susceptible to mining attacks, including double-spend attacks, majority mining power attacks, “selfish-mining” attacks, and race-condition attacks. Any successful attack poses a risk to the project as well as the AUDT or other cryptocurrencies that are used. Mining attacks will negatively affect proper execution and sequencing of smart contracts. Despite the precautions we plan to undertake, the risk of known or novel mining attacks exists. Mining attacks could have a material negative impact on the project, and you may lose all or part of the cost of your purchase.

There are risks related to open source software. 

Certain aspects of the project will consist of open source software. There is a risk that our team, or other third parties may intentionally or unintentionally introduce weaknesses or bugs into the core infrastructural elements of the source code interfering with the use of Pacioli.ai or causing the loss of AUDT or any other digital currency or asset at stake. If these risks materialize, you may lose all or part of the cost of your purchase. Furthermore, the lack of registered intellectual property protection poses a risk that third parties may file patents and trademarks for substantially similar designs. If a competitor emerges and obtains patents covering the designs of our products, development of the project may be forced to be discontinued and you will lose the entire cost of your entire purchase. 

There are risks associated with breakthroughs in the field of computer science and cryptography. 

Advances in cryptography and cryptanalysis, or technical advances such as the development of quantum computers, could present risks to cryptocurrencies and the networks and applications we develop, which could result in the theft or loss of crypto assets, including AUDT. If a significant theft occurs as the result, we will suffer a material negative impact on our business, and you may lose all or part of the cost of your purchase. 

The integrity and immutability of the data of every blockchain system depends on the cryptographic security of the hash functions deployed in the system. (For example; the record on the Bitcoin blockchain of a payment of 1 Bitcoin should not be easily changeable to a record of payment for a different amount.)  There is no scientific assurance that any of the commonly deployed hash functions have these properties of cryptographic security.  Advances in attacks poses a risk of invalidating the integrity of the data in all blockchain systems including our project.

Using the internet or a virtual private network to circumvent laws or otherwise engage in illicit behavior is called hacking and is a criminal offense. 

Intentionally violating laws to obtain AUDT may constitute a criminal offense. If anyone circumvents or otherwise avoids identification by us in an illicit manner, we may be subject to violation of laws and the perpetrator may be subject to criminal prosecution. As such, we may be required to pursue criminal claims by offenders in order to defend ourselves. If we are forced to pursue such activities, it will have a material negative effect on our business, and you may lose all or part of the cost of your purchase.