BLOC.L Regulatory News (BLOC)

11 September 2019

THIS ANNOUNCEMENT (AND THE INFORMATION CONTAINED HEREIN) IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, WITHIN, IN OR INTO THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), CANADA, AUSTRALIA, JAPAN, NEW ZEALAND AND SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

This announcement does not constitute an offer of, or a solicitation to subscribe for or purchase, any securities in any jurisdiction including in the United States.

Securities may not be offered or sold in the United States absent registration under the United States Securities Act of 1933, as amended (the "Securities Act"), or an exemption from, or in a transaction not subject to, registration. The Company has not and does not intend to register any securities under the Securities Act, and does not intend to offer any securities to the public in the United States unless registered under the Securities Act or an exemption from such registration is available. No public offering of securities of the Company is being made in the United States.

No communication or information relating to the issue and offering of securities may be disseminated to the public in jurisdictions other than the UK where prior registration or approval is required for that purpose. No action has been taken that would permit an offer of securities in any jurisdiction where action for that purpose is required, other than in the UK.

Blockchain Worldwide plc

("Blockchain" or the "Company")

Proposed Acquisitions

Proposed 1 for 12 Share Capital Consolidation

Proposed fundraising to raise £8.6 million

Proposed change of name

Proposed waiver of the requirements of Rule 9 of the Takeover Code

Proposed authorities to allot relevant securities and disapply pre-emption rights

Admission of the Enlarged Issued Share Capital to trading on AIM and Notice of General Meeting

Blockchain Worldwide plc (LON:BLOC), is pleased to announce that it has conditionally agreed to purchase the entire issued share capital of Entertainment AI, Inc, GTChannel, Inc ("GTC" or "GTChannel") and Tagasauris, Inc ("TAG" or "Tagasauris") (together the "EAI Group").

Highlights

·; Acquisition of EAI Group for a total consideration of £12.19 million, to be satisfied through the issue of 27,092,886 Ordinary Shares at 45 pence each (equivalent to 3.75 pence per ordinary share prior to the Share Capital Consolidation)

·; Acquisition and integration of:

o GTChannel, which combines a network of affiliated creators, a catalogue of streaming content and a global audience, through YouTube and other social media platforms, focusing on automotive and lifestyle

o Tagasauris, which owns AI and machine learning intellectual property that can deliver more video-based opportunities to GTChannel's ecosystem of viewers and creators.

o Entertainment AI Inc, which has data analytic technology and material contracts with strategic partners

·; The EAI Group generated $11.4m of gross advertising revenues ($6.5m net) in 2018, an increase of more than 200% on 2017

o Momentum continued into 2019 with gross advertising revenue of $8.7m in 1H19, an increase of 107%

o Total video views across EAI Group of 8.5 billion in 2018; 6.4 billion in 1H19

·; Significant opportunities to accelerate the growth of the EAI Group through leveraging the EAI Group's technologies allowing the Company to position itself at the forefront of the "Third Wave" of TV

·; EAI Group technologies, combined with existing content and audience of GTChannel, will enable additional and deeper revenue streams for the EAI Group, focused on enhancing viewer engagement and interaction

·; Strategic investors, Sumitomo Corporation and Water Intelligence plc to drive near term SaaS opportunities for use of EAI Group software

·; Strong management team backed by a Board with strong industry and governance credentials

·; To reflect the new direction of the Company, the Board is proposing to change the name of the Company to "Entertainment AI plc"

Fundraising Highlights

·; A conditional placing and subscription to raise approximately £8.6 million (before expenses) by the issue 16,351,102 Ordinary Shares at 45 pence per Ordinary Share (the "Issue Price") and 3,472,222 Ordinary Shares at 36 pence per Ordinary Share ("Subscription Price")

·; Subject to, inter alia, shareholder approval and admission to trading on AIM, the Acquisition of EAI, the placing and subscription are expected to complete on 30 September 2019

·; Funds to be used to accelerate growth of the EAI Group, including development of technology

An admission document is being posted today to shareholders (the "Admission Document") which sets out in more detail the background and reasons for the acquisitions, the placing and subscription, and certain other proposals and also includes a notice of General Meeting. The acquisition of EAI will constitute a reverse takeover and will require the approval of Shareholders. A General Meeting of the Company is being convened for 10:15 a.m. on 27 September 2019 at the offices of Fladgate LLP, at 16 Great Queen Street, London, WC2B 5DG. The Admission Document will be posted today to Shareholders. The Admission Document will be available on the Company's website: http://www.bloc-worldwide.com/

Rodger Sargent, CEO, said:

"The wait has been worthwhile. AI is the future of entertainment technology and Entertainment AI is an innovative industry leader with ambitious plans. Their unique Artificial Intelligence technology allows frictionless purchasing directly from video. We believe this will be a game changer.

Under the stewardship of Pat DeSouza, and the backing of several leading UK institutional investors, we are confident that Entertainment AI will generate significant shareholder value."

Dr Patrick DeSouza, Proposed Non-Executive Chairman of Entertainment AI plc, said: "Entertainment AI comes at the right time. We are now in a video-first world where audiences not only seek to discover, consume and share short form video but also to fulfil their intentions in the moment through purchase behaviour. Instagram announced its beta test with brands last March to enable purchase behaviour seamlessly from pictures. The ViacomCBS merger in August only reinforced the rapid transformation of the marketplace as telecoms, content and technology sectors converge. We are excited and ready to establish a leading media platform with a world-class board, strong management team, cutting-edge technology, content and a rapidly growing global audience. We appreciate the significant support of high-quality institutional investors and global strategic partners which places our post IPO operating plan on a strong footing."

Definitions and a glossary can be found at the end of this announcement.

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.

1. Introduction

The Company announces that it has conditionally agreed to purchase EAI Group through the Acquisition of the entire issued, and to be issued, share capital of Entertainment AI, GTChannel and Tagasauris pursuant to the terms of the Acquisition Agreement signed today. The consideration payable for the Acquisition is £12.19 million to be satisfied through the issue of 27,092,886 Ordinary Shares at a price of 45 pence each. The Company also today announces: a conditional placing of 16,351,102 Ordinary Shares at 45 pence per share; and a £1.25 million investment to be made by the Strategic Investors through the issue of 3,472,222 Ordinary Shares at 36 pence per share, to raise a total of £8.61 million before expenses in order to provide working capital for the Enlarged Group.

Immediately following Admission, as a result of the issue of Consideration Shares and the Cross-Over Subscription from the Strategic Investors of £1.25 million, a Concert Party will hold more than 30 per cent. and could in due course hold more than 50 per cent. of the voting rights of the Company and therefore existing Shareholders will be asked to approve a Waiver of the requirement for a general offer to be made in accordance with Rule 9 of the Takeover Code. Further information on the Takeover Code and its application to the Proposals and on the Concert Party, is set out in the Admission Document. The Board has appointed EGR Corporate Broking Limited to provide it with competent independent advice on the Proposals as required pursuant to the Takeover Code.

Upon Admission, it is proposed that Patrick DeSouza (proposed Non-Executive Chairman), Todd Carter (proposed Chief Executive Officer) and Scott Schlichter (proposed Executive Director) will join the board of directors of the Company. It is further proposed that David Anton, Michael Kelly and Akiko Mikumo will join the board of directors of the Company as Non-Executive Directors. It is also proposed that Jonathan Hale and Rodger Sargent will resign from the board of directors of the Company upon Admission. Additional details in respect of the Directors and the Proposed Directors can be found in the Admission Document.

At the same time as the Acquisition and the Fundraising, the Directors are proposing that the Waiver also be obtained, that the Share Capital Consolidation be undertaken and that the name of the Company be changed to Entertainment AI Plc.

The Proposals are conditional, inter alia, upon the passing of the Resolutions at a General Meeting to be held at the offices of Fladgate LLP at 16 Great Queen Street, London, WC2B 5DG, at 10.15 a.m. on 27 September 2019, and, on the Acquisition and Admission taking place. If the Resolutions are passed at the General Meeting and the other conditions set out in the Acquisition Agreement, the Placing Agreement and the Cross-Over Subscription Letters are met, then it is expected that Admission will become effective and that dealings in the Enlarged Issued Share Capital will commence on AIM on 30 September 2019. Shareholders should note that the Resolutions are inter-conditional and that consequently if any of the Resolutions are not passed, completion of the Proposals will not occur.

This document contains detailed information about the EAI Group, the Acquisition, the Fundraising and explains why the Directors and the Proposed Directors consider the Proposals and Admission to be in the best interests of the Company and its Shareholders as a whole, and recommend that you vote in favour of the Resolutions to be proposed at the General Meeting, notice of which is set out in the Admission Document being posted to Shareholders later today.

2. Background on the Company

The Company was incorporated on 15 February 2017, and its shares were admitted to trading on the standard segment of the Official List and to trading on the Main Market on 21 September 2017 as an investing company. The Company was originally formed to acquire a company or business in the telecoms sector. On 19 January 2018, the Company was renamed Blockchain Worldwide plc and the scope of the Company's investment criteria was expanded to consider acquisitions within the blockchain technology industry.

On 7 November 2018, the Company announced the proposed acquisition of Chorum Group Limited, subject to due diligence and a successful fundraise. The Company's shares were suspended pending the outcome of this process. On 8 February 2019, the Company announced it had withdrawn from the proposed acquisition of Chorum Group Limited due to greatly reduced levels of activity in London's equity markets. The suspension was lifted on 13 February 2019 and the Company's shares began to trade again.

It was announced on 8 February 2019 that the Company would continue to seek deals within the blockchain space but that it would also consider other high growth opportunities within the wider technology sector.

Since listing, the Directors have sought an appropriate acquisition for the Company that can create significant value for shareholders in the form of capital growth.

3. Information on the EAI Group, its marketing and growth strategy

EAI Group consists of three associated companies in the technology and media sector that are principally headquartered in Los Angeles with strategic relationships in the UK. The Enlarged Group will be composed of the Company, Entertainment AI, GTChannel and Tagasauris, which have complementary assets. GTChannel combines a network of affiliated creators, a catalogue of streaming content and a global audience, Tagasauris owns AI and machine learning intellectual property that can deliver more video-based opportunities to GTChannel's ecosystem of viewers and creators and Entertainment AI has data analytic technology and material contracts with strategic partners discussed herein. Together these assets should enable GTChannel, Tagasauris and Entertainment AI synergistically to unlock value for the creators and consumers.

EAI Group's mission is to be a first mover in a video-first world or what is seen to be the coming Third Wave of media distribution following the broadcast and cable eras. The Third Wave will be marked by full mobility and interactivity with content available 24/7 on mobile devices. One early example of the Third Wave is Instagram's March 2019 pilot launch with select brands enabling consumers to purchase "in-app" while viewing pictures. EAI Group's objective is to embrace the Third Wave by enhancing consumers' experiences on video by enabling interactivity with the video and providing frictionless access to a multiplicity of discovery opportunities, encouraging video sharing among social communities, and even fulfilling impulse purchases from what audiences see in the video.

GTChannel engages with its consumers through YouTube and other social media platforms. More specifically, it is a multichannel network ("MCN"). A MCN is defined as a network that affiliates with content creators and offers services that include programming assistance and product and audience development. As creators deliver more content, the MCN becomes more attractive to consumers, which in turn attracts advertisers. MCNs tend to focus on specific audiences or themes. GTChannel's theme is automobiles and other lifestyle goods and services.

Based on 1H 2019 actuals, GTChannel, through its MCN, catered to a global audience of automotive and lifestyle enthusiasts representing over 6.3 billion video views (12.6 billion on a projected annualised basis) and a network of approximately 10,000 short-form video content creators. There are approximately 70 million non-paying YouTube subscribers across GTChannel's MCN creator partner channels. GTChannel currently manages approximately 370,000 videos and provides for 54 billion watch minutes on a projected annualised basis (having generated 27 billion minutes of watch time in the first six months of 2019). As discussed below, GTChannel's principal revenue driver today is (Google-owned) YouTube ad revenue. In 2018, the GTChannel MCN generated US$11.4m of gross ad revenue, (before deduction of YouTube and content creator commissions) an increase of more than 200 per cent. from 2017 matching the growth trajectory of the MCN's video views. Moreover, GTChannel has an Owned and Operated Site ("O&O") and, following the merger, this site and its content offerings can be used to harness data derived from Tagasauris' technology to provide other value-enhancing offerings for brands, sponsors and audiences.

Tagasauris is an AI and machine-learning technology company with a proprietary process and intellectual property (patent with an early priority date, trade secrets, and know-how) for enriching videos. Tagasauris' process, a combination of AI and human intervention (crowdsourcing), create data derivative assets from underlying media assets in a process conceptualized as a "Micro-moments Factory" - an extension of Google research into consumer behaviour described below. An analysis, enrichment, and linking process breaks apart each video by tracking objects in a video and, then tagging and linking various object tracks or segments in the video so that additional opportunities (related content and products) can be identified. The resulting micromoments can be published, indexed and discovered by search engines and served to audiences, such as GTChannel's, interactively while they are watching videos. Audiences can share these micromoments on social networks and instant messaging platforms. The video opportunities are offered in a panel underneath the GTC video player in an unobtrusive way.

The patent for the software used by Tagasauris is US Patent No. 9,489,636 "Task Agnostic Integration of Human and Machine Intelligence," which is jointly owned with New York University ("NYU"). NYU has granted Tagasauris an exclusive royalty-free licence to the patent for use by Tagasauris for the field of crowdsourced human computation related to knowledge work in online media.

The innovation combines inputs from human processing and machine processing and employs machine learning to improve the processing of individual tasks based on a comparison of human processing results. Once the performance of a particular task by machine processing reaches a threshold, the level of human processing used on that task is reduced. The processes based on this IP and trade secrets integrate human computation into data processing activities and have been used to produce data derivative annotations for some of the world's largest media companies.

GTChannel is a human-curated ecosystem which can be enhanced with Tagasauris and Entertainment AI technologies. The vast majority of GTChannel's streaming content has been created by its network of content creators and is not the result of licensing and syndication deals, web crawling, or indexing. Applying computer vision, natural language processing, and video sequence understanding of GTChannel's content can help GTChannel find and visualize patterns in the data and gain insight into how the audience behaviour and content are related. These insights can be used by GTChannel to inform decision making, from the colour palette used to design promotional video poster frames, to upcoming original content, to personalized marketing strategies. Micromoments extend the granularity of GTChannel's insights to concepts depicted or associated with the segmented subparts of these videos as audience seeking and sharing behaviour can be tracked at the micro-moment level. In this way, GTChannel's decision-making for providing audiences the video opportunities they seek can be increasingly driven by data insights.

EAI Group's O&O business strategy follows research by Google on consumer behaviour. Google has defined real-time consumer decision-making opportunities as micro-moments: "Instances when people reflexively turn to a device - increasingly a smartphone - to act on a need to learn something, do something, discover something, watch something, or buy something… Content-rich moments when decisions are made and preferences shaped." Revenue channels such as digital ads, paid subscriptions, brand sponsorships, commission on contextual commerce and strategic licensing are enhanced by the interactive nature of micro-moments.

The objective of the Acquisition and Fundraising is to combine Tagasauris and Entertainment AI's technologies with GTChannel's MCN content: enriched content attracts viewers and brands which in turn attract more creative content leading again to more viewers and more video opportunities for discovering, sharing, and purchasing.

While EAI Group's MCN and O&O strategy will focus in the near-term on GTChannel's MCN and O&O automotive and lifestyle audiences, Tagasauris may also provide brands and strategic partners with opportunities to access these enabling technologies to enrich video for other audience channels and passion groups. Entertainment AI already has two licensing opportunities, which are being developed with Strategic Investors - Sumitomo Corporation, a global trading and investment company with various audiences from sports to food, and Water Intelligence plc, an AIM-traded company with stakeholders interested in water leak detection and sustainability. Both strategic partners are participating in the Cross-Over Round. Both also have operations and consumers in the UK and globally and both seek video opportunities for their respective audiences that EAI Group can source and present. Given that the trend is toward a video-first world for many audiences, Entertainment AI plans to launch a "software as a service" offering. The goal of the Enlarged Group is to evolve from a global MCN to a global multiplatform network that brings together various audiences, brands, sponsors and creators, all exchanging opportunities ("MPN").

EAI Group seeks to disrupt the competitive landscape emerging from the tectonic shift taking place in the telecommunications, media and technology markets as consumers rapidly transition to short form video content on mobile screens. Telecom giants, such as AT&T and Altice, and tech giants, such as Facebook and Amazon, are moving fast to reposition themselves ahead of the Third Wave by acquiring content, audiences and technology for direct streaming and to harness personal audience data to create Netflix-style platforms. The objective is to take audiences one step further: rather than simply viewing short-form video content on mobile devices, viewers will be able to engage interactively with micro-moments introduced through Tagasauris' enriched video process. Viewers can play, pause, and resume watching and share videos and the most memorable, extreme, emotional, funny, best, cool parts of videos that they love on social media networks such as Facebook and Twitter.

With enriched video, GTChannel's MCN audiences around the world may access a cornucopia of opportunities that can inspire follow-on decisions based on micro-moments: Hypothetical illustrations include "Jim" in New York who may use the GTChannel MCN to watch test drives and walkthroughs while he shops for a new car. He may share videos of his favourite cars with friends who also may want to watch videos on the GTChannel MCN; if someone sees a car that they want to buy, the Tagasauris and third party technologies would enable them to do just that with fulfilment partners such as eBay Motors or Amazon. Alternatively, "Chris" in London may watch the GTChannel MCN for "how to" car videos and may have installed so many of the aftermarket performance parts that he found on the GTChannel MCN that he has gained the confidence to start his own automotive tuning and restoration business. Alternatively, "Zak" in Tokyo recognises that the MCN is his "path to market" for the Japanese domestic market OEM parts he sources and then sells in the United States and around the world. Finally, "Megan" in London really likes the sports watch from Richard Mille that she saw on a Jenson Button video. Rather than visiting the store in Mayfair, she buys it on-line with a one-click from an affiliated retailer that Tagasauris assists on the MCN. Meanwhile, from the opposite side of the marketplace, seeing the data on the consumer experience that the GTChannel MCN provides, corporate marketers ask Entertainment AI to advertise their products on GTChannel's Owned and Operated website.

Market Opportunity

Technological change, once again, has initiated a new era of entertainment: A Third Wave characterised by direct to consumer delivery. The objective of the Acquisition and Fundraising is to capitalise on this shift by enhancing the direct to consumer delivery experience, enabling increased interactivity with videos on internet connected devices, particularly mobile, and delivering micro-moments that motivate consumers to share content.

Looking at historic technological change, the "First Wave of TV" was marked by general broadcast through a handful of network broadcast channels such as the BBC in the United Kingdom and NBC in the United States. Programming was created by media companies producing what they believed might interest "typical" consumers. Technological change brought about a "Second Wave of TV", which was marked by the proliferation of channels whose content was transmitted via cable companies such as Viacom. Programming targeted particular consumer groups that gathered around niche cable channels. The content created was based on external research regarding the niche audiences of the cable channel but still was designed to appeal to a "typical" consumer of that cable channel. The Third Wave of TV, driven by artificial intelligence technology, has now accelerated the personalisation of content by understanding the individual consumer directly. Moreover, the shift to mobile devices enables programming to be delivered anywhere, anytime. Further, social media technology has encouraged content customisation for smaller, tighter communities - a focus on the "long-tail" as described by economists. Machine learning has now reinforced this direction by automating personalisation.

Netflix, with its Quantum Theory of genre tags that facilitate more personalised ways to discover content, is now arguably the most visible new entertainment company. Netflix now has more subscribers in the United States than the largest cable television providers combined. Meanwhile, Facebook, Google and Apple are investing into the content creation business as a way to leverage their AI technology. YouTube Red and Amazon Prime are examples of such offerings.

In order to remain relevant, traditional media companies, such as Disney (Disney +), and even broadcast companies, such as CBS (CBS All Access), are trying to reinvent their business models first to address direct-to-consumer demand for anytime-anywhere streaming delivery of content and then to figure out how to personalise discovery of and access to the underlying content based on individual consumer preferences (a further illustration can be found within the Admission Document posted to shareholders).

Consumer Trends

There are multiple market trends driving this shift to the Third Wave, including:

1. Internet streaming is increasingly popular and, in some jurisdictions, has become the preferred mode of delivery for consumers.

2. 'Cutting the cable' (i.e. ceasing to subscribe to traditional cable services) is a global phenomenon as evidenced by the rise in popularity of Netflix, Amazon Prime, Hulu and entrance of Disney and others into the marketplace (NowTV is an example in the UK market).

3. Video consumption has been largely responsible for Internet growth.

4. Consumers are utilising video, specifically reviews and demonstrations, as part of their online shopping experience.

5. Consumers favour "one click" shopping experiences while retailers are attempting to limit e-commerce abandonment.

The first and second trends are reinforced by data findings from market researcher, eMarketer. According to its findings, in 2017 an estimated 22.2 million people in the US cut the cord on cable, satellite, and telco TV services, a 33 per cent. growth over 2016, switching to streaming content. In Q1 2018, internet TV streaming services like Netflix, Amazon Prime, and Now TV surpassed pay TV for total number of subscriptions in the UK. In particular, Netflix continues to grow at an astonishing pace around the world (except for the United States where its growth is slowing). Netflix reported in February 2019 that it now has over 5m subscribers in France, ahead of the 4.76m who pay for Canal+ (as at the end of September 2018).

Consumption data highlights the magnitude of the switch. In 2016, Zenith OptiMedia reported that the average person worldwide spent 456 minutes daily consuming media. Of the 456 minutes, Internet consumption amounted to 127.5 minutes while traditional TV amounted to 174.9 minutes. By 2019, Zenith indicated that total media consumption has increased to 479 minutes. Importantly, the proportions have changed. Consumption of internet media jumped to approximately 170 minutes, while traditional TV fell to 167 minutes.

Video consumption has been largely responsible for internet growth. Video represents 75 per cent. of all Internet traffic. YouTube revealed in press events earlier this year that more than 500 hours of new video are uploaded each minute on YouTube. According to Cisco, video as a proportion of Internet traffic grew rapidly from 64 per cent. in 2014 to 75 per cent. in 2017. Cisco forecasts that globally, IP video traffic will account for 82 per cent. of all IP traffic by 2022. Cisco expects this trend to increase with internet video traffic growth estimated to be 33 per cent. annually. As the market for Internet video expands, so too will advertising spend. eMarketer reports that US$283 billion was spent worldwide on digital advertising in 2018 and expects spending to increase to US$517 billion by 2023. Video ads offer amongst the highest CPM yield for content businesses.

The popularity of short-form video content has led to recent entertainment offerings such as Instagram TV (IGTV was launched June 2018). In July 2018, former Disney head and DreamWorks founder, Jeffrey Katzenberg, raised US$1billion to create a studio that would produce short-form entertainment content. Younger consumers (Millennials and Gen-Z) increasingly demand short-form video. Technology leaders recognise the importance of consumer interactivity with content to fulfil audience impulses and perceived shorter attention spans. In March 2019, Instagram announced a pilot launch program with select brands such as Nike and Burberry. With its new "Checkout" feature, consumers will be able to click on a photo of a product and purchase it without leaving the app. Instagram will make an undisclosed commission on each purchase. As the select launch program has advanced, various reactions have emerged. On the positive side, in-app purchases enable a more seamless experience for consumers; for small and medium-size brands, one-click purchases level the playing field where big brands have more elaborate web presence. On the other hand, some believe that the select launch test fails to address the "discovery" and "sharing" aspects of the user journey that Instagram's parent, Facebook, seeks to encourage. Entertainment AI's objective is to address the "discovery" and "sharing" aspects and enhance that user journey with purchasing opportunities.

In the changing marketplace for short-form video, investors are looking for new ways to leverage MCN audiences. For example, Tastemade started as an MCN and has now morphed into a proprietary content studio producing short-form video content for food enthusiasts. In October 2018, Tastemade undertook a Series E financing raising approximately US$35 million, in which Amazon was a participant. Of note, Amazon also owns the up-scale supermarket chain Whole Foods. Now, the consumer's short-form video journey can begin with seeing a great meal on Tastemade and within a couple of clicks on Amazon that consumer can order the ingredients for home delivery from Whole Foods to make that meal at home. With the Acquisition and Fundraising, Entertainment AI seeks to create a similar, more frictionless consumer journey for automotive and lifestyle enthusiasts with possibilities for further expansion in to new audiences.

As the market for Internet video expands, advertising spend will follow. In 2017, Google reported that compared to just the prior year, smartphone users were 50 per cent. more likely to expect to purchase something immediately while using their smartphones. An eMarketer report indicates that US$283 billion was spent worldwide on digital advertising in 2018. The report forecasts this to grow at a CAGR of 12.8 per cent. to reach US$517 billion by 2023. In 2018, in the US, the consumer-packaged goods and retail industries accounted for approximately US$33 billion of digital advertising spend, with automotive the next largest at approximately US$14 billion. Travel, and media & entertainment combined for digital ad spend of US$21 billion in the US. Given this level of ad spend, GTChannel's MCN audience of automotive and lifestyle enthusiasts would be in a sweet spot for relevant brands. The US digital advertising market is projected to grow to US$151 billion in 2020 from US$108 billion in 2018 according to eMarketer.

From Market Opportunity to EAI Group Growth Strategy

EAI Group seeks to tap into rising consumer preferences for short-form video, mobility, community and in-app frictionless purchases. For example, with respect to its core audience according to Google, 92 per cent. of car buyers research online before they buy. Sixty-four percent of shoppers report that new formats like 360° video would convince them to buy a car without a test drive. According to Google, across YouTube, in the past two years, watch time of "test drive" videos has grown by more than 65 per cent., marking a trend in online video consumption similar to the surge in electronics reviews and unboxing videos a few years ago.

Operating Plan and Growth Strategy

EAI Group's operating plan starts with adding value to GTChannel's existing audience base - both MCN and O&O - with Tagasauris, Entertainment AI and third party technologies. In 1H 2019, the GTChannel MCN generated over 6.3 billion video views (12.6 billion annualised on a projected basis) and 27 billion watch minutes (54 billion annualised on a projected basis). In addition, the GTChannel MCN has more than 70 million subscribers across its creator partner channels on the demand side and a network of approximately 10,000 content creators on the supply side seeking to feed that audience. Over the longer run, as Entertainment AI works with its strategic partners to develop their respective audiences by infusing Tagasauris and third party technologies, EAI Group's vision is to expand its presence as a Third Wave media company (a further illustration can be found within the Admission Document posted to shareholders).

Five revenue streams for the operating plan:

·; Channel 1: MCN Advertising. As identified above, EAI Group's priority is growing the installed audience base. Google advertising revenue is based on audience views from videos uploaded to the GTChannel MCN. The technology creates an expanded video opportunity set which is expected to feed ad revenue growth: A growing audience visits the GTChannel MCN to explore videos, attracted to the site in part by the growing number of content creators supplying their content through GTChannel, which in turn increases the prospect of attracting brands and commerce brought to the table by technology.

·; Channel 2: O&O Contextual Commerce. Through Tagasauris, AI technologies and other third party technologies that enrich video content, EAI Group could earn revenue from one-click commerce transactions by its O&O audience. EAI Group would seek to fulfill such purchases through affiliated retail partners such as Amazon or eBay Motors. For each transaction, EAI Group would earn a commission on the price of the product purchased. For example, the average order of products purchased by automobile enthusiasts as cited by Auto Parts Warehouse is approximately US$175. Products may span an entire range of prices from small to large. Affiliates typically provide "tokens" such that EAI Group would still get a commission if the consumer left the brand site before purchasing but returned to purchase within a specified time.

·; Channel 3: Machine Learning ("ML") Microservices. Entertainment AI has strategic partners such as Sumitomo Corporation and Water Intelligence that are interested in activating consumer journeys based on micro-moments for their respective audiences. Tagasauris and third party technologies could be made accessible to its partners and deployed as a SAAS platform. Revenue earned from such deployment could take the form of subscription of service fees or professional services.

·; Channels 4 and 5: O&O Proprietary Content; SVOD; Brand Sponsorships. There are more than 70 million non-paying YouTube subscribers who are seeking more content across GTChannel's MCN creator partner channels. GTChannel has worked with brands on exploiting opportunities with respect to its MCN audience. Revenue is expected to be earned on Owned and Operated content, sponsorship agreements and premium subscription content. To this end, EAI Group seeks to apply the growth strategies of other leading Third-Wave technology companies for monetising subscribers such as with YouTube Premium and Amazon Prime.

(A further illustration can be found within the Admission Document posted to shareholders).

Growing the Revenue Channels; Entertainment AI Economics

As noted above, GTChannel's audience for its MCN is the starting point from which to unlock shareholder value because viewers are watching more and more video content. One way to illustrate EAI Group's growth plan is to consider the heuristic of a "Viewership Value Funnel." The Funnel depicted below represents four levels of micro-moment behaviour, each a step in a linear viewer journey from "I want to know, discover, share" (Awareness to Interest levels of engagement) to "I want to do and buy" (Decision and Action levels of engagement).

Because of the data that GTChannel's audience generates, EAI Group can help viewers whether the journey is linear - step by step through the funnel - or back and forth as the viewer enjoys the experience and considers, explores, then reconsiders different video opportunities (see two contrasting diagrams below). EAI Group's priority is growing its audience base and the associated Google advertising revenue. Tagasauris and third party technologies should create an expanded opportunity set of videos which is expected to feed ad revenue growth (a further illustration can be found within the Admission Document posted to shareholders).

In terms of the economics of an MCN, YouTube monetises viewership for GTChannel by selling ad revenue. The growth of gross sales is a direct reflection of the growth in GTChannel's audience views for ad placement. During 2017, gross sales for GTChannel's MCN ad placement (before deduction of YouTube and content creator commission) were US$3.7 million. During 2018, gross sales more than tripled to US$11.4 million (before deduction of YouTube and content creator commission). During the first half of 2019 gross sales continued at a strong pace reaching approximately US$8.7 million. From gross sales, YouTube administers the process and takes a 45 per cent. commission producing net revenue for GTChannel. From net revenue, GTChannel pays typically 70 per cent. to 80 per cent. to content creators as its cost of sales. To date, GTChannel has reinvested its margin to build its audience base.

The objective of the Acquisition and Fundraising is to introduce Tagasauris and third party technologies to reinforce the growth in gross revenue at GTChannel and lead to improvements in net margin. Tagasauris Micro-moments Factory processes add value for GTChannel's MCN network of content creators by making videos more relevant for Google search thus increasing their visibility for GTChannel's audience. Increased relevance, in turn, is expected to encourage more video supply from creators seeking eyeballs for their content. With an increased supply of videos and creators attracted to the technology, audience views would be expected to grow further and add to gross revenue. As a result of its enhanced technology offering, GTChannel may also have an opportunity to reduce the percentage of fees that it pays to creators as cost of sales for their content.

GTChannel also intends to develop its O&O property and leverage data that its audiences provide. The data which both GTChannel's MCN and O&O provide can be used to develop proprietary content for GTChannel's O&O. A content strategy driven by data science has already been deployed by Netflix (for example, script writing for popular shows like House of Cards) and is now being deployed by Amazon Prime.

The next stage of deepening viewer engagement after Awareness is Interest. Car enthusiasts comprise a passion group. Currently, there are more than 70 million non-paying YouTube subscribers across GTChannel's creator partner channels who want more content. "Micro-moments" expose subscribers to more Interest events with the expectation that some portion of those subscribers will convert to paid subscriptions. Brands and sponsors generally seek the kind of Interest data generated by micro-moments and platforms to provide targeted content and promotions to engage audiences.

The economics of providing video opportunities on GTChannel's O&O differs from the economics of providing content on GTChannel's MCN. With respect to the MCN, as noted above, the split of gross advertising revenue is 45 per cent. for YouTube and 55 per cent. for GTChannel. On the O&O, GTChannel retains 100 per cent. of gross advertising revenue. The effect with respect to the cost of sales is similar. For content delivered through the MCN, GTChannel typically pays content creators 70 per cent. to 80 per cent. of net revenue after YouTube's split. By contrast, for content delivered through GTChannel's O&O typically pays content creators 50 per cent. of net revenue. There are also synergies between the MCN and O&O properties as GTChannel develops more proprietary content for brands. For example, within the YouTube ecosystem, Google is open to partners executing a Reserved Media Placement strategy. With this strategy, GTChannel expects to be able to purchase some of Google's ad inventory and resell it to brands and sponsors at a higher price if the market permits.

Moving further down the Viewership Value Funnel to Decision, users with access to micro-moments can continue to fulfil their intentions - "I want to do and buy". EAI Group's mission is to enable frictionless transactions for viewers to empower them in real-time while watching video. EAI Group believes that a subset of those viewers who are at the Interest level of engagement - some of the previously registered 70 million non-paying YouTube subscribers for example - will make decisions, including purchase decisions, ranging from paid subscriptions to e-commerce.

To a degree, EAI Group's technology, know-how and trade secrets enable the viewer to be "in the virtual store." By deconstructing and enriching the video content, EAI Group enables viewers to be "in the store" rather than just viewing the store-front as would be represented by the video itself. Such "in the moment" presence enables the interactivity that marks the Third Wave. The unlocking of shareholder value could be significant if viewers are successfully guided down the Viewership Value Funnel from Decision to Action. With a one-click transaction, fulfilment partners such as eBay Motors would pay between 7 per cent. and 14 per cent. commission on the purchase. To realise revenue from the Action, GTChannel is not dependent on viewers that act on impulse. Affiliate tracking tokens would record a visit to a commerce site and GTChannel would receive commission credit if the viewer returned for a purchase within a certain period of time. Shareholder value would increase even if only a fraction of GTChannel's audience make their way down the Viewership Value Funnel to a purchase action producing commission.

The Viewership Value Funnel heuristic guides possible enlarged Group investors through a proposed consumer journey illustrating the different revenue streams that are part of EAI Group's growth plan. The plan starts, with Awareness arising from YouTube. However, consumers do not always proceed in linear fashion. Some may jump directly to action and purchase "at the point of inspiration"; others might jump to Decision, go back to share and discover more videos to further cultivate Interest and then return to Action. Whether consumers proceed in a linear fashion or not EAI Group can enhance the user experience. First, the consumption of video increases ad revenue and lead to both unpaid and paid subscriptions. Second, viewer Interests and the data gathered about the viewer journey is valuable to brands and sponsors that EAI Group plans to acquire as its customers. Finally, because of the tokens that product sites and fulfilment affiliates deploy to encourage Action, Entertainment AI will still retain commission opportunities for a period of time even if the consumer journey is nonlinear.

(a further illustration can be found within the Admission Document posted to shareholders).

Towards an MPN (Multi-Platform Network) Vision.

The economics of the Viewership Value Funnel applies to most groups of audiences around the world. Hence, Tagasauris and third party technologies will be utilised by Entertainment AI's strategic partners: Sumitomo Corporation (sports, food, shopping) and Water Intelligence plc (sustainability; home improvement). Sumitomo, has investments in another MCN that may benefit from Tagasauris and third party technologies. Based on the market data described above, this direction towards video consumption and value creation is only intensifying as media companies reposition themselves for the Third Wave, especially to embrace interactivity at the point of inspiration.

4. Competitive Landscape

The competitive landscape is marked by companies looking to incorporate technology into their content offerings so as to achieve greater "interactivity" and audience engagement. The Enlarged Group has a more complete model with audience and content assets through its MCN and O&O and technology assets to integrate content and e-commerce in a frictionless way via its proprietary Micro-moments Factory process. By comparison, Motor Trend ("MT") is a high end automotive content publisher located in the US. They have expanded from a magazine publisher to include web and other digital platforms. MT has a YouTube presence but it appears to be largely a mechanism to drive to their subscription video on demand (SVOD) product. MT does not have technology as a driving force for their business model. MT is not involved in e-commerce except around merchandise for their brand - such as Motor Trend t-shirts. Similarly, Motorvision.TV is another example of an automotive media company. Motorvision also has its own YouTube presence, but is also not an MCN nor does it utilise deep technology as a key driver for their business model.

As discussed above, the Third Wave is producing a dynamic repositioning of the marketplace as telecom, media and technology companies are moving rapidly through partnerships and acquisitions to address changing consumer behaviour that demands mobile, 24/7 content and interactivity.

Below is a schematic that illustrates the variety of transactions that have shaped the marketplace over the last few years to make the Third Wave a reality. The Enlarged Group seeks to lead part of this shift by enabling audiences - both its current audiences and those it seeks to attract - to discover, share and consume short-form video 24/7 and in the moment to fulfil a deeper user journey through the opportunities brought forward to them by its technology (a further illustration can be found within the Admission Document posted to shareholders).

This converging landscape of telecom, media and technology took a leap forward with the merger of CBS and Viacom. The Wall Street Journal reported that logic of the merger was to put the new ViacomCBS in a stronger position "to weather the trend of cable TV cord-cutting" (Second Wave of TV). As noted in the Wall Street Journal's coverage, ViacomCBS is looking to build a content factory that can supply programming to streaming leaders such as Netflix, Amazon and Apple. As discussed above, Amazon's interest extends from programming to e-commerce to leverage its technology platform. With its complementary assets of audience, content and technology, EAI seeks to lead the Third Wave and the convergence that is being driven by consumer demand for interactivity.

5. Reasons for the Acquisition

In line with its investing policy, the Company's stated strategy is to acquire a business that will deliver strong capital growth. The Directors believe that in the EAI Group they have identified a business that meets this criteria and which represents a strong and stable platform from which to expand both organically and via acquisition.

The Directors and Proposed Directors consider that the opportunity represented by the Acquisition is in the best interests of the Company and Shareholders for the following reasons:

·; the addressable market for personalised entertainment - specifically for automotive and enthusiasts, and lifestyle content - is global and growing rapidly;

·; the demand for innovation by traditional media companies, such as Disney and HBO, for business to business solutions that enable them to catch-up to next generation technology and media companies, such as Facebook, Google, Amazon and Netflix, is strong and growing;

·; GTChannel and Tagasauris are two well-positioned and complementary businesses that can capture an important and growing global audience that seeks personalised content and e-commerce opportunities;

·; EAI Group's operating assets have valuable operating attributes that should position it to grow given its: (i) status as a MCN on YouTube; (ii) growing audience of more than nine billion views in 2018; (iii) approximately 70 million unpaid YouTube subscribers across GTChannel's MCN creator partner channels that want more video; (iv) patented AI technology that enables more effective personalisation; (v) principals with operating experience in both direct to consumer execution, business to business execution and acquisitions;

·; the principals of EAI Group's two operating businesses have been working collaboratively on projects related to its "One Stop Shop" business model for the last three years, thus, evidencing that the businesses can work together and help lower barriers to integration;

·; Entertainment AI has already identified Strategic Investors who will provide funding for the Enlarged Group upon Admission. The Strategic Investors may enter into strategic sales agreements which the Directors and Proposed Directors believe will benefit the Enlarged Group by contributing to revenue and profits; and

·; As a US business with a global addressable market, the Enlarged Group is, in the view of the Directors and Proposed Directors, unlikely to be adversely affected by potential UK economic disruption as a result of Brexit.

6. Current Trading and Prospects

Blockchain

Blockchain is currently an investing company and does not trade. Its results for the year ended 30 June 2019 were announced on 4 September 2019 and showed net assets of £992,421 at the balance sheet date.

Entertainment AI

Other than transferring technology assets and material contracts and creating the strategy of the EAI Group, Entertainment AI has not traded since inception.

GTChannel

In the twelve months to 31 December 2018, GTChannel's MCN generated gross advertising income of approximately US$11.4 million (prior to deduction of YouTube and content creator commissions), leading to net revenues of US$6.5 million from more than 8.5 billion video views. GTChannel's trading since 31 December 2018 has remained robust with continued increases in revenues and video views across GTChannel and its partner channels. In the first 6 months of 2019, GTChannel's MCN generated gross advertising income of US$8.8 million (prior to deduction of YouTube and content creator commissions), leading to net revenues of US$5.9 million, an increase of approximately 88 per cent. over the prior year.

Tagasauris

During 2018, Tagasauris generated limited revenues as it focused on product development to enable offerings to capture the ability of customers to identify micro-moments and exploit these. Despite the focus on product development, it generated approximately US$80,000 through sales of its technology to a multi-national media company.

Prospects for the Enlarged Group

Upon Admission, the Directors and Proposed Directors believe that the Enlarged Group will be well positioned to fund growth in its existing revenue channels, and invest in the O&O platform, which is expected to substantially alter the Enlarged Group's scalability and gross margin profile. The Directors and Proposed Directors believe that GTChannel's organic viewership growth will provide a strong base from which to grow the Enlarged Group revenue streams both through existing products and new product development.

7. Directors, Proposed Directors and Senior Management

Directors

Jonathan Edward Hale, Non-Executive Chairman (aged 46)

Jonathan Hale was chief financial officer of 32Red Plc, the AIM listed Gibraltar-based online gaming company, between 2006 and March 2018. As chief financial officer, Jonathan was instrumental in several corporate transactions including the sale of the Betdirect sports betting business to Stan James in 2007 and the acquisition of the Roxy Palace online casino business in 2015. In February 2017, Kindred Group Plc made an offer to acquire the entire share capital of 32Red Plc for £176 million and the takeover completed on 5 June 2017. Prior to his appointment at 32Red Plc, Jonathan qualified as a chartered accountant with PricewaterhouseCoopers in 1998, before leaving to work in the finance department of Capital Corporation Plc, an operator of high roller land-based casinos. Following the sale of Capital Corporation Plc to Stanley Leisure Plc, Jonathan co-founded Property Internet Plc and Alan Brazil Leisure Plc, and served as finance director of the Sports Café Group for four years between 2001 and 2005.

Rodger David Sargent, Chief Executive Officer (aged 47)

Rodger Sargent has been the founder and finance director of a number of quoted and private companies over the past fifteen years. Rodger has also been a director of Big Blue Broadband Plc, Audioboom Group Plc and S4 Capital plc. He previously ran the family office of Betfair founder, Andrew Black. He qualified as a chartered accountant with PriceWaterhouse Cooper, London in 1996.

Proposed Directors

On Completion, it is proposed that Jonathan Hale and Rodger Sargent will resign from the Board and that the following will be appointed to the New Board of the Enlarged Group:

Dr. Patrick Jude DeSouza: Proposed Non-Executive Chairman (aged 61)

Since 2010 Patrick has been the Executive Chairman of Water Intelligence plc, a rapidly growing AIM quoted business focusing on technology transformation of the water industry. He has 25 years of operating and advisory leadership experience with both public and private companies in media and technology and asset management industries. Over the last 15 years, Patrick has also invested in and incubated technology companies centred at Yale University. Patrick has served at the White House on the National Security Council. He is a graduate of Columbia College, Yale Law School and Stanford Graduate School. He is a member of the Council on Foreign Relations.

Todd Lawrence Carter: Proposed Chief Executive Officer (aged 56)

Todd is the Co-Founder & CEO of Tagasauris. Prior to Tagasauris, he was Co-founder/President of OWL Multimedia, Inc. a music search technology company centred at Yale University and Co-Founder/CTO of Busy Box, a publicly traded technology company. He co-authored the AXS File Concatenation Protocol, an early standard for image metadata representation that found broad adoption in the printing and publishing industries including by Reuters, Agence France Presse, and PressLink. Todd was also a member of ISO/IEC JTC1/SC29/WG11, more commonly known as the Moving Pictures Experts Group, a working group that develops international standards for audio-visual information representation.

Stephen Scott Schlichter: Proposed Executive Director (aged 52)

Scott is the Co-Founder & CEO of GTChannel. Prior to GTChannel, Scott launched and managed Hysteria, Inc., Dogma Studios, and advised several start-ups including JusCollege. He has 25 years of experience in entertainment and digital video and has launched several media focused start-ups with clients including major Hollywood studios, network television companies and cable channels.

David Anton: Proposed Non-Executive Director (aged 57)

David is Chief Executive Officer of Anton & Partners, a leading advertising, branding, and marketing communication company with a 20-year track record of creating impact for some of the world's most notable brands in fashion, lifestyle, financial and automotive sectors. David is a serial entrepreneur and has founded various successful companies. He is an investor in and advisor to Village Roadshow Productions, a leading movie production company. He is a graduate of Columbia College.

Michael Joseph Kelly Jr: Proposed Non-Executive Director (aged 62)

Mike is the Co-Founder of Kelly Newman Ventures, LLC, an advisory and investment firm. He was formerly Chief Executive Officer of The Weather Channel Companies, a leading weather-focused media and technology company owned by a consortium made up of The Blackstone Group, Bain Capital, and NBCU, Prior to that, he served as the President of AOL Media Networks, a division of Time Warner where he pioneered the media network strategy through a number of successful acquisitions such as Advertising.com and Tacoda. He currently serves on the Board of Directors of Cars.com (NYSE:Cars), is the non-exec Chairman of BGF backed Dianomi LTD, a UK based marketing platform and is a member of the Board of Quantcast Corporation, a US based technology company that specialises real-time advertising, He is a graduate of the University of Illinois, Champaign-Urbana.

Akiko Mikumo: Proposed Non-Executive Director (aged 66)

Akiko is a retired partner at Weil Gotshal & Manges LLP, one of the world's leading law firms. She has over 35 years of mergers and acquisitions, securities and governance experience. Her clients have included some of the leading media and technology companies and investment firms. Akiko founded the Hong Kong office of Weil and led the growth of its London office. She served as a member of the firm's Management Committee. Ms. Mikumo is a director of Cambridge Science Corporation, a biotech investment company in Cambridge Massachusetts. Recently, she served as a fellow at Harvard's Advanced Leadership Initiative. She is a graduate of University of California, Berkeley and New York University School of Law.

Senior Management

Taro Koki: Proposed Senior Manager (aged 49)

Taro is currently President and Co-founder of GTChannel. Taro was previously Chief Executive Officer of Zigzag Asia, Director of Hungry for Words KK and started his career in Tokyo with Mitsui & Co. Ltd. Taro was also a race reporter for ESPN during GTChannel's partnership with the IMSA racing series. Taro has over 15 years of experience in the media space in both Asia and the US. He is a graduate of Waseda University - Tokyo.

Adrian Laurence Hargrave: Proposed Chief Financial Officer (aged 39)

Adrian is currently VP, Corporate Development and Investor Relations at Water Intelligence, having joined from finnCap Ltd in 2018. He was a Qualified Executive for 14 years, having previously worked at Deloitte LLP, Citigroup and Cenkos Securities Plc. He has extensive experience working with AIM-listed companies. Adrian graduated from Cambridge University with a degree in Economics.

8. Principal terms and conditions of the acquisition

On 10 September 2019, the Company and MergerCo entered into the Acquisition Agreement with each member of the EAI Group, GTC MergerCo, TAG MergerCo and certain Vendors pursuant to which the Company has conditionally agreed to acquire the entire issued capital (outstanding immediately prior to the time of the Acquisition) of each of Entertainment AI, GTChannel and Tagasauris via a merger with each of MergerCo, GTC MergerCo and TAG MergerCo. The consideration for the Acquisition is £12.19 million, to be satisfied wholly by the issue of the Consideration Shares fully paid up on Completion.

Completion of the Acquisition Agreement is conditional, amongst other things, upon:

·; Shareholder approval of the Resolutions;

·; a majority of Tagasauris' shareholders approving of the terms of the Acquisition; and

·; the Company's cash and net cash position (inclusive of recoverable value added tax, which will be recoverable post completion of the Proposals) being not less than £1 million.

The Acquisition Agreement contains representations, warranties and covenants given by the principal Vendors and also contains representations and warranties that are given by the EAI Group, each of which are limited in time and scope. In addition, the principal Vendors have agreed to indemnify the Company on a several basis for breaches of all representations and warranties given by them and with respect to the Company within the EAI Group of which they are stockholders on the date of the Acquisition Agreement. Under the Acquisition Agreement the limitation period for:

·; title, authority and tax representation and warranty claims is 6 years from completion of the Acquisition; and

·; all other representation and warranty claims is 12 months following completion of the Acquisition.

The principal Vendors shall not be required to indemnify the Company under the Acquisition Agreement unless the aggregate losses in respect of any representation and warranty claim exceeds 1 per cent. of £12.19 million. The principal Vendors' maximum liability for claims relating to the representations and warranties under the Acquisition Agreement is limited to an amount equal to 17.5 per cent. of the value of the Consideration Shares. The Purchaser's recourse is limited to the Consideration Shares, rather than cash (unless from the proceeds of sale of such shares).

On the closing date of the Acquisition the Company will file certificates of mergers with the Secretary of State of the State of Delaware, United States of America. Upon the certificates of merger taking effect MergerCo, GTC MergerCo and TAG MergerCo, shall be merged with and into Entertainment AI, GTChannel and Tagasauris respectively, with Entertainment AI, GTChannel and Tagasauris existing as the surviving corporations.

The Acquisition Agreement is governed by the laws of the State of Delaware.

Following Admission the Consideration Shares will rank pari passu with the Existing Issued Share Capital (as consolidated pursuant to the Share Capital Consolidation). Application will be made forthe admission of the Enlarged Issued Share Capital to trading on AIM which is expected to take place on 30 September 2019.

Financial effects of the Acquisition

An unaudited pro forma statement of net assets of the Enlarged Group, prepared for illustrative purposes only, showing the impact of the Acquisition on the Enlarged Group is set out in Part IV of the Admission Document.

9. FINANCING OF THE ACQUISITION

The Company will finance the Acquisition through the issuance of the Consideration Shares.

10. THE STRATEGIC INVESTORS

As part of the Acquisition, two strategic investors, Water Intelligence plc and Sumitomo Corporation agreed to invest an aggregate of £1.25million in the Cross-Over Round as outlined below. The Directors and Proposed Directors believe that the Strategic Investors will improve the prospects of the Enlarged Group as they will provide early revenue and their support as Strategic Investors provides third party validation for the Enlarged Group's strategy. The Company has agreed preferential outline terms on which the Strategic Investors will be able to exploit the Enlarged Group's technology.

Water Intelligence is a rapidly growing AIM quoted business focused on technology transformation of the water industry and an existing investor in EAI Group. Patrick DeSouza, the Executive Chairman of Water Intelligence Plc and a co-founder of EAI Group will be on the New Board as Non-Executive Chairman. Mr DeSouza and Water Intelligence, in which he holds a 28.3 per cent shareholding, have entered into a relationship agreement with the Company which is detailed in the Admission Document. Water Intelligence has a right to a New Board observer, for so long as Water Intelligence holds 2 per cent. of the Company's issued share capital.

Sumitomo Corporation, a member of the Fortune Global 500 with 2018 global net income of $2.9 billion, conducts business activities in a wide range of industries on a global scale. Sumitomo Corporation has a right to a New Board observer, for so long as Sumitomo Corporation holds the lesser of the Cross-Over Shares issued to it in the Cross-Over Round or 2 per cent. of the Company's issued share capital.

11. THE FUNDRAISING

In order to fund the Enlarged Group's organic expansion plans, the Company is seeking to raise approximately £8.61 million (gross) (£7.31 million net of expenses) pursuant to the Fundraising through the issue of the Cross-Over Shares at the Cross-Over Price and the Placing Shares at the Issue Price.

The Strategic Investors, being Sumitomo Corporation and Water Intelligence Plc, have agreed to invest in the Company pursuant to the Cross-Over Round and have entered into binding commitments to subscribe for the Cross-Over Shares for a total consideration of £1.25 million. A summary of the Cross-Over Subscription Letters and other associated documentation is provided in the Admission Document. The Cross-Over Shares will represent approximately 6.95 per cent. of the Enlarged Issued Share Capital immediately following Admission. The Cross-Over Round is not conditional on the successful completion of the Placing, which means it will provide a base level of working capital for the Enlarged Group following Admission whether or not the Placing proceeds.

The Placing Shares will represent approximately 32.73 per cent. of the Enlarged Issued Share Capital immediately following Admission. Further details of the Placing Agreement which contains the terms upon which the Placing is being undertaken are described in the Admission Document. The Placing is not being underwritten. Following Admission the Fundraising Shares will rank pari passu with the Existing Issued Share Capital.

Application will be made for the admission of the Enlarged Issued Share Capital to trade on AIM which is expected to take place on 30 September 2019.

12. USE OF PROCEEDS

The funds from the Fundraising are expected to be used to execute the Enlarged Group's growth strategy outlined above: growth of the MCN; introduction of technology offerings to audiences; development of content for the owned and operated site including for subscriptions and brands; and implementation of machine learning microservices. As noted, these dimensions of the plan are synergistic. To that end, based on a £8.61 million fundraise and existing cash from within the Enlarged Group, the Enlarged Group expects to allocate approximately £3 million to execution of products and implementation of software as services model, £2 million for content creation, and the remainder for working capital and balance sheet strength that will allow the Enlarged Group to accelerate its growth plan through new and existing opportunities.

Should more capital be raised as part of the fund raise, the Directors and Proposed Directors are prepared to accelerate the Enlarged Group's growth plan with a further strengthened balance sheet.

13. WARRANTS

The Company, WH Ireland and Dowgate have entered into a warrant instrument whereby, conditional upon Admission, WH Ireland and Dowgate will be issued with warrants to subscribe for in aggregate 170,940 Ordinary Shares at 130 per cent. of the Issue Price which are exercisable over a one year period commencing on Admission, after which time the warrants will expire and become null and void. The exercise price and the number of Ordinary Shares issuable upon exercise are both subject to adjustment in certain circumstances, including a subdivision or consolidation of the Ordinary Shares.

14. INCENTIVISATION ARRANGEMENTS

The Directors and Proposed Directors believe that the success of the Enlarged Group will depend to a high degree on management and other members of staff being appropriately motivated and rewarded. To this end the Company intends to make options available to current and future personnel up to a maximum of 15 per cent. of the Enlarged Issued Share Capital for a period of 12 months, unless it has received written consent from WH Ireland and Dowgate. Upon Admission, the Company will issue options over 4,884,604 Ordinary Shares to certain directors, staff and key contractors. These options will be issued at the Issue Price and will vest immediately, with half exercisable after 1 year and the remainder after 2 years. Post-Admission the Company intends to put in place a share option plan and it is anticipated that any Options will be issued at a premium to the prevailing share price at the time, will only be exercisable after three or more years and will vest subject to relevant performance criteria at the time of issue.

15. DIVIDEND POLICY

The Directors and the Proposed Directors believe that the Enlarged Group will continue to have the potential to be cash generative in the future and recognise the importance of dividend income to shareholders. Any future dividends will depend on the Enlarged Group's profitability, cash position and prospects, whilst also having regard to the future cash demands of the business. The Directors and Proposed Directors do not anticipate the proposal or any payment of any dividends during the current financial year to 31 December 2019.

The Proposed Directors may amend the dividend policy of the Company from time to time and the above statement regarding the dividend policy should not be construed as any form of profit or dividend forecast.

16. THE TAKEOVER CODE, THE CONCERT PARTY AND THE PROPOSED WAIVER

The Concert Party is made up of the GTC Concert Party Members, being certain GTC Vendors, and the Tag Concert Party Members, being certain TAG Vendors who are presumed under the Takeover Code to be acting in concert, by virtue of presumption 9 of the definition of acting in concert, whereby shareholders in a private company who sell their shares in that company in consideration for the issue of new shares in a company to which the Takeover Code applies, are presumed to be acting in concert. The Panel has agreed to rebut presumption 9 of the definition of acting in concert in respect of the remaining GTC Vendors and TAG Vendors as these investors are historic investors who have little or no personal, social or business connections with the members of the Concert Party. Members of the Concert Party include Patrick DeSouza, Stephen Scott Schlichter and Todd Carter, who are Proposed Directors, Water Intelligence plc, a Strategic Investor and those deemed to be acting in concert due to their social, business or or personal connections with the members of the concert party.

Conditional upon the Waiver Resolution, upon Admission, the Concert Party will (excluding Options held by them) be interested in an aggregate of 23,809,153 Ordinary Shares, representing approximately 47.66 per cent. of the Enlarged Issued Share Capital. Should the Concert Party exercise their options over Ordinary Shares (and assuming no new shares are issued in the meantime), the Concert Party will hold 26,862,824 Ordinary Shares, representing a maximum of approximately 50.67 per cent. of the Enlarged Issued Share Capital as enlarged by such exercise.

The Company has applied to the Panel for a waiver of the obligation of the Concert Party under Rule 9 of the Takeover Code that would otherwise arise as a result of the issue of the Consideration Shares and Fundraising Shares to the Concert Party or any subsequent exercise of Options by it in order to permit the Acquisition and Fundraising to proceed without triggering an obligation on the part of the Concert Party to make a general offer to Shareholders. Subject to the approval of the Shareholders of the Waiver Resolution, to be taken on a poll in General Meeting, the Panel has agreed to waive the obligation to make a Rule 9 Offer. To be passed, the Waiver Resolution will require a simple majority of the votes cast on a poll by Shareholders attending and voting at the General Meeting.

Further information on the Concert Party and Rule 9 of the City Code will be set out in the Admission Document.

17. CORPORATE GOVERNANCE

The Directors and Proposed Directors support high standards of corporate governance. Accordingly, the New Board will meet regularly throughout the year and all necessary information will be supplied to the New Board on a timely basis to enable it to discharge its duties effectively. Additionally, special meetings will take place or other arrangements will be made when New Board decisions are required in advance of regular meetings.

The Board has established financial controls and reporting procedures which are considered appropriate given the size and structure of the Enlarged Group. It is the intention of the New Board that these controls will be reviewed regularly in light of the future growth and development of the Enlarged Group and adjusted accordingly.

Share dealing code

The Directors and Proposed Directors intend to comply with Rule 21 of the AIM Rules for Companies relating to directors' and applicable employees' dealings in the Company's securities. Accordingly, the Company has adopted a share dealing code for dealings in securities of the Company by Proposed Directors, persons discharging managerial responsibility and applicable employees which is appropriate for a company whose shares are traded on AIM. This constitutes the Company's share dealing policy for the purposes of compliance with United Kingdom legislation including the Market Abuse Regulation and the relevant part of the AIM Rules for Companies.

It should be noted that the insider dealing legislation set out in the United Kingdom Criminal Justice Act 1993, as well as provisions relating to market abuse, will apply to the Company and dealings in the Ordinary Shares.

Compliance with the Corporate Governance Code

The Directors and the Proposed Directors recognise the importance of sound corporate governance and intend that the Company will comply with the provisions of the QCA Corporate Governance Code, as published by the Quoted Companies Alliance, insofar as they are appropriate given the Company's size, nature and stage of development. The QCA Corporate Governance Code sets out a standard of minimum best practice for small and mid-size quoted companies, particularly AIM companies. Further details on compliance with the QCA corporate governance code will be set out in the corporate governance statement on the Enlarged Group's website; www.entertainmentai.co.uk.

The Directors and the Proposed Directors have established an Audit Committee, a Remuneration Committee, a Nominations Committee and a Strategy Committee with formally delegated duties and responsibilities as described below:

Audit committee

The Audit Committee has the primary responsibility for monitoring the quality of internal control, ensuring that the financial performance of the Company is properly measured and reported on and for reviewing reports from the Company's auditors. The Audit Committee will meet at least twice a year at appropriate times in the reporting and audit cycle and otherwise when required. The Audit Committee will also meet with the Company's auditors at least once a year.

From Admission the Audit Committee will comprise Michael J. Kelly, David Anton, Akiko Mikumo and will be chaired by Patrick DeSouza.

Remuneration committee

The Remuneration Committee is responsible for the review and recommendation of the scale and structure of remuneration for executive directors and other designated senior management, taking into account all factors which it deems necessary. The Remuneration Committee considers all aspects of the executive directors' remuneration including pensions, benefits and share option awards. The remuneration of the non-executive directors will be a matter for the chairman and the executive members of the New Board. No director will be involved in any decision as to his or her own remuneration. The Remuneration Committee will meet at least twice a year and otherwise when required.

In exercising this role, the Directors shall have regard to the recommendations put forward in the QCA Corporate Governance Code and, where appropriate, the QCA Remuneration Committee Guide and associated guidance.

From Admission the Remuneration Committee will comprise Michael J. Kelly, David Anton and will be chaired by Akiko Mikumo.

As the Remuneration Committee will comprise all of the Independent Non-Executive Directors, this committee will also consider related party matters as they arise.

Nominations Committee

The Nominations Committee will be responsible for consideration of future succession plans for Board members as well as to whether the New Board has the skills required effectively to manage the Enlarged Group. The Nominations Committee will also be responsible for, amongst other things, identifying and nominating members of the Board, recommending Directors to be appointed to each committee of the Board and the chair of each such committee. The Nominations Committee will also arrange for evaluation of the Board. The Nominations Committee will meet on an ad-hoc basis and from Admission will comprise Patrick DeSouza, Akiko Mikumo and will be chaired by Michael J. Kelly.

Strategy Committee

The strategy committee will be responsible for reviewing and considering the following matters: (i) control over the strategy development and its implementation; (ii) acquisitions and business sale transactions; (iii) major investment projects, investment budget allocation and key financial targets.

From Admission the Strategy Committee will comprise Patrick DeSouza, Akiko Mikumo, Michael J. Kelly and will be chaired by David Anton.

Advisory Panel

The Company has established an Advisory Panel, comprised of Charlie Collier, Thomas Glocer and Chris Welty. The purpose of the Advisory Panel is to enable the Proposed Directors to draw upon the skills of these industry experts as well as supporting the Enlarged Group in accessing growth opportunities via the network of contacts of each member of the Advisory Panel. The Advisory Panel will meet on an ad-hoc basis and be available for consultations with various Proposed Directors as required.

18. IRREVOCABLE UNDERTAKINGS

Jon Hale and Rodger Sargent have given irrevocable undertakings to the Company to vote in favour of the Resolutions to be proposed at the General Meeting (and, where relevant, to procure that such action is taken by the relevant registered holders if that is not one of them) in respect of their beneficial holdings totalling, in aggregate, 2,325,000 Ordinary Shares, representing approximately 6.37 per cent. of the Existing Issued Share Capital.

Further details of the irrevocable undertakings received by the Company are set out in the Admission Document.

19. LOCK-IN AND ORDERLY MARKET ARRANGEMENTS

Each of the Locked-In Persons and the Strategic Investors has undertaken to the Company and the joint brokers, WH Ireland and Dowgate, that they will retain their entire interest in and not dispose of any interest in Ordinary Shares during the period of twelve months from the date of Admission.

Furthermore each of the Locked-In Persons and Water Intelligence plc has also undertaken to the Company and to the joint brokers that they will retain their entire interest in and not dispose of any interest in Ordinary Shares at any time from 12 to 24 months from Admission, except with the prior written consent of WH Ireland (as nominated adviser) and Dowgate or their successors (whose consent will not be unreasonably withheld or delayed, provided such disposal is in accordance with orderly market principles) and then only through either the joint brokers to facilitate the execution of the trades. Sumitomo Corporation has agreed to notify the joint brokers if it intends to dispose of any interest in Ordinary Shares at any time from 12 to 24 months from Admission.

These restrictions are subject to certain limited exceptions, as described below and in the Admission Document.

20. AUTHORITY FOR OFF-MARKET REPURCHASES

The Acquisition involves the acquisition of three separate entities: GTChannel, Tagasauris and Entertainment AI and the shareholder re-organisation of two of those companies. The Acquisition involves the merging of these three entities into Blockchain subsidiaries. The entities have received advice that the structure constitutes a tax-free reorganisation. It is possible that the tax advice may be challenged and may produce an unexpected tax. In addition, pursuant to the Acquisition Agreement, any liability for the Locked-In Vendors is limited to 17.5 per cent. of the value of their Consideration Shares and the Company's recourse is limited to the Consideration Shares. Should such a claim be made, the Company might require the ability to repurchase Consideration Shares.

Given the lock-in arrangement described in paragraph 19 of this Part 1, pursuant to which the Locked-In Vendors have agreed to lock-in all of their Consideration Shares, should there be a contingency such as an unexpected tax bill or a warranty claim pursuant to the Acquisition Agreement, such lock-in limits the ability of a Locked-In Vendor to satisfy such a contingency with cash.

Under these limited circumstances described above, the Company and the Joint Brokers will permit some of the Consideration Shares to be released from the lock-in arrangements in order to satisfy relevant liabilities. The maximum amount of Consideration Shares to be released from the lock-in arrangements is expected to be less than one-third of the Consideration Shares for the Locked-In Vendors in aggregate. The Locked-In Vendors have agreed that 100 per cent. of their Ordinary Shares shall remain under lock-in arrangements should no relevant liabilities arise.

In circumstances where the lock-in arrangements are waived, the Company and Locked-In Vendors have agreed, in the first instance, to request that WH Ireland and Dowgate or their successors permit the disposal of the required number of Consideration Shares to generate sufficient net funds to pay the relevant liability as it falls due through a market transaction. Such permission is not to be unreasonably withheld, however, should such permission not be granted or it is not possible to meet the tax bill or warranty claim in a market transaction, the Company has agreed to buyback such number of Ordinary Shares from the Locked-In Vendors that will generate sufficient net funds to pay the relevant liability as it falls due.

For the Company to be able to undertake an off-market repurchase of the relevant Consideration Shares:

·; Shareholders would need to authorise the Board, at the General Meeting, to undertake an off-market repurchase and would need to approve the form of off-market SPA set out in Part VII of the Admission Document. The agreement provides for the price of the acquired shares to be the Issue Price or (if lower), a price that reflects standard market practice with a price payable within 5 per cent. of the volume weighted average closing mid-market price of the Company's shares for the 20 business days prior to the day the purchase is agreed.

·; Shareholders will also need to approve, at the General Meeting, a reduction of the Company's share premium account in order to create a distributable reserve to finance the buyback;

·; Subsequently the Company will need the sanction of the Court to the reduction of the share premium account; and

·; before entering into an off-market SPA with a related party, the independent directors on the Board may need to consult with the Company's nominated adviser prior to concluding whether the terms of the buyback are fair and reasonable insofar as shareholders are concerned.

Alternatively and subject to the requirements of the Act, the Company or a member of the Enlarged Group may extend a loan to the Locked-In Vendors to generate sufficient funds to meet relevant liabilities as they fall due. Any such loan is likely to require the Board to consult with the Company's nominated adviser prior to concluding whether the proposed terms are fair and reasonable insofar as shareholders are concerned.

21. RELATIONSHIP AGREEMENT

The Company, WH Ireland, Patrick DeSouza and Water Intelligence Plc (a Strategic Investor) (as significant shareholders) have entered into a relationship agreement, which is conditional upon Admission and will be in effect at all times from time to time when such significant shareholders and/or their connected persons together hold the legal and/or beneficial title to, or the voting rights attaching to Ordinary Shares which constitute, in aggregate, not less than 15 per cent. of the number of Ordinary Shares in issue.

Pursuant to the agreement Patrick DeSouza and Water Intelligence Plc, in their capacity as substantial shareholders, have given various undertakings to the Company regarding the relationship between each of them, their connected persons and the Company.

In particular, Patrick DeSouza and Water Intelligence Plc have each agreed not to take any action that would result in the Company not being able to carry on its business independently of Patrick DeSouza and Water Intelligence Plc or their connected persons. The agreement will automatically terminate upon the earlier of: the execution of an agreement between all the parties to terminate the agreement; and the Ordinary Shares ceasing to be traded on AIM or some other recognised stock exchange. If the interest of Water Intelligence and Pat DeSouza in Ordinary Shares fall below 15 per cent., the agreement will cease but if within one year of the agreement ceasing to apply, those interests reach or exceed 15 per cent., then the provisions of the agreement will automatically re-apply.

22. ADMISSION AND CREST SETTLEMENT

It is intended that if the Acquisition and Fundraising are completed the admission of the Company's Existing Ordinary Shares to the standard segment of the Official List and to trading on the Main Market will be cancelled (immediately prior to Admission) and the Enlarged Issued Share Capital will be admitted to trading on AIM. Consequently, application will be made to London Stock Exchange for the Enlarged Issued Share Capital to be admitted to trading on AIM.

Admission is expected to take place at 8.00 a.m. on 30 September 2019.

The Existing Ordinary Shares and (following the Share Capital Consolidation) the Ordinary Shares (including the Consideration Shares and the Fundraising Shares) are and will be eligible for CREST settlement. CREST is a paperless settlement procedure enabling securities to be evidenced otherwise than by a certificate and transferred otherwise than by a written instrument in accordance with the requirements of CREST. The Articles permit the holding and transfer of Ordinary Shares to be evidenced in uncertificated form in accordance with the requirement of CREST. Accordingly, following Admission, settlement of transactions in Ordinary Shares may take place within the CREST system if the relevant Shareholder so wishes. CREST is a voluntary system and Shareholders who wish to receive and retain share certificates will be able to do so

The Ordinary Shares will have the ISIN number GB00BK6SHS41. The Ordinary Shares will not be dealt on any other recognised investment exchange and no application has been or is being made for the Ordinary Shares to be admitted to any other such exchange.

23. SHARE CAPITAL CONSOLIDATION

Under the Share Capital Consolidation it is proposed that every 12 Existing Ordinary Shares be consolidated as one Ordinary Share. Accordingly, the proportion of Existing Ordinary Shares held by each Shareholder immediately before the Share Capital Consolidation will, save for fractional entitlements (which are discussed further below), be the same as the proportion of Ordinary Shares held by each Shareholder immediately after the Share Capital Consolidation. In the event that the number of Existing Ordinary Shares held by a Shareholder is not exactly divisible by 12, the Share Capital Consolidation will generate an entitlement to a fraction of an Ordinary Share. Any Ordinary Shares in respect of which there are such fractional entitlements will be aggregated and sold in the market for the best price reasonably obtainable and the net proceeds of such sale distributed in due proportion among those Shareholders entitled to a fraction of an Ordinary Share except that any amount otherwise due to a member of less than £3 will be retained for the benefit of the Company. The Consolidated Ordinary Shares will have ISIN number GB00BK6SHS41. Any Shareholder holding fewer than 12 Existing Ordinary Shares on 30 September 2019, being the record date for the Share Capital Consolidation, will cease to be a Shareholder. The Directors and Proposed Directors believe that the Share Capital Consolidation will result in a more appropriate number of shares in issue given the Company's size.

24. CHANGE OF NAME

Pursuant to the power given to the Board in the Articles, it is proposed to change the name of the Company to Entertainment AI Plc with effect from Admission. Upon the change of name being registered at Companies House, the Company's website address will be changed to www.entertainmentai.co.uk.

25. GENERAL MEETING

The Admission Document contains a notice convening a General Meeting to be held on 27 September 2019 at 10.15 a.m. at the offices of Fladgate LLP at 16 Great Queen Street, London, WC2B 5DG at which the Resolutions as stated in the Admission Document will be proposed.

ADMISSION AND ACQUISITION STATISTICS

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Notes:

1. All of the above timings refer to London time unless otherwise stated.

2. Each of the times and dates above is subject to change. Any such change will be notified by an announcement on a Regulatory Information Service (as defined in the AIM Rules for Companies).

3. The times and dates above assume the passing at the General Meeting of the Resolutions, Completion of the Acquisition and completion of the Fundraising and Admission.

4. Events listed in the above timetable following the General Meeting are conditional on the passing at the General Meeting of certain of the Resolutions.

defintiions and glossary

GLOSSARY