Hedera has used the SAFT proceeds to develop, launch, and grow the Hedera network. The funds were used to cover Hedera’s operating expenses, which include engineering, business development, developer advocacy, marketing, and regulatory and legal expenses. Hedera’s operating expenses (unaudited) were $20.5 million for 2018 (excluding the one-time $12.2 million license payment addressed below) and are estimated to be $28.5 million for 2019 (some invoices are still being received).
Hedera treated the SAFT proceeds as revenue for tax purposes, as the sale was treated as a presale of hbars for later use on the network. The proceeds are held on Hedera’s books as deferred revenue. in accordance with generally accepted accounting principles. Accordingly, a reserve of $25 million was established for U.S. corporate income taxes on the SAFT revenue. This tax reserve is not included in the amount described as the cash on hand or current cash position.
Hedera’s operating expenses include licensing fees to Swirlds under the MLA in exchange for use of the hashgraph technology. Pursuant to the terms of the MLA, Hedera had a one-time obligation of $12.2 million to Swirlds in respect of the SAFT revenue, which was satisfied through a series of payments. Hedera’s operating expenses also include other payments to Swirlds for services and/or development work outside the scope of the MLA.