CurrencyWorks Inc. (CWRK) Management Presents on Q3 2021 Results - Earnings Call Transcript

Call Start: 16:30 January 1, 0000 5:04 PM ET

CurrencyWorks Inc. (OTCQB:CWRK)

Q3 2021 Earnings Conference Call

November 15, 2021 16:30 ET

Company Participants

Cameron Chell - Executive Chairman

Swapan Kakumanu - Chief Financial Officer

Conference Call Participants

Unidentified Company Representative

In few minutes to get everybody into the room, and then we'll get started. All right, Cameron, I think you are good to go.

Cameron Chell

Well, welcome, everyone. Thanks so much, Erica. Welcome CurrencyWorks shareholders and stakeholders. I really appreciate everybody taking the time for our Q3 2021 Call. It is with great pleasure that I think the whole team is at this spot right now where we're moving a little bit out of techdev mode and a little bit more and more into operational and revenue mode, and so we've been able to record a base level of revenue for the quarter; so it is a record revenue for us, but certainly, we have every expectation that we'll be scaling from here. And so, we have total comprehensive revenue for the quarter of $325,446, and -- but we'll get into a bit more detail of that as we go forward.

What we thought we'd do for the agenda to date is, I'll just run through a quick update of where we're at with the business. And then I'll turn it over to Swapan, our CFO, to give an overview of the specific financial results for the quarter. And then we'll open it up to Q&A, which will be facilitated by Rolly [ph]. And so with no further ado, I'll just do a screen share, and we'll get into some of the updates of the business; excuse me.

So CurrencyWorks is a blockchain. It is an enterprise level blockchain that is really based -- or focused on being able to do three primary things. Our specific customer is the enterprise Fortune5000 company out there, typically, a company that's looking to participate or a brand that's looking to participate in this incredible dynamic new world of blockchain, which includes everything from publishing to infrastructure to transactions. But to be able to do it in a way that allows them to remain within their corporate governance realm and to remain compliant, so while the digital world of blockchain is incredibly dynamic, providing unbelievable amount of opportunities for all of us participating in it, you know, there is a crossover between regulatory compliance and a bit of Wild West [ph]. And so, the blockchain that CurrencyWorks has developed in the system that we have in place and the people that we have governing it really help bridge that gap. And we do think that overtime, this is where the mainstreaming of blockchain will really happen, and we believe that we are carving out a very specific vertical for us.

So we have three primary areas that we focus on with our blockchain. We focus here in the first area of what we call publishing, which is typically known as things like NFTs today. So we curated an house environments where people can mint, create, sell, buy, trade NFTS; this is also where our whole metaverse development will be happening for other companies as they move deeper and deeper into the metaverse, they're going to have all the same issues of compliance because really the entire metaverse, the construct of it, right, the economics of it is based on blockchain type payment systems and blockchain digital commerce. And so, crossing that world, again, between what's regulatory compliant and what's Wild West will be a really important part of companies that are now quickly moving into that metaverse. So, the metaverse and NFTs are big, big piece of what we're doing going forward, and it's built into the fabric of the CurrencyWorks blockchain.

The second part is infrastructure; and infrastructure includes things like mining and cold storage. And the reason that we have built this into part of the fabric of our entire platform is because we have so many customers that are coming to us that are talking about, okay, well, what do I do with these coins that I have? Or what do I do with the currencies that I have? Or how do I environmentally mine the types of proof-of-work situations that we're building out for a particular currency that we're designing for somebody? And so we've been asked to be able to provide these types of infrastructures, and so we'll talk a little bit more about what we're doing there.

And then, also on the transaction side; we won't touch a lot about on this today. We're doing a tremendous amount of work in it, this has been a very strong piece of technology that we built in the past in terms of building out cryptocurrencies and cryptoeconomies, and we've got a couple of namesake brands that we've done this with. There is a plethora of work that's happening in this space, but most of it is just not quite announceable yet; so we'll talk a lot more about this in our Q4 update and certainly into our Q1 update.

So, let's just talking about NFTs; tons of people are talking about what they are, how they work, we're hearing some incredible numbers out there, and -- but that's really still a very, very deeply misunderstood market. So what we've elected to do is move into an NFT market whereby we're creating curated economies, we're creating curated environments as opposed to creating a general marketplace where somebody could mint an NFT on Ethereum and go and sell it, which is a bit of the Wild West, which has been ridiculously successful and is assuring again some incredible new innovation. However, what we do is we work with established brands like Barrett-Jackson, where we are building out the Motoclub platform; where car collectors, very similar to, say, what dapper has done in the basketball space, we're doing in the car collector space.

So this is built on our old blockchain, people can use crypto or credit cards in order to purchase it. We have control over all of the IP that's created, the supply, the demand, the IP rights, the management, how much content we can create; and these are all the things that are really important in intricate, but a lot of people maybe -- who are observing the NFT space don't really understand or the underpinnings of what currently creates a sustainable environment. So it's one thing to go out and create an NFT and sell a piece of art or -- with most of which are being sold kind of amongst all the same people and in a market that's not necessarily, I mean, quite often it is, but necessarily truly an open market or reflective of the actual values out there as opposed to creating a market where you can come up with constant inventory, constant gamification, constant engagement with the user base that you're building.

And these are some of the things that we think companies like Autograph have done well, we think certainly Dapper Labs has done incredibly well with NFT topshots. And while there is a very, very robust and important market in the open Ethereum type of marketplaces, the ones that we're choosing to build out are the ones where we can actually apply regulatory governance and actually mainstream a larger amount of users into the NFT world. So we're very excited about the work that we're doing on Motoclub and Barrett-Jackson as our signature partner there. We have kept our numbers relatively small in terms of what we're minting and putting out there as part of the model to actually build up the user base and make sure that we've got constrained supply or there is valued supply as we go forward, and not oversupply the market and create a trading environment that's untenable and secondary market. But we've sold out of every single pack sale that we put out there, we have daily users signing up, we've got multiple brands, content providers, more than we could ever handle almost that are looking to onboard onto the system. So, we really think we have a great franchise that we're building here in the car collector space.

The other marketplace that we are building out is called Vuele. And so Vuele is basically the NFT of Netflix platform. However, it's not competitive to a Netflix, it's an adjunct to it. So what this platform does is, it allows users to get the earliest access to the hottest movies coming out, as well as additional content that will never be seen on theaters or in streaming. So it really lends itself to a great secondary market, collector involvement, collector trading, and very, very rich content; it's a very ambitious project to be able to have a full NFT based platform that can create an incredible user experience for full feature movies. So, we did launch the OpenSea version of the NFTs, we sold the first 11 NFTs for $90,000, and we're really happy with that result, and we'll have an announcement here very shortly in terms of when the consumer NFTs come up, when the trading platform starts both, for Vuele and for Motoclub, which is in very short order here. So, super exciting time.

Like all of these things that -- like, the technology is a ton of work, the platform is a ton of work, operations, all incredibly involved. But if you don't have a backlog of content that you can start feeding the engine once it starts, there is no point in doing these things. So we've been very, very focused on trying to get the content out there, put our stake in the ground, start to build the user base, build their operational expertise, and at the same time get ready for the major launches of the technology while building up all the content that will be just an ongoing flow from that point forward. So we're feeling really solid about where we're at, and very, very thrilled about how the markets in terms of the collector car market and the movie market have responded to this. Of course, as you know, to be able to start off with the Academy Award-winning actor, Anthony Hopkins, out of the gate, which is a key thing for us to do because we did not want to necessarily be only launching independent movies or become a film finance site or -- our objective was to be full feature movies and to be able to really establish ourselves as the dominant player as it relates to Hollywood-based movies and talent.

I'm just going to touch base quickly on our infrastructure piece. We have a history separately as our management team in the mining space, and we have a number of customers that have come to us looking for mining alternatives, looking for ways or economically and economically sensitive, environmentally sensitive. And so what we have done is we have designed a system and are currently implementing it where we have a zero cost of energy input to be able to do bitcoin mining or mining of other tokens or currencies that we're developing that might be proof-of-work. We also have that in a way that has a very minimal, I can't quite say zero because our CFO will never let me say that, but we have very close to zero carbon footprint as it relates in emissions as it relates to being able to create this energy, which then we'll be going into our mining infrastructure. So, in relative short order here, we will be making some announcements around the actual mining components of our mining infrastructure but our core technology is really all about being able to create a zero input cost, which we think ultimately will give us and the customers that we have coming through us a huge strategic advantage as it relates to mining. And so in very short over here, you can look for some additional announcements coming to us on that. We have started the process at the first plant build, and we are expecting by the end of Q1 to actually be in production.

Just to touch quickly on our payments business; of course, we designed to build the FreedomCoin, which is likely the most transacted stable coin in the world today. We have announced with CaliCard, which is the consortium of the five largest cannabis retailers in California that are also building out their own currency. And this is as busy as we are in the NFT space and as busy as we are in the infrastructure space, this division of our company is probably the busiest of all of it right now. If you think about everybody that's building their -- a currency right now, whether it's an in-game currency, whether it's a stablecoin currency, whether it's a credit card alternative, you name it; this is -- and so you'll see a number of announcements and earnings related results come to this as we get into Q4 and Q1. Also of note, during Hong Kong blockchain week this year, the tokenized asset and digital securities awards, the TADS Awards. CurrencyWorks was actually voted as the -- given the NFT, The Gold Star, if you will, the top honor of the NFT Platform Award. And this was, in particular, to the work that we were doing with Vuele and the ability to have a full feature film on this platform and be able to do it on scale with multiple films coming in the coming quarters.

In terms of existing [ph] imparables out there; if we looked on the -- just the pure mining side, the multiples are fantastic. And so as we see that side of the operation come on-board and start streaming into place in Q1 of next year, we certainly happen -- are hoping to see a capital appreciation. And then in terms of our actual NFT publishing business and our blockchain work, the best comps out there for us are Dapper Labs and OpenSeas. Obviously, these are much more established organizations, we know them both relatively well, we've done work with Dapper as well in the past. And we think that we've got all the same potential upside as what these organizations do, just in a slightly different way because we're very focused, much more on that enterprise-based type system. And -- but as you can see by those multiples there, and now that our revenues are starting and we're starting to move into scale, we definitely think that we've got upside opportunity here, to be an organization that can take advantage of this incredible digital asset market that we're in, and the fact that we own such a key piece of technology that can enable it for Fortune 5000 companies.

Basically, just to touch base on our cap table; we've got 71 million shares issued outstanding, $95 million fully diluted. You'd have to add another probably $10 million in the balance sheet if you worked on that fully diluted number. To date, we've raised a total of $17 million, which is a drop in the bucket compared to the folks that you would compare us to from a technical capacity and capability, as well as if you looked at our lineup in our pipeline of customers that are coming on board now. We really have ourselves in a spot where we've got a very, very low capital investment rate to the capabilities that we have and the scaling that we're now about just to see.

So on that note, what I'd like to do is I'd like to turn it over to our CFO, Swapan Kakumanu, to talk through some of our key financial and operational highlights. Swapan?

Swapan Kakumanu

Yes. Thank you, Cam. Good afternoon, everybody. Before I jump into the financials, and Cam gave a little bit of an update of the business; I just want to read some forward-looking statements so that everybody is aware of this, they may contain some forward-looking statements.

So before I begin, I would like to remind everyone that statements made during this conference call will include forward-looking statements under the Safe Harbor provisions of the Private Securities Legislation Reform Act of 1995, which involve risks and uncertainties that can cause actual results to differ materially. Forward-looking statements speak only as of the date they are made, except as required by law, as underlying facts and circumstances may change. CurrencyWorks disclaims any obligations to update these forward-looking statements, as well as those contained in the company's current and subsequent filings with the SEC.

So with that out of the way, let me give you a quick update of where we were with Q3 that just recently closed, and we've filed today. Operating revenue, other income and interest revenue for the three months ended September 30, 2021 totaled $325,446, which is comprised of $168,870 of operating revenue, $127,906 of other income from the deconsolidation of SPAT1 [ph] that happened this quarter, and $28,670 of interest revenue; that's -- those are the three components that comprise that other revenue; operating revenue, other income and interest revenue. Compared to this, revenues for three months ended September 30, 2020, were $41,500, which comprised of $25,000 of operating revenue and $16,500 of interest revenue. Operating revenue in Q3 2021 consisted mainly of the ZERO CONTACT and Motoclub NFT sales as Cam just mentioned, as well as developing consulting agreements that we have signed that are in revenue generation mode since April 2021.

CurrencyWorks incurred G&A expenses of $1.24 million for the three months ended September 30, 2021, up from $122,000 for the same quarter last year. As Cam mentioned with the business update, these increases in 2021 compared to 2022 are as a result of more operational activities relating to the launch of the Vuele and the Motoclub businesses which we just talked about. Net loss from operations for the three months ended September 30, 2021 was $2,658,000 compared to a net loss of $99,000 for the same quarter last year; the increase in loss is primarily attributed to stock-based compensation expense of $828,000 and project cost of $1.58 million. Those project costs basically relate to obviously the Vuele platform and the Motoclub platforms. With the equity raise that we recently did in July in this part of Q3, CurrencyWorks paid off the balance -- all the outstanding convertible notes that were outstanding. If you remember at Q2, we had a bunch of convertible notes outstanding; all those have been cleaned up. And any of those balance were converted into equity. As you can see on the Q3 balance sheet, we don't have any other convertible notes outstanding or any other debt outstanding other than general accounts payables.

Vuele CurrencyWorks NFT platform for feature films successfully sold the first 11 NFTs of ZERO CONTACT, starting -- Academy Winning -- Winner, Antony Hopkins, for more than $90,000 in September 2021. The NFTs include the feature length film that the purchaser can watch on Vuele, as well as high sought after content such as crypto art and behind the scenes footage. CurrencyWorks works receives an ongoing fee every time these NFTs are bought and sold on the secondary market. Our Motoclub, CurrencyWorks NFT platform for exclusive automotive collectibles successfully sold it's first drop of Barrett-Jackson Las Vegas 2021 Collector Series, SPARK [ph] NFTs less than an hour after release in September, the rare addition NFT packs featured 1963 Chevrolet Corvette, 1975 Chavalit K5 Blazer, and 1995 Mercedes Benz G 350d, Custom SUV, 2016 Nissan Nismo GT-R as well as 1977 Ford Bronco Custom, which was formerly owned by Canadian Actor, Kevin Hart. CurrencyWorks receives an ongoing fee every time these NFTs are bought and sold on the secondary market.

During Q3 2021, CurrencyWorks invested an additional $850,000 in the revolutionary Zer00 crypto mining platform in the firm office services and long-term agreement with Fogdog Energy Solutions. Zer00 is a fully scalable system that uses the thermal treatment, which is not burning of industrial landfills, [ph] solid waste, as well as all field at the power of cryptocurrency mining operated in an environmentally friendly and sustainable way. It will also benefit communities and environment by reducing greenhouse gases and the demand for landfills. Next page?

This is just a snapshot of the financial results. I'm not going to go in-depth in this, but I just want to highlight some of the key points. So total assets at September 30, 2021 was just over -- sorry, $6.4 million to $6.5 million, and working capital was a positive $479,000. Total non-current liabilities was $882,000, and shareholders' equity -- positive equity was $4.3 million.

With that, I'll stop and give it back to Cam.

Cameron Chell

Thanks, Swapan. Appreciate it. So we're going to go to Q&A. If that's okay, Rolly [ph], I think you've probably got some questions that may have come in. And I think -- I thought I saw one down in the Q&A section here a second ago. But maybe I'll turn it over to you and we can go through some Q&A, if it's all right.

Question-and-Answer Session

Unidentified Company Representative

Yes. No problem. Thanks, Cam. My internet is little unstable, so if I cut out my apologies. The first one that came in live here, which actually has also came in on the pre-submitted; was the -- about our Zero00 initiative. Just wondering whether current work plans to mine bitcoin for our own inventory and approximately give any idea how many bitcoin a year do we think this could produce?

Cameron Chell

Yes. I don't think we can speak to how many bitcoin, we've certainly got some projections to start but we can't give that forward-looking guidance, but it's very meaningful, and we think that we've got all the pieces in place to be able to do that. There is really two aspects, as everybody knows, into the mining business; there is actually getting your hands on the right miners, we've got some announcements coming out around that. The second piece is your power, and I think we have a really unique and maybe I'll let Swapan speak through it a little bit more. I think we have a really unique and prolific means of generating power, which will leave us with a next to zero carbon footprint and emission, as well as having a zero cost base for our power. And really, between that and sourcing the miners, the rest of it is obviously hard work and takes expertise, but those are your two key components. And I think we've got them both solved, and certainly, the zero mining initiative has garnered a lot of not just for only internal use, but we have a lot of -- I should say a lot; we have a number of signature other mining companies now coming to us, asking if we could build this technology out for them, which we're not entertaining at this time.

Swap, any thoughts or feedback on that?

Swapan Kakumanu

No. I think you said it, Cam. I think as we announced when we invested into the Zero00 project earlier part of Q1 and Q2. If you looked at our public disclosures, that was the intention that we wanted to make sure we were doing something eco-friendly, especially what we've heard in terms of amount of power these machines use. Our intention obviously is to get into that space but as Cam said, we really don't have any forward-looking information that we can share right now. But with our commitment investment in Zero00, our obviously, the intention is to ensure that that business segment grows for us.

Unidentified Company Representative

Okay, great. Thanks, guys. Another question that's come in regarding our Vuele platform; are we planning to add more movies to the Vuele platform.

Cameron Chell

Yes, for sure. We have a number of discussions and agreements and everything going in place. We're completely just delighted with the inbound that we've got in terms of content coming on in the system. So I think without trying to get too far ahead of ourselves, I think we have successfully created a situation where we can attract content. And so -- and that was really -- that's -- you know, you've got to build out your technology, you've got to prove out your operations team, you have to demonstrate your business model; but while you're doing all that, actually, the hardest part is like, okay, how are you going to establish yourself as the credible player in the market to attract the content that needs to come on to the system in order to make it sustainable. And so, I kind of feel like Checkmark [ph]; we've got that done, we've got incredible content coming. So the answer is yes.

Unidentified Company Representative

Great. Another couple have come in live. One of them, I'm not sure we'll be able to answer, but I'm asking what our revenue projection is for the next quarter, I'm guessing we won't be able to answer that. So maybe you can just give us some guidance maybe on where do you think our top revenue vertical is going to be for the next maybe quarter or two?

Cameron Chell

Yes. My sense would be that it will be -- coming from two places. One, it will be the increase in ongoing now, sustainable and steady drop of NFTs from Vuele and the content that's coming on board there; Motoclub, as well as some additional platforms that we'll be announcing with content. The great thing about it is that we have a platform now in a system whereby it's kind of like add water and mix and when you've got your batter and then you bake it, and it just kind of keeps going; so we've spent a lot of time putting that in place so that we've got something that's scalable. So we'll definitely see NFT drops continue to help lead the way. Certainly, by -- the trading platform will be up relatively soon, so we'll start to see some secondary sales from that, though I still think the drop revenue initially is going to outstrip it significantly. And then in terms of our transaction development: so new coins, development work, those types of things, developing ecosystems, stable coins, cryptocurrencies for other organizations; we're going to see that as a significant part of it. And then, small part to say actually when all the mining revenue and partnerships start kicking in, but I would imagine that's -- we'll start seeing that probably as soon as Q2, but very -- more meaningfully, probably Q3 of next year, if I'm not mistaken.

What are your thoughts?

Swapan Kakumanu

Yes. From a mining perspective, yes, that's a decent timeline, especially because of the infrastructure we're setting up. But as you saw -- talked about the transaction revenues and the NFT drop revenues, I mean, those would be our focus for the next immediate coming weeks and couple of months.

Unidentified Company Representative

Great. Thanks, guys. Cam, I think you touched on this a little bit but another question has just come in; how are we planning to scale our NFT business?

Cameron Chell

Well, we'll do it to -- well, first and foremost, we're -- it's going to be scalable because we're building platforms; so we can manage the content, we can manage the IP, we have predictability around supply, and so those are the key things that you have to have in place in order to scale them out as opposed to just kind of going and getting some content and putting up NFTs and not only the marketplace that it's on and such. So first and foremost, we want to own the platforms. Second of all, we want to secure the content and either own and/or participate deeply with the IP. We are in markets that are not traditional, so we're not going after a sports week [ph]; we're not going to go trying to get the NHL or something like that, it's very competitive, very well financed companies doing that. But if we think about markets like the car collector market or if we think about markets like the movie market, where it's very fragmented, but if we can create something that we can bring it all together because of our advantages in technology, we can own that market.

In terms of the cars collector market, we can own that market because we partnered with the signature brand in the market, we're the early movers and we've got operating experience and we own our own platform. And so those are the markets that we're going to continue to build out such that we can create a dominant position in it. So yes, we'll announce some new platforms coming up here relatively quickly. And as we announce those new platforms, because it's all built on our technology, and we'll just be able to take kind of new verticals with one at a time.

Unidentified Company Representative

Great. Well, I'll have -- just answer one last one here, Cam. What plans does CurrencyWorks have in terms of bringing more exposure and PR to the company?

Cameron Chell

Yes. So, it's -- within the industries itself, we've had a lot of exposure necessarily within the market, we haven't had a tremendous amount of exposure. I think that's going to come here pretty quickly for a number of reasons, but we do have a number of analysts that are now starting to follow us, we've got an increase in shareholder base that's getting behind us. We did go through a rough patch this year, the stock really ran earlier on, and it's come off pretty hard. In my view, the company is much more valuable today than it ever has been, much less when the stock was running hard. And we didn't invest in any programs or do anything special, like the stock just ramp, it's just one of those things that happens. And -- but I think we've now got sustainable revenues, we've got increased roadmap in front of us for those revenues continuing to grow in an ongoing set of great fantastic partners that we'll be bringing on, and we'll do everything we can to promote that.

Unidentified Company Representative

Okay. Fantastic. If anyone else on the call has any other questions you want to talk about or ask me, you can just send me a note [e-mail]. I will do my best to get the answer for you. So Cam, that concludes the questions. I wonder if you can just give some closing thoughts and remarks to everyone on the call.

Cameron Chell

Well, first and foremost, we thank everybody for the trust and I appreciate the patience and opportunity to work for you. We are really building something special here. The CurrencyWorks blockchain is a one of a kind type of blockchain that is enterprise-focused, to be able to drive and deliver compliant blockchain solutions to those Fortune 5,000 companies. And that's why we've been able to partner with the types of companies that we've been able to partner with. I've been very fortunate to be a tech entrepreneur for 30-plus years, and I've seen the disadvantages of necessarily being -- you've got to be early, but being the absolute first-mover advantage when you're trying to mainstream new technologies can be a huge, huge detriment, and it takes incredible capital. And so, I think we're positioned, we think we're positioned well to be -- continue to be early movers but not necessarily the absolute first mover. But we are in a position where we're able to attract brand names and build out sustainable customers with sustainable users. And so, whatever aspect of the three pillars of the business of our blockchain that we have going forward, that's the strategy that we'll continue to move forward with, so that's sustainable.

Unidentified Company Representative

All right, great. Thanks, Cam. Thanks to all the attendees who joined us today. And more importantly, thanks for your support in our company, in our stock. Like I said, any other questions, you can direct them always to us. We're always here for you.

And with that, I think we'll wrap up the Q3 earnings call. Thanks to all.

Cameron Chell

Great. Thanks very much, everybody.

Swapan Kakumanu

Thank you. Thank you.