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CurrencyWorks Inc. (CWRK) Management on Q1 2022 Results - Earnings Call Transcript

May 19, 2022

CurrencyWorks Inc. (OTCQB:CWRK) Q1 2022 Earnings Conference Call May 18, 2022 4:15 PM ET

Corporate Participants

Rolly Bustos - Head of Investor Relations

Cameron Chell - Founder and Chairman

Swapan Kakumanu - Chief Financial Officer

Conference Call Participants

Rolly Bustos

Yes, I'm just going to start here for people looks like they're just starting to file on. First, I want to watch so apologize, a little bit of confusion there. The press release. And welcome emails both had a 1:15 Pacific start time, we realized that the registration itself had a 1 PM start time. So some of you may have been sitting on the line for a little bit here. So we do apologize, but we're just going to give it one more minute. Very quick for some more people to file in and then we're going to start. Thank you.

All right, I think we're going to get started for the sake of time for people that have been sitting patiently on the line waiting.

Greetings, and welcome to the CurrencyWorks Q1 2022 earnings call. Though, it's been a while since our last update, we've been very busy over here, we're building our business even in these challenging markets. My name as you know, is Rolly Bustos. I'm the Head of Investor Relations here at CurrencyWorks. I personally welcome each one of you to our call today. Today's call will follow the same format as previous ones. They'll start with our Chairman Chell discussing the first quarter operational highlights from their CFO, Swapan Kakumanu will jump in and discuss the financials as we reported earlier this week. We will then end with the QA portion, which will include the questions that were submitted or will be submitted during the call live, and ones that were sent to us earlier this week.

As always, you're always welcome to reach out to me personally at ir@currencyworks.io. Now without further ado, Cam, can you please go ahead?

Cameron Chell

Right. Thank you, Rolly. Thanks, Swapan. Thanks, everyone. First and foremost, I really wanted to thank everybody for their time and consideration today, including our Board of Directors, our incredible employees, our customers, and of course, our shareholders. I'm not going to spend a lot of time reviewing the business model today though, I am going to touch on some highlights, and then we'll have Swapan talk through our financials, and then we'll get to QA as quickly as possible, which we have found been the most productive time.

So first and foremost, congratulations to everybody. We had an absolutely blockbuster quarter record numbers for us and really set the foundation for our revenue model going forward. So I'm just going to throw on my screenshare here and walk us through a bit of a deck. So CurrencyWorks is a blockchain and we feel that we are building the future of the digital commerce. Now the underlying value proposition of the CurrencyWorks blockchain as opposed to say other public blockchains or other private blockchains out there is that we are private blockchain decentralized nonetheless private and we are really focused on regulatory compliance. We're really focused on working and building with customers that in order for them to utilize blockchain technology or blockchain technologies, they have to operate in a manner that has a high degree of regulatory compliance. So that's payments on payment rails, know your client rules and money laundering laws, OFAC, SDM, state-by-state registrations for things like firearms or alcohol or cannabis rules or regulations, brands that really need to have an understanding or a comprehension and a very succinct capability to manage things like IP intellectual property.

And so we learned this back in the days when we were building payment rails in the gaming world. And one of the reasons that the payment rails that we built were so successful was because we had chosen to build rails that were regulatory compliant. So as that industry mainstream what we're seeing now is that I'll use the crypto industry as a catch all is mainstreaming, that more and more of these companies are having to look at organizations and a blockchain that possesses this regulatory compliant audit capability, tracking capability and assurances that their business is in line with the best practices of their particular industry.

So we focus in three particular areas on the blockchain. First is in the area of transactions, so we can build customized blockchain based payment rails infrastructure so providing low cost environmentally friendly cold storage systems and power generation. And of course in the metaverse designing and developing and operating Metaverse is the core fundamental of which in a Metaverse is the fact that one is decentralized. So you need a blockchain. And second of all, you've got NFT capability that is regulatory compliant. Those two things are necessary to build a Metaverse certainly a Metaverse that's decentralized and working toward where that whole future is trending. These are the three areas that we are focusing on, and we've got significant traction on.

So I'm not going to spend any time here in terms of building the future of blockchain. I think if we're lucky enough to have you as a shareholder, or a stakeholder in the company, you're a believer in blockchain, I do think blockchain has been mainstreamed, though many of its applications haven't been. But along with the advent of blockchain and regulatory compliant environments, like the CurrencyWorks blockchain that's happening quite quickly.

The other area I do want to touch base on is the strength of our team. So we have an organization. We started the organization in 2015. We started coding in 2016. We have got some of the absolute leaders that have been in space since 2016 or earlier, not just as advisors, but part of management and the Board of Directors. And we've worked through already almost 10 years, almost a decade, it's just crazy work together in terms of building out this ecosystem for our customers.

Our basic revenue model is this. When we have clients or opportunities that come to us, we do look for upfront development fees. And we look for that to basically cover our costs and the things that we build out for our customers. However, our model is much more geared towards having a ongoing interest and a license for the technology that we build out. So our blockchain holds several license the technology that we built on it out to several different organizations and their applications and now is creating a reoccurring revenue base for us.

We're also very keen and adept at operating these environments as well. So you may take something like the Barrett Jackson NFT platform, not only we have an equity interest in it, but we actually operate that platform as well, which is really important for us in terms of scalability and continuity with the other organizations that we build on top of our platform. The more of them that we do the lower our cost per transaction, or the lower our cost per instance, happens. And so the more operating we can do, actually, the easier that we can scale.

So let's just talk about very quickly, some of the transactions that we've done, I've talked about this in the past. The Freedom Coin, which is probably the most transacted stable coin out there that you've never heard of. It primarily runs the Gunbroker marketplace. However, there are a number of other customers that are now onboarding with that particular payment rail. And basically what happens is, when you open up a Freedom Coin, wallet, whatever that's the overarching brand, the brand itself that our customers -- have might have a different brand around that white labels. When you open up that wallet, you're actually opening up the crypto wallet. And at that moment, you can move in any type of crypto or Fiat or ACH payment or credit card payment, and then use that crypto wallet to actually make purchases online. And you can make purchases in many different environments with these things. It is the easiest signup process for a crypto wallet.

And if anybody has experienced trying to set up with many of the other crypto wallets out there, it takes weeks sometimes, and depending on what state you're in, or what country and you can do it, you can't do it. Some banks do it. Some don't. This is universal. And it literally takes somewhere between three and 10 minutes to sign up for this. So this is a big piece of our future going forward. And we're really excited about the work that's undergoing underway here.

We just recently announced CaliCard or actually we announced CaliCard quite some time ago. But we just recently announced five of the largest cannabis retailers in California, all onboarding CaliCard. And so this is what we refer to as a community currency. But basically it's a virtual debit card based on our rails that allows people drivers in particular that are delivering cannabis to be able to instantly accept payment without having to accept cash. It takes about 60 seconds to set up. And it's incredibly, incredibly easy-to-use. It also acts as a loyalty card and a marketing mechanism for these organizations. These five major retailers and our business development teams are really busy right now and other compliance states where this can now be applicable. We're pretty excited about the federalization of Cannabis if I can use that phrase, and see huge applicability of this across all kinds of different organizations in the cannabis space.

We launched Motoclub which is our NFT car collector site. We did this in partnership with Barrett Jackson, probably the -- certainly the largest name in the car auction market, I would say globally, a fantastic brand and organization for us to work with. They own part of this, we own part of it, we operate it. And we are onboarding a number of other brands now, including creative bespoke, create lock, sweepstakes, NFT opportunity with a physical car, the International Motorsports Hall of Fame, of course, Barrett Jackson, and dozens of others that we'll be announcing shortly. We're really becoming the go to space for the automotive world and NFTs.

Julie is probably our signature technology-based platform. This is a platform where you can have an entire movie as an NFT. Certainly, to my knowledge at this point, we're the only blockchain out there that has accomplished this. I'm not suggesting others won't at some point. But the other thing that's really important about this particular piece of technology on the CurrencyWorks blockchain is that the biggest issue in Hollywood probably isn't the [indiscernible] is probably not distribution, but it's IP rights management. And I think we've done a solid job in demonstrating and learning the, what it takes to manage IP rights in the movie industry. And because of that, you can look forward to some absolutely terrific movies being announced on this blockchain we have on this platform. We have purposely taken a lot of time to learn how to distribute the movie, how to code the movie, how to work with all the IP rights, how to work with the studios. And quite recently, we just announced that Lionsgate bought the domestic rights to this. So the big success for us and it's really driven a lot more content to our table. And so we look forward to several announcements coming out in this regard.

The big thing in this area. And in fact, in all three of the major platforms that we have launched, there's a lot of noise out. There with a lot of people talking about all the things they're doing and such that when you really get underneath the covers, for the most part, at least in two of the three categories, we're actually one of the only and in some cases, the only organization that's actually executed, and been able to deliver what we said we're going to deliver. And we feel that that credibility is going to continue to do well for the organization and build shareholder value.

Also really exciting is our MusicFX platform. So we've got Parker McCollum, we got Michael Ray, we just launched and announced Hale, and we've got dozens of other artists that are now coming on board. What you can look forward to with MusicFX is not just memberships, where people buy into a club, and then they get early releases, they get videos, they get interviews, they get -- all that really special content, at the side passes and concerts and such. But we're also now moving towards being able to do things like virtual concerts and virtual festivals. And again, it's a full music player environment. So it's not like you're getting just a picture or a little clip of something. And this is deep tech that actually delivers real value to those NFT holders. And we're really excited about the future of the NFT market. Not because NFT is necessarily just art, but because of the utility that NFT holds and an NFT really is the building block of -- a building block of the metaverse. So NFT's in our view are what email was to the internet, NFT's are to the metaverse. It is that thing that you can sell and NFT isn't necessarily anything it isn't one thing. It can be anything. It can be a music, it can be movie, it can be a ticket, it can be an experience, it's just a block of the blockchain that makes something digital 100% unique and can verify your ownership. That's a big, big deal bigger than I think most of the world realizes the implications going forward.

Now the other area that we haven't talked a lot about, but it's really becoming exciting for the company is our infrastructure. And so we have developed what we call zero, which is a zero energy, crypto mining solution. And so literally, we can take garbage from a municipality or oil wells side or whatever the case may be somewhat organic, and put it through the process that we've designed, and without any carbon emission out the other end comes biofuel and that biofuel can then be used to power crypto miners.

So as an example, our private blockchain not only has next to none absolutely miniscule and nominal gas fees, but it's also can be fueled by a zero carbon footprint energy generation mechanism. From there, then that energy is then put into the actual mining. So the cost of what we do for mining and or now what we're seeing is a number of other organizations, everything from municipalities to other miners are approaching us and saying, “Hey, we would like to use this methodology in order to power our mining machines.” And so we're looking at several opportunities in that regard right now. So an unintended consequence of this technology is that it could be an entire new revenue stream, and a significant value add for our shareholders in the coming year.

Just want to touch on the metaverse, because I would suggest that most of the work that we're doing in terms of the pipeline work coming in right now is related in some way to the metaverse. And so we've got organizations that are coming to us looking as to do their development work, but they're looking to also develop on top of the currency works blockchain, as well as our NFT infrastructures because we are private and compliant, we have a lot more flexibility in terms of how we can build different types of NFT's for organizations, but yet ensure that they do things like manage IP property.

And so a great example of that is, is in the movie space, where you've got organizations now like Lionsgate, which are working with us and others bringing movies to the table, but they're doing it because they know they can manage those IP rights. Again, really, really important on a go forward basis to help ensure that the economics are fair and compliant as it relates to all of their disclosure and revenue generation.

On that note, I am going to turn it over to Swapan to talk about the quarter that we just knocked out of the park. Swapan?

Swapan Kakumanu

Thank you, Cam, and thank you everyone who have joined in on this Q1 2022 CurrencyWorks investor call. Just wanted to remind as Cam started the presentation. The forward-looking statements, as usual, are important for us. I just want to remind everybody the listeners that there could be quite a bit of forward-looking statements, please be cautious about that. And obviously, I think the entire presentation will be available, so you'll be able to see it.

So I'll quickly go through the financial highlights as Cam said, we had one of the best quarters for this company. Since we've all been together here. I'll run through some highlights here. Cash, we ended up with a cash balance on March 31, 2022 outside of $56,000 of cash [indiscernible] $67,000 at the end of the year. We did raise -- there was some share issuances in Q1 for $18,000. That was part of that cash buildup we have which is really good for us as we get into Q2 and Q3.

The total assets we closed off in March 31 with a $5.6 million of total assets compared to $5.3 million. The increase is slightly because of an accounts receivable on the sale we did, we on the movie rights which we talked about on to Lionsgate in Q1. There is a little bit of a receivable that is outstanding, which is on our balance sheet which we have collected a significant portion of that, subsequently the quarter end.

Total liabilities is 1.5 at the end of March 2022 compared to 1.7. Mainly, the reduction in this liability is related to that derivative liability, which I've think explained a couple of times in the past. That is a non-cash liability, which is on our balance sheet. The reason for that is, it's the accounting standards the way we value our share purchase warrants if they are denominated in other than USD, and we had some share warrants, which were designated in Canadian dollars. And when we do the conversion, there is this derivative liability non-cash entry that we have to put on the balance sheet and fair value at on a quarterly basis. And then, once those warrants either expire or get exercised, that basically goes through into the equity section. So it's really not material, but at the end of the day, it has to show up on the liabilities and what you're seeing now the reduction is one of the reasons is as those warrants are getting exercised are time elapsed, you see that fluctuation there.

On the net working capital, we had a negative net working capital at the end of March 31, but comparatively better than the year end. As you can see, we closed off net working capital around negative 338,000 compared to a negative 594,000 at the end of December 31, 2021. The increase as I mentioned about is due to increase in cash holdings on our hand and the bank and also the accounts receivable has impacted our net working capital to be more positive or less negative compared to the end of December 31, 2021.

Quickly on the income statement revenues, as you can see, we closed off Q1 revenue with 1.3 million to 4 million, which is one of the, I think, is the one largest revenue recognition we had since several quarters. And obviously, the big chunk of it is the sale of the movie rights of Zero Contact, our subsidiary. And the balance of the revenue number is from our NFT sales on all the three or four platforms that Cam just mentioned.

Operating expenses have gone up to 2.5 million compared to the same quarter of last year. Obviously, it's a direct correlation of the amount of projects that we have started since middle part of 2021. And I think that's a fair representation of the amount of effort and time we have been putting in all these platforms. So that's the reason for the increase to 2.5 million compared to 1.5 million of operating expenses, compared to the same quarter last year.

Other income and expenses, we had a positive income of $345,000 for the quarter compared to negative $43 million for March 31, 2021. Again, I want to remind that 43 million negative other expenses was really because of the fair value of the derivative liability, which flows through the income statement. And that was the big reason that we had that huge negative expenses at March 31, 2021, the last quarter -- last year. The non-controlling interest is basically $387,000 compared to a negative $8,000 for last year, last quarter 2021. The reason for that increase is because of obviously the sale of the movie rights we had and it gives us a positive non-controlling interest recognition on our income statement.

This leads us to the net loss for the quarter, the net loss for the quarter March 31, 2022 was $1.2 million, compared to 44.8 million loss for the same quarter last year. Again, I want to remind that 44.8 million loss of last quarter for 2021 majority of that was the fluctuation in the derivative liabilities. That's pretty much the highlights, I think I'll give it back to cam to continue with the rest of the presentation.

Cameron Chell

Thanks, Swapan. Really appreciate it. Great explanation. A couple of things just to mention here is that, when Swapan talks about having sold off the rights to the movie, the NFC movie, we've actually all we did was sell off the domestic rights, we did not sell off the international rights. And all we've collected on that was the upfront portion of the fees for it. So all the revenue share, all the earnouts, all the rest of it still will come from the movie for the next years and years to come, are obviously not accounted for here.

So we're really excited about how this turned out for us. I think we can make a relatively fair judgment that the venture has been profitable and continue to be profitable for us over the years. And that was just our first movie. And now and now we've just got literally dozens of pieces of content that we're ready to start to onboard. So it's an exciting time for us. And we see that same type of understanding and development and maturing happening on all of our platforms, as well as the development work that we're doing for a number of new customers that we'll be announcing here shortly. So thank you very much Swapan and to the team for great work.

I think the other thing that's really important to highlight is that, we have 77 million shares outstanding. And to-date, we have only raised just under $15 million for this business. If we look at the comps out there, the companies that are doing both technically and the types of companies that they're working with, even though we're still in a development stage and not really based on revenues. But if we look at what we're doing and how we've been able to do it, our competitors are -- and they're not really competitors in the marketplace, I'd say their comps in terms of private equity or public companies. They've raised hundreds of millions of dollars, hundreds and hundreds. And they still -- I mean, with the exception of somebody like Dapper, they don't have the traction that we do.

And so I really just want to throw it out to the team for running a business in this manner, bootstrapping it, looking at every dollar, determining the ROI and what we're building, having an incredible platform. That's actually able to produce results. And I'm really excited about what this means for our shareholders as we go forward. I think we've done as good a job as possible to minimize the capital raises and to really, really focus on value.

So 77 million shares outstanding, we also have options of warrants. They're all well, well out of the money. But I shouldn't say all but for the most part, they're all out of the money. And so if you were to look at us as 108 million fully diluted, you'd have to put a significant amount of capital or cash on the balance sheet as well.

On that note, that's our presentation for today. Again, I really want to thank the team and everybody for the success that we've had and what we're building. I know the markets are tough right now. And our share price is certainly not reflective, I think at the value that we have created. But we're going to continue to work to do so. And I'll turn it over to Rolly now to be able to provide insight or questions from our shareholders. Rolly?

Question-and-Answer Session

A - Rolly Bustos

All right. Thanks, Cam. Great presentation. I think you've covered most things. We didn't really get any questions live that have come in, and the ones we've got during the week, you've basically answered all of them to be quite frank. So maybe I'll just have you give some more color on the first one here. Do you have plans to get involved with the metaverse?

Cameron Chell

Yes. The metaverse is probably driving half of our pipeline, right now. And very pleasantly, it's all inbound. And it's all big brands, like names that you would recognize. So I think the work that we've done over the last five plus years in terms of establishing ourselves as a word, a trusted name, that a bit of brand can work with. And when you've got a new disruptive technology that organizations know they need to be involved with, it's not hard, relatively to get the marketing and the sales and bizdev folks from a brand really involved with it. But what's hard is when the rubber hits the road, and you have to start talking to the CFO or to the General Counsel's usually the people that actually have to manage the risk of the business. And because of the work we've done that last five years, those things are moving very quickly for us. And we're being referred to other customers.

So yes, we're looking at a number of metaverse projects. I probably shouldn't say that the exact numbers, but numbers of metaverse projects. And again, those core building blocks are a blockchain and an NFT infrastructure that can support payment rails, so that those NFT's can be sold, that interoperability between other blockchains is super important. But again, that compliance, and that ability to have a very seamless wallet, that their customers can integrate with and not have to be a crypto head in order to do or all tending to be incredibly important aspects that they're looking for and we are able to deliver.

Rolly Bustos

Great, thank you. You talked about this before about the [Uli] [ph] platform and the success of Zero Contact, are we trying to add any more movies or shows to that platform?

Cameron Chell

Yes. So we have struggled back and forth, with the board of Uli and strategically with our teams deciding, should we be onboarding a whole bunch of content, so that people get more of a Netflix experience, because really, it's this is an NFT Netflix-ish type platform that doesn't compete with any of those other platforms. It's an additional revenue stream for Hollywood, or should we really be focused on getting a couple of key pieces of content, learning the industry, learning the business, building credibility with the content providers, and then add another one, and then one, and then start to build it up that way.

So we've elected to do it a bit, one at a time, right now. And we're really seeing that pay off. The quality of content that we have the opportunity now to onboard our eight movies with A actors and A storylines. And I think that's going to be a big, big differentiator for us in time, In fact, I'm in Los Angeles today, doing a bunch of that work, amongst other work. And it's just, it's so pleasant to sit in these meetings. And nobody asks if we can do it. Nobody asks, all the tough questions around credibility and IP, we've answered them. And we've been referred into incredible areas. And we're really going to see this platform do well over the next year.

Rolly Bustos

Great, thank you. Well, the next question is here is, asking if we're going to move ahead with our Bitcoin mining project Zero, you already talked about in slide earlier that yes, we are. Can you give us a little bit more color, maybe on timing of that?

Cameron Chell

Yes. We see a couple of things. We see deregulation in some of the electrical markets, which is going to be which is pretty interesting, because some of those electrical markets are now looking for power back into the grid. It was just not something that we ever counted on and so between that between municipalities, smart cities and miners coming to us wanting to use this technology, just by word of mouth, I think over the course of the next few quarters, we'll start to see some decent and significant announcements and revenue starting to generate from that. Of course, we're going to use it for ourselves as well. And the team that's involved in doing that is a very pragmatic approach in terms of being able to build the data and the metrics, and we've got operating facility in place now we've proven the technology. And again, we've done it for pennies on the dollar for what other organizations have been trying to do. So the proof will be in the pudding, but over the next couple of quarters, I think it's going to be pretty exciting for us.

Rolly Bustos

Right. One last question is a little bit more direct talking to asking about our cash position Swap already showed and talked about it. But the investors want to know, do we have enough cash? How long will it last? And will we need to do another race?

Cameron Chell

Yes. So I think the direct answer to that is, is cashflow and sales. I mean, that's what we're focused on now. We have especially for what we're producing, we have a very low burn rate. And it doesn't take a lot of sales for us to be popped over the top in terms of not burning a lot of cash and/or being cashflow positive. So that's our focus right now is to do that. As it relates to doing if we needed to do any further financings in the short term here that we would do them very small, which we've done again, in the past, where we saw some opportunities to raise a little bit of capital to get a couple pieces of technology bumped over the top. And we've just kept it conservative and small and management participated. And we'll continue to do the same. If need be and/or a newer, we're just going to focus on cash flow.

Rolly Bustos

Okay, great. That's all the questions that came in over the past week. So Cam, if you don't mind, I'll have you just wrap up the call and give the final goodbye to our listeners.

Cameron Chell

Yes, thanks. Well, ad nauseam, I just want to thank everybody again, in particular, our shareholders. I know it's been a tough go. I want to give -- hopefully give assurances that I know the management team is really -- I mean, they are committed and dedicated and doing the right things. We have customers onboarding, and that's the most important thing. We have a great technology platform and people who appreciate what it is and what it does for them. And then finally, I just really like to thank the people in the organization for their committed work for sticking it out for just being really, really all about building something bigger for everybody's future. On that note, we'll turn it over to the next quarter. And hopefully we'll keep knocking some numbers down. Thank you very much.

Rolly Bustos

Thank you.

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