Mr. Andrew Kiguel reports

TOKENS.COM REPORTS FINANCIAL RESULTS FOR FISCAL YEAR 2023

Tokens.com Corp. has released its financial results for the fiscal year ended Sept. 30, 2023 (FY 2023). All dollar figures are in United States dollars, unless otherwise stated.

Strategic review update

On Nov. 8, 2023, the company announced that it had commenced a strategic review. The company is also exploring acquisitions, sales of its domain names, and the sale of its operating businesses and digital assets. As part of this strategic process to enhance shareholder value, on Jan. 29, 2024, the company entered into a definitive agreement to sell the assets of Metaverse Group and Hulk Labs to StoryFire Inc., which is primarily a transfer of its work force and contractors. All capital within Metaverse Group will remain at Tokens.com.

Tokens.com will receive a consideration of $4-million for the sale that consists of a 15.3-per-cent ownership of StoryFire and $500,000 of its native Blaze cryptocurrency token. The transaction is expected to close on March 1, 2024.

Metaverse Group and Hulk Labs revenue was not forecasted to exceed operating costs and reach profitability for several years. In addition, the financing required by these businesses would require Tokens.com to carry significant cash flow losses. To finance these operations, the company would need to sell some or all of its cryptocurrency inventory or look to raise dilutive new equity capital. After careful review of all alternatives, management and the board made the decision to derisk Tokens.com by selling the assets of Metaverse Group and Hulk Labs to a buyer that has a strategic fit and capital to bring the businesses to profitability faster. Tokens.com retains the upside in the combined businesses through its 15.3-per-cent equity participation. Tokens.com also is in a position to retain its cryptocurrencies without the requirement to finance the other businesses. Management believes the sale of the businesses results in a win-win scenario and has eliminated an estimated $1.5-million of overhead annually. Removing the overhead associated with these assets gives the company additional flexibility in pursuing another acquisition or as an acquisition target as a leaner structure.

Subsequent to the closing of the StoryFire transaction on March 1, 2024, Tokens.com's key assets will be its cryptocurrency inventory, cash, a 15.3-per-cent ownership in StoryFire as well as a portfolio of domain names. Operating overhead will be significantly lower, making operations more efficient.

2023 highlights:

• Year-end September, 2023, cash balance of $3.5-million or $4.7-million (Canadian);
• Digital assets/cryptocurrency and non-fungible tokens balance of $6-million or $8-million (Canadian);
• Total year-end digital assets and cash of $9.5-million or $12.7-million (Canadian).

• Total revenue for FY 2023 of $740,000, compared with the nine months ended Sept. 30, 2022 (FY 2022), of $678,000:
  • Staking revenue for FY2 023 of $268,000, compared with $552,000 for FY 2022, primarily due to lower yield overall and liquidation of previously staked tokens such as ROSE and ANKR;
  • Metaverse consulting and lease revenue of $468,000, compared with $121,000 for FY 2022, primarily due to revenue recognition upon completion of projects signed in prior year.
• Operating expenses for FY 2023 of $4-million, compared with FY 2022 of $2.7-million. The increase was primarily due to:
  • Increased professional fees paid to contractors during the majority of the fiscal year for expansion of the Metaverse Group and Hulk Labs teams of $1.6-million for FY 2023, compared with $807,000 for FY 2022. This is partially offset by lower audit and legal fees incurred by the company throughout the year;
  • General and administrative fees increased to $1-million during FY 2023, compared with $355,000 during FY 2022;
  • Investor relations and marketing fees reduced to $358,000 during FY 2023, compared with $743,000 from FY 2022, due to a pause of many non-essential capital market services throughout the year.
• Digital assets activities include:
  • Loss on disposition of digital assets of $172,000, compared with FY 2022 loss of $1.7-million;
  • Gain on revaluation of digital assets -- cryptocurrency of $483,000, compared with FY 2022 loss of $17.6-million, of which $3.5-million, net of tax of $1.1-million, is recorded to other comprehensive income;
  • Loss on impairment of NFTs of $2.6-million, compared with FY 2022 loss of $3.8-million;
  • Reclassification of certain cryptocurrencies being held by Genesis Global Capital LLC to a separate line item on the statement of financial position. These cryptocurrencies were then written down to a fair value of $125,000, which is the exact amount owed to Genesis by the company, resulting in an impairment loss of $828,000 (Sept. 30, 2022 -- nil).
• Operating loss of $5.5-million, compared with FY 2022 loss of $19-million, primarily due to improvement of cryptocurrency prices compared with a significant price depreciation during FY 2022.
• The company also reviewed and performed impairment testing on certain intangible assets and investments at year-end, and has determined the following:
  • Impairment of goodwill related to the Metaverse Group acquisition of $1.1-million (Sept. 30, 2022 -- nil), as the company expected Metaverse Group to incur negative operating cash flows over the next few years;
  • Impairment of intellectual property acquired from CocoNFT of $548,000 (Sept. 30, 2022 -- nil) due to uncertainty of future cash flow generation via operation or a sale;
  • Impairment of domain names of $1.6-million (Sept. 30, 2022 -- nil) due to uncertainty of future cash flow generation.
• Net loss and comprehensive loss of $9.7-million, attributable to owners of Tokens.com, compared with FY 2022 net loss of $3.8-million and comprehensive loss of $7.3-million.
• Net loss per share, attributable to owners of Tokens.com, of nine cents per share, compared with loss of four cents during FY 2022.

A complete financial reporting package, including the audited consolidated financial statements and management's discussion and analysis, is available on the company's corporate website, and the SEDAR+ website.

An investor call has been scheduled to discuss the company's 2023 financial results, hosted by chief executive officer Andrew Kiguel, starting at 5 p.m. ET on Jan. 31, 2024.

Conference call details

Date: Jan. 31, 2024

Time: 5 p.m. ET

To join the webinar, register on-line. Upon registration a Zoom link will be e-mailed to the registered e-mail address. The webinar will be available via computer, tablet and smart phone devices. In addition, a dial-in phone number will be provided in the e-mail upon registration. Callers dialling in using a telephone will automatically be placed in a listen-only mode. The question period will not be available to dial-in callers.

About Tokens.com Corp.

Tokens.com is a Web3 that also owns an inventory of cryptocurrency, digital real estate and a collection of top-ranked crypto-related domain names.

We seek Safe Harbor.