Cosmos Group Holdings Inc. Issued Letter to Shareholders, Making Growth with the DOT Business
SINGAPORE, July 6, 2022 /PRNewswire/ -- Dear fellow shareholders of COSG;
We minted our first DOT on 6 Sep 2021 –about 9 months ago. While 9 months does not appear to be such a long time, a lot of things have changed since then. Right now, we are considering scenarios that seemed implausible just several months ago – inflation risks, raising interest rates, the crash of TerraUSD (UST), etc. just to name a few. As we wind down the first half of 2022 and prepare for the second half, it is timely for us to take stock of the Group's progress as well as to share some insights on how we are preparing for these future challenges.
Overview of our Technology Business – are we affected by the "Crypto Winter"?
By now, many of us have heard about the US$40billion collapse of Terra (UST, Luna). The crash happened on 13 May 2022, and the spill over effect saw many other digital currencies losing significant value. Forbes[1] reported in May 2022 that the cryptocurrency market collectively lost more than US$1trillion due to the Terra crash. Similarly, the NFT market was also affected and CryptoNews.com reported that NFT sales dropped by more than 55%[2] in a single week. While things appeared to have stabilised since then, the general sentiment among crypto stakeholders has not turned positive.
Despite the overall NFT slow down, we believe that Coinllectibles is still growing from strength to strength. In the last few weeks, we have been growing the team, signing up more partnerships, developing new capabilities and launching more services. We have been able to buck the "crypto winter" mainly because we have never been a NFT company. From day one, we have positioned ourselves as a company that uses technology to solve real world problems. When we launched, one of the real-world problems we identified was the issue of provenance and authenticity that traditional collectors face. We believe that by using technology, we can find ways to solve this problem and make money from it. As a result, we have seen little impact from the "crypto winter".
NFT VS Conventional Collectibles – different business models
Prior to the Terra crash, some investors felt that the Group's focus on real-world issues did not make us an interesting investment opportunity. Unlike cryptocurrencies and NFTs that had market values of more than US$2.9trillion[3] and US$40billion[4] at some point, they felt that there was limited potential in serving the traditional arts and collectibles market. From our perspective, we saw an established market that was ready for disruption.
In terms of what we offer, our NFTs are Digital Ownership Tokens (DOTs) that give holders legal rights to the physical arts and collectibles. Conceptually, our DOTs for collectibles are no different from title deeds for properties – one collectible, one DOT.
Technology wise, even though we rely on similar blockchain technology that other NFTs use, we have enhanced it to a point where legal documents, pictures and even media clips are part of the DOT's metadata that are uploaded on the blockchain. In addition, our DOTs can be stored in digital wallets, transacted over NFT marketplaces, and have those transaction details recorded on the blockchain – making our DOTs truly decentralised.
Why are we encouraged…achieving US$510 million worth of annualised sales turnover
For most companies that deal in collectibles, they are primarily focused on selling as many pieces as possible. This is because the bulk of their revenues comes from primary sales. Beyond that, these companies do not stand to gain if they are not part of the resale process. In terms of revenue model for our DOTs, we generate primary income by selling the DOTs and secondary income whenever the DOTs are traded in the resale market. For DOT trading to happen, the physical items do not need to leave the galleries. It is only when collectors want the physical pieces will they arrange for us to ship the items to them.
From the business model perspective, we do not have to keep finding new collectibles to sell and we continue to make money when the past DOTs are traded. In view of this, the more sales turnover our DOTs have, the more profitable it is for us. While we started the new DOT business in Q3 2021, by accessing transaction data openly available on the block chain, our DOTs had a total sales turnover (primary and secondary sales included) of US$3.6 million for the year ending 31 December, 2021 and US$2.5 million for the quarter ending 31 March, 2022. When you consider that we minted our first DOT just 9 months ago, it is simply amazing to see how much the team has achieved in such a short period of time.
Despite these encouraging results, we believe that we have only scratched the surface of the US$50 billion conventional arts and collectibles market. As a Group, we are constantly looking for new ways to solve real-world problems. A case in point is our recent announcement of the Web3 as a Service (3aaS) launch. As Web3, which includes blockchain, NFT, metaverse, AI, autostereoscopic 3D, etc. , becomes more widely accepted, we expect more companies to want to be Web3 ready. Hence, we believe that helping these companies prepare for Web 3.0 will be an additional source of future revenue.
Overview of our Finance Business – a ballast for uncertain times
As the Group CEO, I have often received queries on how our finance business fits into the overall business strategy. Observers remarked that not only are the growth trajectories of a finance and tech business different, but they also serve different market segments as well as require management teams with different skill sets. Why not focus on one type of business instead?
From my perspective, despite the differences, I see it as having the best of both worlds. In a booming market, when we are aggressively pursuing growth, l believe the tech business will lead us in value creation. Conversely, in a depressed market, I expect the finance business to help us in our value preservation. While this means some occasional trade-offs, I see our finance business as a ballast for uncertain times. I believe that the relatively mild effect of the "crypto winter" on our business as compared to its materially adverse effect on some of our industry peers confirms the soundness of our two pronged strategy.
Financially, the whole group achieved a total revenue of approximately US$10 million for the period ending December 31, 2021, with approximately US$6.4 million contributed by our financing business, and approximately US$3.6 million from the new DOT businesses. As we closed the first quarter of 2022, total revenue for the quarter was approximately US$4.1 million, with approximately US$1.6 million from the financing business and approximately US$2.5 million from the DOT businesses. While we retain a net loss position with the company seeing a net loss of approximately US$25 million for the year ended 31 December 2021 and approximately US$ 62 million for the quarter ended March 31, 2022, we believe that overall we are seeing stable results continue to come from the financing business while the DOT business is the first time achieving a higher revenue than the financing business. The Company reported a loss of US$25 million for the year 2021 and US$62 million for Q1 2022. During the first quarter of 2022, the Company recognised a one-time US$60 million non-cash item payment to three unaffiliated vendors for services provided which relates to technology services in IT infrastructure setup, collectibles items storage management, metaverse consultation, and business development services for the sourcing of collectibles inventory to be made available onto the platform. The services were procured and the fees agreed upon in mid 2021 for the fundamental set up of the arts and collectibles business for both the technology platform architectural design and development management to support the new arts and collectibles DOT business, including the coverage of setting up the authentication and verification standards and process for the business. These services build up the core IT and business development operations of the arts and collectibles business for the Company, allowing the Company to continue to move towards the its DOT business initiative.
In conclusion…
I have shared a lot on how I see the business. However, I have left the important part to the last – our values.
At the end of the day, whether a company is successful will depending on its people, and our values is the "heartware" that drives it all. So what are they:
- Experience comes first – All things we do must not only be functional or provide some form of utility, but it must also be intuitive, prove an unparallel user experience, and as much as possible leave the end user with something that's fun and worth sharing.
- Directness – With a decentralized team model, we have the ability to build a highly skilled and globally diverse workforce. However, this depends on efficient and direct communication. Be direct but be respectful.
- Measure and Monitor – The speed at which we are able to innovate, improve and make relevant our offering is directly related to measuring its effectiveness and the rate and quality in which we collect feedback.
- Build Long Term Value (Sustainable Projects) – While a project may not be relevant in its current iteration forever, we focus on projects which have a long-term meta driver, as well as developing a solution which is simple, sustainable and is likely to stand in the face of technological innovation.
- Fail, but do it Quickly – Learning and making mistakes go hand in hand, however, making the same mistakes or not learning from them is costly. Make mistakes, but learn and adapt from them.
We firmly believe that we are in the very early days of an exciting digital ownership revolution. With the continued support of shareholders and with our team's hard work, we enthusiastically look to the future working hard to successfully navigate the rapid and encouraging industry developments under way and contribute in a meaningful way to the new world economy by bringing about new forms of ownership, new valuable experiences, and in so doing, empowering people and companies across the globe. Towards that end, we on the Coinllectibles team would like to thank you, our shareholders, for your continuous support.
Dr Chan Man Chung
CEO
For more information on Coinllectibles ™️ and its DOT offerings, please visit www.Coinllectibles.Art.
[2] https://cryptonews.com/news/nft-sales-volume-down-by-nearly-55-amid-crypto-downturn.htm
[3] https://www.reuters.com/business/finance/crypto-assets-shed-800-bln-market-value-month-2022-05-10/
Forward Looking Statements
This press release contains forward-looking statements. All statements other than statements of historical fact are forward-looking statements, which are often indicated by terms such as "anticipate," "believe," "could," "estimate," "expect," "goal," "intend," "look forward to," "may," "plan," "potential," "predict," "project," "should," "will," "would" and similar expressions. These forward-looking statements may include, but are not limited to, statements regarding future business activities including the expansion into the decentralized financing space. These forward-looking statements are not promises or guarantees and involve substantial risks and uncertainties. Among the factors that could cause actual results to differ materially from those described or projected herein include that COSG is a holding company with no actual operations of its own and therefore may not realize the expected benefits of the operations of its subsidiaries, including the DOT's offered by Coinllectibles™️, uncertainties associated with having its operating business and subsidiaries located in Singapore and Hong Kong, risk of interference by the PRC government, ability to compete, and that financial resources do not last for as long as anticipated. A further list and description of these risks, uncertainties and other risks can be found in COSG's regulatory filings with the U.S. Securities and Exchange Commission, including in its current report on Form 10-K filed on April 15, 2022. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. COSG undertakes no obligation to update or revise the information contained in this press release, whether as a result of new information, future events or circumstances or otherwise.
For media queries, please contact:
Ms Marsella Cheng
Director, PR
[email protected]
About Cosmos Group Holdings Inc
Cosmos is a business group that operates in two business segments:
- Arts and Collectibles
- Financing
Through Coinllectibles™️, the group provides authentication, valuation and certification (AVC) service, sale and purchase, hire purchase, financing, custody, security and exhibition (CSE) services to art buyers through traditional channels, as well as through leveraging blockchain technology through the creation of digital ownership tokens (DOTs).
With subsidiaries licensed under Hong Kong's Money Lenders Ordinance, the group currently primarily provides unsecured personal loan to private individuals, with a small portfolio of mortgage loans. The group is integrating the two business segments by offering secured financing services to prospective art and collectibles purchasers to provide a one-stop arts and collectibles purchasing and financing experience.
About the Company – Coinllectibles™️
Coinllectibles™️ is a technology company supporting the collectibles industry with a focus on rare memorabilia and artworks that exist and have intrinsic value in the real world, whether tangible or intangible in nature.
Coinllectibles™️ applies blockchain, marketplace, metaverse and NFT technologies as tools to disrupt and enhance the real-world collectibles industry. These technologies have multiple functional uses, and we believe they have the power to transform our societies. Coinllectibles™️ applies these technologies solely to provide a legally binding digital ownership token (DOT) to a tangible or intangible collectible in multiple segments including art, sports, watches, numismatics, limited edition toys, limited edition fashion wear and sneakers.
Website: www.coinllectibles.art
Facebook: https://www.facebook.com/Coinllectibles
Instagram: https://www.instagram.com/coinllectibles/
Twitter: https://twitter.com/coinllectibles
LinkedIn: https://www.linkedin.com/company/coinllectibles
Telegram: https://t.me/Coinllectibles
About Coinllectibles™️ Fusion DOT
Coinllectibles™️ prides the Fusion DOT as the industry "Gold Standard". Being a Gold Standard, a Fusion DOT contains the following on Arweave – (1) a sale and purchase agreement reflecting the purchase, by the person minting the Fusion DOT, of the underlying asset at a fair value which agreement contains a detailed description of rights and restrictions , (2) bailment terms governing the rights to possession whilst the underlying asset remains with Coinllectibles™️, (3) a transfer deed reflecting the transfer of the ownership of the underlying asset (together with all rights and restrictions) by the transferor to the holder of the Fusion DOT, (4) ownership title deed written into the description of the Fusion DOT and (5) the identification file of the underlying asset, whose ownership is reflected in the title deed represented by the Fusion DOT.
SOURCE Cosmos Group Holdings Inc.
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