Conference Transcript - IPST 2026-02-04

Operator

This is the Red Chip Fintech and Digital Asset Treasury Virtual Investor Conference. We've been going since 9.30 a.m. Eastern today. We're going to go one more hour until 4 p.m. Eastern. As we just said, with us today, we've got Justin Stiefel. He is the co-founder, CEO, and chairman of IP Strategy, trading on the NASDAQ under the ticker IPST. Justin is going to present in just a moment. We're also going to open this event to your questions. Your lines are going to remain muted, but you can submit a question at any time by clicking the Q&A button at the bottom of your Zoom window. Before we begin, please allow me to read that Safe Harbor statement. This segment may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Five, all statements pertaining to future financial and or operating results, along with other statements about the future expectations, beliefs, goals, plans, or prospects expressed by management constitute forward-looking statements. Any statements that are not historical facts should also be considered forward-looking statements. And, of course, forward-looking statements involve risks and uncertainties. Justin, please tell us about your great company.

Justin B. Stiefel, CEO

Thank you. Thank you for having me. And thank you for all those who are watching. So I'm Justin Stiefel, CEO and co-founder of IP Strategy. Our team includes our chief investment officer, Phil Blouse, who's been in the trading markets for two decades and is helping us get on our strategy to increase yield. The vision for the Story Foundation, this Layer 1 blockchain that is really the crux of what we're doing here, was created by S.Y. Lee. It's the bottom left there. He's the co-founder and genius behind this entire enterprise. He had an exit of a video game company that he built in South Korea for nearly half a billion dollars. Others on the team include Ben Sternberg, who was a CFO for Radish. And then a board nominee joined the board after Q1, David Lee, who was an early leader at Google, and sits on a number of other boards and companies as an advisor. What are we doing here? We've got two parts of the business. One is our legacy spirits business. We started 14 years ago as a craft distillery. We were the most awarded craft distillery in North America for 10 years in a row. I started to look at what was happening in the marketplace and changes that were happening in demographics and also the opportunity to take advantage of transitioning into the blockchain. When we were introduced to the story team, I immediately understood the vision. It's a layer one blockchain designed specifically around intellectual property. It is something that the other layer one blockchains are not really well designed to do. this is purpose built and we drive revenue from the validator business we have in addition to the underlying legacy spirits business the intellectual property space typically is comprised of three things patents trademarks copyrights uh we focus on copyrights the the crux of the story foundation layer one blockchain is really built to support copyrights and to protect creators the ip market as a whole is an 80 trillion dollar market and what we see happening right now is the problem is growing in terms of how do creators protect their intellectual property how do they make sure that people who are using it or ai engines or llms who are scraping the internet are tracking and fairly compensating and giving credit to their creators right now there's too much rights ambiguity training the fine-tuning of these ai platforms and llms uh there's it's just very opaque and it's a big black box very difficult for creators to enforce any kind of licensing rights even common law licensing rights right now if you were to find something on the internet or digital file music video movie rights whatever and you right now would have to go and hunt down the agent or the manager for the creator look for some kind of digital paper physical paperwork pdfs negotiate terms and all that. This layer one blockchain has been designed to remove that friction and to allow for that to be done in a near real-time way. And also to provide the ability for the creators to track and seek payments and compensation and acknowledgement for their works. Right now, when people talk about AI and they talk about LLMs, they've been focused on three things real estate chips and computing power and then the electrical power to drive it they have not talked about the fourth leg and the fourth leg is what do we do with all of the intellectual property that's being scraped and in many cases illegally ingested to create value for the ai companies and the llms and again the story one layer blockchain is the only blockchain designed to solve that and create that fourth missing leg to make the table actually level for all parties. So we think this is a critical part of what has been ignored the last several years. And now because everything else is essentially becoming commoditized, real estate, chips, and electricity, AI is the missing link that needs to be solved. We tokenize the intellectual property. We allow the creators to register their intellectual property on the story blockchain. We also are allowing layer two and Layer 3 projects and programs to be developed that are focused on different features, whether it's music, it's video, fractional ownership of digital assets. User-generated content is a large and growing area. Robotics is a huge, huge open area that this story, Layer 1 blockchain, has been designed to solve and allow for efficient ingestion of data to allow the robots to work more efficiently. From a static IP to native AI, this is really about building the programmable intellectual property world. And this is, again, about registering, licensing, and monetizing. How does a creator of content register their intellectual property in a digital way online? How do they set the licensing parameters in the smart contracts that are embedded in each of the tokens? And then how do they have visibility to be able to track and make sure that they're getting credit and compensation for the works that they created, including derivative works and derivatives of the derivatives all the way down the field. This story network has been several years in the making, the Layer 1 Foundation. The funding has been led by A16Z in multiple levels, including the foundation itself, several of the projects. I'm going to talk about two of them here in particular. And then also A16Z was part of the pipe transaction that we concluded last august between um the legacy company and bringing the pipe transaction in for uh the company as it currently sits today you can see in the bottom here we're talking about a number of of large uh investors in the space who are well known um who have who saw the vision of foresight behind this and jumped in and have been providing the seed funding to get things off the ground right now there have been more than 90 million transactions conducted on story again when we think about the entirety of all the blockchain people talk about blockchain in in big swaths most every one of the other blockchains that we've talked about today are financially based they're competing for a sliver of attention or they have a specific financial metric to remove friction in some type of financial part of the industry this is about bringing the financial part of the industry and removing the friction for intellectual property which makes all the rest of AI legal and compliant down the road. So having 90 million transactions when the token just was launched as of early last Q1 last year, we've already undergone 19 network upgrades, including the most recent one that happened in January, more than 13 million accounts and 5.6 million pieces of intellectual, individual intellectual IP have already been registered on chain. The IP token and its dollar sign IP is what's trading. It is fully tradable and very liquid. Today's market value is roughly about $490 million in terms of active market. The governance is the token tied to the story ecosystem. It powers all network activity and registration, all licensing, staking, and user fees. The cost to run a transaction is very, very low by design, and that was to encourage mass adoption. Creators, developers, and investors alike can buy sell and trade the ip token there are also a number of ways to trade derivatives and options around it every ip registration license or derivative mint consumes an ip token but again the gas fees are very very minor and then as story scales as more projects are built on chain as layer two and layer three programs and apps you'll see more adoption and more utilization of the of the base case for the underlying story ip token in terms of the business model for ipst because the story foundation is a separate entity it runs the protocol ipst is the public trading company that is the largest single token owner and is the largest validator of the story network because story is a proof of chain blockchain it provides rewards and staking we are earning between 5.8 and 12% yield based on the staking protocols. And why the spread is so large is because we set up our own validator at the end of Q1 last year. In this quarter, we've now moved that to a custodian arrangement at crypto.com. So we now have set up our own validating under custody, crypto.com, which is fully insured. And that allows us to put our tokens in under longer term contracts and those longer term contracts earn more yield. So we're slowly this quarter transitioning from the lower yield contracts, shorter term contracts on the validator into the longer term. So we're moving from 5.8 to almost 12%. We also are doing a third party validator for validation work for people who have their own IP tokens. They stake them with us. We'd run the validators. They make 95%. We earn a 5% commission on that. In January alone, we generated 257,000 tokens. We're unlocking a block almost every minute and a half or so, and a block in this instance is eight and a half tokens. Our validator uptime is almost 100%. The third-party validation that we've earned, our commission, was almost 14,000 tokens. Since we started this in September, it's been almost $5.3 million in this revenue coming to us just from this validation work. And as we see the token value go up, and as we see our yields increase by moving the tokens from the shorter term contracts to the longer term contracts, then we would expect to see the revenue go up. And we're seeing that revenue is a greater than 95% gross margin. We think this makes us not just another DAT, but really we're a digital asset and intellectual property company. i'm going to explain what i mean by that in just a moment in terms of the metrics we own almost 53 million of the ip tokens again we're one of the largest single owners of the ip token the six and a half yield percent yield was the blended rate so far that is we anticipate that's going to go up as we move the bigger chunk of the tokens into long-term contracts under staking right now we're slated to earn about three million tokens this year at today's token price or yesterday's token price of $1.49 to be worth a little less than $5 million a year. And again, the fixed costs are less than $400,000 annualized to run this entire thing, and it's run on third-party validators that we control. We have started to use some yield enhancement. We've entered into covered calls where we're earning the most recent contract we entered into today. It was at 4% per month, so we're talking about greater than 40% yields on an annual basis. We are allowed to use up to approximately 5% of our total tokens under this covered call strategy. Typically, the calls are written 20% to 50% out of the money. This is flexible for us. We can size it up or down, and we have these rotating weekly on a monthly basis with 30-day contracts. But you can see the ability to generate 4% per yield per month is pretty attractive and upsizes dramatically. We then can take those tokens in the yield, we can sell them into the market to cover operational needs of the company, we can take them and restake them to compound our returns, or we can eventually bank the capital to maybe go on acquisitions or to do stock buybacks or other financial decisions that the company will make based on needs and market conditions. Why invest in IPST versus an IP ETF? There are a couple of IP ETFs, including Grace Gale recently moved IP into one of the ETFs. It's the ability to generate income from our validator operations because we collect that income. The ETF does not. You can access the capital markets more directly. And in addition to that, we are exploring the idea of physical or real world intellectual property. What do I mean by that? It means, do we go out and start to buy some music collections that have license and royalty Do we start to go out and buy movie rights that are generating revenue from existing royalties and license rights? And then do we take those dollars, because it's cash flow, to reinvest in the company or to build that portfolio? That portfolio would be adding revenue in real time, because those royalties exist already by buying existing catalogs. but also the ability to take those intellectual pieces of property and register them on chain and partner with some of the other layer two and layer three protocols that are focused on different parts of the entire ecosystem. So again, we're not just another DAT. We consider ourselves to be a digital asset intellectual property company, which is both the validator business, very high yields, and how do we focus on the real world intellectual property? several of the layer 2 and layer 3 projects started to make some significant dents in the news and the media especially in in web 3 i'm going to talk quickly about poseidon and aria so aria is a music ip based layer 2 on the story layer 1 blockchain it allows for fractionalized ownership of music libraries. Justin Bieber has some of his music has been acquired and is fractionally owned by Aria investors, Miley Cyrus, Madonna, several of the K-pop bands out of Korea and so on. So Aria has its own token, but the entirety of it is built on the story layer on blockchain. And the tokenization does allow for fractional ownership. There's this debate in the us about how will tokenization and fractional ownership work as a security well folks can invest now through aria by buying the aria tokens and becoming part owner of some of these catalogs that assist are right royalties are distributed to the rights holders again a real world asset and intellectual property space unlike the other blockchains that are designed to run simply financial instruments investors and fans can buy trade or participate through ip $12 million was raised when ARIA launched in terms of investors buying the token. Another $15 million was put in by Polychain, Neoclassic, and other large-scale investor groups. Poseidon is a very exciting project. It's built for the AI data economy. It is registering data sets that prove ownership and origin. Biggest growth they've had since launching a few months ago is in the voice and language conversion, which allows usage and access to be clearly set and protected the project is tokenizing and tracking the video the audio data sets that are being collected as a models are using the data every use of that is recorded and then the creator is compensated for it so the incentives are aligning to get users to sign up and join and create audio files the data sets can also be bundled traded reused and otherwise put to use in data markets in the first month of launched they had five and a half million submissions of people recording various uh audio in various languages almost 35 000 hours of this collected from 400 000 plus contributors and again this is all real world data that's not been tokenized on chain and what's most impressive is that the library that poseidon is building of public data sets and language alone is now one of the largest in the world and when you look here whether it's russian korean portuguese chinese it's the blue spikes are represented by the size of poseidon's data set now why is this important well as these ai engines and llms are trying to learn and are trying to figure out how to convert and how to create agents and do translations, the broadest, biggest, most accurate and validated data set of language will make those agents and bots and other AI things that are consumer-facing or for research much more accurate and much more reliable. And with that, I'd love to open it up to any questions you may have.

Operator

Thanks, Justin. Please click the Q&A button and type in your question into the text box that will appear. If you have any questions for Justin Stiefel, and we do have some already here. How did heritage and story come together? And what drove the pivot into digital assets?

Justin B. Stiefel, CEO

Well, as I mentioned, the spirits business is undergoing kind of a tectonic change, if you watch the news. And as someone who tries to be forward thinking and looking at the data, we were looking at different ways to take the existing public company that we had and leverage it and try to create additional shareholder value. We created a technology and cryptocurrency committee on the board early last year, which I think told people that we were interested in exploring this. We added a board member named Matt Swan, who now chairs that subcommittee, and he was an early participant at Amazon, helping to build their digital payments platform. We just heard from Bragg House here earlier. Matt is one of the lead tech people at Bragg House working with Doge. He's deep into the payments and digital platforms over the last two-plus decades and is a trusted leader and well-drapped worldwide. I think as people saw we were doing that, we started to receive inbound calls. We had lots of suitors looking for us who were trying to do digital transactions last year. and again when i saw the story pitch and i understood as an attorney myself we've got a lot of trademarks and and some patents at the company i understand the value of intellectual property especially copyright copyright is self-effectuating if you create a musical work a drawing a written word under the copyright act it's yours to protect and as we look at this discussion of real world use case for blockchain it was pretty obvious to me that the ability to digitize and track intellectual property for the protection of creators and also for visibility for users was lacking. And the story had identified a way to build upon that.

Operator

Justin, how does story success translate into value for IPST shareholders?

Justin B. Stiefel, CEO

Yeah, so I think watching more projects, programs, and collaborations being built as layer two and layer three pieces of the ecosystem is important. I mentioned two particular ARIA and Poseidon. Each Layer 2 or Layer 3 project adds users and data. It validates, if you will, the need and demand to be able to track and protect intellectual property. Seeing the data is being used by AI models and LLMs to compliantly build and refine their models is another key feature to be looking at. I think as you watch, it's really more important to watch how each one of the layer two and layer three apps are growing in their user bases. The Story Foundation itself is not designed to make money as a blockchain. It's designed to just run the protocol. And so really looking at the transactional work, the amount of data and the quality of the data being collected at layer two

Operator

and layer three. What key performance indicators should investors be tracking for the validator

Justin B. Stiefel, CEO

business and treasury strategy yeah so first i'd encourage people to look at the most recent uh changes in tokenomic improvements that were made at the foundation in january which are both designed to improve the protocol the story protocol they're designed to encourage more long-term holdings of the ip token and to reduce short-term speculation this also included an announcement that long-term locked tokens, that the lock contract was being extended for six more months, which I think should bring more price stability to the token. Again, I think you look at the number, variety, and creativity of new projects and programs being built as layer two and layer three parts of the ecosystem. You have to look at the amount of data being registered and add to the ecosystem. As the largest validator in the ecosystem, as long as our runtime uptime stays at 99.9%, it's a fairly predictable amount of tokens that we are unlocking on a daily and monthly basis. And really then it's about tracking the value per token because that value per token multiplied by the number of tokens that we're unlocking every moment gives you pretty good direction in terms of revenue for the year. What does the company think about managing digital asset volatility? Well, we're taking advantage of some of the volatility by putting approximately 5% of the IP tokens we have into things like the covered call transactions. Earning 4% per yield per month is pretty good, I think in relative terms. I think in the future, being opportunistic about acquiring more IP tokens based on where we think the token should be priced overall in terms of value territory. Reinvesting IP tokens that we're earning from staking into additional staking opportunities for a compounding effect is important. Evaluating the market for traditional IP assets, I talked about, do we go out and acquire music catalogs? Do we go and acquire video catalogs? Do we invest in user-generated content catalogs that are all being scraped or used or have demand and make sure the royalty payment system is fair and transparent? Do we look at possible debt acquisitions for consolidation? There's a number of debts out there that they are not generating enough yield to justify either the valuation they have or the cost structure they have just to run compliance and to remain as public companies. And so do we, because we've got multiple business segments, do we think about doing that, building up the balance sheet? It's really about being opportunistic and adding either operational entities or models that complete the overall strategy.

Operator

This person wants to know why the token IP was chosen as the primary reserve asset.

Justin B. Stiefel, CEO

It was really the partnership and the negotiation with the Story Foundation. The Story Foundation is built, they built the IP as their token. It is the native token of the Story Foundation. So certainly it would not make sense to bring in pipe investments to support the Story Foundation and then go invest in ETH or Solana. Again, the Story Foundation, the layer one protocol, that layer one protocol was purpose built to support intellectual property and tracking intellectual property in that $80 trillion space. I don't think the world needs another layer one that's just designed to run other financial instruments and that's what appealed to us and i think investors who are invested in the pipe and who've also invested in the story foundation and growing the ecosystem have an expectation that our primary treasury asset would be the ip token

Operator

got plenty of questions around this subject conflate them into this justin key near-term milestones catalysts what should we be looking out for yeah yeah first i would say uh

Justin B. Stiefel, CEO

On the X platform, there are lots of announcements, lots of partner announcements who are layer two, layer three, and other projects that are making announcements in partnership with Sometimes they make announcements ahead of the foundation's work. The interesting thing about Web3 is even though we as a public company have certain rules about the type of information we can release and how and when material non-public information, a lot of the Web3 space, they're not hindered by those rules. So if you want to see a view to what may be coming down the pipeline, be checking X because that's where a lot of these projects are being announced ahead of time. I think specific milestones investors should look out for include announcements from existing literature projects like Poseidon. Watch for AI data set owners and LLMs who are recognizing the need to become compliant and who want to be good partners with creators. Look for licensing agreements to be announced from them. I think investors should also look for positive growth starting in the second quarter as the legacy expenses are all behind us and wind down. And free cash is being used to increase participation in token acquisition, possible stock buybacks, validator high margin growth business, or acquisition of things like IP catalogs or potentially partner with other DATs.

Operator

Final question, Justin. the essential value proposition, why should anyone invest in your company or even consider it right

Justin B. Stiefel, CEO

now? Sure. First off, we're trading at an MNAV of about 0.28. So we're 70% on sale when you look at the value of the 53 million tokens we own versus the market cap. Secondly, I think you would need to ask the question, do you think people are going to stop creating things? Do you think people are going to stop coming up with content that they want to share whether it's music video um the written word or whatever and if you think that that will continue then there's going to be a demand to be able to track um and monetize for those creators and also for the ai companies and the llms to be able to defensively be able to say they're doing the right thing with creators and not stealing content um i also think you need to look at the robotic space the best way that robots are trained it's not by programming on a keyboard it's by robots ingesting millions of minutes of video and you can't just go scrape the internet for video legally to train these robots so if you're going to be in the robot building space and programming space you need a compliant way that you can tell both the investors the public and regulators that the video you have used has been licensed to you. And the best way to do that is by licensing through the AI platforms and the projects that are being built so that those videos and other training tools can be used to train

Operator

robots and agents. Thank you very much, Justin. That is Justin Stiefel, who is of IP Strategy, NASDAQ, IPST. If you want more information on IP Strategy, you can call us 1-800-RED-CHIP, or you can write us at ipst at redshift.com. Justin, great work with your company, great presentation. Thank you for everything.

Justin B. Stiefel, CEO

Thank you very much. Appreciate it.

Operator

Thank you.