23 May 2019
“The Sandbox” (TSB Gaming) receives ~$3.6m in investment from major blockchain companies
Animoca Brands receives approx A$3.6 million (US$2.5m) in cash and cryptocurrency via the issue, by its wholly owned subsidiary TSB Gaming Ltd., of SAFE convertible securities and SAND utility tokens to fund development of the upcoming blockchain version of The Sandbox
The investment was led by Hashed, the largest crypto assets fund and accelerator in South Korea, with operations based in San Francisco and Seoul
Partnership with Klaytn to distribute The Sandbox through its Klaytn ecosystem. Klaytn is the blockchain platform and subsidiary of leading Korean mobile technology company Kakao, the dominant messaging app in South Korea with over 50 million monthly active users and ~US$9.2bn market cap
The Sandbox is currently a highly successful mobile game franchise (40m installs, 1.2m active monthly users); once the blockchain version is launched it will become one of the first decentralised, community driven game platforms, providing users with true ownership of their creations as non-fungible tokens (NFTs: virtual tokens for digital scarcity, security and authenticity representing game items)
The Company expects The Sandbox’s decentralised marketplace to launch Q3 2019
Animoca Brands Corporation Limited (ASX: AB1, “Animoca Brands,” or the “Company”) is pleased to advise that its wholly owned subsidiary TSB Gaming Ltd. (“TSB Gaming”) has raised US$2.5 million (approximately A$3.6 million), consisting of 40% in cash and 60% in Bitcoin cryptocurrency, through the issue of “SAND” utility tokens and simple agreement for future equity (SAFE) convertible securities. The majority of Investors allocated their investment to the purchase of both SAND and future equity via the SAFE notes (in the amount of US$2 million), while some Investors allocated their investment exclusively to the purchase of SAND tokens (US$500,000). SAND will be utilised in the upcoming blockchain version of The Sandbox user generated content game platform (the “Game”).
The investment into TSB Gaming was led by Distributed Protocols PTE LTD (“Hashed”), the largest crypto assets fund and accelerator in South Korea, with operations based in San Francisco and Seoul. Other investors included Helix Accelerator Limited, Mind Fund Group Ltd., Blocore (Gameberry Inc.), Thundercore Token Ltd., Klaytn PTE. Ltd., and Alexis Bonte (a partner at Atomico Ventures, the leading technology venture capital firm in Europe), among others (the “Investors”).
Additionally, TSB Gaming has also entered into a Partnership Agreement with Klaytn PTE. Ltd. (“Klaytn”), a recently established permissioned blockchain project led by Kakao, the largest instant-messenger corporation in Korea, to distribute, promote, and market The Sandbox game through its ecosystem, which includes Kakao. Kakao has a market cap of approximately US$9.2 billion (approximately A$13.3 billion) and is one of the dominant messaging apps with over 50 million monthly active users worldwide.
TSB Gaming, The Sandbox, and SAND
In 2018, Animoca Brands acquired the entirety of Pixowl and all of its assets, including The Sandbox (refer to ASX announcement of 27 August 2018). TSB Gaming Ltd. is a wholly owned spin-off company of Pixowl, incorporated in Malta in September 2018, set up to hold all the intellectual property (both new and existing) for The Sandbox (the “Sandbox IP”) and to manage the development and operation of The Sandbox game platform.
TSB Gaming currently has 1,200 ordinary shares outstanding, all of which are owned by Pixowl. Pixowl is currently in the process of transferring the Sandbox IP to TSB Gaming, in return for which TSB Gaming will issue 10 million newly issued shares to Pixowl. After this process is completed (which is expected to occur by 30 June 2019), TSB Gaming will have 10,001,200 ordinary shares outstanding, all of which will be owned by Pixowl.
After transferring the Sandbox IP to TSB Gaming, Pixowl's main assets will consist of the following properties together with their respective assets (as well as its ownership interest in TSB Gaming):
Garfield: Survival of the Fattest
Snoopy's Town Tale
Wonder Park Magic Rides
The Sandbox is already among the world’s largest independent user generated content (UGC) platforms and ecosystems, with over 40 million downloads and one million monthly active users around the world. Its upcoming blockchain version is based on the Ethereum platform, an open-source platform that enables thousands of decentralized cryptocurrencies and projects to be built and deployed on its open and public blockchain. The Sandbox will be one of the world’s first decentralised community-driven user generated game platforms built and deployed on an open public blockchain.
The Company intends to capitalise on the popularity of UGC gaming by giving players the added benefits of true digital ownership of their UGC creations: assets in The Sandbox will be non-fungible tokens (NFTs), allowing players to trade or sell them without restrictions. NFTs are virtual tokens for digital scarcity, security and authenticity, and in The Sandbox they represent items inside the Game.
User-generated digital assets in the blockchain version of The Sandbox are ERC-721 or ERC-1155 tokens, depending on their scarcity. Smart contracts will track token ownership at the individual token level: each item has a unique identifier and, optionally, unique properties stored as metadata.
SAND is the utility token used throughout The Sandbox ecosystem as the basis of transactions and interactions. It is an ERC-20 utility token built on the Ethereum blockchain. It will be used across the ecosystem by gamers, developers, and publishers, allowing content creators and players to exchange content such as assets and games, and build a user-based platform of rewards while developing an ecosystem where users share their unique gaming creations.
In The Sandbox, SAND will be utilised to purchase LAND, which are the spaces (or Worlds), in which players create and play. LANDs are limited, non-fungible, transferable digital assets stored in an Ethereum smart contract.
In addition to acquiring LAND, SAND will also be used to purchase, create, or develop in-game content in the form of NFTs, including digital items such as ASSETs (user-generated voxel items that appear in the game worlds). The uses for SAND are summarised in the table below:
SAND will enable players to monetise the time and effort they invest into The Sandbox by creating NFTs and then selling those creations in the Game’s decentralised marketplace as well as on Animoca Brands’ partner NFT e-commerce platforms, such as the Worldwide Asset eXchange (“WAX” - refer to ASX announcement of 16 January 2019).
The SAND utility token confers no equity or ownership rights in TSB Gaming Ltd. The Company is working to make SAND available on a number of public decentralized exchanges later this year. The Company expects The Sandbox’s decentralised marketplace to launch in Q3 2019, with the full launch of the blockchain version of the Game to follow. The Company will update shareholders on major developments.
Example of Voxel Assets
The Company’s wholly owned subsidiary TSB Gaming Ltd. has raised US$2.5 million (approximately A$3.6 million) via the issue of SAND utility tokens and simple agreement for future equity (SAFE) notes to the Investors.
The SAND utility token portion of the transaction has been conducted subject to the following provisions:
Total token Supply: 3 billion SAND
Investors acquired SAND at the price per token of US$0.0072 (approximately A$0.01)
A total of 333,333,333 SAND utility token will be released to the Investors within 30 days, representing 11.11% of the total token supply
Lockup Restrictions: The SAND utility token issued to the Investors are subject to a 12-month lockup, with 1/12 of the total being released from lockup each month starting from the earlier of (a) June 1, 2020, or (b) the launch date for the full release of The Sandbox
Future Plans: TSB Gaming aims to sell up to an additional 566,666,667 SAND (for a total of 900,000,000 SAND), and will maintain a reserve of 1.2 billion SAND for future use
Additional Notes: should SAND not be launched by 6 June 2020, TSB Gaming will be required to refund the investment made by Hashed, the lead investor, equal to US$1 million (approximately A$1.44 million). SAND is on track to launch in Q3 2019
SAND proposed allocation
Total token supply: 3 billion SAND
In addition to the 333,333,333 SAND, the Investors have been issued a SAFE (simple agreement for future equity). The SAFE provides for a valuation cap for TSB Gaming equal to US$10 million (A$14.4 million) pre-money. If TSB Gaming stock is issued to the Investors under the SAFE, it will be standard preferred stock.
Under the SAFE the Investors have the following rights:
Equity Financing: if there is a future equity raising, each Investor would be issued shares of standard preferred stock based on the greater of (a) such Investor’s investment divided by the lowest price per share of standard preferred stock (which is the price of the preferred stock issued to investors investing new money in TSB Gaming in connection with the Equity Financing), and (b) such Investor’s investment divided by the SAFE price (which is equal to the Valuation Cap divided by TSB Gaming’s pre-equity financing capitalization).
Liquidity Event: each Investor would automatically be entitled to receive a portion of the proceeds equal to the greater of (a) the Investor’s investment (the “Cash Out Amount”), or (b) the amount payable on the number of shares of common stock of TSB Gaming as would result from application of a formula calculated based on the Valuation Cap (Please refer to the Annexures for further details on how an Equity Financing or a Liquidity Event would operate under various scenarios).
Dissolution Event: each Investor would be entitled to receive a portion of the Proceeds equal to such Investor’s investment, but subject to payment of higher ranking claims (such as those of creditors and promissory notes).
The SAFE would automatically terminate on the earliest of an Equity Financing, Liquidity Event, or Dissolution Event.
The Annexure to this announcement includes tables setting out the possible range of stockholding that the Investors could hold in TSB Gaming in the future based on different Equity Financing and Liquidity Event scenarios.
The funds raised through this transaction will be used to grow the development team and infrastructure for the Game Platform, support marketing efforts through acquisition of creators and IP licenses, and provide for security, legal, and compliance expenses as well as general and administrative costs. The Company expects that the sale of SAND tokens will be treated as revenues, while proceeds from the SAFEs will be treated as liabilities, subject to confirmation by the Company’s auditors.
As part of the Partnership Agreement with Klaytn, TSB Gaming will make The Sandbox available on to Klaytn’s Main Net, at which time TSB Gaming will obtain the right to exchange a maximum of US$200,000 (approximately A$288,000) worth of SAND tokens for $400,000 (approximately A$576,000) worth of Klay tokens. Klay is the ERC-20 token that will be powering Klaytn’s network that will allow partners’ decentralized applications to run on its permissioned blockchain. Klay will be available on exchanges starting later this year, will be usable in other Klaytn partners’ applications.
In addition, TSB Gaming has entered into an Advisory Services Agreement with Hashed wherein Hashed will provide services to The Sandbox game platform (including but not limited to business, strategy, promotion, public relations, networking, and potential listing services for the SAND utility tokens) in return for a payment of 55,555,555.56 SAND tokens with a worth of US$400,000.
Yat Siu, co-founder and chairman of Animoca Brands, said: “We are honoured that domain-expert companies such as Hashed and Klaytn, among others, have chosen to join us in this journey of helping bring blockchain to the masses through gaming. This is a major milestone for the company, validating our blockchain strategy and the NFT-centred blockchain and brand partnerships on which we have been working recently, such as Formula 1.”
Arthur Madrid, CEO of Pixowl and of TSB Gaming, commented: “The Sandbox offers everyone access to a new economic model where players and creators fully participate in the value creation chain and can benefit from the new paradigm where content is the platform.”
Sebastien Borget, COO of Pixowl and of TSB Gaming, said: “Our vision for the future of decentralized gaming is that NFTs are a catalyst for mass adoption. Players will benefit from NFT interoperability across games, giving items a value beyond their utility based on factors such as an emotional attachment to their creator, the fame of previous owners, or track record across games.”
Jason Han, the Project Head of Klaytn, stated "We are very excited at the opportunity to bring The Sandbox to the Korean gaming market; this game is one of the first of its kind, allowing for user-generated non-fungible tokens to be traded in-game."
About Animoca Brands
Animoca Brands (ASX: AB1) leverages gamification, blockchain, and artificial intelligence technologies to develop and publish a broad portfolio of mobile products including games such as The Sandbox, Crazy Kings, and Crazy Defense Heroes as well as products based on popular intellectual properties such as Garfield, Snoopy, Thomas & Friends™, Ever After High and Doraemon. Animoca Brands’ portfolio of blockchain investments and partnerships includes Dapper Labs, WAX, Harmony, and Decentraland, and it is also the exclusive China distributor of CryptoKitties. The Company is based in Hong Kong, Canada, Finland, and Argentina. For more information visit www.animocabrands.com or get updates by following Animoca Brands on Facebook or Twitter.
(Please note that the following are scenarios, not forecasts)
Equity Financing Scenario: TSB Gaming Ltd.
Liquidity Event Scenario
Under a Liquidity Event (a change in control or an initial public offering), each Investor will have the right to receive a portion of the proceeds equal to the higher of (a) the Investor’s investment (the “Cash Out Amount”), or (b) such number of shares of common stock of TSB Gaming as would result from application of a formula calculated based on the Valuation Cap. (The formula used would be [Investment Amount / Per Share Price], where the per share price is calculated by applying the formula [Valuation Cap / Total Number of Shares Outstanding] (including common stock, preferred stock, and options, but excluding any unissued option pool and convertible securities such as the SAFEs).)
EXAMPLE SCENARIOS (based on 10,001,200 total shares outstanding pre-conversion, and on a per share price of US$ 0.9998):
Sample Token Purchase Agreement & SAFE (Redacted)