All right. I think that should be better. I said let's kick it off by talking about Forum's business model. I think quite a few people are unfamiliar with us, and I wanna walk you through what we are doing. Number one, we have acquired a series of real-world assets in very large multi-hundred billion-dollar verticals that we built the pipelines in, that we can tokenize on the regulated financial institution, Liquidity.io, that we have a large ownership position in. We generate revenue by holding these assets to generate yield and cash flows. We've taken the capital that's on our balance sheet, both in the form of cash, and we've sold down Ethereum gradually to purchase these assets so that we can hold them on our balance sheet. We have...
We're tokenizing them one by one onto the Liquidity exchange. The first asset that we tokenized was a pair of CFM56 jet engines that are on long-term contract with a large U.S. airline, and that's how we distribute the returns directly to the token holders. With that, we can jump to the next slide. On our management team, we have a very experienced management team. Our CFO, John Saunders, has worked with me previously at Bridger Aerospace. Last 10 years, I've been in aerospace and defense, and prior to that, sort of a long background in private equity. Max van der Griend was a Senior VP at Trivest. He handles all of our financing transactions, and John Kristoff joins me on the phone today as head of IR.
All of our directors have a very deep background, primarily in private equity. Jason New, Vice Chairman of Lazard, and Angela Dalton, Managing Partner of Signum Growth, a large VC fund. Michael Edwards, Head of Private Capital at D.E. Shaw and Arrowgrass. Andrew Suckling runs proprietary metals trading operation. Crystal Heter runs the largest pipeline network in the United States, Tallgrass Energy. Ryan Smith is a oil and gas entrepreneur that I worked with previously in the past at Enermil. We have a deeply experienced board relative to the size of the company today. I think the most important thing about this is the board is very involved in the connectivity of all the deals and about the capital sourcing for the company.
I think we've put together a lot of pretty exciting solutions because of this team that we put in place. I have to scroll in to see this, but I think number one, the thing that we are focused on, we think that the global financial market is going to move onto the blockchain, and we've been at the forefront of that through both the legal activity that we've worked on from a structuring perspective on creating those tokens, and then from a technology perspective, how to develop those tokens to effectuate the distribution of yield. We think that number one, we have to move these operating assets onto blockchain to make them more efficient to originate, and I'll get into that when we talk about the loans.
If you originate from a point of blockchain and then bring these assets into tokenized structures, it makes it very efficient to distribute at very large scale. We've got a very strong balance sheet, like, as it stands today, so you know, over $100 million of assets. We have, in addition, the equity stakes in the various businesses that we've acquired, plus the assets that we hold that are generating cash flow today. Let's start with Liquidity.io. We made an investment in Liquidity in the fall of 2025. Liquidity is a regulated financial institution. They have multiple licenses with the SEC that allow them to securitize assets on the exchange.
They're FINRA regulated, have a transfer agent, have a brokerage dealer license, and you can transact all kinds of digital assets on the platform. They have a fully vetted and highly regulated KYC platform. It's tapped into the TSA's database for facial recognition. This is a platform that's set up to effectively you could trade any type of financial asset on the platform, and I know that they're actively partnering with multiple different platforms globally to bring more assets on the exchange. This is going to be our primary exchange partner, where we create our Ethereum Layer two tokens to trade the physical assets that we have on the balance sheet. All right. So this diagram kinda depicts how everything works. I think we need to start with capital allocation.
As I said earlier in the presentation, we've been allocating our capital into acquiring real-world assets, and we're accelerating that capital allocation in the second quarter. I think you'll see a large percent of our total assets go into these cash flowing assets and US dollars over the course of the next couple quarters. All those are then tokenized and put onto Liquidity for people to accredited investors and institutional investors to acquire. Then the next step we get to is how do we get to this flow of real-world assets? That's the series of transactions that we did to build the pipeline for auto loans with Karus AI, build the pipeline of modular mortgages with Zippy, and the partnership we have with Aero Engine Solutions on the refurbished CFM56 jet engines.
All that leads to the revenue and cash flow generation for the business. We're ready for the next slide. This is the sequence of events and kind of how everything unfolded. The company came public through a reverse merger in August of last year. A combination of Ethereum and cash was raised. We were initially focused on tokenizing real-world assets using Ethereum Layer twos and holding some Ethereum on the balance sheet. To execute on that plan, we initially started with the transaction with Liquidity.io to take an equity stake in the business so that we could have a partner to tokenize with. We then executed on the Zippy transaction, which is the modular mortgage investment. They're partnered with a very large financial institution in the United States.
They've become one of the largest originators of modular mortgages in the U.S. We then invested in Karus AI, which is a car loan origination analysis engine that looks at over $1 billion a month of car loans and then provides this data to a whole slew of different buyers of car loans, insurance companies, banks, and financial institutions. This allowed us to get access to their dealer network so that we can buy the loans directly at point of origination. Then also was the seeding point for us to connect with their origination partner, Automatic, which allows us to then start the blockchain origination at point of origination for the debt.
In January of this year, we tokenized the first two aircraft engines that have ever been brought onto blockchain through a partnership with one of the largest U.S. airlines, and we now have a building backlog of demand for CFM56 engines to be tokenized in the future.
This is just the details on the aerospace token, Mac.
Let's just talk about the structure of that. CFM56 7B engines are the most ubiquitous engine on single aisle aircraft in the world, produced by GE Aerospace and Safran. There's an extremely large backlog for new engines, so the refurbished market for CFM56 has continued to grow. We think there's a pretty large supply demand imbalance in place actually for the next 15 years in the marketplace. In terms of companies that are the largest providers of these engines, FTAI is a large player in the market. You've had Air Lease in the market for a long time. As I said, we partnered with probably one of the largest refurbishers in the country, Aero Engine Solutions.
They provide both a parts refurbishment operation that's global, but then have direct access to airlines both in Europe and United States that are constantly looking to acquire refurbished leased engines. In partnering with them, we put the first two engines on a three-year lease with one of the largest U.S. airlines. It's paid on a monthly basis, and the yield that's generated is kind of right around 12%. I think if you hold the lease till termination over a three-year period, it's around 16%. We have a residual guarantee on the value of the engine at the end of the lease should we wish to execute on that. The way the token structure works is when you buy the token, you actually get the direct collateral in the engine.
You get a direct monthly payment of the cash flow of the engine, and you'll get this until the life of the lease is completed and all your capital is returned. It's effectively a liquidating token. One of the things that we're focused on in the next set of these engines that we do is there's a lot of very positive tax characteristics for investors in these engines. We'll probably set the next one up so that the bonus depreciation will flow directly back through on a K-1 basis to the engine leaseholders. We think it's a pretty unique structure to allow investors to invest directly in the engines.
Most of these assets are tokenized in pools of $500 million minimums, when they are sold to investors, so the yield is tranched out in a couple different ways. The way we've set this up, you get direct access to 100% of the cash flow and 100% of the collateral without any leverage, by being invested in the engine. We think it's a replicable structure that you can put hundreds of millions of dollars into very easily, as we grow out our fleet of engines.
We don't have to spend a lot of time on that one.
Okay.
This is just the four ways that we make money.
I touched on all this. I mean, number one.
Yeah.
We generate revenue by holding the assets. As we're generating the tokens, we're collecting the yield and the cash flow on the assets. Once we build the tokens, there's a small origination fee on every token. Once we receive that capital back from sale of the token, we can recycle the capital back into buying more of the assets. We take a fee from managing the assets that are underlying the token. And then there are some small transaction fees as the tokens trade. A majority of our revenue today actually comes from holding and cash flowing the assets. Our success is really judged on how much capital we deploy into the various verticals that we've put in place to generate that cash flow. All right.
I think this slide looks at like tokenization from a marketplace perspective. I truly think that we're kind of at the most early stage in the marketplace for tokenization. I know we're a leading edge provider. You need a lot of components to be able to execute on this. Number one, you need a marketplace to put the tokens into. You need a relatively complex structure to create the tokens. You need to follow securities laws in the United States to create the tokens. The first one we did was done under Reg D, and we're working on doing future offerings under Reg CF and Reg A. Once that all happens, you still need to program the tokens.
We used Arbitrum, and we'll probably use the Ethereum layer twos for all future tokens just because of the Liquidity in the network, and the high uptime in the network. It's taken really a lot of time and a lot of thought to put both the legal and the technical structure in place. Now that we've done it with the jet engine token, I think there's gonna be a lot of unique ways that you can use the token to allocate cash flow to investors in the future. I think the marketplace is literally just starting to open up for the ability to tokenize real world assets right now today. All right, we talked about these verticals earlier. I think it's worth just digging in to each of them.
We purposely went into car loans, modular home loans, and aerospace is the first three ports of call. We're going to move into commercial real estate next. The reasons why we chose car loans, it is, I think, the second largest loan market in the United States. We've got a wide variety of loans to choose from. You've got hundreds of thousands of points of origination. By doing the deal with Karus, we wanted to apply AI to looking at how car loans performed and use the AI to help at the point of origination. They were already tapped into over 20,000 dealers with the network that they put in place with their partnership with Automatic.
It basically allowed us to tap into a $multi-billion-a-month market per month, take some percentage, a couple of million dollars per month, put those car loans on our balance sheet, and allows us to then set up a future car loan token. We just recently announced also that we put a warehouse in place with Automatic, which allows us to generate a much higher yield than you would get from owning the car loan outright. We generate 12%-13% on that warehouse, but we only hold the car loans for five-seven days.
Why this is important is all car dealers, effectively, go long risk on taking the car loan paper onto their balance sheet for a couple of days while they wait, for their financing partner's capital to clear or their bank partner's capital to clear. We've set this up so that the loans are originated on blockchain. We can then pay the dealers 24/7, 365. Why this matters is you get three extra days of interest income from doing this, from either the loan or the cash that's sitting in the money market fund. Because the data on the loans is tokenized, or sorry, put on a blockchain, it makes it very easy to quickly tokenize those loans, and the data is stored permanently.
We're going to continue to expand the warehouse, 'cause we're seeing on a daily basis demand is growing for that. We can take a percentage of the loans both from the warehouse and the original point of origination on the car loans and put them on our balance sheet to build the Karus token, which is under construction right now. All right. Now in the modular home market, we spent a lot of time looking at the mortgage market as a whole. It's obviously a massive multi-billion dollar market in the U.S. Modular homes are very interesting because the size of the mortgage in general ranges from $500- $300,000. LTVs range from 70%-90%.
The interest rates are typically 200-300 basis points higher than what you get on a conventional home loan, and the default rates are actually substantially lower. Zippy, similar to Karus, is using an AI platform on the back end to do analysis on the original borrower origination, and they have a network of thousands of dealers now and HOAs that they're working with directly to execute on these loans. We have a forward purchase agreement with Zippy to take approximately $5 million a month onto our balance sheet of these loans, which we've already done in the past month and we're continuing to do this month.
We're going to build a Zippy token which consumers can access, and that will yield between 9%-11% plus return, capital amortization on a monthly basis to the token holder. That will probably come on stream at some point in the middle of April onto the L iquidity exchange. We've talked about aerospace. We have a pipeline of more CFM56 engines that we're gonna be bringing onto the platform every month, and most of the large U.S. airlines, or at least the top three, are very interested in participating. We're now looking at working with some of the European airlines to bring these engines onto blockchain. Last point is we've been working on commercial real estate as a marketplace for blockchain origination and Ethereum Layer two tokens.
I think we've identified a couple of really high-grade institutional partners and we should be in position to talk about how we're gonna fractionalize direct real estate interest via tokenization on L2s this spring. Then the next sort of port of call is we're looking at other heavy equipment cash flow generating real world assets that kind of fit into similar both legal and tax verticals to what we've done in the aerospace car loans and mortgages. I mean, how should you judge us? I think it's really speed at which we can deploy capital into the verticals. We've built three large multi-hundred-billion-dollar verticals that we can continue to dip into. We're working on building more.
The more capital we put to work and that we bring into the tokenization marketplace, it's just incremental revenue on a monthly basis and cash flow to us. We've got a very low fixed cost structure business, and our focus is getting as much of these dollars deployed as possible into the cash flow generating assets. That's basically the end of the presentation. We've talked through all the partnership connections that we've made to date. I don't know if there's people on this, but if they're happy to, I'm happy to take some questions.
Fantastic. We can open the floor for Q&A here from our attendees. As a reminder, feel free to type in any questions in the Q&A tab at the bottom. Why don't we start here with a question from our attendees. Why do you think your stock is, you know, much lower than the NAV at a lower PBR?
I think it has a lot to do with Ethereum, and I think that obviously Ethereum's gone down quite a bit since we did the original offering. It was a large percentage of our total balance sheet. I think a lot of initial shareholders who got into the deal after the first PIPE came out pretty early. We've gone through both a shareholder rotation but also a bear market in Ethereum. I'll highlight that we have been gradually reducing our Ethereum exposure over the course of the last couple of months as we've executed on the real-world asset tokenization, and we're likely to continue to do that as we allocate more capital in the US dollar.
I think we should start to decouple from the correlation with Ethereum, which has put a lot of the impact on the stock price. You've got a lot of fundamental investors that are not digital asset investors that just won't invest in companies that have digital assets on their balance sheet. I think the value in our business is obviously the cash flow and revenue that we're generating by executing on the tokenization of the blockchain. This correlation with Ethereum has had a huge impact on the stock price over the last couple of months.
That makes sense. Kind of pivoting to the tokens themselves, can you talk about the you know maybe distribution or marketing of the actual tokens on Liquidity.io? Yeah, I think you mentioned that it's more so geared towards accredited investors and institutions. How has traction been in the tokens thus far?
Yeah. All right. Let's start with we've really not actively gone out and marketed the tokens very hard, particularly the aerospace token, only because it was a, I'll call it took us a lot of time to get it right, and we wanted to make sure that all the transactional mechanisms on Liquidity function properly, which they do. What we've waited to do is get all of our various offerings onto the Liquidity platform. We've all personally invested in the first token to make sure it works properly. We're gonna do the same with all the other ones. Once we have a larger menu, then we wanna go out and create a much larger distribution network.
Our focus on that is to connect directly with banks, directly with RIAs, to connect with entities that can distribute at a large scale versus spending advertising dollars today on trying to sell into a retail marketplace. It's an accredited investor product today, and I think it's actually really well-suited for high net worth individuals and institutional investors. I do think down the track, as we do more Regulation CF offerings, we can create a more retail-oriented presence. I think large scale distribution is our focus, and that's the next step in the business model in the second quarter is to ramp the distribution up once we have more product on the exchange.
Got it. Are you considering cross-listing tokens outside of the Liquidity.io platform?
Brendan, yes. The answer is yes, and that's why we built on Ethereum Layer 2s. There's not many other places that we can go to cross-list the assets only because there's not many exchanges that have the licenses that are available to this. Securitize is one of the others. The Figure has its own marketplace, but it's built on a different blockchain. We're gonna need the marketplace to develop, and we think Liquidity is gonna be one of those marketplaces. A lot like the stock market was 30 years ago, there were a lot of various regional markets that then started to combine, I think, into much, much broader whole markets, and I think you're gonna see the same thing happen in the tokenization marketplace.
It wouldn't surprise me if you start to see sort of the big equity marketplaces, Nasdaq, bond marketplaces, ICE, get into tokenization. They're already doing it on stocks. I think they'll start to find ways to do it for real world assets come on chain. That's why we're using Ethereum Layer twos because they're so transmittable.
That makes sense. That's helpful. In terms of the regulatory environment, how can investors really think about, you know, regulatory risk out there? How developed is the framework at this point? Any other thoughts on regulation that you have?
We have a whole team of securities lawyers that have helped us with these offerings. Bottom line is, like, the regulation. We're following U.S. securities regulation to issue these tokens. I actually think that I heard that the SEC came out today and said that tokens are securities. That was their viewpoint, and that's the viewpoint we've taken. People that are creating tokens that are not offered under, you know, regulated securities offerings rules, I think they're gonna have to follow that pathway. I think the regulation, definitive debate regulation on tokenization is coming, and it's gonna be to our benefit because we're following. I think it's just you need a strict framework to make the marketplace work.
Great. In terms of capital allocation and maybe how we can think about the asset base and the long-term development there, you know, you've talked about, you know, on the home loan side, you know, consumer credit and as well as, you know, aviation assets. How can we ultimately think about how Forum Markets, you know, asset base will develop over time? How do you know, judge or, you know, I guess underwrite the asset that you'll get into?
Well, in terms of allocation, every month we're trying to allocate capital into each of the three verticals that we have. Let's call it, you know, each engine that we buy is $6.5 million per engine. We're trying to buy an engine per month, $5 million of mortgages per month, approximately $5 million of car loans per month. As we build out other verticals, you know, kind of a similar scaling, and there are some areas where we can put a lot more to work faster. I think from a pure allocation perspective, we can have well over $100 million deployed here by the, you know, the summertime into these cash flow and yield producing assets with just what we have.
From a longer term perspective, you'll just have to be opportunistic about raising more capital to generate more return on AUM deployed.
Got it. That makes sense. That's helpful. In terms of the competitive environment, are there how many other companies are out there doing this, you know, bringing assets on chain, tokenizing the assets? What's the competitive dynamics like in your space?
I've heard a lot of people talk about it. I have not seen a lot of people physically tokenize like, the types of assets that we're tokenizing yet. You've seen some money markets get tokenized, and I think BlackRock's been on the leading edge of that. Figure's done a really good job on tokenizing, getting HELOCs from their balance sheet moved into a stablecoin construct that people can buy on their own exchange. Securitize has tokenized some private equity fund interests that, you know, can effectively buy an LP interest on their exchange direct in a fund construct. I have not seen anywhere globally an asset get tokenized at the level that we're doing it right now.
Got it. Circling back to capital allocation, there's a question from our attendees: Would you consider, you know, looking to buy back your own stock at some point, just given current valuation levels?
We weigh that between putting capital to work and buying back stock, and I think right now it's more important for us to get the revenue ramping at a very fast pace, so we have to allocate the capital into buying the physical assets versus buying the stock. I think, I mean, obviously the stock is at a huge discount to where the physical, like to the balance sheet assets, but we need to deploy the balance sheet to get the revenue and cash flow spun up.
Understood. Maybe over the longer term, how do you view your revenue profile evolving as your asset base grows? Do you look at this more of a, you know, AUM structured business?
Yep. I think the two major components are AUM average. Let's say the average yield across the entire portfolio is 10%-11%. You can just do the math on AUM deployed on that. And then you generate, call it 3%-5% on tokenization if you start recycling the assets through the tokenization platform. And I think you'll start to see that accelerate over the course of the next couple of months. It is an AUM deployed game for the foreseeable future to ramp the cash flow up.
Got it. One question on the Oracle itself, how are you managing the risk of the Oracle?
Sorry, when you talk about the risk of the Oracle, can you talk about that a little more?
I think it's referring to maybe the Liquidity.io platform.
We're pretty tightly partnered with them. I mean, we've done our own internal kind of analysis on the security side. We have programmers that we work with them on the tokenization, like programming component on the blockchain side. I'd say we're very heavily integrated with their operations literally on a daily basis. We work hand in hand with them on the exchange front and on the timing of the marketing exchange. I think when it comes time to really push down on distribution, they just brought someone in who had a very Senior role at Goldman on the debt capital market side and experience with BlackRock, and I think when the time is right to roll out distribution, we're gonna be working with them hand in hand on the marketing.
Understood. Well, McAndrew, John, we'll conclude there. I'll pass it back to you for any closing remarks.
Look, I appreciate you having us here at this conference, and I think we've covered everything pretty well.
Fantastic. If anybody has any further follow-up questions, feel free to reach out to Forum or you can contact Sidoti. Thank you everybody for joining us.
Thank you, Brendan.
Take care, everyone. Bye.
Thank you.