Tokens.com Corp.'s (SMURF) CEO Andrew Kiguel on Q4 2021 Results - Earnings Call Transcript

Tokens.com Corp. (OTCQB:SMURF) Q4 2021 Earnings Conference Call April 4, 2022 4:00 PM ET

Company Participants

Andrew Kiguel - Chief Executive Officer

Ian Fodie - Chief Financial Officer

Conference Call Participants

Joe Gomes - Noble Capital Markets, Inc.

Operator

Welcome to the 2021 Financial Results Call. My name is Richard and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note, the conference is being recorded.

I will now turn the call over to Andrew Kiguel. Mr. Kiguel, you may begin.

Andrew Kiguel

Thank you. First, welcome, everyone, to the Tokens.com conference call for the 2021 audited financial statements in Q4. First off, I want to just apologize for filing slightly after we said we were going to, the auditors made a last-minute request for an extra 24 hours just to complete their work. Obviously that was done very late in the process, so we didn't have much choice around that. Part of that related to there being some accounting shifts on the treatment of things like warrants that are not related to tokens or crypto at all, but just required some extra time to account for them for the satisfaction of the auditors. So again, apologies on that.

Moving into the results for 2021. It was a very busy year for management and we accomplished a lot. Keeping in mind that Tokens.com is still a fairly new company with a limited operating history. The operations began in 2020 with a focus on crypto staking which we still believe is a crucial part of the infrastructure for DeFi and NFTs. And this involved using our balance sheet to purchase an inventory of tokens and staking them to own compensation in additional tokens.

Today, Tokens.com has evolved to have three Web3 verticals. The first vertical remains that of purchasing and stake in tokens. We use proof-of-stake technology to earn additional tokens. The second vertical is Metaverse Group. It's the majority-owned subsidiary that's focused on building a vertically integrated digital real estate business. And the third is our wholly-owned subsidiary called Hulk Labs, which is focused on NFT assets and investing in crypto-based games that have token returns attached to them. Across these three verticals, we leverage our human resources and our knowledge base and utilize synergies across these businesses to make sure that they're successful. And thus far, we feel very confident about the success of all them.

From a high level, our investment approach is to identify the key trends happening in the crypto and Web3 sectors, purchase assets and build businesses linked to the macro growth of these assets. We remain confident that our assets and businesses are poised for further growth in 2022 and beyond.

I'll now talk a little bit about some of the operational highlights from 2021. As I said, it was a busy year. We did our initial IPO raise of CAD25 million in equity last March, which was followed by a listing of the NEO Exchange in Canada. The NEO is a senior Board in Canada that is home to pretty much all of the crypto blockchain public companies here.

We also commenced trading on the Frankfurt Stock Exchange and in the U.S. on the OTC venture market. We've purchased numerous tokens in the year, Bitcoin, Binance Coin, Polkadot, Axie Infinity, Ethereum, Terra Luna, Shiba Inu and Solana. We acquired majority control of Metaverse Group and I'll talk a little bit about that later.

While under control of Metaverse Group, we did at the time what was the largest metaverse real estate transaction in history and the purchase of the Fashion District in Decentraland and we immediately turned around and announced an agreement to lease out that land to Decentraland to host the first ever Fashion Week, which was held in March 2022. We've successfully grown Metaverse Group from really just being a business that helps some assets into being a fully integrated real estate business with several employees in several different areas.

And finally, at the -- in November of 2021, we closed a CAD16 million unit offering consisting of long common share 0.5 warrant. In terms of ‘20 and ‘21 highlights, most notably, we continue to grow our assets, positive staking margins, net gains on revaluations of digital assets and the same thing for Q4.

In terms of the capital markets review, we certainly haven't been happy with where our share price has been. We do believe this is temporary, the backdrop has been tough, causing volatility for not just our company but for all small caps and particularly those in the small cap -- in the crypto sector, I should say.

With myself as the largest shareholder, nobody wants their share price to reflect their value more than I do and I certainly have not sold a share to date. But in terms of the backdrop, crypto has dropped from all-time highs in November. There's been substantial interest rate fear and inflation fears that have really been causing a lot of volatility. And of course, the Russian invasion of the Ukraine, which has resulted in some sectoral shifts with capital.

What has resulted though is our company today is stronger than it was in November when we hit our all-time highs, yet we're trading at far lower prices. We're continuing to explore ways to remedy this, keeping in mind that this industry is volatile and that we're building this business for the next five years, not just for the next five months.

Our financial statements which Ian will review in a second, provide a picture at a point in time as implemented by accounting rules, but we do believe that there's far more value in our business that isn't reflected in those figures. For example, our domain name is carried at book value, although we received far higher valuations for it. Hulk, our newly formed entity in January, it's making a lot of progress is not even reflected in those numbers. Metaverse Group has carried at book value, although we have premised into a leading operating business in the metaverse sector and it's been valued at multiples higher than what we're carrying it at.

Keeping in mind, when we're talking about the metaverse that Citibank put out a report, I believe, this week saying that they believe the metaverse is an $8 trillion to $13 trillion market by 2030. That's only eight years away. Metaverse Group is at the forefront of all this. We started that from a small land acquisition company to now, again, a fully operating business with recurring revenues, several tenants and a lot of online advertising.

Other things that are noted, the Oasis Rose tokens that we own were not fully reflected in this audit. That's partially due how it's contracted to us which will be fully reflected not until May. And there was also many one-time non-cash items against us, such as the charge against the warrants issued on our last fund raise which again, some of these new accounting treatments required us to take some non-cash write-downs of that.

As I mentioned, although the market may not recognize that we do believe we've been creating a lot of substantial value within the company. The company is being run very leanly, as you can see from our management fees and salaries. So maybe with that, I'm going to turn it over to Ian to provide you with an overview of the financials.

So, Ian, are you there?

Ian Fodie

Yes, I am.

Andrew Kiguel

Okay. I'll turn it over to you.

Ian Fodie

Can you hear me?

Andrew Kiguel

Yes, we can hear you. And I'll turn it over to you to walk through the financials. At the end of that, you can turn it back over to me and we can take some Q&A.

Ian Fodie

Wonderful. Thanks. Good afternoon, everybody. Just going to quickly run down the -- both the year-end numbers and our Q4 because it continues the trend that's happened in Q3 for us. So very quickly, our revenue for the year was approximately CAD1.1 million and we had operating expenses totaling CAD6.3 million. What that transpired to after other adjustments was a net loss attributable to Tokens.com shareholders and I say attributable to Tokens.com shareholders is because we have the minority or the non-controlling interest of metaverse that has an impact on our financial accounts now. So the net loss for Tokens.com shareholders was CAD8.2 million. However, when we look at adjusting that net income for non-cash and one-time items like share-based comp, listing expenses, the revaluation of digital assets.

And as Andrew has already mentioned, the new accounting issue of the revaluation of the warrant liability, that net loss turns into a positive net income of $0.7 million for the year. Likewise, our comprehensive loss attributable to Tokens.com's shareholders was $3.9 million. And once again, once that gets adjusted for noncash, it would show an adjusted net income of $1.6 million. From a perspective of Q4, we had revenue of $300,000, operating cost of $3.3 million which created a loss for our shareholders of $3.7 million. But once again, removing all of the noncash and onetime charges would turn into an adjusted net income of $0.1 million. Likewise, the comprehensive loss of $1.6 for Q4 would turn into a net income of $4.3 million. So you can see the impact that the noncash and onetime charges has on our operations.

As far as cash flow is concerned, Andrew has already mentioned that the fundraising the company has done. The financing for the company has contributed a total of $32.0 million for the company. We've used $3.6 million of that in our operating expenses and we have invested $20.7 million. So what that has done is that it's created a net inflow of cash for the year of $7.7 million. So we have cash left on our balance sheet at the end of the year of $9.7 million. When you add that to the assets that the company has, we have a total current assets of $40.1 million and an extremely strong working capital number, part of the working capital of CAD38.7 million. So as Andrew has already mentioned, the company is in an extremely advantageous position to continue to work on our strategy for the New Year.

Andrew, I’ll pass it back to you.

Andrew Kiguel

Thanks. So again, I'm a little bit biased but I do believe that we're very undervalued by any metric, especially when you start incorporating in the valleys and where these businesses are today, every CEO wants to see the company share price go up and we've been working very hard as a management team to demonstrate the value that we have and to attract more investors. And we give you the commitment that we're going to continue to work hard to do that.

So maybe with that, operator, we can turn that over to questions, please.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question online comes from Joe Gomes. Please go ahead.

Joe Gomes

Good afternoon.

Andrew Kiguel

Hi, there.

Joe Gomes

So a couple of questions here on the numbers first and then maybe after those when you get to the bigger picture. But you were saying the revenues in the fourth quarter came in at around CAD300,000 which would be down from what it was in the third quarter. Just trying to get an idea of what was behind that sequential decline in revenue.

Andrew Kiguel

So some of that has to do with the fact that cryptocurrencies dropped. So the way the revenue is recorded and Ian can step in but it's the value of the token on the day that we state it - if the prices of crypto are going down, that will be reflected in as lower income -- sorry, lower revenue.

Joe Gomest

Okay. And the nice thing that I saw there, the staking yield in the quarter -- fourth quarter was 28.4%, for the full year was 19.2%. What drove the staking yield up in the fourth quarter? And do you expect going forward to continue to see those types of staking yields? Or do you think that will come down?

Andrew Kiguel

So the way we calculate those staking yields is based on our cost basis. So part of the answer is the same to the first question I answered which is I'll give you an example. If we're mining Ethe or sorry, stake in Ethe at CAD1,000, let's just say Ethe was CAD1,000, we've taken Ethe and we received something that's worth $1,000. That's recorded as revenue. If at the end of the quarter, that has gone to CAD2,000, we can record the upside on that and we record our yield based on that upside.

And so while the yield in Ethe might only be approximately 6% if the value of Ethe has doubled back or to 12%, if it's tripled, that would go 3x the amount. And so I can give you another example with the Oasis Rose token that we hold. When we originally purchased that, it had a CAD0.03 -- it had an 18% yield or payment in additional Oasis tokens because that token has gone up by over 1,000% but let's just say 1,000% that 18%, when we value it into fiat terms, is more like 180% staking return on our investment and that's how we measure it.

So really, when you're looking at things like the staking and the revenue, it's just the function of that moment in time and where crypto happens to be at that point.

Joe Gomes

Okay. Thank you for that explanation. And if you look at the operating expenses in the fourth quarter and then we take out the share comp and the one-time expenses, it looks like it would have roughly been about CAD2.1 million for the quarter. Anything else to adjust that? Or is that kind of a good number, a good run rate going forward here on the quarterly OpEx side?

Andrew Kiguel

Could you repeat that? I just want to make sure I understand it.

Joe Gomes

Sure. So if I was looking at -- let me just pull that up to here. So I'm looking at the MD&A that you guys filed and it says your operating expenses for the three months were CAD3.3 million include non-cash share-based payments of CAD394,000 and one-time financing and listing expenses of CAD773,000. So if I take that roughly CAD1.1 million, let's call it, CAD1.2 million subtracted from the CAD3.3 million that gives me a normalized, so to speak, operating expense of about CAD2.1 million. Is that CAD2.1 million a good number going forward for where you see those operating expenses, excluding the non-cash share.

Andrew Kiguel

Yes. That seems high to me. And I'm happy to do an off-line walk through with Ian and I to go through that, but that number feels about CAD1 million high.

Ian Fodie

Okay. And Andrew, if I can add on to that, this. You got to remember that in Q4, we have to make an accrual for our audit fees for the year. So that's a one-time hit in Q4. Also, our advertising and investor relations activities have been extremely strong throughout the current year because the company was launched and we got a lot of exciting things going on, a lot of activity. And I think we anticipate the annualized levels of those costs to be a little bit less moving forward as well. But certainly, the professional and consulting fees number has the full year's audit accrual in there.

Joe Gomes

Okay, that makes sense. Thank you for that. If I can get one or two more in here. So you mentioned the fashion show on the Decentraland land there. How did that go? What did you accomplish with that? And what kind of the key takeaways from holding that event?

Andrew Kiguel

Sure. So that event was held by Decentraland on our property. We are the virtual landlord. But we did some of the things as well. But I think -- I'll tell you what we did and then I'll tell you what I think that demonstrates to the market. So the first thing was that the majority of the show was held on our lands and we were compensated for that. Number two, there were several top brands that were there on our land, such as Dolce Gabana, Jacob & Co and many others, with some of the brands and I'll point to Forever 21 is a good example, we went and provided them what I would call a full stop shop for everything that they needed. And so we designed their building, we designed the NFTs for them. We helped coordinate the sale. We helped coordinate their fashion show, including the music and DJ.

And on something like that, we're compensated not just for the rental of the land and the building of the building but also a portion of any NFT sales. So in stepping back, what did this whole thing really demonstrate? Well, when we initially bought the land in the Fashion District, I think there was a lot of people who were skeptical as to how we would be able to monetize this. What I think we have validated which is exactly what we said which is that we are able to charge rents, we are able to create a business around this that involves digital advertising which a lot of groups are now paying us for. It involves providing design and architecture services in the metaverse. It involves being able to host events.

And when you put that all together, it really starts looking a little bit like a SaaS model with recurring revenue because, again, these are things that keep coming back. And right now, within that business, we are talking to, I would say, in the dozens of groups about further rentals, some of them from the fashion show, whole bunch of new ones. The event itself got great coverage in all kinds of newspapers like Vogue, The Wall Street Journal again, what that led to is a bunch of parties and brands and retailers that didn't participate that contacted us immediately after the show to say, "Hey, when are you guys doing this again?

How do we participate? How can you help us create a footprint in the metaverse. And so I believe that what we've done is we had a thesis that we could buy the land and use it to generate recurring revenue and we've now validated that at the very beginning point of starting to build that.

Joe Gomes

Okay, great. That was excellent. I appreciate that. And one more, if I may. You talked a little bit about Hulk Labs and kind of just launching and getting that off. I mean how much do you expect to expand on this platform in 2022? And any plans to acquire a company in the P2 play to earn field or space or just more looking at organic growth through Hulk?

Andrew Kiguel

So I can't comment right now on the acquisition side. That is, I would say, a material non-public but what I would say is that I would expect, based on our plans, we are looking to build Hulk as big or bigger than Metaverse Group. And so it's probably going to be a combination of both organic and acquisitions that we're looking at there. We're super excited for that business and what we're doing there.

Joe Gomes

Great. It's exciting times. Thank you, Andrew. I'll get back in queue.

Andrew Kiguel

You're welcome.

Operator

Thank you. [Operator Instructions] Our next one comes from Robert Alcatraz [ph].

Unidentified Analyst

Thank you. Hi, Andrew. General question about the NASDAQ listing. I know you've mentioned that in the past as a stated goal. I know a lot has happened since then. Is that still a goal? If so, is that a long-term goal or more of a short term? I know there's not a lot you can say on that. But can you kind of give us a high-level timetable type of thing?

Andrew Kiguel

Sure. So number one, yes, it's still a goal. I think our business is well suited to the NASDAQ and it would open us up to a whole new broader investor audience that really wants to get exposure to what we're doing. To my knowledge, we are still probably one of the only public companies that provides people this direct exposure to Web3 assets like the Metaverse Group and operating businesses that are earning revenue within these areas. The process for the NASDAQ is really this. We've been investigating to make sure, number one, we meet the criteria to list there. We're making sure that the cost base is in lining of anything else and there's an application process. We can't -- we don't know how long the application process will take. We're certainly looking to engage into that. And I would say it's a goal. We'd love to be able to do it this year. But I don't have anything beyond that to report other than to say dead square and a radar and we'd like to get there as soon as we can.

Unidentified Analyst

Okay. Thanks, Andrew.

Operator

Our next question on the line comes from Dave Brownie [ph].

Unidentified Analyst

Yes, Andrew; a great job in terms of what you've accomplished so far from really ground zero to where you are. So again, good job on that. I had a couple of questions. If you could comment to the group, will the staking operation continue to be kind of the hard rock basis part of the business. And the real, real upside is in the other two sectors. Could you comment on that?

Andrew Kiguel

Sure. In my mind, when I process what we're doing, it's really all part of the same technology which is the utilization of blockchain technology across the different verticals with consumers. I still really like the staking business. I think in staking, we're really part of the supporting infrastructure of Web3 of the metaverse of DeFi and NFTs. And I think that's a really important place to be and I'm still super excited about that business. What's happened since though is that the metaverse side has really taken off and there's a lot of excitement there and that business has been growing faster. That's a full operating business now with over 10 employees. We're hiring people on the customer service side and trying to keep up to the demand. And so I think it's a mix and a balance where capital is going to go to is where we see the opportunities. We certainly won't be selling any of our staking portfolio. And we'll see how we can continue to grow it while also leveraging these two operating businesses.

Again, both operating businesses are always focused in on owning assets first, liquid assets first, that we can then apply services and businesses to generate revenue. And again, we're at the early stages of all three of those verticals but we're starting to see that progress where all three of those verticals are now revenue positive. And for a business that in a sense can still be considered a start-up, I think we're doing a pretty good job there.

Unidentified Analyst

Let me just expand on the -- in the way of a question regarding the gaming business and so forth. What do you see just kind of simple statement, the upside potential in that part of the operation?

Andrew Kiguel

So the upside is massive. If you look at other gaming guilds that are out there in terms of comparable to what we're building, they have private valuations in the several billion dollars side. So if you were to look at our market cap today versus where I think we will have built over the course of the next six months, it would be comparable in size to these private businesses that have valuations in the billions. So I don't know where the value sits are going to stay. And obviously, we're evaluated differently as a public company. But I'm super excited about what we're doing there. And again, you'll continue to put out there that we hope the market will continue to recognize what we're doing because we think we're really on the cutting edge here in all of these areas and with respect to what we're doing.

Unidentified Analyst

Those comments excellent in terms of the three basic businesses. Could I ask as a last question. Andrew, the gentleman before me asked about the NASDAQ listing and so forth. In reality, is it probably for us, people -- or all the people that are on the line today that are interested in the company and share price improvement. Is it realistic to think, Andrew, that it may take a NASDAQ listing before you obtain the real sponsorship that's necessary for share price increases.

Andrew Kiguel

That's a good question and I wish I had the crystal ball to know that. I can tell you back in November, when crypto prices were hitting all-time highs in mid-November, so were we. And so this company still remains largely linked and leveraged to whatever happened in the crypto world. And look, even in the metaverse, metaverse real estate is really just an NFT. It's a type of NFT different than the ones you're hearing about but that's what it is. And so we'll always remain highly tied to what's happening in the crypto space. We didn't have a problem achieving spectacular volumes and really good share price back through from -- I think it was from September, October, November, I don't know what it's going to take. We're going to keep working hard. I think a NASDAQ listing notionally could help improve our liquidity and access to new investors but we've also shown that the in the right market that our share price can perform under the current circumstances as well.

Unidentified Analyst

Just to finish up, Andrew. It seems to me from all I read in the report plus what you -- you and your number wizard have shared today that -- and probably I'm not very objective about this but the share price at these levels look like a giveaway. So with that, again, I want to thank you and continue on with your good work.

Operator

Thank you. [Operator Instructions] Our next one on line comes from Kevin Dede [ph].

Unidentified Analyst

Hi, Andrew. Thanks for taking the questions. Just a quick follow-up on your fashion show. I appreciate the insight you offered on the corporate side. I was just wondering if you had any feedback or insight as to who watched it, I guess, within the metaverse and whether or not you had access to any of that data, we will have access to that data. I believe it's still being put together but there's a couple of interesting touch points we can give you. This one I find really fascinating. So Forever 21, we built the facility for them. It was on our -- basically, the who's who of the fashion show was on our land. And Forever 21 was a good one because we had a relationship with them beyond them just sort of doing the work and that we helped them build it structure and put something really unique and immersive together for them. This is an interesting statistic.

The amount of time that people in the Forever 21 shop spent there was over 20 minutes. I believe it was 24 minutes was the average time spent in the store. Let's compare that now to a website. Most people who go to a website, especially for a brand or for shopping, don't spend that much time. And I think we were all pleasantly happy to see numbers like that because it just to validate why can start using this as the next iteration of the Internet, the exideration of shopping, branding and advertising. If you can go in and somehow engage a potential client and an environment that's fully surrounded for -- with your things for 24 minutes, that's a pretty good metric. Agreed it be comparable to having them in your store, bricks and mortar.

Andrew Kiguel

Correct. And so when you think about the promise that we have this area built out and I don't know if you went and saw it, Kevin but I mean it's a whole neighborhood with tons of things going on and there were shows like people performers and DJs, you go there and you walk around, if we can start communicating to people, hey, this is a way to have someone spend this much time in your store, almost the equivalent to a bricks-and-mortar or physical store, that will only help us to attract more and more tenant. And we put out all these press releases, I mean, I hope people don't think they're fluff when they're putting them out all the time with like, hey, we signed a new tenant. We signed a new tenant. What I'm trying to do is communicate to people, we had a thesis. We are now validating our thesis, people will pay us to provide design, architecture and leasing services online advertising for them in the metaverse.

And I think that's really significant because people, frankly, six months ago didn't know if this was going to work. We had a VC tell us that they -- from what the research they've done, they don't know of any other metaverse company that's collecting the rent in the metaverse. And so when you start looking at this and comparing it -- and again, I know this is a bit of a stretch but you start comparing it to other companies that make revenue this way.

You're talking about Google, you're talking about Facebook/Meta. We're charging people for this advertising revenue and the ability for them to engage with potential customers to advertise and reach in the demographic in a way that hasn't been done before. We're really breaking ground here.

Unidentified Analyst

So speaking to your point on rents, given the influx of interest that you've had post show, is there an opportunity for you to adjust rents higher?

Andrew Kiguel

Yes. In fact, what we're doing is we're coming up with a different model, what we're finding to be more lucrative and exciting for us and the conversations we're having with various groups as this. Rather than us giving you a rental fee or a charge for the land for the digital land, why don't we partner, we create the building together. We each contribute to the building of the development of the land. However, subsequently, we would share in any NFT sales that you make. And so the potential for this is huge. If you look back and you see what Adidas did with Steph Curry, the basketball player, I believe it was in under one minute they sold $20 million of digital shoes, okay? If we are able to create good partnerships with good brands, good retailers and create a sort of a JV where, hey, we can design this for you, we can create the NFTs we can create the event and we get a portion of the sales of NFTs, that's a far more lucrative model than collecting a few thousand dollars in just digital rent.

Unidentified Analyst

Andrew, could you just remind us of some of the other properties you own and the opportunities they present an offering or perhaps Tokens.com, rather, offering other interactive events?

Andrew Kiguel

Yes. So we own across seven different metaverse. I don't have everything in front of me but we own a lot in Sandbox. We own Sandbox would be a good comparable to Decentraland. However, it's still in beta version but that's where SnoopDog is, did a spot land there. We also own Somnium Space. Somnium Space is the one that's backed by the Winklevoss brothers. It's more of a higher resolution VR focused metaverse. We own in SuperWorld which is a recreation of the world. We've bought a bunch of stuff there in the equivalent of Miami and New York. We've bought one called NFTs world which is linked to the platform used by Minecraft. So installed user base there. But -- and there's a couple of others that we own in but we have a fairly deep portfolio and we're certainly on a daily basis, exploring how this happens.

The one that's easiest to monetize on today is Decentraland because it's not in beta and it's easily accessible by a lot of people. What I always say is the central land has only approximately 45,000 parcels available for development, okay, that can be owned that are owned. Their growth rate last year was 3,300%. They're surpassing one million, I guess, registered users. At some point, if they're able to continue on this growth rate and continue to build this business and there's 5 million, 10 million, 20 million people using their service or that metaverse what's each one of those 45,000 parcel is going to be worth. And what are people going to be willing to pay in terms of advertising revenue in order to access that demographic. And that's, again, the thesis that we're starting to prove out which is if we buy large contiguous estates in these metaverses we can then approach brands like Forever 21.

We also announced the deal with SKECHERS, large brand and work with them to create immersive experiences for consumers to go in, shop around, learn about the brand, they can access this new demographic and then we can continue to sort of grow that across various metaverses. We've already been talking about replicating tokens TOWER which I haven't even talked about but replicating that in Sandbox as well.

Unidentified Analyst

Are your transactions, the rent that you're collecting and advertising? Are they paid you in MANA token?

Andrew Kiguel

No. We're doing the transactions in the fiat equivalent because that is the most frictionless way for many corporations to enter this. One of the appeals that we have from any corporation is that while we have a lot of crypto natives on the team, there's also a lot of people from the financial world and from the real estate world. And so we can provide them with a frictionless entry point into the metaverse where they don't have to figure out how to transact in MANA; they can just pay us in U.S. dollars.

Unidentified Analyst

Fair enough, Andrew. Thank you for your time and attention.

Andrew Kiguel

No problem.

Operator

Our next question on line comes from [indiscernible].

Unidentified Analyst

Hi Andrew, thank you for this today. I want to say really quickly that I am glad to hear that the staking operation is still a focus for you. The staking operation is what brought me to this company for all of the reasons that you've previously discussed, the lack of customer acquisition costs. You're not having to educate the entire world on what blockchain, is the cryptocurrency is. You're just sort of gaining revenue by merely being a part of cryptocurrency. And I really like that process. I think all of us are wondering just how valuable the new lease agreements are, congratulations on all of that with Forever 21 in all of the major brands that you've been in communication with and relationships that you've built but we all want to know sort of what the value with the lease agreements are. We know -- I know that I'm probably not going to get details but can you just go ahead and just let me know, I mean, when should we get, I guess, another audited financial statements?

Because obviously, the one that we got today is unfortunately so old. So much has happened with the company that so much has changed. So if you could just speak to that.

Andrew Kiguel

Sure. So I think when you're talking about lease agreements and the value of -- you're talking about the value of Metaverse Group.

Unidentified Analyst

Yes, that's right.

Andrew Kiguel

So when I look at -- when we think about the verticals as a management team and I agree with you, I love the staking business and I think it's one of the best businesses and if we can continue to build that, we will. What's happened though with the Metaverse Group is that there's been so much what I will call low-hanging fruit and opportunities there to build that in sort of -- it's this exciting operating business that is backed by real assets. What I would tell you is that relative to what we carry it on our books, the company was recently valued at close to 10x the amount we're carrying it for. And that's really all I can say on it. There's a lot of value attributed to that operating business and what's there. I don't know that you're going to see right off the back, like millions of millions of dollars of revenue. I think the business is still in its infancy and it's very early with respect to the metaverse. But certainly, that business, the value of the land that's there is certainly much higher today with a lease on it and that it's been developed than it was when we bought it. And I would say that the team that we've assembled there in this, what I would call the infrastructure to grow the business certainly is not reflected in the financial statements that you -- that we put out today.

Unidentified Analyst

Thank you, Andrew. I do want to say that even if the first lease agreement was for $1, it would be irrelevant to me because it would -- because it just -- it's a proof of concept. It proves that you are capable of doing exactly what tokens was set out to do. And obviously, the goal being to eventually create revenue and bring in income Regardless, this is a new frontier. Okay so...

Andrew Kiguel

But it's more than a $. I would say it's a -- it's a lot more than the $1.

Unidentified Analyst

But. Are we thinking we won't get any new audited financial statements until next March? Or could this be like a twice a year thing? Or...

Andrew Kiguel

So I'll add two things to that. Auditing statements is and you can ask Ian, our CFO, is one of the most painful things you could ever do in life. We've literally been up 24 hours a day to get the stuff out and done. One of the things that we're going to do which I think you'll -- so doing -- it's also expensive. So during this twice a year is not in the cards in the long term. However, we did go to our Board and ask that we change our year-end to September. And the reason why is everybody who has a calendar year-end, ends up scrambling through March to get their audits and get trying to get the attention of the auditors on your project versus the dozens of other people that are trying to file at the same time is challenging.

And so assuming that, that continues to go forward, we push that through, the next year end for us will be the end of September and then we have approximately -- I think it's -- you know -- Ian, how much -- how long do we have after the year end before we file? Was it eight weeks?

Ian Fodie

Its 90 days. So it would be the end of December but obviously, we want to wrap that up by mid-December before the Christmas break. And if I can just add to a couple of things that you're saying here, Andrew, just on the financial statements in respect of metaverse; please understand that as far as the cryptocurrency and the staking activities we have, all of the tokens we hold there get revalued there, so the revaluation gains and ups and downs that you see in our income statement and our other comprehensive income each quarter, that's because there is a -- what they call an actively traded market for cryptocurrency. Unfortunately, at this point in time, there is not a sufficient actively traded market for the metaverse real estate; so that's why we are forced to carry the cost and you don't see the types of gains being recorded for accounting purposes that Andrew was referring to, that we are clearly seeing and receiving comments on and valuations upon.

So it's still an accounting anomaly between the two. They are both considered intangible assets as far as accounting is concerned but because the cryptocurrency has an actively traded market, that's where we get the ups and downs valuations to what's happening in the crypto market.

Unidentified Analyst

Thanks, Ian.

Operator

Thank you. Our next question on line comes from Ken Schultz [ph]. Please go ahead.

Unidentified Analyst

I think that was me. Was that Scott Scholtz [ph]?

Operator

Yes. Go ahead, please.

Unidentified Analyst

Okay, great. Thank you. Hi Andrew.

Andrew Kiguel

Hey, Scott.

Unidentified Analyst

I have kind of a three-part question, if that's okay. The first is -- and this is obviously just my personal opinion but the rental lease model has always been, from a strategic perspective, far less interesting to me than what you touched on earlier which is this notion that these brands will allow you to participate in their e-commerce streams. Can you talk about their willingness moving forward and how you see that playing out in terms of brands, letting you play in that space?

Andrew Kiguel

Sure. So generally speaking, for a brand to navigate in this area, they need to have an understanding of how crypto works, how do you mint NFTs, how do you market NFTs, how do you hold events in these areas. And frankly, it's a little bit intimidating or scary for a lot of them. When we can show up and say, "Hey, we will do this and we have enough faith in the project that we will front half the cost" and trust me, developing in the metaverse is far cheaper than in the physical world. But if we say, "Hey, we will share in the cost of this build with you but in return, we need upside; they so far have seemed to be willing". We've signed two agreements in that area. I don't -- again, I don't want to disclose because every lease agreement is a little bit different and there's privacy issues with the clients. But there seems to be a willingness to do that. That's -- I mean, I think that answers your question.

Unidentified Analyst

Yes.

Andrew Kiguel

And that's where I see the upside. The upside like -- who -- because the rents -- we look at the rent in the metaverse and we've done some research on this which is, what's the price -- the rental price per square foot and somewhere like Idaho or different places versus the metaverse and the rental pricing in the metaverse is still far cheaper than some of these areas, although you can access more visitor traffic, more eyeballs in the metaverse; and so the rental prices will continue to -- I think -- to catch up and appreciate. But in the meantime, like I said, if you can team up with the right groups and say, "Hey, we can help deliver all of these things for you but we want a piece of the upside", they generally seem to like that because they feel like it's shared risk. So we're in lots of conversations with people to do that and certainly, I think that's -- that's the model I want to continue pushing as opposed to, I guess, $5,000 a month for the rental of a plot.

Unidentified Analyst

Yes, thank you. Yes, I think that's where it becomes exponential. And so, the second part of my question is, how do you see -- or have you seen thus far brands because there is still a lot of nascency with the metaverse in connecting these back to brands? How have you seen brands plans for driving customers into their metaverse properties?

Andrew Kiguel

Well, everybody is trying to figure that out. What we have seen is that events draw people. When Decentraland holds an event, it tends to attract people. From the numbers that I saw for the music festival they held last October attracted over 50,000 unique visitors. While I don't have full confirmation for the fashion show, I've been sort of -- the whispers, it's in the hundreds of thousands or so. So, how do you continue to bring people back? If you go into Decentraland right now, there is certainly not going to be 100,000 people walking around; it's event-driven. And so, very much like you might do in the physical world, where if you wanted to attract people to your stores, something else you have to provide some incentive for them and if there's something that's exciting for them, I think that's how it's going to continue to go.

Where we're starting to see some traction with the brand is, if we can go to them and say, "Hey, let's brainstorm on some ideas, they get excited about that". They get excited about the idea of being able to create things or use their imaginations to build things and we can bring them to life to do that. But to your question, it's largely event-driven right now. I think in time, if we build a neighborhood where somebody can go in and there's 20 to 30 stores where they can choose from to; A) get an idea of the brand, get an idea what their physical goods are and also be able to buy digital goods, that's huge. I mean the digital good market is -- I think it's -- last year, [indiscernible] but I think it's like over -- I'm going to say just in Decentraland last year, it was $50 million in digital asset sales but don't quote me on that. I have to go back and look at it.

Unidentified Analyst

Okay. No, that's helpful. And then, I [indiscernible]. My last question on that, that was -- like from your personal opinion, I have really struggled with like Decentraland, just the navigation of it, I get lost. It doesn't seem easy yet to find where you're trying to go; it's a bit laggy. From your personal opinion, like what needs to happen for there to be a tipping point for this to get to mainstream adoption? It feels like there's still a long way to go. What's kind of your personal feedback on where the improvements need to be made?

Andrew Kiguel

So you have to think about this in terms of the audience and part of your audience has very new computers with great graphic cards and have access to really high-speed Internet and everything up-to-date. And then you have a whole other contingent of the population, probably a larger part of the population that doesn't have the most recent graphics card and maybe average or mediocre Internet connections and their computers might be two, three, maybe five, six years old. When a group like Decentraland or Sandbox or any of these -- and today, there is probably well over 100 different metaverse's being built and we're in conversations with pretty much all of them. But when they're being built, they need to decide, how do you -- where do you fall on that spectrum? If you go to high resolution, if your graphics are ultra-realistic, you're going to eliminate 98% of the population that just doesn't have the computer that's able to capture that. If you look at that -- think about Minecraft which my kids play; Minecraft looks like a bunch of Lego blocks put together but the genius of that is, that you've just created your audience is basically any computer that's even 10 years old can access that game.

And so I do think that it's progressing, I think you're going to see -- I was reading the Citibank report this morning before this call and it was saying you're going to need probably 10 times increased computational power on computers in order to make things smoother; and so that that's all coming. I agree with you, Decentraland has ways to go but think about the early days of Facebook or other social media platforms; and you remember like, "Hey, what's your mood today?" Things evolve, things improve and it will happen hand-in-hand with what I think consumers want to see and continued upgrades in computing.

Unidentified Analyst

Got it. Thank you, Andrew. Great work.

Andrew Kiguel

Thank you.

Operator

Thank you. Our next question on the line comes from Kyle Nicor [ph]. Please go ahead.

Unidentified Analyst

Hi, thanks for the opportunity here. So, great job on how things are moving forward, definitely, this is a very interesting company. The main reason that attracted me to move forward with investing here is mainly because when I went to invest in the metaverse, it looked like there is higher risk but with your diversified portfolio around digital assets, property appreciation in the metaverse, plus managing your own event such as the fashion show. But one thing that's really interesting me is your capabilities in developing on top of these clients. Is this something you're investing in? Like, do you have a team that does it? And are you planning to outsource development for other players, like companies, because this sector is -- could definitely leverage some more effort in this area [ph]?

Andrew Kiguel

Yes. So, totally agree with you. And what we noticed last year, right at the beginning is, companies would approach us and say, we want to rent your land; we'd be like, great, this is what we think it's going to cost. And then say, well, we don't know how to build it, like -- we don't know how to create this cup [ph] that's on top. We developed a relationship that turned into a business partnership with Metaverse Architects. And Metaverse Architects, we made an equity investment in them, so they're a portfolio company of ours and we all work together as a team. And so within Metaverse Group, we have the real estate people, the leasing, the client, where to ramp; then we have an entire design in architecture sector where again, it's the rendering [ph], the programming, the people software who actually build what you see. And it's actually quite challenging because remember, we need to hold their integrity from -- three-dimensionally from every angle; it's quite a process to do that. So, we do have that capability now that we can offer with the Metaverse Architect Group which we've integrated with. And yes, we -- it's a service we certainly provide to anybody, it doesn't have to be on our land.

The other thing we started doing is we provided a consulting services business; so for institutions that were looking to buy land, we can now provide a quasi-brokerage [ph] service where they can say, "Hey, can you help us find land? Can you teach us how to transact? How does a cold wallet work? How does all this work? So we can help them buy it, we can help them design it, we can help them build it". Or for many companies say, "Hey, we would prefer to just rent it from you and do it in your space because you're in the right neighborhood or you have further expertise or the land is very expensive and we'd rather let you guys own it".

Unidentified Analyst

That's very interesting. So -- and I would like -- if you do not mind a follow-up question. So that kind of effort when you are building on top of these lines, these require developers like you have in-house developer to do that or are they sustaining that effort [ph]?

Andrew Kiguel

So that's the company, Metaverse Architects, that we've taken equity ownership in; so that's -- it's a portfolio company that we work with to do that. We don't -- we own 20% but we do that -- I would call it in-house.

Unidentified Analyst

Okay. I see. I see. And that's very important because you are sitting on assets equivalent to $40 million with a market cap of like $70 million [ph]. But everything you are doing on top that's really like -- you have a nice safety net in there would divert you to bring in new revenues which is really nice.

Andrew Kiguel

Well, here's the way I would look at it. I mean, if you wanted to talk about the assets; like I said, we're showing US$43 million in assets which is about, I don't know, CAD60 million, okay. We're currently at about an CAD85 million market cap last I saw. But of the $60 million, we're carrying Metaverse Group at -- I think we're carrying it after the stuff at about a CAD7 million valuation; I can tell you that business has been valued at close to 10 times that amount. We're carrying the Tokens.com domain name at book value. I can tell you, we did a whole bunch of appraisals and valuations around the offers, we know it's worth a lot more than we're carrying it for. So, you have to distinguish between accounting standards and accounting is book value. As Ian said before, the metaverse real estate doesn't have -- it's like it real real estate; it doesn't have -- it's not fungible like a bitcoin or an east [ph] that you can just point to the market and say, "Oh, this is the price, let's evaluate there". Because it doesn't have that super liquid market, we know it's worth more than we paid for it because it's now developed, it's got clients, tenants, all these things. We don't have a way to reflect that in our accounting statements today.

Unidentified Analyst

Absolutely makes sense. Thanks very much for sharing. That was great.

Andrew Kiguel

You're welcome.

Operator

Thank you. And our last question on the line comes from Bill Pappinas [ph]. Please go ahead.

Unidentified Analyst

Hi Andrew, thanks for taking my call.

Andrew Kiguel

Hey, Bill.

Unidentified Analyst

Yes, before I ask my first question, I just want to say congratulations on hosting the Fashion Week in Decentraland. It's encouraging to see the partnerships that you guys have made and it's clear that you guys are building out a community there and driving utility kind of -- to your platform in Decentraland. I know a lot of questions have been coming in in regards to the metaverse or NFT side of the business but I wanted to focus on the staking segment within the housekeeping item. But within the filing statement, I believe there is note that the company has plans to rollout staking technology in-house for the purpose of providing third-party services to institutions. I'm wondering, if you could provide an update on that?

Andrew Kiguel

Sure. Ultimately, it's a function of cost. Right now, our staking margin -- so after our cost of staking, I think it was -- Ian, was it 98%?

Ian Fodie

Yes. I don't know, it was in…

Andrew Kiguel

Okay.

Ian Fodie

Yes, it was in that [ph].

Andrew Kiguel

98%. So, if you would ask me today, I would say why I don't want to invest a couple of million dollars to build something in-house that's costing me 2% of my revenue in that space. My hope is that eventually, we get large enough that it will merit doing that, where -- if we can start doing it for less than 2% gross margin, at 1%, then we would certainly make that investment. But today, I think shareholders are being well served by the methods that we're using and keeping the operating cost on that part of the business way lower than you could do on your own. Keep in mind, coin base, if you can figure out how to use their services charges a 25% margin on that; we're at 2%, that's pretty good.

Unidentified Analyst

Yes, definitely. And I think it allows your company to kind of focus on building out your metaverse platform. And then lastly, I guess my second question is, in regards to looking at different staking solutions; I believe you guys said earlier on the call that you have plans on allocating additional capital into the staking side of the business. Can you provide some extra color -- are you looking to deploy into new L1s or are you just planning on reinvesting in the existing kind of coins that you're staking?

Andrew Kiguel

That's a good question. I mean, look, we have an entire process and our CFO -- sorry, our COO, Devon is on the line and I think we talked about the selection process. We try and look at a bunch of things but primarily, we're trying to find ways where we can make money and that the coin that we're staking or whenever we're staking, it has high appreciation value. One of the things that we put out earlier this year through Hulk Labs which is the gaming group is, we bought a crypto punk there and we're taking that and I believe our return there would have paid in NFTX to Tokens; and I believe we're earning there just under 20% annualized return for an asset that we bought, I think, at a low rate before they made the announcements on the [indiscernible] acquisition and all the rest of that stuff. And so we're constantly looking for ways to buy assets that would generate revenues at the lowest risk point. What I don't -- I never say never but what I don't want us to do is to start investing into what I would call the consumer-based tokens; the ones that are built on top of Ethereum, Solana or Polkadot and are then trying to compete against other tokens for DeFi or other things because in my experience, those businesses require a lot of -- it's heavily regulated, requires a lot of marketing dollars and ultimately, you never know who's going to succeed.

What I love about owning things like Polkadot, Solana and we're looking at stuff like Avalanche and obviously, in Polkadot and Oasis is, it's the building blocks for the macro growth happening in DeFi, NFTs and the Metaverse. Like, metaverse is that we own and that we're talking about are built on Ethereum, right? As those platforms grow from a macro level, I become extremely bullish about owning something like Ethereum, especially when this merge gets completed in the next few months and we're expecting that the yield on that in Ethereum terms are going to probably double from where they are today. That's exciting to be holding something like that, it's like owning a piece of iOS or Android operating system that all the apps are built on, where we don't have to bet on which app is going to be successful with the consumer; we're taking sort of an infrastructure play, a macro growth play in terms of how you're building a staking entities; that's the staking vertical.

Unidentified Analyst

Great. Thanks for the color on the investment methodology you guys are deploying. That's all the questions I have today.

Operator

Okay. We have no further questions at this time. I'd like to turn the call over to Andrew for closing comments.

Andrew Kiguel

Great. Well look, thank you everyone for the support. Management is working hard, we do recognize that the share price here is not where we want it to be; we're certainly continuing to try and get in front of eyeballs. Everyone hopefully realizes that they can reach out to the company, we always try to be responsive and certainly, some of the people who have asked questions have e-mailed or messaged me in the past and I try to respond to everybody. So, thank you, everybody. And with that, we can end the call.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.