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. During the question-and-answer session, if you have a question, please press zero one on your touchtone phone. Please note the conference is being recorded. I'll now turn the call over to Andrew Kiguel. Mr. Kiguel, you may begin.
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. Like I said, 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. Again, apologies on that. Moving into the results for 2021, it was a very busy year for management and, you know, 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. This involved using our balance sheet to purchase an inventory of tokens and staking them to earn compensation in additional tokens. Today, Tokens.com has evolved to have three Web3 verticals. The first vertical remains that of purchasing and staking 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. 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. Thus far, we feel very confident about the success of all of 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 CAD 25 million in equity last March, which was followed by a listing on the NEO Exchange in Canada.
The NEO Exchange 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 US on the OTCQB Venture Market. We've purchased numerous tokens within 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. 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 held some assets into being a fully integrated real estate business with several employees in several different areas. Finally, in November of 2021, we closed a CAD 60 million unit offering consisting of one common share and a half warrant. In terms of 2021 highlights, you know, 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 crypto sector, I should say.
With myself as the largest shareholder, nobody wants the share price to reflect their value more than I do. I certainly have not sold a share to date. 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. 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 interpreted by accounting rules. 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've received far higher valuations for it. Hulk Labs, our newly formed entity in January, it's making a lot of progress, is not even reflected in those numbers. Metaverse Group is carried at book value, although we have turned this 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 Citi put out a report, I believe this week, saying that they believe the Metaverse is an $8 trillion-$13 trillion market by 2030.
That's only eight years away. Metaverse Group is at the forefront of all this. We've 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 reflective not until May. There was also many one-time non-cash items against, you know, against us, such as the charge against the warrants issued on our last fundraise, 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 it, 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. Maybe with that, I'm gonna turn it over to Ian to provide you with an overview of the financials. Ian, are you there?
Yes, I am.
Okay. I'll turn it over to you.
Can you hear me okay, Andrew?
Yep, we can hear you. I'll turn it over to you to walk through the financials, and then at the end of that, you can turn it back over to me, and we can take some Q&A.
Wonderful. Thanks. Good afternoon, everybody. Just gonna quickly run down both the year-end numbers and our Q4 'cause it continues the trend that's happened in Q3 for us. Very quickly, our revenue for the year was approximately CAD 1.1 million, and we had operating expenses totaling CAD 6.3 million. What that transpired to after other adjustments was a net loss attributable to Tokens.com shareholders. When I say attributable to Tokens.com shareholders, it's because we have the minority or the non-controlling interest of Metaverse that has an impact on our financial accounts now. The net loss for Tokens.com shareholders was CAD 8.2 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 CAD 0.7 million for the year. Likewise, our comprehensive loss attributable to Tokens.com shareholders was CAD 3.9 million, and once again, once that gets adjusted to non-cash, it would show an adjusted net income of CAD 1.6 million. From a perspective of Q4, we had revenue of CAD 300,000, operating costs of CAD 3.3 million, which created a loss for our shareholders of CAD 3.7 million.
Once again, removing all of the non-cash and one-time charges would turn into an adjusted net income of CAD 0.1 million. Likewise, the comprehensive loss of CAD 1.6 million for Q4 would turn into a net income of CAD 4.3 million. You can see the impact that the non-cash and one-time 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 CAD 32.0 million to the company. We've used CAD 3.6 million of that in our operating expenses, and we have invested CAD 20.7 million.
What that has done is that has created a net inflow of cash for the year of $7.7 million. 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 total current assets of $40.1 million and an extremely strong working capital number, a positive working capital of $38.7 million. As Andrew has already mentioned, the company's in an extremely advantageous position to continue to work on its strategy for the new year. Andrew, I'll pass it back to you.
Thanks. 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 values of where these businesses are today. You know, every CEO wants to see their 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. You know, we give you the commitment that we're gonna continue to work hard to do that. Maybe with that, operator, we can turn that over to questions, please.
Thank you. We will now begin the question-and-answer session. If you have a question, please press zero one on your touchtone phone. If you wish to be removed from the queue, please press zero two. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press zero then one on your touchtone phone. We're standing by for questions. Our first question online comes from Joe Jones. Please go ahead.
Good afternoon.
Hi there.
A couple of questions here on the numbers first, and then maybe after those, we can get to the bigger picture. You were saying the revenues in the fourth quarter came in at around CAD 300,000, which would be down from what it was in the third quarter. Just trying to get an idea of, you know, what was behind that, the sequential decline in revenue.
Some of that has to do with the fact that cryptocurrency's dropped. The way the revenue is recorded, and Ian can step in, but it's the value of the token on the day that we staked it. If the prices of crypto are going down, that will be reflected in his lower revenue.
Okay. The nice thing that I saw there, the staking yield in the fourth quarter was 28.4%, for the full year was 19.2%. What drove the staking yield up in the fourth quarter? Do you expect going forward to continue to see those types of staking yields, or do you think that'll come down?
The way we calculate those staking yields is based on our cost basis. Part of the answer is the same to the first question I answered, which is, I'll give you an example. If we're staking ETH at $1,000. Let's just say ETH was $1,000. We're staking ETH, and we receive something that's worth $1,000. That's recorded as revenue. If at the end of the quarter, that has gone to $2,000, we can record the upside on that, and we record our yield based on that upside. While the yield in ETH might only be approximately 6%, if the value of ETH has doubled, that goes to 12%. If it's tripled, that would go, you know, three times the amount.
I can give you another example with the Oasis ROSE token that we hold. When we originally purchased that, it had a $0.03. It had an 18% yield or payment in additional Oasis ROSE tokens. Because that token has gone up by over 1000%, but let's just say 1000%, 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. Really, when you're looking at things like the staking and the revenue, it's just a function of that moment in time and where crypto happens to be at that point.
Okay. Thank you, thank you for that explanation. 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 CAD 2.1 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?
Could you repeat that? I just wanna make sure I understand it.
Sure. If I was looking at. Let me just pull that up too here. I'm looking at the MD&A that you guys filed.
Mm-hmm.
You know, it says your operating expenses for the three months were CAD 3.3 million include non-cash share-based payments of CAD 394 ,000 and one-time financing and listing expenses of CAD 773 ,000. If I take that roughly 1.1 million, let's call it 1.2 million, subtract it from the 3.3, that gives me a normalized, so to speak, operating expense of about 2.1 million. Is that 2.1 million a good number going forward for, you know, where you see those operating expenses excluding, you know, the non-cash share?
Yeah. That seems high to me, and I'm happy to do an offline walkthrough with Ian and I to go through that. That number feels about $1 million high.
Okay.
Andrew, if I can add on to that, just for that. You've got to remember that, in Q4, we have to make an accrual for our audit fees for the year. 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 had a lot of exciting things going on, a lot of activity. I think we anticipate the annualized levels of those costs to be a little bit less moving forward as well. Certainly, the professional and consulting fees number has the full year's audit accrual in there.
Okay. That makes sense. Thank you for that. If I can get one or two more in here. You mentioned the fashion show on Decentraland there. How did that go? You know, what did you accomplish with that? You know, what kinda are the key takeaways from holding that event?
Sure. That event was held by Decentraland on our property. We are the virtual landlord. We did some other things as well. I think I'll tell you what we did, and then I'll tell you what I think that demonstrates to the market. The first thing was that the majority of the show was held on our land, so we were compensated for that. Number two, there were several top brands that were there on our land, such as Dolce & Gabbana, Jacob & Co., and many others. With some of the brands, and I'll point to Forever 21 as a good example, we went and provided them with all, you know, a fully stocked shop for everything that they needed.
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 a DJ. 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. 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. 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. 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, a whole bunch of new ones. The event itself got great coverage in all kinds of newspapers like, you know, 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?" 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 and we're at the very beginning point of starting to build that.
Okay, great. That is excellent. Appreciate that. One more if I may. You know, you talked a little bit about Hulk Labs and, you know, kind of just launching and getting that off. I mean, how much do you expect to, you know, expand on this platform in 2022? You know, any plans to acquire a company in the P2E, play-to-earn field or space or just more looking at organic growth through Hulk?
I can't comment right now on the acquisition side. That is, I would say, material non-public. What I would say is that I would expect based on our plans, we're looking to build Hulk to be as big or bigger than Metaverse Group. It's probably gonna 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.
Great. It's exciting times. Thank you, Andrew. I'll get back in queue.
You're welcome.
Thank you. Once again, for questions, that's zero then one on your touch-tone phone. Our next one comes from Robert Alcatraz. Please go ahead.
Thank you. Hi, Andrew.
Hey, Robert.
General question about the Nasdaq listing. I know you've mentioned that in the past as a stated goal. I know a lot's 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 kinda give us a high-level timetable type of thing?
Sure. 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. You know, to my knowledge, we are still probably you know one of the only public companies that provides people this direct exposure to Web3 assets like the Metaverse Group and you know 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 line with everything else, and there's an application process. We don't know how long the application process will take.
We're certainly looking to engage in that and, you know, I would say it's a goal. We'd love to be able to do it this year. I don't have anything beyond that to report other than to say it's, you know, squarely on our radar and we'd like to get there as soon as we can.
Okay. Thanks, Andrew.
You're welcome.
Thank you. Our next question in line comes from Dave Browning. Please go ahead.
Yes, Andrew. Great job in terms of what you've accomplished so far from really ground zero to where you are.
Thanks.
Good job on that. I just had a couple of questions. If you could comment to the group, will the staking operation continue to be kind of the hardcore basis part of the business and the real upside is in the other two sectors? Could you comment on that?
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 these different verticals with consumers. You know, 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. You know, that's a full operating business now with, you know, over 10 employees. We're hiring people on the customer service side and trying to keep up to the demand.
I think it's a mix and a balance. You know, where capital is gonna go to is where we see the opportunities. We certainly won't be selling any of our staking portfolio. You know, 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. We're at the early stages of all three of those verticals, but you know, we're starting to see that progress where you know, all three of those verticals are now revenue positive. For you know, a business that in a sense can still be considered a startup, I think we're doing a pretty good job there.
No, I have 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?
The upside is massive. If you look at other gaming guilds that are out there in terms of, you know, comparables to what we're building, they have private valuations in the several billion dollars side. 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. I don't know where the valuations are gonna stay, and obviously we're evaluated differently as a public company, but I'm super excited about what we're doing there.
Again, you know, 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.
Well, those comments are 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?
You know, 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, you know, hitting all-time highs in mid-November, so were we. This company still remains largely linked and leveraged to whatever happened in the crypto world. Look, even in the 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. We'll always remain highly tied to what's happening in the crypto space. You know, we didn't have a problem achieving spectacular volumes and really good share price back, you know, through September, October, November. I don't know what it's gonna take. We're gonna keep working hard.
You know, I think the Nasdaq listing, you know, notionally could help improve our liquidity and access to new investors. We've also shown that in the right market that our share price can perform under the current circumstances as well.
Well, just to finish up, Andrew, it seems to me from all I read in the report plus what 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. With that, again, I wanna thank you and continue on with your good work.
Thank you.
Thank you. Once again, for any questions on the line, that's zero then one. Our next one on the line comes from Kevin Dede. Please go ahead.
Hi, Andrew. Thanks for taking the question. Just a quick follow-up on your fashion show. 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. There's a couple of interesting touch points we can give you. This one I find really fascinating. Forever 21, we built their the facility for them. It was on our, you know, basically, the who's who of the fashion show was on our land. 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 it, and put something really unique and immersive together for them. This was 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. I think we were all pleasantly happy to see numbers like that because it starts to validate why people can start using this as the next iteration of the Internet, the next iteration of shopping, branding, and advertising. If you can go in and somehow engage a potential client in an environment that's fully surrounded with your things for 24 minutes, that's a pretty good metric.
Agreed. It'd be comparable to having them into your store, bricks and mortar.
Correct. When you think about the promise that we have this area built out, and I don't know if you went and checked and saw it, Kevin, but I mean, it's a whole neighborhood with tons of things going on. There were shows like, you know, 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 mortars or physical store," that will only help us to attract more and more tenants. You know, we put out all these press releases, and I hope people don't think they're fluff when we'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 that people will pay us to provide design, architecture and leasing services, online advertising for them in the metaverse. I think that's really significant because people, frankly, six months ago didn't know if this was gonna work. We had a VC tell us from what the research they've done, they don't know of any other metaverse company that's collecting rent in the metaverse. 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 a new demographic in a way that hasn't been done before. We're really breaking ground here.
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?
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 is this: Rather than us giving you a rental fee or a charge for the digital land, why don't we partner? We create the building together. We each contribute to the building or the development of the land. However, subsequently, we would share in any NFT sales that you make. 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, you know, $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, you know, digital rent.
Andrew, could you just remind us of some of the other properties you own and the opportunities they present in offering or perhaps Tokens.com rather offering other interactive events?
Yeah. We own across seven different metaverses. I don't have everything in front of me, but you know, we own a lot in Sandbox. We own in Sandbox. You know, Sandbox would be a good comparable to Decentraland. However, it's still in beta version, but you know, that's where Snoop Dogg is. Adidas bought 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. You know, we bought a bunch of stuff there in the equivalent of Miami and New York. We've bought one called NFT Worlds, which is linked to the platform used by Minecraft. You know, installed user base there.
You know, there's a couple of others that we own in. 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. You know, what I always say is Decentraland 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, you know, five million, 10 million, 20 million people using their service or that metaverse, what's each one of those 45,000 parcels gonna be worth?
What are people gonna be willing to pay in terms of advertising revenue in order to access that demographic? 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 a deal with Skechers, large brands, 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.com Tower, which I haven't even talked about, but replicating that in Sandbox as well.
Are your transactions, the rent that you're collecting and advertising, are they paid to you in MANA token?
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 for many corporations 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. 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 US dollars.
Fair enough, Andrew. Thank you for your time and attention.
No problem.
Thank you. Our next question online comes from Steven Kuhn. Please go ahead.
Hi, Andrew. Thank you for this today. I wanna 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. Not the lack of customer acquisition costs. You're not having to educate the entire world on what blockchain is and 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 and all of the major brands that you've been in communication with and relationships that you've built.
We all wanna know sort of what the value with the lease agreements are. We know. I know that I'm probably not gonna get details, but can you just go ahead and let me know? I mean, when should we get, I guess, another audited financial statement? Because obviously the one that we got today is unfortunately so old. Much has happened with
Right.
The company that so much has changed. If you could just speak to that.
Sure. I think when you're talking about lease agreements or the value of the lease, you're talking about the value of Metaverse Group.
Yes, that's right.
Is that right? 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, you know, 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 would call low-hanging fruit and opportunity there to build that in sort of a, let's say, this exciting operating business that is backed by real assets. What I would tell you is that relative to what we carry on our books, the company was recently valued at close to 10 times the amount we're carrying it for. 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 gonna see right off the bat, like millions and millions of dollars of revenue. I think the business is still in its infancy, and it's very early with respect to the Metaverse. 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. I would say that the team that we've assembled there and this, what I would call the infrastructure to grow the business certainly is not reflected in the financial statements that we put out today.
Thank you, Andrew. I do wanna say that, you know, even if the first lease agreement was for a dollar, it would be irrelevant to me because it's just 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, you know, this is a new frontier. Okay.
Right.
So.
It's more than $1. I promise it's more.
Right.
It's a lot more than a dollar.
Right.
Okay.
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?
I'll add two things to that. Auditing statements, and you can ask Ian, our CFO, is one of the most painful things you could ever do in life. We've literally, you know, been up 24 hours a day to get this stuff out and done. One of the things that we're gonna do, which I think you'll. It's also expensive. Doing 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.
The reason why is everybody who has a calendar year-end ends up scrambling through to, you know, March to get their audits and trying to get the attention of the auditors, you know, on your project versus the, you know, the dozens of other people that are trying to file at the same time is challenging. Assuming that that continues to go forward and 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 long do we have after the end before we file? Is it eight weeks?
It's 90 days, so it would be the end of December. We'd obviously want to wrap that up by mid-December before the Christmas break.
Right.
If I can just add to a couple things that you were saying there, 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. That's 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's 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're forced to carry the cost, and you don't see the types of gains being recorded for accounting purposes that Andrew is referring to that we're clearly seeing and receiving comments on and valuations upon.
It's still an accounting anomaly between the two. They're both considered intangible assets, as far as accounting is concerned. Because the cryptocurrency has an actively traded market, that's where we get the ups and downs of valuations to what's happening in the crypto market.
Thanks, Ian.
Thank you. Our next question on the line comes from Ken Scholz. Please go ahead.
Hi, I think that was me. Was that Scott Scholz?
Yes, go ahead please.
Oh, okay. Great. Thank you. Hi, Andrew.
Hey, Scott.
Have a kind of a three-part question, if that's okay. The first is, 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 would 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?
Sure. 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. 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.
Again, I don't wanna disclose because every lease agreement's a little bit different and there's privacy issues with the clients. There seems to be a willingness to do that. That's. I mean, I think that answers your question.
Yeah.
That's where I see the upside. The upside.
Yeah.
Like, you know, because the rents, you know, we look at the rents in the Metaverse and, you know, we've done some research on this, which is, you know, what's the price, the rental price per square foot in, you know, somewhere like, you know, Idaho or different places versus the Metaverse. 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. The rental prices will continue to, I think, catch up and appreciate.
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. You know, we're in lots of conversations with people to do that. Certainly I think that's the model I wanna continue pushing as opposed to, you know, pay us CAD 5,000 a month for the rental of a plot.
Yeah. Thank you. Yeah, I think that's where it becomes exponential. The second part of my question is: How do you see or have you seen thus far brands—'cause there's still a lot of nascency with the metaverse and connecting these back to brands. How have you seen brands' plans for driving customers into their metaverse properties?
Well, everybody's 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, the whisper is it's in the hundreds of thousands or so. How do you continue to bring people back? If you go into Decentraland right now, there's certainly not gonna 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 store or something else, you have to provide some incentive for them or something that's exciting for them. I think that's how it's gonna continue to go. Where we're starting to see some traction with the brands 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, you know, being able to create things, you know, use their imaginations to build things and, you know, 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, you know, 20-30 stores where they can choose from to, A, get an idea of the brand, get an idea of 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, Devin, who's on the phone maybe, but I think it's like, you know, I'm gonna say just in Decentraland last year was at $50 million in digital asset sales. But don't quote me on that. I'd have to go back and look at it.
Okay. No, that's helpful. I hate to hog time. My last question on that, though, is 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 kinda your personal feedback on that? Where the improvements need to be made.
You have to think about this in terms of the audience. Part of your audience has very new computers with great graphics cards and have access to really high speed internet and, you know, everything up to date. 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. You know, maybe it's average or mediocre, you know, internet connections. Their computers might be two, three, maybe five, six years old. When a group like Decentraland or Sandbox or any of these, today there's probably well over 100 different metaverses being built, and we're in conversations with pretty much all of them. When they're being built, they need to decide where do you fall on that spectrum?
If you go too high resolution, if your graphics are ultra-realistic, you're gonna eliminate 98% of the population that just doesn't have the computer that's able to capture that. If you think about Minecraft, which my kids play, Minecraft looks like a you know 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. I do think that it's progressing. I think you're gonna see. You know, I was reading the Citi report this morning before this call, and it was saying you're gonna need probably, you know, 10 times increased computational power on computers in order to make things smoother. That stuff's all coming. I agree with you.
Decentraland has a ways to go, but think about the early days of Facebook or other social media platforms. If you remember, like, "Hey, what's your mood today?" Things evolve, things improve, and it'll happen hand in hand with what I think consumers want to see and continued upgrades in computing.
Got it. Thank you, Andrew. Great work.
Thank you.
Thank you. Our next question online comes from Kyla Nakur. Please go ahead.
Hi. Thanks for the opportunity here. Great job on how things are moving forward. Definitely, this is 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. One thing that really interests me is your capabilities in developing on top of these lands. Is this something you are investing in? Like, do you have a team that does it? Are you planning to outsource development for other players like companies? 'Cause this sector could definitely leverage some more.
Yeah.
More effort in there. Yeah. Go ahead.
Totally agree with you. What we noticed last year right at the beginning is companies would approach us and say, "We wanna rent your land." We'd be like, "Great. This is what we think it's gonna cost." They'd say, "Well, we don't know how to build it." Like, "We don't know how to create the stuff that's on top." We developed a relationship that turned into a business partnership with Metaverse Architects. 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. Within Metaverse Group, we have the real estate people, the leasing, the client, you know, where to rent.
We have an entire design and architecture sector where again, it's the renderings, the programming, the software, the people who actually build what you see. It's actually quite challenging because remember, things need to hold their integrity three-dimensionally from every angle. It's quite a process to do that. We do have that capability now that we can offer with the Metaverse Architects group, which we integrated with. 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.
For, you know, institutions that were looking to buy land, we can now provide, you know, a quasi brokerage service where they can say, "Hey, can you help us find land? Can you teach us how to, how to transact? How does a cold wallet work? How does all this work?" We can help them buy it, we can help them design it, we can help them build it. 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 that you guys owned it.
That's very interesting. I would like, if you don't mind, a follow-up question. That kinda effort, when you are building on top of these lands, these require developers. Like, do you have in-house developer to do that? Or are you outsourcing that effort?
No. That's the company, Metaverse Architects, that we've taken equity ownership in. That's a portfolio company that we work with to do that. We own 20%, but we do that. I would call it in-house.
Okay. I see. That's very important because you are sitting on assets equivalent to CAD 40 million with a market cap of like 70. Everything you are doing on top, that's really like you have a nice safety net in there with the ability to.
Well.
Bring in new revenues, which is really nice.
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 $43 million US in assets, which is about, I don't know, CAD 60 million, okay? We're currently at about a CAD 85 million market cap last I saw. Of the 60 million, we're carrying the Metaverse Group at, you know, I think we're carrying it after the stuff at about a CAD 7 million valuation. I can tell you that business has been valued at close to 10 times that amount. We're carrying our Tokens.com domain name at book value. I can tell you know, we did a whole bunch of appraisals and valuations around those offers. We know it's worth a lot more than we're carrying it for.
You have to distinguish between accounting standards and accounting, you know, book value is as Ian said before, the metaverse real estate doesn't have. It's like real estate. It doesn't have, it's not fungible like a Bitcoin or an ETH that you can just point to the market and say, "Oh, this is the price, let's value it 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.
Absolutely. Makes sense. Thanks very much for sharing. That was great.
You're welcome.
Thank you. Our last question on the line comes from Bill Papanas. Please go ahead.
Hi, Andrew. Thanks for taking my call.
Hey, Bill.
Hey. Yeah, before I ask my first question, I just wanna say, you know, congratulations on hosting the Fashion Week in Decentraland. It's, you know, encouraging to see the partnerships that you guys have made. You know, it's clear that you guys are building out a community there and, you know, driving utility to your platform in Decentraland. You know, 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's a note that the company has plans to roll out 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.
Sure. Ultimately, it's about, 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%?
Yes.
I don't know if.
It was.
Okay.
Yes, it was.
Yeah, I think I read that right, 98.
98%. If you were to ask me today, I would say why I don't want to invest $2 million 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. Today, I think shareholders are being well served by the methods that we're using and keeping the operating costs on that part of the business way lower than you could do on your own. Keep in mind, Coinbase, if you can figure out how to use their services, charges you 25% margin on that. We're at 2%. That's pretty good.
Yeah, definitely. I think it allows your company to kind of focus in on, you know, building out your Metaverse platform. Lastly, I guess my second question is, you know, 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 kinda coins that you're staking?
That's a good question. I mean, look, we have an entire process and our CFO, sorry, our COO, Devin, is on the line. I think we've talked about our 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 whatever we're staking 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 CryptoPunk there, and we're staking that.
I believe our return there is we're paid in NFTX 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 Bored Ape acquisition and all the rest of that stuff. We're constantly looking for ways to buy assets that will generate revenues at the lowest risk point. I don't 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, you know, DeFi or other things.
Because in my experience, those businesses require a lot of, you know, it's heavily regulated, requires a lot of marketing dollars, and ultimately, you never know who's gonna succeed. What I love about owning things like Polkadot, Solana, and you know, we're looking at stuff like Avalanche and obviously we own Polkadot and Oasis, it's the building blocks for the macro growth happening in DeFi, NFTs and the Metaverse. Like, Metaverses that we own and that we're talking about are built on Ethereum, right? Like, as those platforms grow from a macro level.
Yeah.
You know, 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 yields on that in Ethereum terms are gonna 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 gonna be successful with the consumer. We're taking sort of an infrastructure play, a macro growth play in terms of how we're building the staking entities, the staking vertical.
Great. Thanks for the color on the investment methodology you guys are deploying. That's all the questions I have today.
Okay, we have no further questions at this time. I'd like to turn the call over to you, Andrew, for closing comments.
Great. Well, look, thank you everyone for the support. You know, management is working hard. We do recognize that the share price here is not where we want it to be. You know, 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 and be responsive, and certainly some of the people who have asked questions have emailed or messaged me in the past and, you know, I try to respond to everybody. Thank you everybody and with that, we can end the call.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.