01 Quantum Inc. (ONE) Earnings Call Transcript & Summary

I think the number of attendees has stabilized. So I'd like to begin. So I hope everyone can see me. I'd like to thank you all for coming to our Annual General Meeting of 01 Communique. This will be the third year that we've -- COVID has forced us to do this as a virtual meeting. Hopefully, again, next year, we will be back at live events, and be finished with COVID. So for those of you that have been to our AGMs in the past, you'll know that we have a number of formal things to take care of before we get into a Question-and-Answer Session with Andrew. And of course, Andrew will be making a presentation about the milestones and good things that have happened over this past year. So ladies and gentlemen, my name is William Train, and as Chairman of 01 Communique Laboratory, Inc., I welcome you to this Annual Meeting of Shareholders. I would like to introduce you to our proposed Board of Directors. We have Andrew Cheung, Chief Executive Officer and Director; Gary Kissack, Director; and Tyson Macaulay, who is a new Director. He comes from a long story history of different companies within the cybersecurity and encryption marketplace. So we're very thrilled to have Tyson join us; Jane Yang, we thank her for her participation as a Director over the past 3 years, and we wish her well; our Corporate Secretary and Controller is Ms. Gigi Loo; and our CFO is Brian Stringer. I'd like to ask Gigi Loo to act as Secretary in the meeting and Lori Winchester of TMX Equity Transfer Services to act as scrutineer. Ladies and gentlemen, notice and proxy materials for this meeting were duly mailed to shareholders. Additional copies are available on SEDAR. I have been advised by the scrutineers that prior to the meeting, proxies were received from the holders of more than 23,160,258 shares, representing 26.72% of all shares entitled to be voted. As a result, we have a quorum for this meeting, and the meeting is properly constituted for the transaction of business. In view of the need to attend to a number of formal corporate matters, certain shareholders have volunteered to move and second resolutions where required. While this procedure will facilitate the handling of the formal matters, any shareholder or proxy holder may speak on the matter when that matter is before the meeting. There will be a Question-and-Answer Session after the meeting, and I will give instructions on how you can participate either on telephone or by raising your hand through the Zoom call, that I'll give those instructions later. When I recognize you, please give your name and state whether or not you are a shareholder or a proxy holder. The minutes of the last Annual Meeting of Shareholders held on April 21, 2021, are available for inspection from the company via e-mail from Gigi Loo at [email protected]. I'm also tabling a copy of the 2020 audited financial statements. You will have received them with the proxy materials, and additional copies are available on SEDAR. By the way, that should be 2021. After the formal portion of the meeting, there will be a presentation by management, which will then be followed by an opportunity for questions. The first item for business for which this meeting has been called is to fix the number of directors. It is intended to determine the number of directors at 4 and to elect 4 directors for the ensuing year. May I have a motion that the number of directors be fixed at 4?

I so move.

That was Brian Stringer. Thank you, Brian. Is there a seconder?

Mr. Chairman, I second the motion.

Gigi Loo, thank you very much. Is there any discussion on the motion? Based on the proxies received in favor of management, if a ballot vote were conducted on this matter, more than 95% of the votes eligible to be cast at this meeting would be voted in favor of setting the number of directors to be elected at 4. Therefore, I declare that the number of directors to be elected is set at 4 in accordance with the motion. We're turning now to the election of directors for the term expiring in 2023. 4 directors are to be elected and 4 nominees are named in the proxy circular for this meeting. The Secretary will now read their names.

The names of the nominees are: Andrew Cheung, William Train, Gary Kissack and Tyson Macaulay.

Thank you. I would like to note that the company has adopted a policy whereby any nominee for election as a director for whom the number of shares withheld exceeds the number of votes cast in his or her favor will be deemed not to have receive the support of shareholders, even if he or she is elected. A director elected in such circumstances must immediately offer his or her resignation to the Chairman of the Board within 90 days of receiving the final voting results. The Board will issue a press release announcing the resignation of the director or explaining the reasons justifying its decisions not to accept such resignation. This policy only applies in the context of an uncontested election of directors. May I have nominations, please.

My name is Brian Stringer, and I am a shareholder. I nominate the 4 persons whose names have been read to this meeting by the Secretary for election as directors of the company to serve until the annual meeting of shareholders to be held in 2023.

Thank you, Brian. Does any shareholder or proxyholder wish to make a further nomination? Since there are no further nominations, I declare the nomination is closed. 4 persons have been nominated as directors, and there are 4 directors to be elected. Accordingly, I declare that the 4 nominees whose names have been read by the Secretary have been elected directors of the company to hold office until the close of the next annual meeting of shareholders or until his or her successor is duly elected or he or she otherwise ceases to hold his or her office. The next item on the agenda is the appointment of the auditors of the company. I will now entertain a motion in this regard.

My name is Brian Stringer, and I'm a shareholder. My name is Brian Stringer, and I'm a shareholder. I know that McGovern Hurley LLP chartered professional accountants be appointed auditors of the company to serve until the annual meeting of shareholders to be held in the year 2023 at a remuneration to be approved by the Board of Directors of the company.

Thank you, Brian. Is there a seconder?

I second the motion.

Thank you, Gigi. The motion has been made and seconded to appoint McGovern Hurley LLP as the company's auditors. Based on the proxies received in favor of management, if a ballot vote were conducted on this matter, more than 95% of the votes eligible to be cast at this meeting would be voted in favor of the reappointment of the auditor set a remuneration to be fixed by the Board of Directors of the company. Therefore, the motion is carried, and I declare that McGovern Hurley LLP has been reappointed auditors of the company in accordance with the motion. The next item of business for which this meeting has been called is to consider and, if thought appropriate, to approve a resolution ratifying the stock option plan of the company as more particularly described in the management information circular. The full text of the proposed resolution is set out in the management information circular. In order to be approved, the resolution must be approved by at least a majority of the votes cast thereon. May I have a motion for the approval of this resolution?

Mr. Chairman, I hereby move that the resolution approving the ratification of the company's stock option plan in the form set out in the management information circular be passed without variation.

Thank you, Brian. May I have a seconder for the motion?

Mr. Chairman, I second the motion.

Thank you, Gigi. A motion has been made and seconded to approve the ratification of the company's stock option plan. Based on proxies received in favor of management, if a ballot vote were conducted on this matter, more than 95% of the votes eligible to be cast at this meeting would be voted in favor of the ratification of the company's stock option plan. Therefore, I declare that the company's stock option plan in the form set out in the management information circular be ratified and passed without variation. Now that we've completed the formal part of the AGM, I think it is appropriate to terminate the meeting now. May I have a motion to terminate this meeting?

Mr. Chairman, I move that the meeting be terminated.

I second the motion.

Thank you, Gigi. A motion has been received and seconded to terminate this meeting. The formal portion of the meeting is now concluded. Management will now make a short presentation about the company, after which there will be an opportunity for questions. Thank you very much for attending. By the way, here are the instructions. There are a couple of ways that you can ask questions. So I'll just read for you the options. [Operator Instructions] So thank you very much. I'll turn it over now to Andrew.

Thank you, Bill, and welcome to our 2022 Annual General Meeting for the benefit of our many new shareholders,. My name is Andrew Cheung, and I am the President and CEO of 01 Communique. Before I summarize our progress during 2021 and our plan for 2022 and beyond, I would like to first update you on the major changes in our ecosystem and marketplace since our last update. Now first of all, as we all know, cybersecurity problems are now the top global threats and headline news. The world has just experienced massive disruption and spread in the speed and intensity that we would never have been about. Firstly, obvious, the war in Ukraine is the first time cyberwarfare has been embedded in the major global contract. This is indeed a wakeup call about what cyberwarfare can impose. In the commercial -- on the commercial level, we still remember the massive ransomware effect of the colonial pipeline about 10 months ago. But the more alarming news was actually the cracking of the Bitcoin wallets of the colonial pipeline hackers was intruded by the FBI. This actually raised a question about how safe are the cryptocurrency in wallets. Now elaborate more later. And further on, we have just witnessed a $325 million theft of the collateral money in the Solana network and another $625 million theft in Axie Infinity. These are just the tip of an iceberg and I keep quoting what the U.S. Federal Research Chairman, Jerome Powell has said. Cyber attacks are now the formal risk to the global financial system even more so than the lending and liquidity risk that lead to the 2008 financial crisis. In other words, cybersecurity is simply trending center. Now while the hacking incidents were eye popping, the real story is much deeper and much dirtier. By now, the world has recognized that ransomware was very nasty and only can get worse. Because ransomware attacks are very easy and really don't require very sophisticated hacking skill, not even 1% of ransomware really begins with just a single e-mail phishing. The hackers plan malware into your system and can control it. And often, they don't do anything right away until they find other penetration target from your computer, such as other computers in your network. And in many cases, malware just encrypt all the files and demand a ransom to unlock your file without even guarantee that they will honor the ransom after you pay the money. And many simply just, they don't ask for ransom, they just steal your data and for later use or sell it or whatever they wants to be. So now let's return, as I said, I will talk a little bit more about the colonial pipeline hacking incident. Let's return to that for a moment. Interesting that within 2 weeks, as I said a little earlier, within 2 weeks of the ransom money payment, the FBI managed to crack the Bitcoin wallet of the hackers and received half the money. While this was good, it is inadvertently exposed a big crush. That is like technically to crack a Bitcoin wallet as we all know, we must find the private key, which is the basis of all crypto operation nowadays. Now did they really steal it, as how they said, although they really process something so powerful that they can reverse engineer the private key from the public key, such as a special purpose quantum computer designed just for that. Now obviously, they would never tell you the real truth. But personally, I believe it is viable to steal a private key on a non-tech key wallet holder, but I strongly doubt, a highly sophisticated colonial pipeline hacker will be simple be enough to leave a private key on a device that is connected to the Internet exposed to someone else, including the FBI or something. And in fact, Joseph Steinberg, who is an expert witness for the cybersecurity and the author of the best seller Cybersecurity For Dummies, agreeing with us in his post. The government often possesses technology years ahead of the public, keeping it secret for obvious reasons. And the best example was like the -- if you still remember unique code processed by the British during the Second World War, they cracked the code long before it was known to the public. We know that buildings are being spent by nations stage on quantum computing every year. So it is highly likely possible that the queue day, which is the day when hackers are using quantum computers to do their dirty works has already arrived quietly. This quantum tsunami is going to be the faster for those who are not protected. Now after the colonial pipeline, there are other incidents that I want to quote, which is related to crypto theft. As mentioned earlier, in February, there was a $325 million theft of the collateral money in the Solana network. And only a few weeks ago, there was a $625 million theft at Axie Infinity. Now the scale of these theft is certainly eye popping. But again, the underlying story is way more alarming. First the Solana $325 million Solana theft was actually caused by an accident due to a software update, having some traffic key is being exposed for a short period of time. Now this short time exposure was good enough for the hackers to port signature initiate some [ mateus ] transactions to steal the money. This is a solid proof about how quantum computers can render current cybersecurities and blockchain totally exposed. We have been warning the world about this for years and the immediate quantum studies maybe not on the chain, but actually the digital signature at endpoints. When that actors can forge a private key to sign a transaction, this type of theft will be on an hourly basis. And in the non-crypto terms, this is kind of like someone faking your bank card, exactly the same kind of effect. Now quantum computers can and will trigger massive financial theft, and it's very likely that nation-state actors already have special purpose computers that can perform the cracking. The world of traditional and decentralized financing must convert to quantum safe need, and we have the solution, IronCAP, that is financially, commercially ready for the world. IronCAP focus not only on the cryptographic engine, but also end user solution. We have marketed the world as -- the world's first quantum safe end-to-end e-mail security solution, offering a free personal version, and the business version to be followed soon. We also have incorporated this quantum safe security solution to our remote access product. And both of these product are in the marketplace and commercially available to-date. Now we actually offer IronCAP in a very wide kind of application, not only just the thing we talk about remote access or e-mail, but also cryptocurrency, blockchain, credit cards and many, many more. So we have a news that came out just about 2 weeks ago. And this is the ability to protect blockchain and crypto or decentralize financing from hackers in the post quantum world. This announcement was a joint venture with a prominent group of cryptocurrency and de-finance -- decentralize finance operators to create the world's first quantum safe version of Solana. This will be the world's first quantum safe token with high TPS transaction per second to enable not just quantum safe tokenization, but also NFTs and even smart contracts in the metaverse. Our partnership with Thales, which announced about 2 months ago, will also be applied to further protect the private key of the valid data/minor in the meta grade device. In other words, nearly to be quantum safe blockchain is in the pipeline. Now we have been talking to the crypto marketplace since 2019 already. But the recent crypto theft has created awareness and fast tracked the joint venture. The project is advancing on schedule and the agreement allow us not only to compensate the development costs, but also critically paying an ongoing 10% share of the token reward or coins we wanted to validate. This will be extremely lucrative for us, just think about that, this is kind of like owning 10% of the coin issued in this revolutionary quantum-safe chain. And to put it into kind of like reference context, is kind of like if someone has -- 2009 had a similar feel like that the Bitcoin, that party would actually have 10% of the Bitcoin value today, which is 10% of $700 billion is a lot of money there. And suppose the quantum state for Solana, if that at least [ R to R ] would be original Solana, our 10% means potentially $3.4 billion, which is 10% of the Solana market today. And it's important to know that all the points that are being paid to us can be booked as revenue, and we're talking massive scale and massive protector. Most importantly, this is not even the engine. We are using this to prove to the world that cryptocurrency and blockchain that we can do the same for them to protect against quantum computer threat. And even more, along the way, we have discovered a resolution that we method to keep the project key of the digital wallet. So instead of using a piece of paper, which is like today, the digital wallet, they are using a piece of paper with the 24 words listed on it, this is really like an 18th-century technology applying in today's 21st century decentralized financial world. And we have developed a patent [ handling ], we call it quantum-safe steganography technology to hide secret messages. In this case, the private key in a normal folder. The way it's like having this Mona Lisa, if you look deeper into the digital picture, it's actually hiding some data there and we should supply the key of the digital model which take -- whilst the kind of graphic is not a new technology in the old days, they call watermark or subliminal message. The bridge still here that we have applied patent is that it's using our patent protected quantum space method as the era vector to hide a large amount of private data, so that it's unexpectable even by quantum computers. So in other words, the key -- the hiding is the key is no longer the piece of paper that you were, we are about losing and you will lose everything. You can even make multiple copy of it because you're having a peace of mind now that even the file is going to the hand of someone else, right, they cannot expect the private key even with a quantum computer. So an international patent application has been filed last month, and we are planning to use this technology applied to not just the revolutionary quantum space Solana project that I talked about, but also other industries such as NFTs, proof of ownership in the digital identity of any kind of digital assets and it's a real breakthrough in this industry. Solana efficiency are many of the seeds we have planned since 2018 are now bearing fruits. And to maximize the potential as a leader in the post-quantum world of cybersecurity, we have added a new board member, which our Chairman has briefly introduced, Tyson Macaulay. Tyson is a well name in the global cybersecurity market. He is currently the CFO and VP of Rockport Networks, and he has held many key level positions at places like Fortinet, InfoSec, McAfee, et cetera, et cetera. Tyson was also a board member of the Canadian Internet Registration Authority. So Tyson would like to say a few words. So please welcome, Tyson.

Thank you very much, Andrew, and thank you, everyone on the line. I'd just like to say that I'm happy to be here as a new Board member for 01 Communique and the promise of this technology, I think, is substantial. And the time for this technology is now, in my opinion. I've been 27 years in cybersecurity. And this is one of those solutions that is going to be in very high demand in a very short period of time for many organizations. And I'm happy to provide some guidance to the company after this position. So thanks, Andrew.

Thanks, again Tyson. I would -- let me take a quick pause here. Because I'm sure the audience has a lot of questions. So let me take a quick pause allowing more time for question-and-answer. But before I do that, I'd like to make a summary first. We have a viable and secure [indiscernible] access product and a market-ready e-mail security product. And now we have added a new generation of blockchain/decentralized financial solution with lucrative compensation as well as a revolutionary digital wallet solution. It has been a Hallelujah year. If you still remember for those who joined us last year, I promised you that IronCAP will gather momentum and open up new partnership and business lines. And despite colder and the chaotic world in the last 12 months, our achievement has exceeded even my expectations. [Operator Instructions] And Brian, as usual, will be moderating the question and on the first come first serve basis. And there has been a lot going on. So right away, over to you, Brian.

Thanks, Andrew. I'm giving a couple of minutes here for the questions to roll in. Okay. The first one I have here is, Andrew congratulations on the new crypto-wallet protection. I know wallet security is a huge problem. Can you explain -- I thought you were clear, but just expand a bit on how you're solving that problem?

Yes. Thank you. This is a pretty good question. Yes, let me answer that by bringing back a little bit about the problem first. As we all know, the problem with digital wallet, which is really a new industry, is about how you recover the wallet in the time when you lost it. And the current technology is actually work, but it's an 18th century technology, is that it is giving you a random list of, say 24 English wallets, that you write on paper. And then you keep that taper and making sure you don't lose the paper, then you can put it in your safety deposit box or something missing, you don't lose it. And you lose it, sorry, your coins are not. And there are a lot of stories on the news that you -- occur that really someone has lost the paper and millions of dollars have been gone because of that. And no one can have, because this is the nature of it. And also if you have accidentally leased out the table like someone stole your papers, took a photo of it and they can replicate your wallet and just skew anything in the wallet. So this is something very unreal to have a -- using an 18 century technology for a 21st century decentralized financial world. And so we have been monitoring that for many, many years. And now this -- now that we have received patent approval of our technology, so we're expanding what we have to solve this problem. So how we solve this is in the way that instead of hiding the project key in a 24-word sequence, right? And you can just hide it in a digital file. It can be just a family picture that we took in your last vacation and then we are using the error-correction technology we have as the error vector to randomly at the -- we were hiring those private key data inside your picture. So they call this steganography technology. And without the pin no one can extract the -- private key out from that picture, including the use of quantum computers. So in this way, what we have solved is a very big problem that you never need to worry about using the paper because you can make multiple copy of it, putting in multiple different places. And even to the extreme, you can put it on the cloud, you can even mix with all your normal pictures and even someone possess, getting hold of your special picture that with the private key hidden in it, they still cannot extract anything without your pin even using the help of a quantum computer. So this is a real breakthrough in solving the world bringing that the 21st century technology to the decentralized financial digital wallet side. And this technology can also be applied way beyond digital wallet, such as the proof of ownership of NFT. NFT has been identified as the future in the digital world. And, but then the problem is a lot of the time when a creator has created a digital picture, how can they prove the digital picture is really theirs, right? So in the [ only day ] when the -- say Vincent van Gogh painted to the picture, they actually -- the first thing they do is find on the camera. So it digitalizes the same thing. Now they can do it, digital signature signed and then embedding into the digital picture using our quantum space steganography technology, embedding with this is the signature of theirs that no one can forge and no one can extract without their pin. So we solved a very, very big problem of proof ownership of NFT or any kind of digital assets. So yes, so that's a long-winded answer to your question about exactly what we have done is basically hiding information in a multimedia. And it doesn't even just work with picture, they can -- it can hide information in even an audio, like something a song that you sing or a family video that you have taken and that's [ embedded ].

Next question. The last few calls that we've had, we've been hearing about ICX and e-mail hacking. How is the project coming along?

Yes. In fact, that project is going on well. We have already -- as I said before, we have already released a personal free version that anyone can download from our website. And the business version is following and -- but we have kind of like intentionally delayed that process a little bit giving way for this blockchain solution and the new pattern to be filed so that we can integrate everything that we can within the business version. So now we have announced the new technology. And so I'm expecting the business version of the e-mail security solution will be available within the [indiscernible].

The next one. The blockchain Solana project sounds very interesting. Can you elaborate on who -- how the format is? And is there an IPO coming up in the near future?

Yes. It is actually a private group who is related to the Solana Group, and we have been trying to pitch the quantum threat to them since 2019. And I'm sure recently when they saw all these kind of quantum potential problem and some kind of threats in the crypto-world, they fast tracked the project and about 6 months ago, discussing about a joint venture with us. And this is very lucrative as I said, because it is going to be the first quantum stage blockchain and really putting into everyday use as a quantum stage token NFT, my contract, et cetera, et cetera. So yes, that's basically the economics of this deal. And more importantly for us is actually that we are trying to prove to the world that we can do this on a practical sense of how we can help transforming any blockchain or any kind of decentralized financing, any kind of the cryptocurrency into a quantum stage fashion that we can repeat for everyone else. That is the one of the end games that we're trying to put beyond the immediate financial compensation that we will receive from this joint venture.

Okay. Now the next one has to do with Talent Summit as well. And the development fees that we received, is that profitable and how well does that help our cash flow and extend our cash flow?

This is a good question, too. In fact, it is to compensate our development cost or let's say it is kind of more or less breakeven. And -- but most importantly, it is the coin, the ongoing licensing of the IronCAP technology and the agreement as disclosed in the press release is 10% share of the coins that is going to be awarded to the validator, that minor community. And this can be -- I think I mentioned a little bit in the presentation, can be very lucrative, because despite an ongoing basis that the 10% of the coin will be easy to us as a kind of like a license fee of using IronCAP, because each transaction being created in this change is going to be first, is digitally signed by using IronCAP technology by the creator. And then the validator, when they validate the transaction, they also have to sign the transaction during the validation process. So from end to end, it is requiring the IronCAP to our quantum stage solution. So that is a lucrative fee that we have negotiated, that would be generated and can be booked as revenue for us ongoing.

Okay? And the next one is, Andrew, can you update us more on the progress with sales?

Oh, you mean the Talent, I keep looking up on that. [indiscernible] Yes. Talent, as mentioned a little early in one of the slides, is related -- now the company is not related to Talent Summit, but the project is related to this quantum stage token, because we are proposing together with Talent, to this, the Talent Summit joint venture to further enhance the security of this token. Because currently, you may be surprised that a lot of the miner/validators in the crypto world, whether it is a Bitcoin or Ethereum or the original Solana or whoever, the private key of the validators are just being kept in some, you're not very sophisticated fashion, okay. And instead of a military-grade hardware security module. So the proposal here is that for the -- we call -- at this point, the coding for [ QSOL ], is going to propose to the validator using a certain machine, which is a military grade [indiscernible] to store the project key. That is -- today, those people using the Talent [indiscernible] are all the Military, expensive banks are all the very highly secure organizations. So which should be applied into the validator, because the validator to be frank, is the heart and soul of the digital currency of the world and they have to be protected like that. So a short answer to your question is like, we are amalgamating the Talent relationship to help secure the validator in the compensate [indiscernible] project that we are processing right now.

Okay, and the next one Andrew has to do with the financial picture. And the question is, when can we expect to see revenue going forward, with all the incidents that have taken place so far?

I think we are seeing this already, just haven't been reported because this deal with Talent Summit has just been announced about a few weeks ago, and it's not in the past quarter. And the revenue will be showing immediately beginning from this quarter. And hopefully, the tokenization will mean an ongoing revenue counted as the coin being rewarded to us in all the ongoing quarters starting from maybe next or the quarter after.

Okay. Just to add to that, we don't give guidance on revenue going forward. We do make it publicly available. All our press releases as we sign new partners, where you can see that we are moving forward. Our cash position is quite good right now. We're not concerned at all. And the revenue will take hold as it takes hold.

Okay. So if there's no more question, I'd like to give a final thank you, again for joining our 2022 Annual General Meeting. We have been experiencing few [ share ] and completely prepared to capitalize on the [ QD ] and so should you as a shareholder of 01. So I hope to see you next year in person at our AGM, and until then, please enjoy the ride. Thank you, again.