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

Okay. Let's get started. Welcome, everybody, to our 2025 first quarter results and business update. I'm Brian Stringer, I'm the Chief Financial Officer for 01 Communique. And with me on the call today is Andrew Cheung, our President and CEO. The agenda today will be I'll turn it over to Andrew shortly, and he'll take us through our results and give us a business update as to where we're going with IronCAP and the future for the company. And following that, there will be time for Q&A. [Operator Instructions] I'll moderate the questions at the end and present them to Andrew. Now before I turn it over, if you take a look at this disclaimer, which forms an integral part of this presentation, take a few minutes to read it. And now Andrew, over to you.

Thank you, Brian. Welcome, everyone. My name is Andrew Cheung, President and CEO of 01 Communique. Since January, I have talked to a number of new shareholders, so I would like to welcome you all to the 01 community. Although it was just less than 2 months ago when we last met, there are already quite a bit of new developments in the field of post-quantum cybersecurity and I'm excited to provide you with all the updates today. First of all, quantum threats are accelerating at an unprecedented pace. The white hot announcement from Google in December about its Willow chip was only 3 months ago, but it felt like prehistoric already. And shortly after that in February last month, the Microsoft announced its Majorana 1, which is the first quantum chip powered by topological core that can scale to 1 million qubit on a single chip. This is another significant milestone to fault-tolerant qubit after Google's breakthrough announcement in December last year. I guess most importantly, they are not the only players in the world. For example, IBM is anticipating their 4,000 qubit version of new quantum computer later this year. And then only 2 days ago, Honeywell, which is Quantinuum, says they're expecting the next quantum computer release in a few months that is going to be 1 billion times faster than the last version only 18 months ago. And probably even more important is that there are many other players in the world, including national level players in Russia and China who don't announce their road map. I am fully expecting a kind of like a DeepSeek-like event coming out of nowhere on the most unexpected way that they have created a super-quantum computer beating everyone very soon. Whether this is coming out of U.S., China or whoever is not important. What's important is that the world must prepare for this to happen or it will be a disaster for those who have listened to some self-serving irresponsible comment saying quantum computers are decades away and caught unprepared. I basically have been saying this for many years because technically 372 quiet qubits or 4,000 somewhat quiet qubits can cross the line of Q-Day already. You don't need millions of qubits for that purpose. Q-Day is the day when malicious users are using quantum computers to do the dirty work by reverse engineering the public key of everything back to their private key. This allows stealing of password, eavesdropping sensitive communication, stealing cryptocurrencies, national safety measure being disclosed, et cetera, et cetera. The chaos happened several weeks ago in the Bybit attack, if you remember, that they had lost about $1.5 billion worth of cryptocurrencies. I guess this incident is just a mild preview of what will happen on Q-Day. Although Q-Day is exactly not there yet today or at least not on a commercial level, but it is awfully close. I personally hold a strong belief that Q-Day has arrived at least 2, 3 years ago on the national level because they are usually about 5 years ahead of the commercial world. Are you surprised if the U.S., Russia or China national security have already contracted their quantum computing vendors to create a special purpose quantum computer that does nothing but cracking RSA and elliptic curve. Frankly, I know that it's misleading listening to what company says about Q-Day because the comment tends to be self-serving. Obviously, we say Q-Day has arrived because we bet our futures on it. And then those businesses who will be killed by Q-Day will certainly hope that it is decades away. And I believe you should pay attention to what the government said instead. Now NIST is the semi-government agencies in the U.S. that they scrutinizes and standardizes the encryption algorithms while the rest of the world follows suit. They have started their study and standardization process for quantum safety since 2017, almost the same time when we started our IronCAP business unit focusing on post-quantum cybersecurity. So almost bang on with their anticipation, they have announced their first set of post-quantum cryptography, short for PQC, algorithms about 7 months ago and then on March 11, less than 2 weeks ago, announced one more algorithm in the code-based category. So let's jump right into what we do. Our focus is post-quantum cybersecurity, obviously. And our expertise is encryption, cybersecurity and end-user product development. After spending millions of dollars over the last 5, 6 years, I would like to tell you how we are taking full advantage of our expertise and how we're going to capitalize on it. The bottom line is that we believe the huge demand on quantum-safe enterprise end-user applications will come many years before the demand on general purpose quantum computers. We are ready to capture that market right now, not tomorrow. We are ahead of our competitors in a way that our engine had been completed about 2, 3 years ago and we have already invested in PQC-compliant enterprise end-user product development since then. While we will certainly license our technology for money for our partners such as cryptocurrencies players, post-quantum multi-signature, et cetera, for their journey of PQC migration, we believe revenue potential is way higher and way sooner for enterprise end-user using PQC-compliant applications with existing demand such as e-mail security, AI platform, remote access, mobile messaging, et cetera. These verticals are carefully picked for a single factor that they have huge existing demand without quantum safety. In other words, we believe once effective marketing kicks in, revenue will start flowing. And the reason we picked e-mail as the first quantum-safe enterprise end-user solution is not only because it has a huge market with 700 million business e-mail accounts in the world, but also e-mail is the most insecure, but yet a globally adopted business tool. Since its inception, we all know that e-mails are virtually sent unencrypted. And even the tiny portion that are sent encrypted, the encryption is really not end-to-end. Not end-to-end means it is really not secure because people other than the recipient can also decrypt your messages, such as the service provider, the agencies of Big Brother. So let alone being quantum-safe, they are just not secure. We took this opportunity to leapfrog an e-mail security product that is not only quantum-safe, but also truly end-to-end encrypted. In other words, we guarantee 100% privacy that even government authorities are unable to tap into. Even more important than encryption is authenticity of the senders. Virtually all e-mail senders today are unauthenticated. That's why 91% of all ransomware attacks in the world are initiated by a simple phishing e-mail. The end-to-end e-mail signature in our product is not only quantum-safe, but also allow the senders to digitally sign the message, proving the sender's authenticity. In other words, this alone can plug 91% of the source of ransomware because we know that the recipient will know whether the sender is legit or not. IronCAP X is already available for public usage and the first version is limited to Windows Office Outlook usage. With the recent capital injection, it allowed R&D expansion to provide an e-mail client for Windows, Mac, iOS and Android for cross-platform users and expecting commercial availability within this year. In previous meetings, I have mentioned about mobile messaging platform and remote access being other 2 major verticals. Remote access is so obvious because so many people today are depending on that for their remote working nowadays. But none of the product in the market is PQC-compliant. And I believe a PQC-compliant remote access product with proper marketing will get their market very, very quickly. And similarly, the mobile messaging platform is another no-brainer. You may remember several months ago, the CEO of a popular messaging platform called Telegram was arrested in France. He was arrested for Telegram's noncooperation with authorities in censoring the messages on the platform while some people said the arrest was a pure political move. I'm not a politician nor do I care, but I'm just a cybersecurity guy knowing for the fact that Telegram is not truly end-to-end encrypted whereby they possess a master key. Maybe this is the real reason for the CEO arrest that someone was trying to gain access to something. The real motive is outside the scope of this discussion here, and we may never know and I don't even want to know. All I know is that the world is strongly in need for a mobile messaging platform that is not only quantum-safe, but also truly end-to-end encrypted, whereby there's no master key to share and we are committed to build this product. I guess saving the best to the last, I have talked about development in PQC AI platform during the last maybe 2 or 3 quarterly results. I was unable to say too much before we filed the patent application. And well, we did that 2 days ago, so I can release a bit more information today. Bottom line is that our invention is revolutionary. In AI, the biggest business market is not large language model, LLM, like ChatGPT, but special purpose AI models. Let me give you some examples. Imagine there's a reliable AI model specialized in credit card fraud detection, whereby it will return an answer, a fraud or valid, to any credit card transaction being fed into it. This will be very useful to the credit card company, but practically unachievable today due to security because AI operations are unencrypted. As we all know, each credit card transaction contains highly confidential customer information such as name, credit card number, expiration date, billing address, amount, merchant, et cetera, et cetera. So feeding those information into a third-party credit card fraud detection AI model will constitute a significant violation of privacy. So the banks will never do that, period. Similarly, the AI model vendor also do not want their unencrypted model in the hands of users risking a simple, easy pirated copy being created. So another easy example is malicious activities detection for, say, data center by monitoring the network traffic, which is, again, extremely confidential and it can never be sent to an AI model unencrypted. And the other quick examples, including -- the sky is a limit basically like the facial recognition, anomaly detection, privacy-preserving machine language. So these examples are just the tips of an iceberg. So what we have been working hard since last year was basically invented a technology that can preserve both the confidential data of the users as well as the intellectual property of the AI model vendor in a manner that is quantum-safe. This is not only revolutionary, but also greatly enhanced the adoption of special purpose AI, which is a multibillion dollar market. And we have accelerated in the commercialization process and are very confident that we can showcase a public demonstration within the next few months. And the demonstration we expect to be around some -- where we're real using example on credit card transaction in the demonstration. So carrying forward, from the pivotal years in 2024, I have to say that it's fair to say that 2025 has kickstarted a positive tone for 01. First of all, we received a strategic nonbroker equity financing in January. While our Q1 continued to operate in an essentially break-even position, the strategic equity financing really allowed us to accelerate and expand on our PQC-compliant product development. The innovative AI marketplace solution that I just talked about is an exciting area that we are firing up. The reliable recurring revenue from our legacy product, although suffered slightly by the unfavorable exchange rate, continued to fund part of our operations. Our focus from 2025 onwards will be towards building quantum-safe solution-related revenue by expanding our R&D, sales and marketing activities. So in closing, I expect 2025 to be an exciting year for 01. And we have patent-protected technologies, patent-pending technologies and mass market-ready products. While we are inching closer to Q-Day, the world really needs to start its journey of quantum-safe migration, not today, but actually yesterday. 01 is poised to be the industry leader in offering PQC-compliant enterprise end-user product, and we are confident that 2025 will be a massive year for us in achieving major product milestone and kickstarting the revenue. I believe revenue growth will accelerate once sales and marketing activity begin in the latter part of this year. I'm sure you have a lot of questions. So I am going to take a quick pause to reserve more time for question and answers. As mentioned by Brian at the beginning, I'm sure you guys are very familiar with Zoom already [Operator Instructions] And Brian will moderate your questions accordingly. So over to you Brian.

Okay. Thank you, Andrew. First question, it's a combination, there's two questions here. Because it's on AI, I'm going to combine them together. First one is technical, Andrew, and it says, how is your solution different from other homomorphic, if I've got that word correct, solutions in the market. Some claim PQC like duality. What is unique about the patent in the field of homomorphic? And then the second part, which is the second question, large financial transaction monitoring and AML firms are looking for homomorphic solutions now. Are you speaking with them yet?

Yes. I think this is a loaded question, rather technical, but I'm trying to answer in more English than just the technical terms. A homomorphic encryption is one type of computation-preserved encryption, which allows the mathematic computation in encrypted data. And we are not -- our patent is not about the encryption technology, but it's about the application of math-preserving encryption in an application process in a method that can allow something that is not able to function today, such as AI platform. So what we have filed a patent for is actually a platform that would allow us to bridge between the AI users with sensitive data and the AI model vendor with sensitive AI models, and they don't want to disclose to each other, and we provide a platform that would allow that to happen. So that's basically what we did. And then from your -- the second question is about really like the end users. We expect the sky is the limit. Like I was just using credit card as an example because it's easy to understand that the credit card company can be a user. And then the credit card fraud detection AI model would be the seller, and we are bridging them in between. And kind of like a platform, you can imagine that it's like an Amazon platform bridging buyer and seller. Only that here, the product is AI model. So yes, I hope this will be easy to understand answer, although it's a bit winded, long-winded answer.

Okay. And the next one on AI again is it seems that AI is moving forward at light speed. And you used the example of credit card detection, I think everybody can understand that. But the question is could this be used to prevent fraud related to cryptocurrencies?

Absolutely. I think the quick answer is absolutely. It can be a detection of a happening, right? But then to protect cryptocurrency, they don't need. It's not about using AI to protect. To protect cryptocurrencies, as we mentioned before, it would have to be a complete overhaul on the digital signature, which we are in discussion with a number of potential partners in marketing that. And -- but extending towards the detection of fraud, it is definitely possible. And another easy-to-understand example of AI would be -- maybe I'm digressing a little bit into other examples such as health care. It's a typical place where the pharmaceutical company would create an AI model specialized in their drug. And then the health care provider can be the user providing patient data in order to seek advice of how to use the drug. So you can very quickly picture that the huge usage on that and the huge privacy issue that can be derived and needs encryption in order to make that happen. So yes, the sky is the limit.

Okay. I'm cognizant of time, so I'm going to try to get through these questions quickly. Andrew, there's quite a few, in your AI use case, do you rely on NVIDIA GPUs and software? Or can you work with any AI infrastructure?

Well, this is a very good question. So first of all, in the -- as I think I mentioned, in a few months, we are expecting to host a public demo. And we have already created a platform here, which is using normal computer without GPU and anything, and it's working perfectly. But obviously, applying GPU like NVIDIA GPU into the operation will significantly enhance the throughput of the platform, which means like we can handle more customers and more transaction using less hardware. So quick answer is yes, definitely, a GPU type hardware platform will be significantly enhancing the throughput of the system.

Okay. The next one, is there any update on Real Matter?

Yes and no. We have not announced anything. The partnership was just signed up about a month ago. And they are a prominent cybersecurity provider in Asia. And at this moment, I cannot release the name of the people they talk to, but they have been talking to a number of major banks in that geographical area that we expect some serious discussion to be happening fairly soon.

Good. It's safe to say we're in close contact and working with them. Now two more questions. This one, we have a new shareholder in Tony G, a recent financing. And the question is, you've seen what he did with Sol Strategies going forward. Do you communicate with him at all? And if so, does he provide any input on 01's business strategy?

Yes. I guess short answer is yes. We are in constant communications. And yes, while I cannot disclose too many nonpublic information, but we are strategizing a lot of things as we speak. Yes, I think I would just stop at that line, but we are in constant communication. He is very supportive.

Okay. Great. And cognizant of time, we got this last question, which I think is kind of a fun question. Andrew, how big do you see 01 growing in the next 5 to 10 years?

Wow. Yes. As a visionary, I have been preparing 01 to this stage for so many years because this is basically our Chapter 3, and I am betting Chapter 3 to be a leader, and not only a leader but evolving as the unicorn in the PQC world. And that's what I expect this would happen because we are -- as I said, we are not only leading the world in the engine development, but we are really leading the world in PQC enterprise applications development, which is where I believe the majority of financial benefit would come from. We are not -- like licensing, as I keep saying, licensing the engine for money, yes, is some kind of a good source of revenue. But the major source of revenue, I believe, will be coming from our PQC-compliant enterprise end-user products. So I'm expecting 01 to become the unicorn in this field.

Yes. Andrew, I think it's safe to say the sky is the limit, right?

Well, yes.

Okay. I thought you'd like that one. Okay. And that's about it, cognizant of time. Andrew, I'll turn it back to you for closing comments. And thank you, everybody, for attending.

Okay. Yes. Once again, thank you, Brian, for moderating the questions. I guess, closing, I just want to say that we have entered a very exciting moment. And please stay tuned for all our upcoming news. And thank you for joining our corporate update, and I'll see you again probably at our AGM in April. Thank you.