01 Quantum Inc. ($ONE)

Good morning, everyone, and welcome to our first quarter 2026 results and business update. I'm Brian Stringer. I'm Chief Financial Officer for 01 Quantum. And with me today is Andrew Cheung, our Chief Executive Officer. The agenda today will be -- Andrew will give a presentation of the company, of the results, a business update on how we're progressing. And that will be wrapped up by a Q&A. I'll moderate the Q&A at the end. [Operator Instructions] Now if you notice, we have our disclaimer, which forms an integral part of this presentation. Take a few seconds to look it over, please. And with that, I'll now turn it over to Andrew for the presentation.

Thank you, Brian. How are you doing? I'm Andrew, the President and CEO of 01 Quantum. We specialize in making everything quantum safe, which is guarding against hackers who are using quantum computers to do the dirty works. So we started doing this about 7 years ago, maybe more than 7 years ago, invested over $7 million to reach where we are today. We are the first one in the post-quantum cybersecurity space that has crossed into revenue generation last year. We are carrying over this advantage into 2026 and beyond. So I'm going to give you all the details later. Our value proposition is very simple. I won't go into the details about how quantum computer works, what they are, quantum annealing or whatever. All I want to say is that their excessive computing power has created an unprecedented cybersecurity threat for the world or a.k.a Q-Day, which is the day when the bad guys are using quantum computers to do the dirty works. So on and after Q-Day, essentially everything under the sun that is protected by today's today cryptographic technology such as RSA, elliptic curve will become totally naked in front of a quantum computer. Now Q-Day concerns everyone not only because it is mathematically proven by Shor's algorithm that it can crack those RSA and elliptic curve algorithms, but it is also affecting everything from e-mail to financial to medical, AI, cryptocurrencies, just to name a few. So major enterprises like Apple, Google, Microsoft have already started their PQC conversion, post-quantum cryptography conversion journey already. So if you don't believe in how business people handle QA, you should at least listen to the government. First of all, the U.S. President office back in 2022 had already issued an official letter, NSM10, warning that the agencies to be very mindful of a famous attack called HNDL Harvest Now Decrypt Later, whereby the hackers are obtaining the encrypted data, they hold on to it and wait until they get hold of a quantum computer that is powerful enough, then do the hacking. So the problem is not a problem of tomorrow, but a problem today or even yesterday. So no wonder why Howard Lutnick, the U.S. Secretary of Commerce on the CNBC in the field about 8 months ago, openly said that the worldwide cybersecurity will be totally broken by quantum computers if we don't act immediately. In addition to that, Jensen Huang of NVIDIA also said that we are now in an inflection point, while Vitalik Buterin of Ethereum also said that they are 20% chance that Q-Day would arrive by 2029. And this is dovetailed by the announcement from IBM that they expect to have a fully fault-tolerant quantum computer by 2029. But the most concerning fact to me is that all these writings on the wall are only from the open world. There are some closed worlds such as Russia and China, whose vendor never published their road map. So my biggest worry is kind of like a DeepSeek-like event in the quantum world that one day a company you never heard of the name suddenly announced a quantum computer that beats everything. And if you're not prepared by that day, basically, you toast it. So the bottom line is that you have to act now before it's too late because the difference between Q-Day ready 2 years ago -- sorry, 2 years too early versus 1 day too late is basically everything. So I keep reiterating that unlike most of our competitors, aim to license their PQC technology for others to do the PQC journey conversion, we are doing it differently. Instead, we are giving it away for free, right, as long as our customers are using us to help them do the conversion journey. So for example, they can say that, yes, we give you a quantum vulnerable product and all we want is that you guys spit out on the other side a quantum-safe version, right? So this kind of business model has proven early success versus our competitors who are still in -- largely in pre-money stage. And we have already generated revenue and created some solutions for our customers already. So the first of this type of product we have created was for Hitachi, head office in Japan. Earlier last year, they asked us to kind of like the one I just mentioned, they asked us to help them converting their remote access offering to become quantum-safe. We spent about 7 months going through a very tough software engineering process, successfully completed the task and a joint press release has been issued about 2 months ago. Now remote access is very susceptible to HOD and HNDL, Harvest Now Decrypt Later attack because your encrypted communication session can be recorded by hackers, which is kind of like a history book of all your corporate activities that will become naked when the hackers eventually get hold of the quantum computers, right, that they can do the hacking. So being quantum-safe gives Hitachi a huge edge, and they are now actively selling this in Japan. Hitachi is selling a server version, which is starting price about USD 6,000 and a SaaS Software-as-a-Service subscription model for about $15 per month. So we typically receive a onetime engineering fee plus ongoing revenue sharing. So we don't need to spend. The beauty is that we don't need to spend a dime doing sales and marketing. We just sit back being the SME subject matter expert and collect royalties, a risk business. The second application that we have created was to help a crypto foundation. We have started working on crypto POC proof of concept more than like 3 years ago because we believe cryptocurrencies will likely be probably the lowest hanging fruit for quantum attack because of the heavy financial incentive as well as the total open nature of cryptocurrencies/blockchain technologies. So essentially, crypto is a perfect storm for HNDL attack because hackers can easily obtain the public key of any crypto wallet, and they simply hold on to the list of public key and then up to their mercy of which wallet they want first when they get hold of a powerful enough quantum computer. So qLABS Foundation asked us to create for them a truly quantum-safe token. And despite the bar market, they call it the token Q1. They went through a successful ICO in February about a month ago. And we are currently in the final stage before commercial launching at the end of April, allowing the token Q1 to be used as a "quantum gas fee for crypto users to pay to protect their Layer 1 asset like hyperliquid, the Hype token, the Ethereum token, Solana token, et cetera, against Q-Day threat's, of course. So this exercise -- throughout this exercise, we have applied 3 patent protection, was granted and 2 more in the patent-pending stage. And the market size is huge because the whole $4 trillion digital asset market must be protected against Q-Day threat. And similar to Hitachi, we are also receiving a onetime engineering fee plus $22 million number of this Q1 token as the compensation. So a simple math is that for every dollar worth of this PQC gas fee that it would eventually achieve, it would represent $22.5 million worth for us. So again, we don't need to spend sales and marketing dollar. We just sit back being the subject matter expert and collect royalties. So another risk-free business. Now the third one is our own product, which is the world's first truly quantum-safe end-to-end e-mail security product, IronCAP X. It complies with the NIST FIPS 203 and 204 encryptions and digital signature standard. So with the quantum-safe digital signature, it basically guarantees the authenticity of the sender, hence, effectively plugging the whole of phishing e-mail, which is 91% the source of ransomware attack. It's end-to-end encryption guarantees privacy, which is a big blind spot, in my opinion, in the usage of e-mail since day 1, especially for the highly confidential professional industries such as financial, legal, accounting, et cetera. And most importantly, we made it operating as a plug-in of Microsoft Office Outlook, which is the de facto standard in corporate e-mails. In other words, we are mainstream ready pending proper marketing budgets. The marketing -- the market size is huge, like the total addressable market. It's very simple that there are 730 million business e-mail addresses in the world. So if only 10% of them are serious and wanting some quantum protection and paying $3 a month, that's a potential $2.6 billion annual revenue up for grab for us. So after that, right, besides all these 3 revenue generators that we have already created, we are also cooking another, I would call it, bigger than the combination of all these 3 in this year and next year. We have a unique invention that is kind of like a crossover between AI and quantum safety. If there are -- if there's one single obstacle that prevents AI from doing its full potential, it's privacy because AI operations today are performed in unencrypted fashion totally and the privacy applies not only on the user data that breaches business confidentiality, compliance, national securities, et cetera, but also the AI model itself can be [ comparative, ] right? So there's a huge market need for privacy preserved AI operations, and we have these solutions. Now during the most of 2024 and last year, we have invested heavily in creating a patent-pending technology that we call Quantum AI Wrappers QAW technology. And this is basically using full homomorphic encryption technology to encrypt both the user data and the AI model before performing AI inference. Together with quantum-safe communication, we have essentially protected the privacy of both the user data and AI model while at the same time, operating everything in a quantum-safe fashion. So this year and next year will largely be a market building stage for the QAW market as professional services and managed services. So the total addressable market is huge, growing from $0.9 billion because basically it's paralyzed, as I mentioned earlier, by privacy last year to $5.4 billion by 2032. And the full homomorphic encryption subset alone has a size of $850 million by 2028 already, while the subsegment of finance, government and health care alone has a size of $650 million. So it's very sizable addressable market that we are diving into. So our value proposition is very straightforward, which is to protect the user data and the IP of the AI model. And user data protection allow compliance and national securities related users to take a full advantage of public AI without worrying about privacy. And this also opens for dedicated and on-premise deployed business. And finally, we are also creating an Amazon or eBay-alike AI marketplace where we allow AI model vendors to list their model for users to search and use in a total quantum secure fashion. So we simply in this kind of marketplace, we -- again, similar to Amazon and eBay, we simply share 15% to 25% of the usage revenue, and we will build for the AI model and deposit for them and taking a percentage as our commission. And this value proposition also allow us to open to government funding and procurement opportunities. And the market channels are very typical PR public relation, demand generation, partner events and market event, et cetera, which the sales channel will be typical direct channel, government procurement, channel partners and et cetera. So we have created a very tight time line that the first target is Q1 2026, which is right now that we already have an optimized FHG full homomorphic encryption model, which is ready for demo to various potential customers already that we are currently doing that. And we will have a private AI in Q2, a few months from now this year and followed by a hybrid FSG in the Q1 of next year. Then the AI marketplace for private AI will be there by Q2 of next year. And then the optimized version will be by Q3 and then culminated with an AI marketplace that is between premium and hybrid FAC by the end of 2027, the end of next year. So that is a very tight time line that we are achieving as we speak right now for the crossover between AI and quantum safety. So all of the above are kind of reflected by our Q1 result with $350,000 of engineering revenue, and this is actually up more than 400% from last year. And most importantly, despite ramping up our marketing, investor relations, R&D, et cetera, we spent less than $300,000 in the quarter and ended with a cash position of about $3.3 million, which is increased by more than $2.3 million from last year. And we expect income starting from additional area on top of what we already produced, which I think is likely coming from the AI and other service providing. So I'd like to take a quick pause here, reserving some time for Q&A because I think you would have a lot of questions that you would like to ask me, so I'd like to reserve more time for that. So again, as mentioned by Brian, I assume that everyone by now is very familiar with how to use the Q&A section with Zoom. So please do that. And Brian, again, as usual, we will moderate your questions. Back to you, Brian.

Okay. Thank you, Andrew. Let me gather several of them here. Okay. The first one, Andrew, has to do with the Q1 token. And his comment is on the $22.5 million Q1 how are you reflecting these on the balance sheet? I'll take the first part, and then Andrew can elaborate on the valuation. But with respect to the balance sheet, remember, these were received subsequent to the end of the quarter. So it's a subsequent event. So no, they're not reflected on the Q1 balance sheet. And going forward, it will be a matter of -- we'll disclose in the notes as which follow proper IFRS and GAAP reporting. And I'll turn it over to Andrew now to answer the second part of the question was how do you feel about the value.

Yes. This is a very good question. And it's also that this is -- the ink is still wet about this because, as Brian mentioned, this is happening after the quarter ends. And part of the compensation was to receive a bunch of the Q1 token. And we believe this token has tremendous value because it is not a mean token. It is actually the first quantum-safe token in the world. And also, it is the first quantum-safe utility token, like utility token, meaning that this is not just for a store of value, it has usage, like what the usage of Q1 token is for other people that are holding digital asset and worry about Q-Day threat to quantum protect their token. So for example, if you're holding some hyper-liquid token and you're worrying about Q-Day threat, and you can go to our partner site, the qLABS Foundation site and click a button to link your wallet to our product and then they can quantum protect, they call quantum locking, doing the quantum lock to protect the asset against Q-Day threats and then doing quantum unlock when they want to sell or transfer or something like that. So obviously, doing this kind of protection, we will require people to pay some fees, which is very cheap. You're talking about like $0.01, $0.02, something. So the business model is kind of like when you are combining so many pennies together, it becomes $1 billion of revenue. That is the kind of things that they are going after. And then this would also help pushing the value of Q1 token. So today, the value of the Q1 token is about $10 million, which is very good, as I said, in a bad market like that, and they are still going out with a successful ICO. And then the real gain is by the end of April when we are releasing the quantum lock and unlocking process while people can protect the token and paying the quantum guest fee using this currency. So yes, after a long-winded answer to the question, the short answer is that we are very I would say, positive on the value proposition of this Q1 token.

Okay. This is a follow-on question to it, and I think it's more technology related. It came in as you were talking. Can you outline the current measures being taken by crypto players like BC, I assume that's Bitcoin and Ethereum to protect from hacking and how our solution compares with time lines?

Yes. I would say that a few years ago, when we were preaching about Q-Day threat, nobody even -- some people don't even understand and nobody listened. And now everyone is talking about it, and they started doing something, but they are where we were about 2, 3 years ago. So the kind of solution that they are all presenting are either a new layer one chain, which the world doesn't need another layer one chain, right? Or they are proposing something that would be a quantum signature, changing the signature of the fundamental blockchain technology, which also doesn't work because we went through that before 2, 3 years ago that it is too large to fit into the existing data structure. So it just won't work, right? And finally, some of the proposal by, say, the original layer 1 chain or Bitcoin chain that may work, it also would take a long time because the nature of the blockchain technology, the nature of the cryptocurrency technology is an open community rather than having an owner. It is a community-owned technology, which take a long time for so many like thousands of smart people to come together, having the same consensus in how things work, right? So if you are following what Ethereum has been doing simply changing from proof of work to proof of stake. It took them 5 years to do it. So to do something like that, it would take another few years to do it like 2029 or 2030 or something is definitely passing the Q-Day threshold already. So I would summarize saying that it's about -- it's too late. While our solution is today, so whether Q-Day came in 2029, '28 or '27 or whatever, the technology is here today of what we have created for our partner, which is ready for use beginning April, about 1.5 months from now.

Okay. Thanks. And now I'll turn it over because I grouped these next group of questions because they have to do with AI Andrew, the first one is in the last few presentations, you were mentioning the AI marketplace. And now you're talking about small language models, SLMs. Are you switching focus?

No, we're not switching focus. And basically, the AI marketplace is a marketplace for SLM. It's just that we haven't used the term SLM, which is small language model. And the market for SLM or some people calling them special purpose AI is extremely large. And the reason being is there are all kinds of different technology for specifically for a different sector. The typical example I always give is say, credit card fraud detection for the credit card company, right, or facial recognition, anomaly detection, medical advice and all these kind of things are typical SLM, small language model market. And the only difference that we were -- the first application we thought at the beginning was to implement the AI marketplace for these small language SLM models to be listed for their users to use. But then after starting our market generation activities, we found that the market is way larger than that. We have many inquiring from the like of financial sectors, government sector or something that they want to have their own model for their own use, which is also very privacy-oriented. So yes, the market has been just expanded rather than the switching focus. So it is still the same thing, only that becoming bigger.

The next one is still on AI, and I'm group several of these together because I'm asking pretty much the same. And it's -- what is your plan for sales revenue in AI? And one person that noticed that we talked about a use case for banks in our press release. And governments and health care are obvious ones as [ Wally ] says. This represents a huge opportunity. Can you elaborate on 01 Xero1 Quantum's strategy for AI?

Yes. In general, I think I kind of alluded a little bit in my early presentation here that we are going after the market in several different cylinders, like -- the first one was the government. And then the second one are going after enterprises. And we are also running some seminar or webinars in educating the market. So we have 2 executives focusing on 2 different things. One, focus on the government procurement and government funding sector and the other executives are focusing on the financial sectors. But they are both addressing the same SLM small language model requirement by either the government sector, the defense sector or the financial sector. And then there's also a third front that we are working with partners. And we have some really big partners that are currently in discussion with us and doing demonstration to their large enterprise customer in the areas of AI. So yes, it's a multi multidirection attacking for the sales and marketing channel for this market.

Okay. And then I think we've got time for one more, Andrew. How are companies protecting their AI generating -- generated data now? And it seems to be confused, how is our proposed solution going?

Yes, I think I understand your question is likely that how people today are protecting their data and how we are addressing that problem. I think the answer is very simple. Today, people are not protecting their data, simple. So there's no protection. Everything that is happening in the AI sectors, the AI inference or you call it AI queries are totally unencrypted. So everything that you ask ChatGPT, for example, or you ask your SLM are 100% unencrypted that the -- someone -- the operator of the model would understand what you have asked, right? And they can analyze your question. They know what you have asked. And they also know the answer to that. So what we have created and is patent pending today is encrypting the user query or the prompt, right, and encrypting the AI model so that they are encrypted before the AI inference. And then the answer is also encrypted back only the person who asked having the project key can decrypt the answer. So the AI model vendor would have no idea what exact -- although they can provide the answer, but they don't know what the user has asked, right? So that's how we protect the privacy, the complete privacy of the user and also the AI model itself.

Okay. Thank you, Andrew. I'm cognizant of time. There are a few open questions. And for those, if you wish, please, you can contact either myself or Andrew Cheung, you can call us or e-mail us any time for any further questions or updates. And again, thank you for attending, and I'll turn it back to Andrew for closing comments.

Yes. Thank you, Brian. In closing, I would say timing is everything. The quantum market is like AI 3 years ago. And it has a huge total addressable market. So my goal is to have 01 come out at the unicorn in the PQC market, and we are very well positioned to achieve that goal. So thank you again, and I hope to see you again in our AGM happening, I think, something in April that we will announce the date. So thank you very much again. See you later.