01 Quantum Inc. ($ONE)

Good morning, everyone, and welcome to our 2026 Second Quarter Results and Business Update. I'm Brian Stringer. I'm the CFO for 01 Quantum. And with me today is our CEO, who you all know is Andrew Cheung. Now before we get started, I'd like to refer -- please, Andrew, the next chart. Our disclaimer, which forms an integral part of this presentation, take a brief second to review it, please. And the agenda today will be -- I'll turn it over to Andrew, and Andrew will give you an update on our financial results and our business perspective going forward. Following that, we'll have a Q&A. I will moderate the questions. And I think by now, everybody is very well familiar with Zoom. [Operator Instructions] Andrew, over to you.

Well, thank you, Brian. How are you doing? I'm Andrew, the President and CEO of 01 Quantum. We specialize in making everything quantum-safe. We started the journey almost 8 years ago, invested over $8 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, and we are carrying this advantage over into this current quarter and beyond. Now I'll give you all the details later. Now first of all, our value proposition is very simple. The excessive computing power of quantum computers has created an unprecedented cybersecurity threat for the world, or AKA Q-Day, which is the day when the bad guys are using quantum computers to do the dirty work. So on and after Q-Day, everything we use today, whether it's the AI, financials, cryptocurrencies, e-mail, everything will become totally naked in front of a quantum computers. So the tech giants like Apple, Google, Microsoft, et cetera, have already started their PQC conversion journey. And the government is no exception. So first of all, the U.S. President back -- I mean, the office back in 2022 had already issued an official letter called NSM-10, National Security Memorandum 10, wanting the agencies to be mindful about a famous attack called HNDL, Harvest Now, Decrypt Later attack, whereby the hackers are obtaining the encrypted data, they hold on to them, they cannot decrypt, but they wait until they get hold of a quantum computer powerful enough, then they do the hacking. So this means the problem is not a problem of tomorrow. Even the tomorrow is not that far away, but a problem of today or even yesterday. So no wonder why Howard Lutnick, the U.S. Secretary of Commerce on the CNBC interview about 8, 10 months ago, he openly said that the worldwide cybersecurity will be totally broken by quantum computers if we don't act immediately. So the trillion question most people ask me is when exactly Q-Day will hit the world. So really, there's no definitive answer to that question. But there are lots of writings of the world that you can reference to. First of all, the founder of the NVIDIA and the Ethereum are all calling for a 2029 Q-Day possibility. And this is also dovetailed by the announcement from IBM that they expect to have a full fraud tolerant quantum computer released by 2029. And the latest and greater was that Microsoft last week also announced the Majorana 2 quantum chip and calling for 2029, a commercial availability. So I don't think it is a coincidence that 2029 seems to be the latest consensus of Q-Day, which is really only 2.5 years away. But the most concerning fact to me is that all these things, all these writings on the wall are only from the open world, and there are some close worlds such as Russia and China whose vendor never published their road maps. So my biggest worry is kind of like a DeepSeek-like event that the -- in the quantum world that a day, a company you never heard of the name, suddenly announced a quantum computer beating everyone. So if you're not prepared by that date, you're toasted. So the bottom line is that you have to act now before it's too late because the difference between being Q-Day ready 2 years too early versus 2 years or 1 day too late is everything. So unlike most of our competitors, here is our business model. We don't try to license our technology to others to do the PQC conversion journey. We simply give it away for free. So how do we make money is that we are leveraging our deep experience in building solutions in order to help our customers -- customers/partners doing the works. So this kind of the business model seems to be at least successful for us because they basically are saying that we don't want to handle PQC conversion. They want to give us their quantum vulnerable product and asking us to spit out on the other side a quantum-safe version. So this business model, as I said, has proven early success, at least for us, that we have created three PQC-compliant products and use of product that people can pay and use. This is like namely the e-mail, digital currencies and remote access. So the two of the three are really products of our partners. Well, the first one, I think I have talked about it in brief in during the AGM, only 1.5 months ago. The first one was with Hitachi head office in Japan. So earlier this year -- early last year, they asked us to help them converting their remote access offering to become quantum-safe. So we spent about, I would say, 7 or 8 months going through a very tough software engineering process, successfully completed the task and a joint press release has been issued about this earlier this year. And the remote access is very simple. It's very susceptible to HNDL 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 a quantum computer powerful enough to do the dirty works. So being quantum-safe gives Hitachi a huge edge against their competitors, and they are now actively selling and marketing this product in Japan to their customers. Hitachi is selling a server version at a starting price of USD 6,000 and a SaaS version, the subscription monthly subscription base for about $15 per month. So we receive a onetime development fee plus ongoing royalty revenue sharing with them. So this means we don't need to spend a dime in sales and marketing. We just sit back and support them as their SME subject matter experts and collecting royalty, a risk-free business. Now the second application that we have created was to help a crypto foundation called qLABS Foundation. We have started working on the crypto POC, Proof Of Concept more than 3 years ago, now maybe 3.5 years ago or more. Because we believe cryptocurrency is the lowest hanging fruit for quantum attack because of the heavy financial incentive as well as the totally open nature of the cryptocurrencies technology. So essentially, crypto is a perfect storm for HNDL attack because hackers can easily obtain the public key of any crypto wallet anytime they want, including the original Satoshi, the wallets. So 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 asks us to -- similar to Hitachi, they asked us to create for them a special token called qONE to be used as a quantum guest fee for crypto users to pay to quantum lock and quantum unlock their Layer-1 assets such as Hyperliquid, Ethereum, Solana, et cetera, against Q-Day threat. So the market size, needless to say, is huge as the whole $4 trillion worth of digital asset market must be protected against Q-Day threat. So similar to Hitachi we are receiving a onetime development fee plus $22.5 million of the qONE token as the compensation. So as a simple math, it's like for every $1 worth of qONE token value, it represents $22.5 million to us in value. So again, we don't need to spend sales and marketing dollars. This is all on our partners. And we just sit back basically being their SME, Subject Matter Expert, support them similar to how we support Hitachi. And collect royalty and which is another risk-free business from here on. Now the third one is our own product, which is the world's first truly quantum-safe, end-to-end e-mail security product, we call IronCAP X and soon, we will call it [ Xmail ]. It complies with NIST FIPS 203 and 204 encryption and digital signature standard. With quantum-safe digital signature, you can imagine that it really guarantees the authenticity of the senders. Therefore, it is actually effectively plugging 91% source of ransomware attack, which comes from a simple phishing e-mail. So it's end-to-end encryption also guarantee privacy, which is a big blind spot, which I call in the usage of e-mail since day 1, especially for the highly confidential professional industries such as financial, legal, accountant, et cetera. The most importantly, we made it operating as a plug-in of Office Outlook, which means its mainstream ready because Outlook -- specifically Office Outlook is the de facto standard for corporate e-mail. So the market size, you can imagine, is huge because they are very open information, there are 730 million business e-mail addresses in the world. So if only 10% are serious and wanting some sort of quantum safety and paying $3 a month. By the way, our [ MSL ] is $10 a month. So if they are paying just a channel fee of $3 a month, it is already a potential $2.6 billion annual recurring revenue potential of brand that we are kind of like tapping into, right? So besides the current three quantum-safe revenue generators that we have created we don't stop here, right? This is what we've done in the last few years and reaching the point where we are beginning to write the revenue from the sales and marketing activities of our partners. But we don't stop here. Our immediate future is in the quantum-safe AI space, which is a crossover between AI and quantum safety, which we actually have started the R&D about 1.5 years ago. And this is something that we are contemplating, which we believe is even bigger than the combination of all three we mentioned. This is for this year and next year. And our unique invention that is -- I keep saying, is a crossover between AI and quantum safety. If there's one single obstacle about AI that is preventing it from achieving the maximum potential is privacy. Every people know. So some organizations such as a bank, they don't even allow the staff to use AI to ask questions and things like that because AI operations today are totally performed in unencrypted fashion. So privacy applies not only to the user data breaching, but also compliant the national security and even the AI model, the IP value themselves, right? So during most of 2024 and 2025 last year, we have invested heavily creating our -- we call it QAW, Quantum AI Wrapper technology and this is using fully home encryption technology to encrypt both the user data and AI model before performing AI inference. So it's kind of like magical that the -- what really happened is that the AI model really doesn't understand what the question is, but they can provide the answer, the encrypted answer that only the user has the private key can decrypt the answer. So it's totally end-to-end privacy preserved AI operations. So together with quantum-safe communication, we have essentially protected the privacy of both the user data and AI model, IP value, while at the same time, operating everything in a quantum safe fashion. This is very exciting, and we have -- it is very exciting that only about, I would say, 3 weeks ago, we have received a U.S. patent allowance of the patents we filed about a year ago. Needless to say, the total addressable market is huge, is basically growing from virtually 0 to $ 5.4 billion in the 2032. And the subset of fully homomorphic encryption alone has a size of $850 million by 2028, while the subsegment of finance government, health care alone has a size of $650 million. So it's a huge market that we are tapping into just the tip of the iceberg. Our value proposition is very simple, very straightforward. It is to protect the user data and IP of the AI model. So user data protection allows compliance and national security-related users to take full advantage of public AI without worrying about privacy. This also opens for dedicated and on-premise deployment businesses. And finally, we will create an Amazon or eBay-like AI marketplace where we allow AI model vendors to list their model for users to search and use in -- like a total quantum safe platform. We simply share similar to, again, eBay and Amazon concept, we simply share 15% to 25% of the usage revenue, that's our plan. And this value proposition also allows us to open to federal funding and procurement opportunities. Market channels are the like of demand generation events, such as the TMLS, Toronto Machine Learning Summit next week, whereby we are a major sponsor alongside with the likes of IBM, et cetera, and we will be conducting a live demo of our QAW, Quantum AI Wrapper Technologies at the event. And sales and channel -- sales channel will typically be direct channels, the indirect channels, government procurement, the channel partners, et cetera. So our timeline target is we're reaching every milestone so far. It's calling for Q1. The first quarter 2026 for the optimized FHE, which we reached already and ready for demo to various potential customers. We have also reached the second milestone of private AI and then we will be followed by a hybrid FHE by Q1 of next year. Then the AI marketplace will be there in Q2 next year and the AI marketplace for optimized FHE by Q3 culminated with AI marketplace for premium and hybrid FHE before the end of next year. Now all of the above are basically reflecting in our Q2 results with a little less than $700,000 of engineering revenue which is up more than 560% from last year. This is very encouraging. And despite ramping up our marketing, IR and R&D expenses, we still spent less than $200,000 in the quarter ended up with a cash position of almost $3 million and increased by more than $2 million from last year. And we expect income generation from sales and marketing activities of our partners and which we talk about. And our partners are the like of Hitachi, PwC, Thales, CGI, plus the new potential in the area of AI. So I would like to take a quick pause here reserving time for Q&A. So please like mentioned by Brian earlier, I'm sure that by the time everyone will be very familiar with the Q&A feature of Zoom. So I would hand over to Brian who will moderate the question and I would answer them one by one. Over to you, Brian.

Okay. Thank you, Andrew. Several came in, and please keep them coming. The first one, Andrew, has to do with what we said in our Q2 press release, you say you added people to your senior executive team. Can you elaborate on their background and what you expect from them?

Yes, sure. Well, what we expect from them is very simple. We expect revenue. So we have added a very good SWAT team of senior executive headed by Tyson Macaulay, who is wearing to two hats. He is a Board member for many years. And then recently, we named him as our COO, Chief Operating Officer, so Tyson has more than 20 years in the cybersecurity space. He is basically the dictionary in the cybersecurity space worldwide. Everyone knows him in the cybersecurity space. And he is managing a SWAT team of three individual senior executive. One has 20 -- more than 25 years experience in the Canadian finance market. And the other one also has similar 25 years plus experience in the Canadian federal and provincial level of procurement and the federal funding sectors. And then the third one is having more than 10 years' experience to cover the remaining of the private sector. Don't forget about me. I am also handling the Asian market, Japan, and Asia, mostly related to all the PQC-related business. So yes, we got some very good things happening. Obviously, all these things takes time to complete, but we are well in the process. So yes.

And the second question, I'll handle this, Andrew, the comment is you received 22.5 million tokens, qONE tokens. And they've asked, can you elaborate on the accounting treatment? Yes, it can be a bit confusing. We follow IFRS in Canada, which can be different to U.S. GAAP for U.S. reporting companies, okay? For us, we received, yes, 22.5 million tokens and that was part of the founders' round. These are in addition to the cash we received for development fees and ongoing royalties going forward. So from our perspective, we look at them as a bonus with the potential with the launch of the qVAULT, which Andrew has talked about coming up next week, we see that we've got a potential large gain, okay? And now with respect to accounting treatment, we're required to value them on our balance sheet as a long-term asset, which we've done, and that's at the fair value on the day received. And the best value for this date was February 7, by the way, was the value for the final financing round, which was $0.01 per token. Remember, that's at a preliminary time. The corresponding amount is treated as revenue, which we've done. And when we sell any of these tokens, we will recognize them as a gain in the income statement. So we feel, overall, there's lots of room for potential here. Okay. Now more questions have just come in. The other one is, I guess with Hitachi. Andrew, can you elaborate on your meetings with Hitachi? How are they progressing with their marketing plan?

Yes, absolutely. This is a good question. As I mentioned earlier that the product has been completed. And the joint press release has been released about, I would say, 5 months ago, a little less than 5 months ago. And they are actively marketing the remote access product called DoMobile in Japan to their customers. And their customers are the like of the university, banks and government agencies and things like that. So being, as I said, being the first quantum-safe remote access is really giving them a huge leg over the competitors. So yes, again, we are we completed the job. We got the money paid and everything, and we just now sit back and enjoy the royalty payment whereby we are the support. They are spending sales and marketing dollars doing that. We sit back and support them enjoying the royalty payment ongoing. So yes, I'm very comfortable with that. We are on a very, very closely communications. Yes, a lot of things are happening.

Next one is AI. And the comment is this is a huge market. How close are you to a demonstrable product for the pilot projects you've been talking about? And which ones do you expect to come first?

Yes. I think this is kind of like dovetailing into what I talked about 10 minutes ago, we -- how close are we -- first of all, we are there already, as close as 0 distance. Next week, on the 16th of 18th is one of the largest AI event in the world called the TMLS, Toronto Machine Learning Summit, hosting in the Toronto at the CIBC building in Lower Bay. And we are one of the major sponsors alongside with the likes of IBM and other people. And we -- this event is basically almost like kicklaunching/demonstration of our QAW technology. So a short answer is it's demonstratable already, and it is going to be demonstrated next week at the TMLS event and we are very excited about that.

The next one, you announced a large system integrator announcement yesterday. Can you tell us why they're not named in the press release? And what is the marketing plan going forward?

I think the first part is an easy answer. As many as they are a large system integrator. So which means there's a vast difference in the company's size between us and them that material to us may not be material to them. So they likely do not want to mention the name because of that, although their sales and marketing people really want as much exposure as possible but the lawyers doesn't want to do that. We just understandable from me, understandable to me. And so in terms of the sales and marketing, we are conducting a joint social media campaign. So yes, wait, stay tuned to that. There will be a very visible joint social media campaign between us and them in the immediate happening into the next few months. So yes, we are very excited about that.

Good. And the last question has to do with qVAULT. When is it coming? And by that, I think they mean launch is June 16, but what does that mean? And what are your expectations?

Yes. I think I'd like to start from what I kind of like continue about what I have said about the qONE token. The qONE token was created for qLABS Foundation as the currency to pay for quantum guest fee when their customers are performing quantum locking and quantum unlocking of the token, whether the token is Hyperliquid and Ethereum and things like that. So the lock and unlock is called the qVAULT product. So essentially, it is like a quantum state vault boat that we are -- we have created for them alongside with the qONE token. So the token is the currency to pay for the action and the product itself is qVAULT. And again, as I said, we are the technology provider. And our partners are responsible for all the sales and marketing. So I cannot steal their thunder about exactly what they're doing, but I know that they are doing a lot of sales and marketing, planning and the product launching will be very close. So you can look for their press release and our press release very, very soon. And then the -- once it's ready, that product is basically the driving force for the Q1 token value because anyone who are afraid of the quantum threat for the token would like to lock the token to prevent from quantum hacking and then unlock when they want to sell. So whenever they do a lock and unlock they have to pay some fees in the currency of qONE, and that would drive the qONE value. So yes, I'm very excited about that project. Again, as I mentioned, the project is technically completed, and we are now sitting back similar to Hitachi that we are supporting them as the SME subject matter expert and they are doing all the sales and marketing to -- of promotion. So yes, I think that's kind of like a long winded answer to your question.

That about wraps it up. I've tried to group -- we have a number of questions, so I tried to group them into categories here, so we're not getting redundant. I hope we've answered all your questions. If not, and if you got more, Andrew or myself are available. Our e-mails, you can use Investor Relations or call us directly. And with that, I'll turn it back to Andrew for closing comments.

Thank you, again, Brian. So in closing, I would say that timing is everything. The quantum market is exactly like AI 3 years ago with a large total addressable market. And our goal or my goal is to have 01 becoming, and coming out as the unicorn in this PQC market, and we are very well positioned to achieve this goal. So thank you again for attending our conference and see you soon in our next meeting.