Mobilicom Limited ($MOB)

Good afternoon, everyone. My name is Chris Donovan, Mobilicom's Head of Investor Relations. Welcome to Mobilicom's First Quarter 2026 Earnings Results Conference Call. Joining me today are Oren Elkayam, Mobilicom's Founder and Chief Executive Officer; and Liad Gelfer, the company's Director of Finance. Earlier today, Mobilicom issued a press release announcing its financial results and business highlights for the 3 months ended March 31, 2026. A copy of the release is available on the Investor Relations section of the company's website. Before we begin, I'd like to remind everyone that certain statements made during this conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements are based on management's current expectations, beliefs and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. For a more detailed description of these risks and uncertainties, please refer to Mobilicom Account's filings with the U.S. Securities and Exchange Commission, including the Risk Factors section of the company's most recent annual report on Form 20-F and the subsequent reports furnished on Form 6-K. All forward-looking statements speak only as of the date of today's call, and Mobilicom undertakes no obligation to publicly update or revise any forward-looking statements. except as required by applicable law. Following management's prepared remarks, we will open the call for analyst questions. As for the agenda today, it will be a brief introduction to Mobilicom for those joining the story for the first time. Our 2026 outlook and progress we've made against it in Q1, an update on programs of record, including progress under the new U.S. Army [ Lasso ] program and our new -- our 2 new U.S. Tier 1 design wins. Cybersecurity regulatory momentum side as well as Q1 2026 financial highlights and our equity and cash position. An update on our Q1 operational achievements will follow. [Operator Instructions] This webinar is being recorded and will be available for replay on ir.mobilicom.com. With that, I would like to turn the call over to Oren Elkayam, Founder and Chief Executive Officer of Mobilicom. Oren, please go ahead.

Thank you, Chris, and good afternoon, everybody, and I would like to thank you for joining us on this call. For those joining us for the first time, the next few slides will be enabled me to introduce and provide a concise overview of Mobilicom, if you would like a longer version, they are available on our investor website, obviously, and we will present briefly who we are, what we do and how the company strategically evolved to address a rapidly growing market and the cybersecurity opportunities around autonomous platform and unmanned systems. So let's let me introduce Mobilicom at a glance. So Mobilicom offer essential IP-based, high-value cybersecurity, software and hardware solutions. Those are subsystems within the drones robotics both and used by drones, robotics manufacturers to build their platforms. Those proprietary solutions are the one that power, connect, secure and safeguard transrobotics. We can say that those are the heart and soul of the drones and robots. Mobilicom is actually at the convergence of 3 major trends. One is the drones second is cybersecurity and third is robotics autonomy, which positioned the company extremely well in the current evolution that we see in the defense as well as in the commercial market. If we would like to describe a little bit more about Mobilicoms offering and our visionary approach, we can see that Mobilicom has two core divisions. One is hardware solution. Those are hardened, resilient communication and data link system designed to operate in contested environment. And the second is cybersecurity and software solutions. Those focused on electronic [ operexistance, ] cybersecurity protection for the drone platforms and robotics. We can also see that Mobilicom hardware, which is hardening hold significant key U.S. defense and regulatory validation, including the BlueUAS framework select. We have the trusted cyber certification, the NDAA validation, the DD-494, equipment frequency allocation approval. And during this quarter, Mobilicom was also included in the SEC new trusted drone list. Collectively, all of those certifications and approvals, strengthened mobility composition with the U.S. Department of market for drones and autonomous systems. And being part of the supply chain for America and may help streamline the qualification and procurement process for OEMs and defense program seeking trusted compliant drone technology for American solutions. Our business model is very clear for those to let's say, department or offering. On the hardware, we established a customer relationship through the hardware solution that you see on the left side, the families of the battening the mesh networking, the ground control station, which enable them the basic operational capabilities of drones or robotics and those are generating about 50% to 60% gross margin for the -- for our business. Which is very steep and high, and it's based on the IT and knowledge and know-how that we have embedded inside those products. Then we have the expansion into higher-value cybersecurity and software solution that can generate higher gross margin, which is close to 90% with limited direct competition as we see today. And that gives Mobilicom evolution into a very lucrative licensing per unit business model. Since we're already a hardware supplier for the drone manufacturers and the platforms, we can incorporate the cybersecurity and software solutions more efficiently without restarting a lengthy process with the platform and qualification or procurement with the same vendors we supply them the hardware, which makes our cross-sell opportunity easier and market expansion faster getting into scalability in our business. I would like to, with this slide, remind everybody what we previously discussed on our 2025 annual earnings update. What we expect in 2026, going to be a year of growth for the U.S. drone system. And we believe we are extremely well positioned as one of the supply chain leaders for components for small-sized drones and [indiscernible] providers. In this slide, is our forward-looking framework for 2026. The following slide will show how we progressed on the plan that we set for this year. So let me go -- let me look -- walk through the progress we have made against the 2026 outlook in Q1. On the hardware side, which is describing the Tier 1 customer pipeline. This is in addition to second and third tier customers. So we advise that on design win and R&D stages, our 2026 goal was 3 to 4 Tier 1 partners at this stage. As for now, we have met the goal for the year with the 4 players including the 2 leading U.S. Tier 1 is drone platform for a cybersecure type and I electronic wafer software in the period, which we announced recently. In the initial production, the goal for the year was to be in 3 to 4 players -- Tier 1 players and customers in this phase. As for now, we have 3, all originating from the 2025 continuing with us. This continue to generate initial follow-on orders still within the low rate initial production scale to support ongoing commercialization activity, demos and initial deployment with both existing and prospective customers. On the ramp-up stage, which is -- the goal was for the year. We are with one currently -- our existing ramp-up customer is accelerating into mass production under the OPS L program of record deploying for the U.S. Department of State. So the total Tier 1 customer, we have right now 8 so far against the goal of 8 to 10 with the year still in front of us, and we believe that we will continue to grow on that. On the software and cybersecurity side, the AI autonomy and OEM ecosystem -- the 2026 goal is for 4 to 6 OEM partners across NVIDIA and Qualcomm plus 2 AI autonomy software partners. The status is ongoing progress. We are continuing our engagement with the NVIDIA ecosystem and the partners that we have there for the hardware and the software that we published in 2025. And we are constantly working with a Qualcomm-based solution on the AI edge platforms and working with multiple engagements to fulfill the goal for the year. Let's discuss some of the operational progress and financial progress. So on the operational side, production capacity. The status is ongoing progress as we planned. Our strategic long lead item inventory is building up continuously and component pre-buying has been expanded above the initial plan as we see stronger-than-expected demand signals from our Tier 1 customers. The U.S. manufacturing or statuses ongoing progress as contract manufacturers are in selection process in the United States with an on-site visit and final terms underway. I will come back to this in more details in later in the call in a dedicated slide. From the program of record expansion, the status is confirmed as -- this is the headline of the quarter. We received a $2.2 million purchase order in Q1 under the initial OPL plan, PFL program of record. And under -- and there is an additional -- which is part of the ramp-up that we are experiencing. And separately, our Tier 1 customer in the United States has progressed under the additional program of record, which is the U.S. Army Lasso program, which we'll cover both in the next slides. I would like to dedicate the slides on an update on the meaningful progress that was done and ongoing, progressing with the programs of record. Let's spend a moment on the program of record picture. -- because this is where the fundamental story of our U.S. defense business side. First, during Q1, our Tier 1 customer has progressed under the U.S. Army last program, which is low altitude, striking and strike ordinance. This is a program of record of the army. The progress was -- this is an initial deployment phase to equip inventory breakcade combat teams with man portable precision strike capability. What does it mean for ably ask. So our cybersecurity data link and electronic for software solutions are embedded with this customer platform. The last of progress, therefore, Borden the U.S. defense footprint of platforms in which Mobilicom Technology is embedded and could be deployed in masses. And add a new U.S. service branch, the U.S. Army to customer base previously anchored by the Marine Corp. While we are thrilled by this inclusion, however, Lasso is currently in initial deployment phase and we have no Mobilicom orders associated with this program to date. We anticipate that, that will change, but this is part of the progress that we see over those programs. What the last of progress does tell us and the investors is that something powerful structural, the program of record winners tend to win additional programs of art. That is what we said in the past and that we are rising that is happening today. That is the compounding dynamic of U.S. defense procurement and is now visible visibly playing out for the platform for which we are embedded in. And now on to the fundamental program, the U.S. Marine Corps or PSL. Already, we have close to thousands of systems already fielded in the recent years for testing evaluation and use, the production for mass deployment start has commenced in January and the production is ramping up. All of Mobilicom recent U.S. Tier 1 orders are related to this program including the $2.2 million additional order we received in Q1. This program has a continued multiyear delivery cadence ahead of it. Usually, problems of airport are at least for 5 years. Most are extended for 10 years. And then there is additional procurement for spare parts, maintenance, training and so on. So you understand the volume and the value of such program for a company like Mobilicom. I would like to take a step back from the individual programs in these slides and provide you with a full picture of our position in the U.S. defense drones ecosystem, which does essential if you compare Mobilicom to competition, newcomers and other players in this market. So currently, we have 5 very important regulatory or compliance certification. Starting with the BlueUAS framework Select. Select means that they selected us and did the entire process by the Department of Innovation for the Department of for. The NDA certification, which was validated by DOW testers and evaluators. It's not self-preparation. It was a thorough process for software and hardware. We have the trusted cyber testing that we have done under the [indiscernible] the DD4994, and excuse me, for the numerical description, this is electromagnetic registration within the department of word map which is essential if you would like to catalog and include system from us deployment within the U.S. forces and the new FCC trusted drone designation which defines Mobilicom as a critical provider for the U.S. drones, and that's really important. I would like to say that products not on this list cannot participate in future U.S. federal problem. That's why it's a structural moat. Obviously, the programs of record deployment and the success today with those programs shows how those are positioned regulatory-wise and being embedded across the Department of certification and regulation is translated into business, and we intend to continue with that and expand that. The operational channels footprint with the U.S. Our U.S. production capacity is being expanded. The dual U.S. Israel operation supporting us in our development, combat-proven evaluation and then bringing solution to market, established U.S. Department of our DLA partnership and sales channels are critical factors on the different recent shows seen us with those partners, which are critical partners getting into the U.S. procurement for the Department of 4, which together give us flexibility to deliver into both allied government and commercial drones market later on. Let's take a moment to discuss the recent announcement from, I think, a week ago from one of the shows where we announced the 2 new design wins with Tier 1 platform. This slide discuss one of the most important commercial development since the annual call that we had evolved a few months ago. We announced new design wins with 2 leading U.S. Tier 1 defense drone manufacturer platforms for ISR, which means intelligence, surveillance and [indiscernible] drone platforms. So the first design win is with a well-known American drone manufacturer for Group 1, which is handheld size, ISR intelligent surveillance drone platform supporting military application that already own and have deployments with the United States and scaling dramatically. Mobilicom, Skype Datalink and the i-Serve security software suite are being integrated to extend operational range, improve resiliency in contested environment and provide advanced electronic warfare resistance in secure communication capabilities beyond the platform current configuration. Integration activity has been progressing over the past several months, and we currently anticipate to complete the integration process during the next quarter that will allow the customer to progress and catalog and use our solution and start selling them to obviously, Department of Foreign and other customers worldwide. The second Tier 1 design win, which is a major U.S. defense and commercial aerospace conglomerate. This is for a group 2, slightly bigger backpack size, ISR drone, intelligence of related drone platform designed for long-range mission longer payload capacity. Mobilicom developed a tailored sky pre-configuration specifically for this platform with the customer. including customized interfaces, mission-specific integration requirements and so forth. The combined sky offer and the electronic offer resistance solution is expected to enhance operational range, strength, resiliency and electronic or existing capability and support more advanced operational scenarios for the customers' platform beyond what they have today. The integration and testing activity for the second design win are progressing very well. We anticipate to complete the validation process over the coming months or 2, enabling the customer to begin offering the enhanced platform to the end users. So importantly, those 2 design wins represent 2 more seats at the U.S. Tier 1 table for Mobilicom, with both OEMs selecting Mobilicom, cybersecure type data link and ice electronic warfare software protection solutions. This reinforced the exact trajectory we said we were on expanding presence across the trusted U.S. defense 1 platform as ISR and autonomous or loitering munition solution. and increasing military grade cybersecurity communication I think it's, again, a good opportunity to discuss the cyber security, regulatory momentum and what it means for Mobilicom. On the cybersecurity side, we are seeing an urgent need to meet cybersecurity regulations. But I would like to mention that Mobilicom strategy was not developed in response to current market trends. Mobilicom began investing in drones and autonomous systems cybersecurities years ago. based on the belief that cybersecurity would eventually become a core requirement for scalable autonomous operation. The challenge was developing cybersecurity solutions specifically designed for small-sized drones or robots platform, where the size the power consumption, the marine, the computing resources are highly constrained. Mobilicom developed a lightweight embedded cybersecurity solution optimized for this tactical edge environment while also working alongside with U.S. defense abidation initiatives. Today, we are seeing the market evolve in the direction we anticipated. The U.S. defense cyber security frameworks that were published. Including the CNS standard, the Cyberseability endorsement standard. The CRMC initiative, the new one that was released in November last year and the broader agenda by the Department of Work called the Zero Trust strategy or increasing cyber security requirements across the drone and autonomous platform programs. The industry is moving beyond the basic onetime static cyber test that they had in the past towards an active always-on online cybersecurity protection embedded directly on the autonomy AI edge computing of those platforms. This is aligned with -- closely with Mobilicom, OS-free cybersecurity software and the secure autonomy farmer Computec released, which were specifically designed for this new generation of requirements. Cybersecurity is becoming increasingly integrated into program of effort and future large-scale drone deployments, we believe Mobilicom is well positioned as an early provider of purposely built cybersecurity solution for autonomous systems and specifically for small size, [indiscernible] drones and autonomous systems. Over time, this also creates a highly attractive recurring software licensing per unit opportunity for Mobilicom, tied to deployed drone and robotics plans. So now I would like to hand the call to Liad to walk through the Q1 2026 financial highlights as well as our equity and cash position.

Thank you, Oren. So 3 months ended March 31, 2026. The single number that trend in the quarter is the $2.4 million in revenue visibility. Revenue visibility is what we cover recognized revenues, those constrained backlog at quarter end. It was up 50% year-over-year. That is the metric that best captures but actually attend in Q1. Let me unpack the numbers behind it, okay? Revenue, we reported Q1 revenue of 548,000 against the 44,000 in Q1 2020. This difference is entirely driven by delivery timing rather than just market demand. Specifically, certain Q1 shipments deferred into later quarters, okay, due to temporary procurement schedules as the customer transition to scale program of precede production. The underlying demand remains intact. The revenue has simply shifted out in time. Order backlog was $1.8 million at merger against 737,000 at the same point a year ago. up approximately 11% above the same point last year. Backlog more than doubled while reported revenue is temporary dip. Post quarter momentum since March 31, there book has continued to grow with additional orders from our U.S. run customer under the OPF program, plus follow-on orders from other global customers, all of them to be delivered during 2026. And as Oren just covered 2 additional U.S. Tier 1 design wins. Cash position, $70.7 million or March 31. As we mentioned previously, 0 debt, 0 credit facility, 0 convertible, clean balance sheet. During the quarter, we also terminated our aid at the market facility delivery decision made from a position of strength because we did not need it. The decision reflects the discipline we want to demonstrate to investors -- we will only raise capital when it creates more value than it did us. Operating cash burn approximately $528,000 per month, the increase is funding operation readiness and growth initiatives. The investment is targeted in key areas, each ties directly to revenue we expect to recognize during the next 12 to 18 months. First 1 is solution integration work for the new U.S. Tier 1 manufacturers were designing into like these 2 new design is we published recently. Second one, proactive long leg item inventory build for production scale deliveries, including for those under the OPF program of record and other orders to come. And deferred and the last one, our U.S. manufacturing strategy. and U.S. team expansion. $707 million in cash combined with disciplined execution provides runway towards positive cash flow as the order momentum continue to be it. About our equity and cash position. This slide consolidated our equity structure and cash position as of March 31, 2026. On the capital structure, ordinary shares outstanding were $12.6 million as of March 31, 2026. Warrant outstanding are $2.6 million, the majority is struck at $5, which representing another additional $12.9 million of additional capital is exercised. Fully diluted share was $15.2 million, excluding employee is on rebrands and $17.8 million, including all dilutive components. One thing to say compared to 2025 while the total fully diluted share did not change. We did see exercise of warrants in about 1.2 million, meaning it's continued with this opportunity for additional future was exercise as the share will continue to increase. About the balance sheet and cash management metrics, this has been covered and discussed in the previous slide, so I will not return on that. And now back to Oren.

Thank you, Liad. This slide is has 6 styles of snapshot and recap of execution across customers, technology and partnership in Q1, most of which we have already covered, but I would like to briefly touch on 2 additional points. The international expansion. During the quarter, we announced a design win with [ AssePacific ] customer, a UAE-based defense manufacturer with initial orders and an Israeli customer for India deployment with an initial order as well. The hardware first foot in the door playbook -- we're replicating across the regions. And we see those expansion important for future growth of the company beyond United States, which is our focus today. We also launched 2 new products during the quarter. So we continue with innovation with maintaining the gap and answering the needs of the customers we are serving in America in Europe. The first carport tactical, which is a wearable software-defined communication solution, purposely built in response to direct operational requirements from defense customers and design for dismounted team operation in contested environment. And that was a requirement that came from the early deployment into programs of airport with the department or in the United States. And per those requirements that came in the second half of 2025, new product was initiated. Development was done and product was released in a very short time and it will arrive to the hands of the soldier that will use that very soon. The scope multiband, our next-generation communication platform featuring software-defined band selection solution, which is twice the widest available solution in the market until that product was released. So we are doubling the capacity of the frequencies and operational scenario from any other solution for this market, and that's unique, especially given that software that electromagnetic. Joining interception and operation is the biggest issues today that we see in Ukraine, the Middle East and American operation abroad, and therefore, expanding or doubling on that give better opportunity and performance to carry on the mission in any operational scenario. I would like to -- overall, I would like to summarize our presentation to date. Overall, we believe that Mobilicom is entering an important transition period is Tier 1 defense programs advanced from development to validation into broader production and deployment phases. Our investment thesis is centered on 3 core drivers: First, Demand is building faster than current delivery timing. Backlog increased approximately 150% year-over-year. Revenues and visibility increased 50% and Mobilicom additional few millions of dollars order for program of aircore for deployment in the United States in -- as a follow-on to a $1.5 million order in late 2025. Second, we believe Mobilicom, strategic mode continues to widen through expanding programs of record exposure with the SEC trusted drone designation, the growing Tier 1 customer relationship and increasing cybersecurity requirements tied to the initiatives across autonomous defense systems. And third, the company is investing from the position of financial strength. Ending the quarter with almost $80 million cash in hand, 0 debt, no ATM facility while continuing to invest in inventory to supply customer demand and being production readiness, including U.S. manufacturing footprint and service security solutions that support future production scalability opportunities and higher-margin recurring software revenue. I think that this is the time to thank the leaders and employees around the world of Mobilicom for the tremendous effort this quarter, the execution, the dedication behind those results are all things within I also want to extend a specific thing to our co-founder, [ Yosi Segal, ] probably the smartest person I know -- he's continued innovation, technology leadership, which remains central to Mobilicom depreciation for the long-term vision. Thanks to our entire team, we believe that Mobilicom's positioned at the right place at the right time with property involving defense and autonomous system market with significant opportunity ahead to scale and grow production programs ramp up, Tier 1 opportunity expansion and demand for trusted cybersecure drone and autonomous solutions acceleration. On behalf of the entire mobile comp, thank you for the continued support. Chris, I think that this is the time to move to the Q&A.

So with that, I will open the line to Barry Sine with Litchfield Hills Research.

A couple of questions if you don't mind. First of all, congratulations. I mean, 2 major Tier 1 design wins, so we're off to the races there. I also really appreciated the update you gave us from last quarter's expected goals, and it looks like we're really meeting those goals. So that's a great update. So thank you for that. Question is on the new U.S. Tier 1 ISR design wins, could you just walk us through, typically, what is the path from a design win to the different milestones and when might investors expect to see significant revenue coming from those new design wins?

Thank you, Barry. So I would like to say, typically, what we usually have and specifically for those specific programs. So for typical Mobilicom cycle with customers and it's mainly dependent on the customers, Mobilicom, fast and agile. So typically, 6 to 12 months for integration and certification and then we move to initial production orders and then to ramp up. For the 2 new design wins customer evaluation and integration through 2026 is already in very progress stage. Therefore, we expect that they will translate from completion of all the validation testing in catalog into the sales catalog solutions within the third quarter, which allowed them initial orders in late 2026 and material contribution of those platforms move to scale production in 2027 onwards. Short answer initial revenue in 2026 and meaningful revenue in 2027..

And then presumably because these are programs of record or large Tier 1s, not just in 2027, but continuing on beyond that.

Yes. Both of those platforms are of very large known companies significant, significant Tier 1 players that already have substantial business, both in the United States with the Department of work, but also with allied countries. Therefore, they don't have to look for the business, the business exists. And the fact that they are a partner with Mobilicom, integrating Mobilicom, to close the gap on needs that they have that couldn't be met and answered with the current solution. Speaks volume about our opportunity and how fast they can scale that from validation and testing, which is completed right now into business creation, which is a...

Okay. And then my next question, you announced during the quarter, and you referenced this in the call about your recent -- most recent regulatory win, which is all of your products are in the FCC trusted drone program, and that is on top of multiple other compliance certifications. Can you walk us through what does that mean when you're going to a customer and competing for a design win? How does that impact customers' decisions, not just for U.S. Tier 1s but for other customers and internationally, presumably, if you're that -- if you're meeting the standards in the U.S., that should benefit you globally.

Yes, Stefan. So First, it was important that you mentioned, but I would like to note that again that our full suite is covered. The [indiscernible] the meeting, the ground control station the OSI cybersecurity phrotonomous platform, the iSelectronic offer software. All of them were defined in the papers and the publication made by the Department of and the public to the world under Mobilicom, is trusted and critical components for America for Jones or robotics. So that was amazing that they decided to include all of our offerings. Second, federal customers and their OEMs can use our components without any restriction or risk for government exclusion which means it signals to the market that Mobilicom is a critical technology provider for trusted drone, yet another validation for mobility composition by the government, which is the regulator. I would like to emphasize, it's creating a U.S. small ecosystem of vendors that meet the different criteria who will enjoy the market scalability. You cannot buy something which is not within the ecosystem that was approved, certified and regulated, which is, in a sense, a world garden opportunity for the players that are in this list and it's a very, very short list. In addition to that, I think that the CSRC and the CMMC standards and the 0 trust strategy on cybersecurity are becoming gating criteria for mass production. Competitors facing delays before -- I mean before they can ship to scale, and we do not. So we can anticipate that if customers would like to scale their production, and they have to meet the cybersecurity criteria they will not be allowed to do so without making those things -- and therefore, we are the solution for the scalability going forward. And with your question to the regulatory procurement decisions, -- we witnessed that bids and programs recently initiated required that the winners will need such regulation before they receive mass procurement orders. One example I can use is from the drone dominance initiative or a program, which is very famous recently. We're in the -- there are several of the 11 winners named several months ago did not receive eventually the commercial order and they didn't -- because they didn't meet those criteria. And that was a very powerful sign that it's great that you have technology and you pass the first holders of first phase, second phase. But before you are getting any commercial large quantity orders, most of the list of the 11 didn't receive that because they didn't make either those NDA requirements by validation and testing not by declaration, the cybersecurity requirements and other procurement registration that Mobilicom has, which then advise you the importance of what we have achieved for getting to the scalability with different programs in the United States going forward.

Okay. And 1 more question, if you don't mind, please. You've talked about 2 key programs of record. So the first one, and I think that's tied to some of the large orders you've announced recently is the United States Marine Corps OPFL program. The new one is the U.S. Army LASSO Lasso program. The U.S. Army is about 2.5x bigger than the Marine Corps. So I'm assuming that this is a much larger potential opportunity with this new program of record than even the 1 that you already have won with OPFL. Can you talk about that?

Yes. So any program of record is substantial for Mobilicom, beginning the fact that it's not a regular order. It's a long-term multiyear commitment of the government to buy preserve their capability, maintain, replace and so forth. So any program of [indiscernible] is a huge one. Yes, you've mentioned the fact that our partner progressed on the last program, which is not yet in the commercial stage, but it's getting there, and there is a few players over there. So the fact that our partner, the Tier 1 American platform maker that use our solutions or multiple of our products progress to the next phase is very important because once they win that, that can open a huge scalability opportunity, which is multiple times bigger than the PFL that we have today. So that's obvious. The Army is much, much bigger than the Marines, and that could accelerate significantly adoption, obviously. But what we said in the past is once you win the first one, your chances of winning the following ones are much bigger. And the fact that they move to the next phase, actually prove what we said and I would like to remind that these specific partners is not engaging on 1 program fair product to PFL. They are targeting 84 in the U.S. and 4 international. So you can imagine their importance for Mobilicom, if they will scale to 2, 3, 4 of the 8. And that's obviously a strategic partner that we are proving our commitment, joint work and acceleration with him as we speak.

Okay. Now we're going to take a question from Blair Carry, [indiscernible] Capital.

Oren and Liad, how are you guys?

Thank you for joining us.

I just have a couple of quick questions here. more relating to not necessarily U.S. operations. We've seen a dramatic depreciation or appreciation of the new Israeli shekel versus the U.S. dollar over the last even 6 months. I would say it's really accelerated over the last Q1 of this year. What is sort of the expense mix? And how are you guys thinking about hedging against your U.S. revenues and your Israel expenses. So it's a tough question, but important question to be asked, and so I would like to address it.

First, I would like to say that the fact that we have R&D and operation team and site in Israel is very important, given the fact that Israel is in the front of drones, robotics, autonomy and cybersecurity. Everybody clearly see the biggest cyber or drones companies coming from Israel. So being with foot on the ground with site over there, with R&D center over there with talent over there is extremely important from Mobilicom in addition to the fact that the combat-proven experience that we gain from our products being deployed over there. And the technology that we understand and develop with incorporation with the government over there either essential and priceless for Mobilicom, going forward, introducing that innovation into America and elsewhere. So that's important to understand Second, the recent year FX changes, and it's been, I think, in the last 12 months was significant, yes. It affects our new Israeli shekel, which is mainly labor costs for the team in Israel. Yet the production that we are doing in Israel is done under U.S. dollars, which means that it's not suffering or affected by the changes in the FX currency between U.S. dollars and Israeli shekels. And third point, I think, is that the ongoing team growth in United States, the operation in the United States alongside with the planned U.S. production capacity this year will decrease the effect of FX going forward. while contributing to our business opportunity growth in the United States. In the short term, we also implement different defensive methodology, FX currency and that's another angle that we took on that.

Okay. Thanks very much for that Oren. Helps me understand. And as I understand it right now, the current contract manufacturing is done both in Israel and Philippines. Is that correct?

Currently, the production is done in Philippines and Israel, where we are producing -- everything is done under the U.S. dollars. And then the new production capacity is built in the United States based on the Pentagon requirement and request and to increase our footprint in America and made it 10% American product. We are proud of finding ourselves with the department of our requirements and would like to win on the back of that additional business, obviously. I understand. Okay. So basically, over the course of the -- of this year as the production capacity expands in the U.S., we should expect less impact as a result of foreign exchange on the cost structure was what I'm hearing. Yes, definitely, the fact that we're increasing our team over here and operation of here and production over here will balance the effects of the and give us a more balanced strategy for Mobilicom, being an international company with different sites yes. Can you -- so can you give me an idea about what's going on with the sales cycle and compare between what you've experienced in the U.S. versus the rest of the world, in particular, APAC in the NATO region countries? So what we've seen in the U.S. is affecting, obviously, Europe and Israel and other sites, which are worldwide, which are leaders in the drone evolution. And most of them are targeting also the American Department of market. So we've seen that the fact that there is tremendous budgets being allocated by America to close the gap on the production scalability that was done by adversaries like Russia and elsewhere we run budgets and programs are being allocated and progressed rapidly. Therefore, we see momentum built in the market. And therefore, we see more of players building their capacity and needs and adjusting their solution to mass market and adjusting their solution to meet with the challenges that we see in the battlefield where we have experience and that accelerates the market momentum. Obviously, there is one end of the equation that's fueled the entire anticipation of ramp-up. On the other hand, it takes time for large programs of record to be seated or to be, let's say, deployed. But once they are deployed, the beauty behind those programs is that it will continue for long term. It's not 1 procurement process that I have to chase the other 1 is procurement processes that have multiyear, usually 5 to 10 years of constant deployment and delivery. And I would like to also mention that Mobilicom, specifically, our biggest success so far is in the larger in munition space, which is one-way ticket [indiscernible], what's one you use them even for training, you have to buy another one. Which makes the recurring revenue on the hardware let alone on the software. So we have a few things that are working well for us, although the recent wins were in a new fee in intelligence and surveillance steel. But our previous wins in integrations and design wins by multiple Tier 1 players are in the lowering. We are now expanding into ISR drones and other elements. So it's a time because the cycles in the states, it really depends on the company's. Some of the large, large companies we work with, obviously, are moving slower than Mobilicom, we are agile, very fast-moving company, usually are ahead of the curve. We are before termed, and we are waiting for them, which is obviously what you have to do when you're working with giants -- but once the giants are getting to mass market deployment, it's a great machine to ride to success, and this is what Mobilicom is doing.

And just to follow on that, how does that relate that cycle that you've described here today in the U.S. related to your efforts in Europe and in the APAC region. Are you winning deals faster? Are your partners winning deals faster because there's already a quasi certification from the Department of War or do you have to go through the same sort of procurement journey?

So I would like to use real data from real meetings from the last few weeks, okay? Let's not extrapolate that give you some information in. So in the last few weeks, Mobilicom was super busy across the globe. We've been in multiple conferences, exhibitions where we sponsored event had booth, lots of meetings with government procurement officers program officers as well as OEMs and manufacturers, which are eventually our target customers. And we've done it in Europe in multiple locations in the United States. In those locations, obviously, we met with a lot of American companies, which are some of them are partners right now or in partnership in progress, but a lot of other European or Israeli companies. The fact that we make with Mobilicom, and they want to replace their existing solution and add Mobilicom to their offering is to mainly shortcut reduce the risk that once they will win something in America, they will have to replace their elements inside to something that American can trust, which is Mobilicom, 1 of few players order. So it's opened the door for us for additional business with Israeli as well as European companies that now would like and operate the gate from Mobilicom for partnership and integration on the back of our success in America because if they want to win the American or not market, they have to use solutions that were certified and approved in America. Therefore, it accelerates or increased the opportunity for Mobilicom, with companies outside of America. This is what I see. And I can name you , it's not 1 or 2 or 3 customers. discussions were made and progress was made with multiple of those across the globe that we made in the recent weeks. There we said 2, 3 weeks.

I understand. Okay. That's somewhat helpful. And just quickly your OEMs, are they -- is it still mostly airborne drones that of interest? Or are you seeing -- are they seeing more interest in land and drones as well?

One of our biggest -- 1 of the big Tier 1s that we are having from the AT1s that we mentioned and discussed -- in Asia Pacific, huge conglomerate is all about ground robotics. So this is ground robotics. We've done some implementation with other Tier 1s in Israel, which is maritime that was deployed to India, I mean, actively deployed in India. So we've seen and already implemented in other applications, which are either maritime or our ground robotics from different kinds but majority of lorry emission or small-sized drones, Group 1, Group I, which stability-wise, and volume-wise, are the biggest and the lion's share of the market. I think you are.

All right. Thank you, [ Warren, ] and thank you for those questions. With the interest of time, we're going to cut the presentation here. We saw some other questions come in via Q&A. We'll make sure to respond to you separately. So that's going to conclude our session on behalf of Arena and the entire team, I want to thank you for joining us today and your continued interest in Mobilicom, a replay for this webinar along with this presentation and related materials will be available shortly on the IR side at ir.mobilicom.com. And along with the SEC filings, including our Form 20-F can be found at sec.gov. For any follow-up questions, feel pleased to be talk to me directly, [email protected]. Thank you very much for your time. Enjoy the rest of your day.