CSP Inc.

fourth quarter and fiscal year 2023 conference call. At this time all participants are on a listen-only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Michael Poliview, IR at EVC Group. Sir, the floor is yours.

Thank you, Alex. Hello, everyone, and thank you for joining us to review CSPI's fiscal 2023 full-year results, which ended September 30, 2023. With me on the call today is Victor DeLobo, CSPI's Chief Executive Officer, and Gary Levine, CSPI's Chief Financial Officer. After Victor and Gary conclude their opening remarks, we will then open the call for questions. Statements made by CSPI's management on today's call regarding the company's business that are not historical facts may be forward-looking statements as the term is identified in federal securities laws. The words may, will, expect, believe, anticipate, project, plan, intend, estimate, and continue, as well as similar expressions, are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results. The company cautions you that these statements reflect current expectations about the company's future performance or events in our subject. Several uncertainties, risks, and other influences, many of which are beyond the company's control, that may influence the accuracy of the statements and projections upon which the statements are based. Factors that may affect the company's results include, but are not limited, to the risks and uncertainties discussed in the risk factor section of the annual report on Form 10-K and the quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Forward-look at statements are based on the information available at the time those statements are made and management's good faith to lead as of the time with respect to future events. All forward-look at statements are qualified in their entirety by this cautionary statement and CSPI takes no obligation to publicly revise or update any forward-look at statements whether as a result of new information, future events, or otherwise, after the date thereof. With that, I'll turn it over to Victor DeLobo, Chief Executive Officer. Please go ahead.

Thanks, Michael, and good morning, everyone. Earlier this morning, we announced our fiscal 2023 four-year results, and I'm pleased to report we achieved revenue growth of 19% compared to fiscal 2020. I believe our strong performance is due to several factors, including the sustained contribution of the technology solution business, our ability to successfully convert a sizable portion of our backlog to revenue, and our proactive decision to leverage our strong balance sheet to finance large customer orders. Furthermore, we reported gross margin percentage of 34% and grew EPS well over 100% from prior year. All significant accomplishments that raises our confidence level that we can continue executing our strategy of transitioning the business to higher margin products and services. Moreover, we are continuing to experience positive momentum to kick off the 2020-2024 as we already achieved significant achievements in the technology solution in high performance product businesses. First, let me address the backlog issue. and then I will provide an overview of the TS business and then spend a few minutes highlighting some of our recent and exciting developments within the HPP business. As many of you already know, we entered fiscal 2023 with a level of uncertainty due to well-documented supply chain issues that impacted global economies. Specific to CSPI, the inability to receive key components from suppliers kept us from shipping orders to our new customers, raising our backlog to near record levels and dampening our revenue opportunities. However, as the supply chain issue began to ease up during the year, we started receiving some of these key components that were able to ship finished goods and reduce the backlog to a more normalized pre-pandemic level of approximately 7.6 million. I applaud the team's ability to remain engaged with the customers throughout this period. I believe our clients Loyalty demonstrates the value we bring to them because they recognize that the products and solutions are the most effective, cost-efficient answers to their critical needs. Our performance throughout the fiscal 2023 was driven by continued performance of our technology solution, or TS business, which grew compared to fiscal 2022. The success continues to be driven by our customers' increased use of implementation, installation, and training capabilities. Regarding the UCAS, it turned a corner in the second half of fiscal 2023, and it is now a profitable business. We believe we'll continue to see positive developments within the UCAS as we move forward through fiscal 2024. Now turning to our high-performance products and HPP business. We recorded total revenue of $6.9 million for the fiscal year compared to $3.8 million in fiscal 2022. The results were within our expectations. However, the level of optimism within the business is high and increasingly growing following the recent launch of AZT Protect. AZT's advancement allows us to offer our customers a giant leap forward in the evolution of cybersecurity solutions. AZT's performance surpasses what's available on the market today, and it's a new generation of endpoint application cybersecurity protection designed for both critical operational technology and IT environments. The unique patent solution protects a line of organizations' endpoints from a full spectrum of cyberattacks and intrusion techniques, including most advanced zero-day attacks, malware, ransomware, supply chain vulnerabilities, even those threats that are completely unknown to security teams. By deploying artificial intelligence capabilities, AZT halts attacks before damage occurs, ensuring seamless operations without disruption or downtimes. It lowers the risk code base of security vulnerabilities exploits on endpoints devices applications to near zero without the need of constant patching updates. Developed internally, we knew AZT was going to be a game changer for the HTTP business, so the team has significantly targeted several high profile conferences and seminars to raise awareness of AZT, including The 18th Annual API Cybersecurity Conference, which was held in Houston earlier this month for oil and natural gas industry. The Rockwell Automation Conference, which was also held last month in Boston, was the world's premier industrial automation and digital transformation event. The ICS Cybersecurity Conference, which was held in Atlanta in October, is the largest, longest-running event series focused on industrial cybersecurity. Since 2000, the conference has gathered ICS cybersecurity stakeholders across various industries and attracts operational and control engineers, IT, government, vendors, and academics. And then finally, the MANUSEC U.S. Summit, which was held in October in Chicago. MANUSEC is the premier conference for cybersecurity and manufacturing. addressing sectors' drives towards digital and automation and how imperative it is to balance it with security. We know this is a crowded field, so a visible on-site presence at these and other events was critical and allowed the team to engage and communicate with key influences and prospective clients, including Fortune 500 companies. The in-person feedback is quite positive. And the comment we often hear from them is, we see the need. for something like AZT. Subsequent to the end of fiscal 2023, we received orders from a Fortune 500 chemical manufacturing to protect its critical production application from all forms of attack, enabling production lines to continue running without disruption. We also received an order from a Western Intelligent Agency to protect its critical intelligence gathering and analysis operations from cybersecurity attacks. This new contract bills on ARIA cybersecurity, proven track record, and proven security solutions for military and intelligence agencies around the world. Additionally, we launched our AZT Protect solution in Australia via partnership with Logitech, a leading local managed security service provider. By adding AZT Protect to its portfolio, Logitech can offer a groundbreaking service protecting critical applications in operational technology and IT environments, such as manufacturing, mining, and government. To summarize, we gathered strong growth in our fiscal 2023 and positioned the company for even greater success in the coming years. Although the TS business has been the growth driver over the past few years, the emergence of AZT offering has changed the dynamics and gives us two businesses that can grow side by side and provide consistent growth with significant upside potential. With that, I will now ask Gary to provide a brief overview of the fiscal year's financial performance.

Thank you, Victor. For the fourth quarter ended September 30th, we reported revenue of $15.3 million compared to $16.7 million in the year-ago fiscal fourth quarter. We reported a significant revenue increase of 66% in last year's Q4, as we began to work down the record backlog, so the comparability represented a high bar. For Q4, growth profit was $5.2 million, or 33.8% respectively. We also lowered compared to the year-ago period. However, whereas the supply chain was responsible for some of the choppiness. We achieved significant annual growth in fiscal 2023 compared to fiscal 2022 as we reported revenue of $6.4 million, a 19% increase compared to 54.4 million in the fiscal year ago. As Victor mentioned, this performance is due to the continued success converting some of the older backlog, allowing us to deliver product to our customers. We reported gross profits of $21.9 million or 34% of sales compared to 18.8 million or 35% of sales in fiscal 2022. A slight decrease in gross margin compared to the year ago period was anticipated, and due to the business mix and the lower margin products that had been in backlog. We continue to believe our annual gross margin will expand as the business transitions to a higher margin product and services. For the fourth quarter, our engineering and development expense was $700,000, down $150,000 from the year-ago fiscal quarter, with a reduction in outside contractors and not filling some open positions. Our SG&A cost for the fourth quarter was $4.8 million, similar to last year. For the full fiscal year, our engineering and development expense for the fiscal year was $3.1 million, relatively flat with comparison to the year-ago period. Our SG&A expenses in fiscal 23 were $16.9 million compared to $15.8 million in fiscal 2022 due to increased variable compensation for bonuses, sales commissions for sales, higher sales, as well as payroll and initial costs associated with unveiling and launching of the AZT, which includes conferences, participation, and hiring several salespeople. We reported net income of $5.2 million or $1.9 per diluted share for the fiscal year September 30th, 2023, compared to net income of 1.9 million or 42 cents per diluted share for the fiscal year ended September 30th, 2022. During the quarter, During the last quarter of the fiscal year 2023, the company received an employment retention credit, ERC, of $2.1 million net of expenses. The ERC was not available in fiscal 2022. We had a tax benefit of $.5 million due to the release of the valuation allowance against our company's deferred tax assets. Included in the net income is stock compensation, a non-cash expense of $1.1 million. The company had cash and cash equivalents of $25.2 million as of September 30, 2023, compared to cash and cash equivalents of $24 million as of September 30, 2022. The cash and cash equivalents are considerably higher compared to cash and cash equivalents of $13.8 million for the quarter ended June 30, 2023, as significant cash flows were generated through the payment of receivables, including payment from financing sales provided to customers prior to fiscal year 2023. We believe this robust financial position allowed us to successfully implement this approach. It yielded positive results and we will entertain certain options if it meets our strictest criteria. I also want to highlight that the board of directors approved a quarterly dividend of 4 cents per share payable on January 9th, 2024 to shareholders of record on the close of business of December 22nd, 2023. With that, I will turn it over to the operator to take your questions.

Thank you. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is coming from Joseph Nurgens with Seagram Investments. Your line is live.

Good morning, guys. How are you today?

Good morning, Joe.

Good morning, Joe. Okay, I see you must have shook up the market today because the stock is down like three points. So evidently it's in your press release. Let me explain what I think is going on. uh... here with a big drop in the backlog people think that uh... that obviously sales aren't they're going forward uh... that concern yet in your press release you issued you said that you thought there was a technology solutions which of course is the bulk of our sales right now is expecting a major contribution this year in twenty four you're looking for good business uh... with new customers and expanded existing customers is that Is that what you're trying to convey, that you're expecting expanding technical service, technology solutions business segment?

Yeah, that's correct, Joe. We budgeted for significant growth in 2024.

So, in effect, the drop in the backlog from last year to this year is not really going to cause a problem as far as what you were expecting for 2024 growth, at least in that segment of the – on that division going forward. That's correct. The backlog, in effect, you know, granted it's down, what was it, 20, I forget what it was last year, it was 20 million or something like that, that we had, you know, because of the, we couldn't get a lot of the orders through the supply channel. That's number one. So we're really not concerned. The backlog may be low, but business is not.

It's back to pre-pandemic levels. Basically, we were just trying to talk about where the backlog was, where it is, because now it's not a factor any longer moving forward. It's pretty much business as usual for 95% of the products that we sell and, you know, we're probably not going to be discussing it any further moving forward.

And, and, and a point I guess I'm asking is even though it's, it's back to pre-pandemic levels, it has no effect on what you think, what we think is going to be business 24. We think it is sufficient to grow, to grow the business in that, at least in the PSX division. Correct. Okay. Um, Second, on the AZT product, that's a dynamic product, and I don't think people realize how much that can contribute to the future of this company. You should get added salespeople, and they're responsible for bringing in new business. Are we talking about new business beyond the two press releases that were issued, one on the chemical company and one on the – intelligent, Western Intelligent Agency business? Do we have additional customers beyond that?

Well, there's the pipeline. They're growing the pipeline right now, Joe.

Okay. So we have a lot. And when we're talking about the pipeline, are we talking about customers that are testing the product at their facilities? Yes.

I assume some, some of them, some of them are doing POCs already. They're large fortune 500 companies. They're the largest companies out there. So the sales cycle might be a little longer, but they're in, they're quite engaged right from the beginning. A lot of them, we met them at the show. We talked to them and within a week or two, they wanted to, to discuss the product further. And some of them are already looking to set up a POC either, you know, Testing, yeah, yeah, proof of concept. But with the holidays, some of it's getting pushed a little bit to the first quarter just because of Thanksgiving and Christmas. But they're quite engaged right from day one when we met them at the shows.

Okay, great. Well, that's understandable, just the time of year we're at right now. Talking about the existing – now, of course, in the two press releases you issued – You never talked about the size of the contracts, and I assume that most of these people are going to be paying on a monthly basis. That's the type of over a period of a number of years that they contracted out. Is that correct? We're talking about not upfront payment for the software, mostly on a monthly basis?

No, the first seed units that we put in there were just to buy it. Outright. And then, you know, as we expand, these companies are so large, Joe, that, you know, 170 locations. And it was whether we boil the ocean and try to take all 170 down. And that would take about a year to two years, they said, to get that. processed or do we start seeding it in one or two of their locations and expand from there? Like, you know, one of the government agencies were already talking to seven different locations. Some of them had some, you know, money left over and they wanted to, you know, cut peels right away. So, you know, right now it's about customer engagement, getting them to test it, buy it, you know, and evangelize when we need, you know, references moving forward.

So in both cases, they're rolling out the software in segments, let's put it that way. You said in one case you're talking about 170 plants. Well, you can roll that out in one time.

Unfortunately, we have to talk to all 170 plants because they all have separate budgets. So we're going to knock one down at a time. But to get... To get our product inside their environment, saying it's running, it's working, was one of the most important factors. And we did it quickly, right, with less than 60 days from beginning to end.

And just going back from an idea from a charge standpoint, I'm assuming we bill on the basis of how many devices are being protected or, in the case of what you call, endpoints. The more endpoints we protect, the higher the bill.

Correct.

Okay, so as we roll it out little by little, supposedly the bill increasing little by little, let's put it that way, as they keep expanding within their divisions.

Yeah, some departments will have to purchase it outright, and some of them will want to pay on a monthly basis or a yearly basis most likely, right? Sign a three-year deal and pay it each and every year.

It depends on how the departments decide. In some cases, the departments will make the decision whether they want to buy or whether they want to lease, basically.

Pretty much, yes.

Okay. On the cash, I assume a lot of the cash that we have is short-term treasury bills, or how do we have that going, Gary? Do you have a fair amount you're rolling over in short-term treasuries, or...?

Yeah, we roll them over and save that and stay in some money market funds, but yeah, we're rolling them over short-term.

Okay. And Logitech, how are they doing? Now that I realize that you just put a PR on that, our Australian partner, have they been able to have the same, let's say, initial success that we're having as far as interest in Australia?

Yeah, they're generating opportunities that we're working with them hand-in-hand.

Okay. All right, that's all I've got right now. It sounds like it was great. And, of course, the AZT product has changed HPP dramatically from where I'm sitting.

Yeah, we're excited. All the feedback has been positive. No one has said, oh, I don't see the value in this. I don't understand it. We're definitely changing things. people's, you know, the way they look at securing endpoints in the application. So, the conversations are happening frequently and they're getting it.

Yeah, and just one more question. You know, Australia is an example, but there should be, there's got to be additional countries out there that are demanding the same kind of reporting requirements that are being required by the U.S. and Australia. So is there an opportunity now to establish, how can I say it, similar operations for managed security service providers in these other countries, like UK example or Germany?

Yeah, of course, Joe. It's just the size of our organization kind of prohibits us moving as fast as we would like to. As I said, TS has been – has been doing so well that it paid for all the development of this new product but in you know the hvp is truly a startup organization right with the new product that's that you know we believe is game changing um but yeah it's just the size right now but we're we're working as as hard and as as efficient as we possibly can to try to talk to as many people and like i said we've rolled it out and we did as many shows that we could get ourselves into. Um, and the feedback was really, really good. And I, like I said, we have 50 opportunities that we're working right now, just from those couple of shows that we did, um, you know, over the last couple of months, 50 opportunities. Yeah. Over 50. Yeah. Over 50. Yeah.

Over, over 50. Uh, do we, how many people do we have in the UK? I know we have a very, very small bill for us over there. We still, I have a couple people over there.

Yeah, we do.

Are they up to snuff on this? They really are kind of like technology solution type salespeople. Is that correct as opposed to HPP salespeople?

Correct.

But they're familiar with the product.

Yeah, we cross-trained all our salespeople on AZT, so they're able to at least ask the right questions and then engage people. the engineers on the AZT side when there's an opportunity. And some of those opportunities that we're working right now came from the TS side.

Yeah, I'm sure. All right, well, thanks a lot, guys. It's really exciting going forward, and I appreciate the time. Thanks.

Thank you. Our next question is coming from Mike Price, who is an investor. Sir, your line is live.

Good morning. Thanks for the time to ask some questions. Can you give us an idea of how big you think the market opportunity is for AZT? Multi-billion. Okay. And that being said, you know, it's nice that you're having conversations with 50 potential customers. But going back two quarters ago, you said that a problem CSPI has is a lack of name recognition. And last quarter, after the introduction of AZT, I asked the question of not having name recognition. Is it not better and more efficient to partner with somebody that does have name recognition? And your response was that you've only been in the market for 30 days. So, but the question now is, do potential customers, more than 50, know CSPI and potential competitors and potential partners? Is it not more efficient? Because a lot of times the best product doesn't even get seen in the market because it's not the fastest introduced to the market.

I agree with that. And we are talking to – and we have signed some of the largest security resellers and integrators in the market space, and we started working opportunities with them. We definitely – you know we use as much marketing money with all the shows and then we targeted you know the top 20 or 30 security focused resellers integrators and we started talking to all them some of them we met at the shows that while we were there they saw the need and actually some of them reached out to us directly on large large opportunities they had in the healthcare industry are protecting Microsoft OS systems and Android that we're working in conjunction with them. So we are trying to get our name and using the reputation from these large security resellers as fast as possible. But they have a stringent, they don't take on every single security partner. So we have, I think, been fortunate that two of the largest ones already signed contracts with us to represent AZT and ARIA.

Okay. Last quarter, I asked, and I think Joe Nergis asked also about using funds to buy shares. And prior to today, the stock had doubled. Did you buy any shares during the quarter? No. No. Okay. With what's happening today, does this not provide an opportunity with $25 million in cash? I mean, the stock's down 25% today. I mean, is this... Not in the thought process?

It is in the thought process. We talked about it this morning, Gary and I. Okay.

And the final question I have, prior to today, it's great since the last conference call that the stock price has doubled. But what shows today is the, you know, small float in the illiquidity. You know, I couldn't sell a measurable number of shares to take a profit. And, Victor, you couldn't. And Joe Nurgis certainly couldn't. So the question is, you know, the market cap here is, what, $90 million. And looking at somebody like Adragos, who I assume is a competitor, recently raised $200 million with a $1.7 billion valuation. It seems like a big discrepancy between a CSPI and somebody like that, where CSPI supposedly has, you know, a revolutionary product, and you think it's as good or better than anything out there. Can you address that and how we close the gap?

You know, we actually – we saw – you know, we talked to Dragos while they were at the show too, you know, and the thing is they're truly not a competitor. We will complement what they do. They have gaps, and our product would actually complement with them. So there's, you know – We would love to talk to companies like that. There's really no one out there that's doing exactly what we're doing on the application the way we're doing it at the BIOS core level.

Okay, so if you're not exactly like it, that seems that CSPI and AZT should have more value if, in fact, the market is aware of it with a multibillion-dollar market opportunity.

I mean, what am I missing here?

What am I missing here?

You're not. But, like, you know, the product was released end of July, and we're evangelizing and rolling it out as fast as possible. Okay. All right. And Dragos has been doing it for years, you know. So, you know, they've been at it a little longer than we have. when it comes to this, this product.

No, no, no, no. I appreciate, I appreciate the fact that they've been doing it longer, but I'm talking about the discrepancy and the valuation. Sure. It might take you a while to get in there, but you're valued at $90 million and they're got a valuation of a billion seven. I mean, that's a huge discrepancy. So, okay. Well, it looks cheap to me here. It looks awfully cheap at 17 and a half. So, okay. I appreciate your time. Keep up the work. Thank you. Have a great day. Bye.

Thank you. Our next question is coming from Bresh Davidson, who is a private investor. Your line is live.

Good morning. The EZT thing. So, you know, you can sell it. You can do it on a subscription model. how long does it take to roll this out? So, so you sign a contract tomorrow. What's involved in rolling this out to a customer?

Well, it makes our product, which I've spoken in the past about is we can be rolled out very, very quickly. You know, we've done a thousand end points in less than an hour. There's some, a little tweaking after the fact, but you know, the way we, we roll our product out is like a driver. It goes on the system, then it expands, and then it goes and looks out at all the applications. You ask a few questions and it starts protecting immediately, you know, within that, what's, you know, that hour timeframe you're up and running. And there's a little tweaking that goes on, but very, very minor. You know, when we rolled out the last couple, you know, you know, it was a couple hundred end points and, you know, it was done in less than 30 minutes. We built it in conjunction with customer feedback, and that was the biggest thing, especially when we developed it for the OT space, that you cannot have downtime in manufacturing facilities at all. And that's the difference with our product. You roll it out, it does not need a reboot. And that's really, really big compared to all the other products that kind of do what we do, but not really. need a reboot takes a long time it takes months to roll out and ours is done very very quickly and efficiently and that adds tremendous expense in a manufacturing environment um yeah i could see where it would be a big advantage um yeah see that's a difference a lot of times with other products you would have to have those systems be taking down And the way we roll it out, the system does not have to be taken down. It could still be working and doing what it needs to do in conjunction with us, you know, implementing our product inside that environment. No downtime.

So that ends up, you know, affecting the value proposition here because that's kind of like a hidden expense in competitive products. Mm-hmm. So, you know, if you're rolling this out onto, you know, let's say it's a business with 10 sites. I mean, is this something that the physical location matters? So you're going to do one site, you know, at a time? Or does this depend on what their IT infrastructure, how that's set up, and you can literally just blanket 10 locations at once?

We could do 10 locations at once. We could do 100 locations at once. It does not matter. All we need is just, you know, access. whether they wanted us to do it or we could walk it through. The one rollout that we did with that government agency at that one location, we were not able to have any access to that whatsoever. It's a closed environment, and we just walked them through it, and within less than an hour, they were up and running, and they had never touched a product in their life.

Now, when you say you walked them through it, was this, you know, physical on site or was this?

No, no, we weren't. No, just over the phone. We had no access to the site nor did we have access to their systems.

So you guys don't even have to be physically present to walk them through. Correct. Got it. So then all of the time sucked up in this process is all going to be in the sales cycle.

All in the sales cycle.

So once you get the dotted line, you're ready to go and can roll this out. As fast as they want it rolled out, we can help them. So, I mean, the press releases the past few weeks have been great. You know, with 50 of these things in the cycle, I mean, is this something we can anticipate on maybe a more frequent basis that these things are going to be rolling out and announcing these new relationships? Yes.

Um, yeah, the significant ones I'm going to say, you know, we're, we're evangelizing as much as we can. We're trying to get people to, to see the announcements. Um, you know, some of these larger ones that we're working on, um, I'm definitely, you know, we announcing those, um, as soon as they hit.

Got it. And, uh, the last thing I just want to touch on, I know that the cruise ship thing was still winding back up. Is that, uh, has there been any headway making getting that, getting those jobs started back up?

Yeah, we started doing, we started doing some cruise line work again, a little in a little different aspect. They're doing a NAC solution. So we're starting to roll out at different locations for the network access control. So yeah, that business started picking up again. And, you know, we had people in Japan this week on, on some boats and, So, yeah, it's not – they gave us a nice schedule in the past, and that schedule hasn't, you know, come up. It's more like, hey, I need you here in two weeks or three weeks. It's sporadic where the other ones were like, here's the next 12 ships. Here's the next 12 dates. This is when we need you. It was easy to plan for, and that's not happening. So we're doing business with them. It's just not as organized as it was – once was.

And maybe one more follow up question. So the AZT thing, you know, I saw the Western Intelligence and we're talking about manufacturing and you also mentioned health care. Are there any other areas that kind of jump out where this would be a really good fit?

It's really anywhere, right? Because when we first rolled out the announcement, we focused because we worked with, I told you, some large manufacturing companies. So we focused on the OT space, zero downtime. When we rolled that out, we rolled it out into the Windows world at first, and then we rolled it out into the Linux world. So we have both different type of operating systems that we we can support in, you know, one of our key key factors compared to anybody who thinks they play in the space is that we go all the way back to XP in the early versions of Linux, right? Most companies are only doing one or two versions back. We're supporting all the way back to, like I said, to XP. So that's definitely a game changer for us, especially in the OT space, because a lot of these manufacturers don't update or upgrade their systems. Because again, I mentioned, you know, zero downtime. And now, you know, the latest version that we're rolling out right now is for the IT environment to where, you know, it allows, you know, patching. We can schedule things. So we're rolling that out, you know, as we speak. You probably see it, and I'm announcing it now, but you'll see an announcement that we're also rolling out a full IT product line version of AZT.

And that would be for like data centers? Mm-hmm. Correct.

Yeah.

So that's going to be a significant number of points that you guys could hit.

Correct, correct. And, you know, we're talking to some financial institutions right now. We're also going to talk to all our managed service customers that we're supporting right now about, you know, potentially – increasing their monthly spend by rolling out AZT on their IT servers to protect their application at the core level.

And that's quite a few endpoints.

Yeah, quite a few endpoints. Yeah, we're going to talk to every one of our managed service customers. Some of them will say yes, some of them will say no. It just depends on budgets, but that's what's going on right now. This conversation is happening as we speak with some of our larger MSP customers.

Nice. Well, thanks so much for the color and look forward to continued success here.

Thanks. Have a good one. Happy holidays.

Thank you.

Thank you. Ladies and gentlemen, if there will be any final questions or comments, please indicate so now by pressing star 1 on your telephone keypad. Thank you. We have a question from Paul Scolardi, who is a private investor. Your line is live.

Hello, gentlemen. I have several questions. The first one is you have a revolutionary unique product in this AZT. You're a smaller unknown company. And why not go partner with with a Dragos or even like a Palo Alto or one of these big cybersecurity companies that have the relationships that can get this revolutionary product out there quicker than you can on your own? That's my first question.

I think I mentioned it earlier. You know, we are talking to, you know, all types of, you know, manufacturers, right, people who are in that space. I can't mention who we're talking to now, but there's quite a few conversations going on with companies that are in that security space that we would complement. We would go side by side with, we don't compete with, and we would enhance the overall security performance, you know, in every potential environment. So, yeah, those conversations are going on right now.

Okay, and I assume if something happens, we're going to hear about it, correct?

You will hear about every exciting news that comes across the board. I hope you guys see that I'm trying to share all the information as it comes across as soon as possible.

Well, yeah, I mean, if I may be really honest and with all respect, you have done an excellent job, I think, with press releases up until today. And I think while we're seeing the reaction in the stock market, right now is because you did a poor job of explaining the excitement that you have now on the call and the opportunity, like the reseller contracts, that this can go into the network endpoints also, the massive PAM. You did a poor job on the press release capturing all the excitement on AZT. So my question is, the number one part of your job is execution, and you're doing a great job at that without question. but you also have a responsibility to shareholders in the fact that you're a small company with a very small float and that nobody knows about this company, this story, or this opportunity. I like to say you're at the Super Bowl and nobody knows that you're playing. So what is your strategy to enhance shareholder value since, you know, with the poor press release today, the stock shareholders are suffering for what's a massive opportunity. Like right now, the stock is at one time sales plus cash. It's profitable. It pays a dividend. It has a great balance sheet and it has a really massive opportunity in front of it. So how are you going to get the story and connect to Wall Street, this massive opportunity? Number one is I hope we're going to hear about every contract. Why didn't we hear about all these reseller contracts? And if you look in the news, Lately, you've got utilities being attacked, water utilities, electric utilities. China attacked in the last 24 hours. There's massive highlight on operational technology cybersecurity. You have a unique radical product. Nobody knows about it, so shareholders will suffer until that connection is made. So I want to know what you're going to do different going forward to get this story connected to Wall Street. to enhance shareholder value because it's a great story, but nobody knows about it.

Yeah, I think we talked about that this whole conversation, right? You know, we're doing events. I'm talking to partners. We're talking to, you know, distribution lines where, you know, as I have said, you know, the shareholders, I think, you know, their expectations sometimes may be a little bit, you out of whack offline where, you know, they want a dividend, they want it to be increased. They want us to have earnings for share and they want us to, you know, self fund a startup. Right. So it's, it's, you know, at this stage of the game, we, you know, enhanced our marketing budget by 10 X, you know, that we normally did. We hired salespeople that are industry leader, salespeople that, you know, um, frankly cost a lot, right? But we, we figured we'd get better quality. We able to get into the oil and gas, talk to these, some, some of these large manufacturers and companies, uh, oil gas companies directly that they had relationships in the past. Um, and yeah, you know, that's what we're doing right now. So, and we're using the largest resellers in the security space with those conversations. But as I mentioned, these companies get, you know, their doors get knocked on constantly on small security companies, right? I think there's over 6,000 small security companies out there wanting them to represent them. So we have to go through that. you know, 100-page, you know, form that we have to fill out, why we're different, the whole thing. You know, and they don't want to pick up a product that the company's going to be out of business in a year or two because they're not funded correctly. There's a lot that goes into it. It's not just about ringing the doorbell saying, you know, would you want to buy some cookies? I'm here. So there's a lot that goes into that.

My question more was your communication with the street. in getting the story out. That's execution. You're doing a great job there. I'm talking about doing press releases. You got some good new resellers. We don't know about that. You have 50 opportunities.

Yeah, but these are hot off the presses, right? We had a call immediately while these are – literally, the ink's still drying on some of these things. So you'll see things rolling out. But, you know, we were having this press conference today, and I knew a lot of this would be coming out today. And, you know, you'll see a lot of things coming out in the next two or three, four weeks, and hopefully some exciting news on some opportunities that are closing.

Okay. Yeah, and I think that's where – you know, the taking on a strategic investor, even, um, with, with a big name with, with, and it sounds like you're talking to those. I think that would be a great way, uh, as well to give you guys the, the name and the resources to rapidly expand this because you have such a low structure, you're selling software. It's not going to take a lot of sales like it would for another company to drop a lot of EPS in the bottom line. Last question. Um, Obviously, it's a small equity structure. At some point in the future, would you consider a forward stock split so funds can have the ability to buy more shares? And maybe it's not, you know, whatever the right time is to think about something. Is that something that you consider?

Yeah, we've talked about that at the board level, you know, at every meeting, you know, what our options are. So, yeah, we would consider everything. And that's one of the things that we've talked about.

right yeah okay we're in conclusion a great job on the execution and honestly on the press release up until today i think you did a poor job of getting the azp opportunity in the press release today but that's that's not fatal because it's what's more important is that the opportunity is there and it's it's super exciting so i just hope the communication um is going to be you know very clear and consistent i think consistent communication is important these small cap companies want to run If you want to run it like a private company, nobody's going to know you're at the Super Bowl. So great job on execution, and I hope we're going to hear a lot more on AZT to really correct the lack of excitement in the press release today. But you corrected that in a lot of ways on the call, but now people have to get the story out so Wall Street connects with it. So thank you very much.

Fair enough. Thanks for your feedback. Appreciate it.

Thank you. Our next question is coming from John Crotty, who is an investor. Your line is live.

Hi. Thank you for taking my call. And I got to tell you, I really enjoyed that last back and forth with you and Paul because those were some of my questions. I'd like to just kind of turn and talk on a more technical side now. As Paul mentioned, there's a lot of headline news out there with all the cyber attacks, especially with China, quote, Taiwan, Ukraine, Russia. What interested me the most was the fact the way they're breaking through the firewalls. They're having a harder time coming through. I'm speaking more technical now. But I think you guys are sitting in a potential sweet spot. If I understand this properly, AZT is deployed on the other side of the firewall where it's listening all the time. Employees are now being the lead target for producing the cyber threats, whether it's through a UBS or through a personal computer plugged into the network. And I'm saying that because I noticed you were saying the word air-gapped quite a lot, and to me that means it's almost like it's a self-contained network without a direct link or constant link to the Internet. I'm just hoping you can maybe explain more to the rest of the world because that's a real serious way of breaking in now, and I believe that's how we've seen some certain nuclear reactions go down. If you could clarify that and give me a little more understanding. Thank you so much.

Okay, I'll do my best on the technical side. So where we reside is in the servers, right, on the core of the servers where, you know, it's a driver that gets installed, and it's about 40 meg, very, very small, uses 1% or 2% CPU utilization. And what happens is once that gets installed, it expands, right? and it looks at every single application. Now, we're talking to some customers right now that are testing it on literally over a thousand systems that are running 1,100 applications at one time. And it goes out, it looks at all 1,100 applications, and then the person looks at it and says, is it a viable application? Yes, it is. This is where we're at. At that point, it's not going to allow anything else besides what's installed to be executed on that. So if someone tries to get in, um, and you know, because the biggest thing is when end users open up the executables, right? And then all of a sudden then they're inside the system and then everything goes haywire at that point. So we're at the very beginning on the core and you know, and that's where we start protecting and that's where we're looking at all the applications and how we protect all those applications. And then after that, that's where, you know, it's the perfect picture at that point, and, you know, we stop everything, you know, immediately at that stage.

Okay, and that makes sense. Is that sitting on the NVIDIA chip, or is it just a software install with the driver?

It's just a software install on the driver. It's about 40 meg.

Oh, small. Okay, thank you. Very, very small. That is quite a bit for me, yeah. And one last question. I'm sorry. With the AI attached to it, is it self-learning? Does it retain or does it learn or how does that happen?

Well, yeah, it looks at it and then it looks at what the customer's environment and what's correct for that customer. And that's what the perfect model is. And then everything else that is not there, that's when it stops it. And then, you know, we can write code against it that will allow certain things to come through after the fact. If we've seen it, this is the correct new environment and what it should look like.

So you're starting at a static perfect world and what's different from tomorrow and the next hour. Thank you. That makes total sense. Thank you very much.

No problem.

Thank you. Our final question today is coming from Brett Davidson, who is an investor. Sir, your line is live.

Back again. I just want to hop on a soapbox here for a minute. I understand the sentiments of some of the other callers, and everybody would love to see the share price just skyrocket and this to become an overnight success. But, you know, I think patience is probably a pretty good idea at this point. I would love to see this rapidly adopted. And I think you guys are, I got your nose to the grindstone trying to push this forward. But at the same time, I have realistic expectations. It's not going to happen overnight. I'll step back down, and thanks again, and we'll talk to you next quarter. Thanks, Brett.

Thanks, Brett.

Thank you. As we have reached the end of our question and answer session, I will now turn the call back over to Mr. DeLovo for any closing remarks.

Thank you. As always, I want to thank our shareholders for the continuing interest and support. Our success throughout the fiscal 2003 has given us momentum heading into fiscal 2024. as we're already off to a good start with recent AZT client engagements. CSPI has always had a good reputation within the industry. The launch of AZT strengthens this view, and I believe will allow us to engage and sit at the table with Fortune 500 companies. Gary and I look forward to sharing our progress in fiscal 2024 first quarter in February. Until then, be well, stay safe, and enjoy the holiday season. Thank you.

Thank you.

Thank you, ladies and gentlemen. This does conclude today's conference, and you may disconnect your lines at this time. We thank you for your participation.