Remark Holdings, Inc.

to ask questions. To ask a question, you may press star then one on a touchtone telephone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Fei Tian. Please go ahead.

Thank you, Nick. Good afternoon, everyone, and welcome to Remark Holding's second quarter 2024 financial results conference call. I am Fei Tian, Vice President of Investor Relations for Remark. On the call with me this afternoon is Kaixin Chao, Remarks Chairman and Chief Executive Officer, and Mr. Todd Brown, Vice President of Finance. In just a moment, Mr. Chao will provide an update on our businesses and Mrs. Brown will recap our second quarter 2024 financial results. Following these remarks, we'll open the call to questions. But before I turn the call over to Mr. Chao, I would like to take this opportunity to remind you that some of the statements made today may be forward-looking statements. These statements involve risk, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements reflect Remark Holding's current views, and Remark Holding expressly disclaims any obligation to update or revise any forward-looking statements after the day to hear off. This disclaimer is only a summary of REMARC holding statutory forward-looking statements disclaimer, which is included in full in its filings with the SEC. I will now turn the call over to REMARC's Chairman and Chief Executive Officer, Mr. Tao, so he can provide additional information to REMARC's businesses and recent developments. Please go ahead, Ching.

Thank you. It's been no secret about our intention to transition our revenue base from Asia to the US, especially due to the political conflicts between the US and China. While it's taken us some time to do so, as most government contracts do, we are proud to see the successful fruits of our labor begin to show with our recent contract win with the Clark County School District, which is the fifth largest school district in the United States. Our recent contract win for implementing weapon detection technology in the Clark County School District is a significant milestone that will likely lead to a multitude of future opportunities, both within Clark County and other school districts of similar size. We are optimistic that the contract value will meet or exceed its proposed $45 million value over nine years as we expand and introduce the value-added functionality of our smart safety platform. By successfully deploying weapon detection technology in a large school district, Remark AI demonstrates its capabilities, building trust with potential clients. The Clark County School District serves as a high-profile reference, enabling Remark AI to showcase its expertise and technology in a large and real-world setting. This contract win attracts attention from other educational institutions, law enforcement agencies, and government organizations. potentially leading to new partnerships. Remark AI can leverage this success to enter adjacent markets such as other school districts and educational institutions, public venues, government facilities and buildings, and private enterprises. Remark AI can offer complementary solutions like facial recognition, fight detection, unattended object detection, and advanced analytics to existing and new clients. We have already started our POC with one of the largest subway systems in the U.S., and we look forward to updating you on our progress. Other highlights for Remark AI this past quarter. We showcased our AI Fire and Smoke, Smart City, and Smart Agent Solutions at the New York City Smart City Expo. in conjunction with Oracle and NVIDIA. The success and uniqueness of our AI products has led to additional POCs to help the top 100 US cities turn into modern 21st century smart city. We completed the POC at the headquarters train station for one of the largest European railway systems with over 600 stations deploying our AI-powered passenger counting, fare evasion, fire and smoke detection, and unattended baggage detection. The success of this POC has led to current contract negotiations to close the deal in the second half of 2024. Another highlight is that we have completed a successful POC for the migrant centers in one of the largest sanctuary cities in the U.S., where we deployed our AI-powered facial recognition, fight warnings, fire and smoke detection, as well as weapons detection modules. The success of this PLC has led to preparations to deploy our technology across multiple city agencies as we negotiate to close a contract also for the second half of 2024. As far as the new platform and product introductions, going into the second half of 2024, we are introducing our Remark Fast AI training platform. Fast AI is a SaaS product that can train and tune up general and specific computer vision models. For example, fire and smoke detection, unattended bags, unauthorized personnel, and vehicles. As a SAS program platform, it provides AI training infrastructures, i.e., GPU optimization, GPU resource management, TensorFlow framework, CLIP framework, and SAM framework. to ease the training and testing of computer vision and multimodal models. It also offers the zero-shot sample annotation, which can annotate training samples by AI itself without a large amount of human labeling. FAST AI license is a permanent license and a fixed cost for individual AI models with training testing hardware provided in the cloud. There is no extra cost for AI model retraining, upgrades, or tune-ups for customization. The IP of the training data and the train-tune models belongs to our customers. Why do we think this is a winning proposition in the US? I'm sure you have read about how our businesses are looking for smaller models, ones that solve real business problems with precision, while those large language models solve creativity problems with bearable errors. Bearable errors for them, but unbearable for business solutions. Let alone the cost, data privacy, and IP problems that are unsolvable yet with large language models like ChatGPT. During the second quarter, we've continued our alignment with both the Microsoft and Oracle sales team. Remark AI completed its migration to the Microsoft Azure platform preparing Remarks Smart Safety Platform, otherwise known as the SSP, to be marketplace ready, allowing Microsoft's global sales force to begin selling Remarks SSP across multiple industry verticals and through established systems integrators. Integrating with leading cloud providers like Microsoft Azure and Oracle Cloud is crucial for success, especially as we are now able to tap into their vast customer base and expand our market presence. Our focus with Microsoft Azure Marketplace is simple and straightforward. Based upon our mutual analysis of the potential for Microsoft and Remark to jointly capture $400 million of business together in the next five years, we've committed to consume 80 million of services on the Azure platform, which incentivizes Microsoft Salesforce to evangelize and widely deploy our AI products. We are conducting regular teaching sessions to their Salesforce by specific industry expertise. Microsoft Salesforce is tracked and paid commission based upon how much remarked software is consumed and priced by the annual recurring revenue SAS model. With Oracle, we'll be one of the companies featured in the Oracle AI Pavilion along in partnership with NVIDIA at the upcoming Oracle Cloud World taking place in our town of Las Vegas in early September as one of Oracle's key innovation partners. This will be the second event we'll be presenting together. The first happened this past May at the New York City Smart City Expo in conjunction with Oracle and NVIDIA highlighting the broad capabilities of our AI Smart City platform. As we go into the last couple quarters of the year, We're excited to bring Remark AI into the hotel hospitality industry. In the near future, we'll announce our partnership with a global hotel hospitality brand that combines music, art, and culture as its preferred vendor on all AI-related initiatives. This strategic partnership aims to revolutionize the guest experience and operational efficiency across its properties worldwide. Remark AI will provide its innovative AI-powered solutions to enhance various aspects of the hotel operations, including one, personalized guest services experiences through AI-driven recommendations and tailored services, two, intelligent chatbots for seamless guest interactions and support, three, predictive analytics for optimized room allocation, pricing, and revenue management, and four, automated workflows and process optimization for improved operational efficiency. Remark AI's proprietary AI platform will be integrated with its existing systems to provide a unified and intuitive interface for staff and guests alike. The partnership will also facilitate the development of new AI-powered applications and services, further solidifying our position as a pioneer in the hospitality sector. Todd?

Thank you, Shane. And thank you to everybody for joining us on today's call. As we have previously noted, we have been working to expand our business in the U S and during the second quarter of 2024, we were able to complete the first Clark County school district project, which resulted in $3.7 million of revenue for the second quarter of 2024. As she noted earlier, this has already led to an additional order and other opportunities for us in the US. Our operating loss of 3.2 million during the second quarter of 2024 reflected the decrease of about $0.8 million from an operating loss of $4 million during the second quarter of 2023. During that second quarter of 2023, We had recorded an impairment of approximately $0.4 million related to certain prepaid expense amounts that were deemed unrecoverable. The absence of any impairments during the second quarter of 2024 contributed to the decrease in operating loss, as did the $0.2 million decrease in payroll-related expenses reported as part of technical. For the second quarter of 2024, we are reporting a net loss of $5.3 million or 12 cents per diluted share compared to a net loss of $5.9 million or 42 cents per diluted share during the same quarter of 2023. Interest expense during the second quarter of 2024 did not significantly change from the amount that we reported during the same period of 2023. while finance costs also remained relatively flat. Finance costs is related to the establishment of and remeasurement of our obligations to issue common stock, which arise as a result of our transactions with Ionic Ventures LLC, which consists of draws on an equity line of credit. At June 30, 2024, our cash balance totaled $0.4 million, which compares to a cash balance of $0.1 million on December 31st, 2023. We used $6.1 million of cash in operating activities during this second quarter of 2024. Lastly, in August of 2024, we were able to resolve all outstanding events of default regarding our debt agreement with Mudrick Capital Management by entering into an agreement with Mudrick to exchange the existing non-convertible notes we had issued to them for convertible debentures. And with that, I will turn the call over to the moderator to begin the question and answer portion of this call.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster.

Again, if you have a question, please press star then 1.

Seeing no questions at this time, this will conclude our question and answer session. I would like to turn the conference back over to Fei Tian for any closing remarks.

Thank you, Nick. Thank you, everyone, for participating in Remarks Holdings' second quarter 2024 physical financial results conference call. A replay will be available in approximately four hours through the same link issued in our August 19th press release. Have a good afternoon. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.