MDB Capital Holdings, LLC

this conference call is being recorded. Before we begin the formal presentation, I'd like to remind everyone that statements made on this call and webcast may contain provisions, estimates, or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment of what the future holds, They are subject to risk and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Also, please keep in mind that we are not obligating ourselves to revise or publicly release results of any revisions to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. So you should also review our most recent form 10Q for a more complete discussion of these factors and other risks, particularly under the heading risk factors. A press release detailing these results, which crossed the wire this morning, is available in the investor relations section of our company's website, mdb.com. Also, a replay of this call will be provided on mdb.com. Your host today is Chris Marlette, CEO and founder of MDB. Chris will present an update on the first quarter ending March 31st, 2025. At this time, I'd like to turn the call over to MDB Capital Holdings Chief Executive Officer, Chris Marlette.

Thanks, Kevin. Thanks, everyone, for joining today. Well, each one of our calls, I start with sort of a little bit of a different spin on our business strategy, how we create value, and really just to reinforce with all of our shareholders where we're at, the way we look at things, and basically how we currently view the future. So Some of this is going to be a little bit of a repeat, but hopefully you'll get, for the new people, they'll get a better flavor for what we do. For the people that have watched a few other of these conference calls, the first five minutes may be a bit of a repeat. So just to remind everybody, what do we do? We curate public venture capital. It's pretty simple. We're looking for asymmetrical return potential with public market liquidity. We've tried to really set ourselves apart from everybody else with this whole idea of public venture capital being a preferred alternative to traditional venture capital. And we'll get into a little bit more of that later in the presentation. Again, what do we do? We transform these big ideas into valuable public companies. That's where we create all of our value. That's where we see what we're really good at is making big ideas financeable. A lot of things that we have taken public and had a lot of success with actually weren't seen as investable assets by most people. So we actually created that transformation that we're very proud about. Again, you got to look through thousands of them. We've done this. We built the team to basically look through thousands. We've talked about this before, but we've really got a great team that's doing a great job of curating new big ideas. And I would tell you that now is probably the best time in the history of us doing this for 20 some odd years or close to 30 years, actually, and that we're seeing better ideas of better valuations we've ever seen. That has a lot to do with the current environment, which is obviously not not has not been great for small companies trading in the public markets. I'll get to that in a bit. Again, what do we do? We have a platform to stand them up. Patentvest really helps us to guide these companies and position them properly. We have this broker dealer that is now a clearing firm that gives us a lot of flexibility to basically take these companies public when it's very, very hard for other underwriters and other people to do this clearing through other traditional type clearing firms. And we've got a growing community of investors that understand what we do. We think we have a very unique platform that really represents an unbelievable opportunity to extraordinary business opportunities that feel that the public markets is a great place for them to be. This is some updated data, which we rely on Carta for data on the venture market. And I think this chart's gonna sort of have a different flavor to it today than it usually has in the sense that those venture companies that are still active, not gone public, There are literally thousands of those. And you can see just in 2018, there was 4,300 of them. I would say because of the boom in financing that happened post-COVID, there has to be, I don't know, 30, 40, 50,000 companies that have been funded by VCs that have not gone public. I mean, you can see here that of this class, only 15 have exited by IPO since 2018. So over the last seven years, only 15 of them made it public. That means that there are, I would say, at least tens of thousands of companies that have been funded that see no exit. And right now, what we're seeing in the venture market is really quite interesting because we're getting approached by lots of venture firms with opportunities to take things public. because they're not, they're not positioned to be able to continue to fund these companies. They're not new fund formation is way down, et cetera. So what's happening is, you know, nobody really wants to invest in a, you know, you know, be locked up in a traditional venture fund. So what I see is a huge opportunity is, you know, literally thousands and thousands of companies that could come public and probably should come public. If you take the top, you know, 5% of all of those ones that are still alive, there's a lot of great companies there and we're getting to see a lot of them. And I'm pretty excited about it because the valuation expectations are changing as the market's gotten worse. And I think there's this mismatch that is gonna enable them to accept the valuation and leave something on the table for public investors to participate in the future growth. I'll talk a little bit more about that in a minute. And of course, our track record helps. We had a call with a VC last week, and we proposed to take their company public. And they were, quite frankly, I expected them to walk away. We offered them a valuation that was lower than than, you know, much lower than their most recent financing. And I expected them to just tell us, you know, they're not interested. And what they said was, you know, the fact that you're 17 for 17 of taking companies public, you know, gives us the certainty and we're willing to accept this lower valuation as a result of the certainty of getting public. And hopefully we'll get it back, meaning their return, you know, the value of that company will come back to the values they funded it at previously. You know, in the public markets. So I think that our track record not only benefits us from being able to tell investors that that, you know, we're good at getting these things public and judging what we can get public. But it's now, I think, you know, reaching beyond that to either founders or VCs that say, wow, MDV really does have a model that works. And so what I'm excited about is the pent up demand for IPOs, I think is not only getting strong, but I think it's bigger than it's ever been. And what's happening is the backlog or the, I would call it what's kept it from really being unleashed in my mind is sort of the changing market dynamics. And the changing market dynamics are really that investors don't want to buy, I would say, green bananas anymore. They want to buy stuff that's closer to commercial realization where they're not worried about big dilution issues. downstream from you know from future financing so they want to see that these companies don't need to raise a lot of capital so they need to be capital light and they need to um look like there's going to be a business where there could be some profitability that's having a big impact on what we're curating as well so this this backlog of opportunities in my mind is getting rationalized and i think for the first time we're seeing more of a match where we can take some of these companies public that will actually be well-valued in the public markets like we've never seen before. I would tell you that when I started in the business, we wouldn't look at anything that we didn't think was going to be profitable pretty soon. And we took companies public way before I started MDB, and they all had to have some sort of profit advantage. profile in the not too distant future. I think we're going back to those times. I think there's a whole nother presentation we could do about that and sort of the changing market dynamics, interest rates, et cetera, that I think is gonna change this sort of 45 year downtrend in interest rates that's caused the growth of private equity and traditional venture. And I think we're gonna see these companies come public And if you look at the company and the reason why I think this is going to happen is that the companies that are public, that are profitable, are trading at very big valuations. So I think that for me, this means, you know, this that I believe that the small IPO market is going to be very robust and which is going to basically see a reversal of the downtrends that we've seen for now decades. So. I just already kind of covered this, but the valuation mismatch is really, in my mind, the biggest impact on microcap IPOs. And we see that, again, leveling up right now. And our pipeline is pretty thick with companies that want to go public that we think will do well in the public markets. So we're excited about it. It does mean there's a bit of a... a bit of a product mix, if you will, change. We have other companies that we're looking at taking public that are actually profitable, which is really a new thing to us. Again, it's not something that we've even looked at since I was just a baby in the business, just starting out in my 20s. And so I think it's kind of a very unique, interesting time. And, you know, we're pivoting not completely away from, you know, big, huge, you know, deep tech ideas, but we're pivoting to make sure that everything we bring public is going to resonate in the changing marketplace. And really, what do we do? It's really about curating deals, the right companies that could really make a difference at the right valuation. Valuation is critical. If we can't find them, and that's been a big problem in the last couple of years is that expectations were so high. but now we see that dynamic changing. So I'm very excited that we're gonna find really extraordinary businesses at the right values that'll represent great return opportunities for investors. So we've got LOIs with three companies. One is actually a biotech that we've exposed to a number of people in our community already. Very exciting. Again, biotech has been the worst space to be in recently, but this is a team that we've worked with before with the formation of prevention that we sold to Sanofi for 2.9 billion. So we took it from the back of an envelope to 2.9 billion. And the team, which we love, has come back to us to do another IPO and And what's exciting about this one, it's a relatively small amount of capital to a really, really big inflection point, which is, could we give somebody a pill that would get the pancreas to produce insulin again? We think that it's got a good shot. We think that... that if that happens, it's a monumental inflection point, much like the other drug that got us bought for $2.9 billion. So pretty exciting, even though it's biotech, we're very excited about it. It's also, we're pricing it right. It's going to be at about a $20 million pre-money valuation. We've got a company that was going to more than likely take money from private equity. And it's a beverage company that is very profitable, growing at a very fast rate. And they could see that an IPO made actually a lot more sense than private equity. Private equity, I think, is going through a real transition. I think private equity is going to be very difficult for a lot of investors. A lot of companies have not had good experience with private equity. In fact, the founders of this company have had experience with private equity before and really felt that IPO was a better alternative. I think this company will trade for a really nice valuation in the public market. One, because it's growing. Two, because it's profitable. And it's something that everybody can identify with. And I think that these kind of companies... have not been coming public over the last five to 10 years. So I'm pretty excited about that one. We have another healthcare software company, has revenue growing, really big upside potential. And we're looking forward to exposing that one to you as well. Great management team. And again, these are companies that don't need much capital to get to very big inflection points. So what we've seen is our mission after going public, which is really scaling up what we did before. Everything has gone great operationally. The backdrop for what we do has been the worst environment that we've been in in the history of our firm. So the good news and the bad news. The good news is that all the things we thought we were going to be able to do, we've been able to do. So we've trained our analyst team. We've got unbelievable analytical capability. I can tell you right now that I would put up our analyst team against anybody in the business. The clearing firm's working great. Our operational team did an awesome job of getting that up and running. That's not an easy thing to do. It's also become a really major asset for us. And a lot of other people are looking at us because of our capability to do clearing. And we have a lot of opportunities now. potentially to add some additional really interesting products to our mix because of our clearing platform. And we're in discussions with a lot of people that see the value of aligning with us because of our clearing platform. And we're broadening our relationships with new investor groups. You know, one of the things that we, you know, had done is we really spent a lot of time with, you know, a relatively small group of people because we didn't have that many companies. So why go broaden your investor group? But now... We're really broadening that, which I'll talk about here in a second. And our community service team is doing great. You've probably heard from some of them. And our back office platform in Managua is really doing great. Our leaders here in the U.S. have done a great job training. Everyone's licensed, doing a great job. It's really a lot of fun to see what this public offering has enabled and from building the platform. In the last quarter, we closed the Heartbeam deal. Heartbeam was the only financing we did. Like I said, we've got three new LOIs in the hopper and look forward to presenting those here shortly. Our shareholder base moved up modestly. We onboarded a number of new accounts that wanted to invest in the Heartbeam offering. What I thought was really great about what happened was it was, you know, a lot of smaller investors. So we had, you know, really a lot of small investors, as opposed to big lead investors, which many times we've had in our deals historically. I think that that really is exciting for us. And I wouldn't say that we're getting close to crowdfunding, but it's sort of like curated public venture, but with a broader group of people. And so what we've been doing is talking to angel groups and RIAs And that's kind of exciting for us because we've gotten really great reception from these people, even in a really difficult marketplace. And so, as I mentioned, we're looking at leveraging our platform and broadening our IPO offerings. That's in the works. And I think you're going to see that evidence of that here shortly. The other thing we did was recognize that our executive comp plan for our four top executives, which was really heavily based on RSUs, which means we get stock even if the shareholders aren't winning, that we had to change that. And we realigned our compensation and converted them to options. We gave up, I don't know, $21 million worth of stock. So I think was the number, don't hold me to that number, but it was a large number. And we just, we assumed that we were going to be hugely successful coming out of the shoot and we were wrong. You know, the market did not cooperate and things did not cooperate. So we recognize that we can't be winning if the shareholders aren't winning and, you know, So we're realigning comp across the board to make sure it's perfectly aligned with the shareholders. So this is sort of what we call our enterprise value calculation, which is if you look at that we're now presenting every quarter, To simplify it, we take net current assets, which is largely cash. And then we take our big ID investments and to give you sort of what our balance sheet looks like. And then we take our stock price, shares outstanding to give you a market value and then sort of calculate the enterprise value. Turns out that at year end, we were trading at a large discount to our enterprise value. As of the end of the quarter, it's gone down a bit, and that was largely due to the volatility and heartbeam and exozymes. Exozymes is... um, you know, is, is, I think it was $10 then it's up to what, 15. So if you did the calculation today, uh, the enterprise value discount, you know, the enterprise value, you know, discount to market would be a little bit bigger. Um, cause I think it was, it says in there it was $10. I think it's 15 today or something. So anyways, you know, that's, that's an easy way to look at it. Um, and I think that, um, Anybody that wants to create a model or something, we can help you to create the model, but that's where it stands today. If you look at net current assets dropped by about 2.3 million. So we actually utilize less than 2 million in cash for the quarter. I think that with our backlog of financings and whatever, again, what we're trying to do is be relatively cashflow neutral when you take the cash from financings and other revenue from patent vests, et cetera. And so we're not there, obviously we're pivoting on the type of companies that we're gonna fund and hopefully that'll increase our activity. and get us closer to that. But obviously what you can see is the big valuation differences are going to be in our big idea investments. So talk a little bit about the transformation, which is we were in the business of selling deals we've curated. So if we only had one deal every 18 months, we had a relatively small group of investors, four to 500 that were looking to invest with us and what have you. But as we scale this up to where we think we can do four or five companies a year, We're working with investors and advisors that can allocate to this public venture asset class. So it's pretty important to sell people on the public venture asset class or more importantly, a curated public venture asset class, which is what we do. So we started talking with these various folks and they gave us a lot of suggestions about how to sell this as an asset class. And it got pretty exciting in the last month or so as we started to have more discussions with them, which I'll talk about in a second. So one of them said, well, why don't you go back and actually tell us how to invest in public venture? And we said, well, geez, how do you do that? And so we got our analyst team together and we started saying, OK, why don't we go back to all 17 of the companies that we launched, you know, as after we started MDB. And go back and really look at each one and look at, depending on how you invest it, what would your return profile be? So not only demonstrate, okay, MDB's companies always gave you sort of the opportunity to make money, but also... you know, what was the best strategy to invest in them? And the results were pretty interesting. And so what we did is we said, okay, why don't we break it into three kind of, you know, models? One was sort of a buy and hold, kind of hold long-term. One was more balanced. you know, and more was sort of more active management and and the results were were interesting. But it was kind of like I didn't know how they were going to turn out. I had a I had a sense of it because, you know, we we obviously invest in these companies ourselves. Plus, you know, you know which of your investors kind of do better than others. But, you know, the results were were sort of interesting. So if you took sort of a buy and hold which is really not you know too practical but you could have and just kind of held it forever um you would have had you know a great return but your irr would be actually lower because of the time frame because we've been in business for 27 years if you know uh the return would would be would be much lower if you just took that approach And then if you took a balanced strategy, which again, this publication will be out and you can read all the details of what a balanced strategy is. You would have had an IRR of 49%. If you had active management, you would have had an IRR of 44%. So basically with active management, you took a little bit more off the table earlier and et cetera. So I encourage you all to read the report, which we'll be putting on our website. If it's not on the website already, it'll be on the website in the next few days. But this data and this report, now that we've presented to RIAs and angel groups, they sort of are understanding the difference between public venture and and private venture. And the real difference is, is that because of the liquidity, a lot of these companies, you know, not the ones that went and were sold, you know, not the preventions or the medivations that were sold to Big Pharma for huge numbers, but a lot of the companies that did well, you know, for a few years, you had the opportunity to take money off the table. You generally don't have that opportunity in private venture. And that's a huge difference from a return perspective and why I think our story is really resonating with a larger group of people. So the keys really for us are scaling and we need to really bring forth three or four new investment opportunities, not just ones that we like, but that really will do well in the public market. So that's why we're having to pivot because we do see things changing. And we do see that this may not be a market like we've seen before. We've gotten a lot of our really sophisticated investors are calling up and saying, hey, you guys need to to pivot your your product mix. And we're listening. And so but I'm super confident we can bring three or four of those opportunities every year and maybe more. But I think we can commit to three or four of those opportunities every year. I think that should be fairly easy. You know, the ability for our, you know, for us to really scale and take advantage of our clearing platform to broaden out this community of investors is really going to be important. And we're working really hard to do that. And that's our probably our number one initiative, because I think that our deal flow is certainly sufficient to find really, really good stuff. So, you know, I think the good news is I don't see that we need to bring on a lot of people unless we really, for whatever reason, scale the number of investors, you know, materially. We really are, our level of expenses right now can handle, you know, thousands of more investors without having to scale organizations. So we have a lot of scalability currently from our current people platform. Now it's just getting more, getting more companies through the pipeline. You know, talking about our existing companies, you know, Exozymes is really focused on getting, you know, really valuable products that are really meaningful. And I think NCT, which they recently announced, is really a big one. As you dig into it and you learn more about it, I think you're going to find out that NCT is a big opportunity for Exozymes. And I think there's, you know, other big opportunities right behind that. Heartbeam, with any luck, will have good news from the FDA on the 12-lead synthesis software. I think that's going to be a really big value-creating event in that now this card really can be in the hands of every consumer that is worried about their heart or other things. We're getting unbelievable reception from not only cardiac patients and and concierge docs and cardiologists that really see that there's going to be a huge market for this soon. ClearSign company, they're continuing to scale revenues. And I think that they are continuing to build a business. And the valuation has really been volatile. But we see them continue to make good progress. And Q recently had some news where they brought in a partner and they're now really, you know, making a move into autoimmune. And, you know, I would call it the depression in biotech. The company's got a good runway cash wise. And I think that you know, the platform has, you know, done everything that we always hoped it would do, which was having a, you know, really effectively a T-cell management platform to modulate the immune system to either, you know, effectively, you know, increase length of life if you have cancer or mitigate autoimmune disease. So we're still hopeful. Again, you couldn't ask for a worse biotech market in my career, but we're still hopeful that Q that the value of Q becomes realized in the not too distant future. So our key priorities coming forward are really just executed on these financings for our existing three big idea companies and really get new ones in the pipe, which I think we have a number of candidates that are close behind it. Continue to expand our investor community, really focusing on folks that are capital allocators as opposed to deal buyers. And I think that that's... happening in our conversations with ROAs and family offices and angel groups. And what are we good at? We're good at curating great opportunities. That's pivoting a bit to companies that are a little bit closer to product revenue and value creation. And we're continuing to scale our capabilities across the board. to help these companies. These companies are all struggling right now in the marketplace, but I think that's gonna change. And I also think that there's a lot of emerging growth companies that could go public that we're gonna be able to be a great platform for them to go public with. And I don't really see that we have any effective competition. There's really very few firms left that could take small companies public. So I'm super excited about what we built. And we've got to respond and just find the right things for this market. And but we have a really experienced team that's been doing this for a long time. You know, I'm tenacious. I can tell you that I'm going to I'm going to always fight to find find the best opportunities. That's what I'm good at. I'm spending more time that I've ever have really just diving in to make sure that happens. And and I'm having a lot of fun. you know, in these challenging times, because I really do believe we've got a special place for companies to go public that are the most exciting companies in the world. With that, Kevin, I'll turn it over to questions. I took exactly half an hour, so I'm glad I didn't go too long.

Great. Perfect, Chris. Thanks. You want to put my video on, please? It just went off. If you have questions, use the chat on the bottom. We're actually starting to get a couple in. The first question actually came in, Chris. Can you just talk about The one company that you have that you're financing the 20 million for the potential cure for diabetes question was, what's the name of that? And that's Paul X Bio. Yes. The other questions that we have right now is how does management interpret the persistent discount of the MDBH stock price relative to the IPO price? Is it execution, macro conditions or market misunderstanding or other?