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spk00: Well, thank you for joining us today, May 3rd, for the IIOT Auxis Incorporated Investor Conference call covering Form 10-K Annual Results. As always, I will be joined by Cliff Emmons, the CEO of the company, and Karen McNamara, the CFO of the company. But before I introduce them and we begin this call, I must give you the forward-looking statements. Now, this call may contain forward-looking statements that reflect management's current views about future events and financial performance. Forward-looking statements often contains words such as expects, anticipates, intends, or believes. The company's forward-looking statements are subject to a number of risks and uncertainties that may cause actual results and events to differ materially from those projected in the forward-looking statements. Risks and uncertainties that could have adversely affected the company include, without limitation, the loss of major customers, the company's failure to obtain new contracts, the company's inability to patent products or processes, their infringement of patents held by others, their inability to finance their business, and other risks and uncertainties that are discussed in the most recent filings with the Securities and Exchange Commission. The forward-looking statements made on this call are made only as of the date of this call. The company undertakes no obligation to update their forward-looking statements, whether as a result of new information, future events, or otherwise. If you'd like to read this at your own leisure, you can do so by pulling it up on the filings with the SEC at sec.gov or just using the ticker symbol for the company, ITOX. Go hit the newswire. You can find... the forward-looking disclaimer in every press release. Now, with that, let's get to the fun stuff. Let's welcome Cliff and Karen to the show. Cliff, how are you today?
spk02: Doing well, Stuart. Thank you.
spk00: Thanks so much for taking the time to have this call and entertain all the questions from your shareholders as well as giving us your overview of the results. And Karen, thank you for your time today. Welcome.
spk01: Thank you very much, Stuart.
spk00: All right, Cliff. Well, congratulations on the successes of this past year in 2022 and the momentum you've been able to carry forward into Q1 of 2023. If you would, Cliff, could you please share your opening comments and overview for us now?
spk02: Happy to do so, Stuart. We're very pleased with our results in 2022 as recorded in our recent 10K report. As promised, our 2022 revenue exceeded that in 2021, doing so by more than seven-fold. This is the highest annual revenue we've had since the negative impacts of the COVID pandemic. Also, as promised, our revenue in the second half of 2022 exceeded that in the first half. And furthermore, Fourth quarter revenue exceeded third quarter revenue, marking three consecutive quarters of increasing revenue. There were several reasons for that strong growth in 2022, including the following. First, our DOT bridge monitoring contract. We were awarded a six-figure subcontract from a major Northeast States DOT for bridge monitoring. in addition to the extension that was given on the previous contract. This project will continue to contribute a strong revenue stream through June of this year, and we're confident our performance will yield further extensions and expansions in the second half of this year. Secondly, our continued focus on our smart manufacturing vertical enabled us to secure a CNC proof of concept, or POC, contract in December of 2022. The POC successfully kicked off back in January and will conclude this month. It's already yielding results that are impressing our customer. We expect the SAS contract to follow, which would contribute to revenue by the second half of 2023. The ongoing strength of our strategic partnership with Aindura, which provides supplemental expertise, equipment, and software, it ensures we'll continue to bring value to our customers. Finally, our partnership with the Canadian Indoor Air Quality Sensor and IIoT platform company, Airtas Sensor Networks, continues to progress well. and our retail sales efforts are beginning to show results. All these strengths are pointing to great results for 2023, which I've stated previously will be a year in which we transition from surviving to thriving. Very good news indeed for Oxus, our customers, and our shareholders.
spk00: Well, thank you so much for that, Cliff. We appreciate your comments. Karen, I would like to turn the call over to you at this time, if you would give us your comments. And once again, congratulations to you as well for all of your efforts and the fruits and dividends that they paid off in 2022 and so far here in 2023. Karen, the call is yours.
spk01: Great. Thank you so much, Stuart. So I want to start off by letting our shareholders know that we continue to be responsible with our funding. by keeping our expenses as low as possible. One of the ways that we do that is we make sure our staff is the right size for our workload. We supplement our workforce with part-time contractors when services are required and leverage our partnerships such as the long successful ones that we have had with Angora. We work diligently to minimize these monthly expenses For example, we finished 2022 with operating expenses down 17% from 2021. We also continue to decrease our debt. But running a public company does come at a cost. And I think I've mentioned this before. We must maintain a certain level of overhead. We spent approximately 25% of our operating expenses on outside services related to being a fully reporting company.
spk00: Well, Karen, thank you so much for that as well. Now let's turn the call over to you, the investors. We, as always, have taken all of your questions. We've compiled them, made sure to get rid of any redundancies and things of that nature. So, Cliff, our first question is for you. Here it is. Are you actively pursuing AI tech contracts? And what distinguishes your AI technology from other companies?
spk02: Thanks, Stuart. The short answer is we are absolutely pursuing AI tech contracts. In fact, both our current projects heavily employ our proprietary AI machine learning technology. But let me take a few moments to discuss the recent and ongoing excitement around AI technology like ChatGPT and what distinguishes our AI technology from others. First, Everyone who uses artificial intelligence, or AI, in their products and services, including us here at Oxus, are excited to see the enthusiasm around chat, GPT, BARD, and other large language models, or LLMs. Those are the specific types of AI programs that chat, GPT, fall into. Everyone is talking about it. from teenagers to CEOs, tech companies, and non-tech traditional companies alike. They are all experimenting with it and savvy investors are funneling money into it. For sure, these AI programs have raised the awareness of customers and investors to the good, the bad, and the ugly of this technology. All of this attention is helpful to all AI tech companies, including us here at Oxus, and our unique AI machine learning technology, because it allows us to contrast that tech with ours and point out the pros and cons of our technology as we apply it to our key industry verticals. LLM's LikeChat GPT build on techniques such as natural language processing, or NLP, using convolutional neural networks. They require large amounts of data to train the models and significant investments in fast and expensive processing resources. They have shown significant weaknesses in the form of hallucination, That is, they actually will fabricate information. Sometimes that information is false. Our AI technology at OXIS uses sophisticated machine learning algorithms, techniques like clustering, Gaussian mixture models, and Bayesian information criteria. You get it, pretty geeky stuff. Terms mostly only known to data scientists and mathematicians. We focus on hard data coming from sensors and machine controllers, what we call time series data. We develop algorithms from relatively small amounts of data from specific manufacturing processes or a particular bridge design and constructions. The algorithms can be run on common, inexpensive processors, sometimes as simple as a Raspberry Pi, what we call edge computing, or computing where the data is gathered. Our technology gives manufacturers, infrastructure asset managers, and facility managers the insights they respectively need to be more productive, safely maintain their bridges, and optimally manage their buildings without the hallucinations. It is our AI machine learning technology that allows us to tackle the hardest questions these customers have, such as extending tool life and minimizing tool breakage while maintaining precision and quality for CNC machining shops. So in summary, yes, we are pursuing AI tech contrast. And we're pleased with the attention that programs like CHAT-GBT are bringing to our technology and industry.
spk00: Excellent. Well, thank you for that deep dive, Cliff. Karen, this next question is for you. And several shareholders have questions around this topic. And we've discussed it in previous quarters, and it's about dilution. Most often, the questions fall into two topics, which is why is there dilution? And then how long will that dilution continue? Karen, can you provide your insights?
spk01: Absolutely. So you're correct. This is a question that we received in the past. And the first one here is why is there dilution? First off, there's only certain ways that you can raise money. You can raise it through convertible debt, but people don't like when you have convertible debt and we continue to work to decrease this debt. The only other way to raise money is through a line of equity or selling stock. This doesn't mean that the value of the company is going down. We put that money towards sales and marketing, to execute projects and to fund our operations, all which are very important in running a company. Secondly, how long will it continue? Well, first, let me let you know that we currently have approximately 402 million shares outstanding. We will continue with this line of equity through 2023. Projects should offset some of it this year, and it should be less than last year. While we realize that some shareholders aren't keen on dilution, our leadership and board are comfortable with this method of funding because these funds create value. We also believe that the current market cap doesn't reflect the true valuation of the company. We'll continue to work to grow the valuation of the company, which in turn grows shareholder value.
spk02: Karen, thanks for that answer. And I just wanted to also add on a related question that came to us. And there was a question about why weren't we pursuing funding through angel investors and venture capitalists? To put it simply, most times angel investors and venture capitalists aren't interested in jumping into a public microcap company traded on the OTC. like IIoT Auxis. They prefer to invest in private companies and actually stay with those companies till either the companies have an IPO or are acquired by another larger company. And there's an important point to be made here. Even if we were able to attract angel investors or venture capitalists, that would still create dilution for our current shareholders. In actuality, in the case of the private companies, every time you hear another round being raised, those rounds are dilutive to the earlier investors. So unfortunately, there's no way to escape dilution if we want to see the company grow and become cash positive.
spk00: Very good, Cliff. Well, we have another question for you. Some shareholders are interested in gaining guidance for the rest of 2023. What are you and your team focusing on this year, Cliff?
spk02: Thanks, Stuart. Overall, the focus is twofold for me and my team. First, execute on the current projects. Secondly, grow the business. Now, we'll grow the business by first getting new business from current customers. Like I just mentioned about the DOT contract, as well as the CNC POC. Secondly, we're going to focus on getting new business with new customers. I also want to give some overall growth goals. First, 2023 revenue, we expect to exceed that of 2022. An important caveat here is as we execute on current projects, capture new business with current customers and add new customers with new projects, shareholders should expect some lumpiness in revenue from quarter to quarter. Although we will continue to target increases quarter over quarter, the more important metric is year over year growth. Second, we are going to focus on increasing the number of customers somewhere between three and five fold. Increasing the number of customers is the primary goal and metric we need to ensure that overall growth in revenue. Let me break down how we'll add customers and build revenue in each of our three key segments. First, smart manufacturing. This is our biggest and most important market. The global smart manufacturing market, also known as Industry 4.0, was $97.6 billion in 2022, and it's expected to reach $228.3 billion by 2027. That's a CAGRS of 18.5%. The excellent results of our current POC position us well to market to numerous prospects, some which we're waiting to see what we could accomplish on this current POC, and others that we generated from business development activities with IIoT World late last year. Our focus will be to build on the successful CNC POC to land more CNC customers and to secure initial POCs in other discrete manufacturing categories, such as metal stamping, plastic injection molding, plastic extrusion, and automated assembly and test. The second industry that we focus on is structural health monitoring or bridge monitoring. It's our second most important market due mostly to the strength of our current business and expertise. The worldwide structural health monitoring industry was $2 billion in 2021, and it's expected to reach $4 billion by 2027. That's CAGR of 14.6%. We are actively pursuing DOT contracts in other states with the heaviest focus on the Northeast, Mid-Atlantic, and Florida. It's also important to point out that we actually have two very strong contacts in two additional Northeast states other than the one that we have a current contract with. I just want to make that emphasis because there was a question from our shareholders about if we are reaching out to other state DOTs. There is a caveat that comes along with this industry. These are all government contracts, either state for local governments. They're typically awarded on an annual basis. So time will be required to develop the contacts to submit proposals to active bids and successfully close the contracts. Finally, let me talk about indoor air quality. Another good industry for us to target. Indoor air quality monitors was estimated to be a 3.7 billion US dollar industry in 2020, and it's expected to reach $6.4 billion in 2027, growing at 8.2% per acre. Now, we're still learning the ropes of the sales process through our partner. We're starting to see some success with small retail sales, and we've begun focusing on larger site opportunities, ones with more sensors at a single site. both through our current advertising channels and some targeted outreach, especially in the Northeast. So overall, we'll continue to build partnerships within these segments, as well as continue developing the other opportunities we've shared in previous press releases. To summarize, we have a clear plan for 2023 growth, and we'll continue to execute the plan.
spk00: Well, thank you for that, Cliff. Karen, I've got another question for you. And some of the shareholders are interested in getting an update on the company's existing notes, including the status of the senior secure note. Karen, can you give us some insights on that?
spk01: Absolutely. So as far as the senior secure note, we had filed an 8K regarding that. And as a follow-up, the negotiations are going well. We do expect to announce and file a resolution shortly. And then just secondarily with GHS, we have two notes with them. And the larger note with GHS has been paid off. And other good news there is the maturity date of the remaining note has been extended by two years. And to close out this question, just a reminder to everyone, is that I want to emphasize that all of our note holders, they all continue to be supportive investors of Auxis.
spk00: Thanks for those insights. Karen, any closing comments or thoughts from you before I hand it back over to Cliff?
spk01: Yeah, so our shareholders, they can feel confident that we'll continue to be fiscally responsible with our funding and the revenue until we become cash positive and beyond. I, of course, want to thank you, Stuart, and the shareholders that sent in their questions. We want to continue to be transparent with our shareholders through our filings and these calls. And as always, I'd like to give this reminder that all current and potential shareholders should read our SEC filings, especially the latest 10-K, for additional details, overall information that wasn't covered on this call. And as a reference, you can find these SEC filings at www.sec.gov and search for IIOT Oxus, Inc. Thank you.
spk00: Thank you, Karen. Really appreciate that. Cliff, the call is yours once again for your closing thoughts and comments for the shareholders and listeners.
spk02: Thank you, Stuart. Just to recap, 2022 was a great bounce-back year for Oxus. 2023 will be a transition from survive to thrive, and we'll thrive by growing our customer base, which will in turn grow revenue. While we understand some of our shareholders aren't pleased with our current funding model, it is necessary to build the company's growth to become cash-positive. We're executing well on our current projects and our customers are satisfied. Our AI machine learning technology is uniquely capable to solving the toughest problems in our target industries and will thrive on this strength. In closing, to echo Karen's comments, we appreciate the support and feedback from all of our shareholders. And we look forward to continuing our dialogue through future calls. Thank you, Stuart.
spk00: Thank you, Cliff. Cliff is the CEO of IIOT Auxis. And of course, we were also joined by Karen McNamara, the CFO of IIOT Auxis, ticker symbol on the OTC ITOX. And this concludes our investor conference call covering the Form 10K annual results. I want to thank everybody for participating today, as well as those who sent in their questions in advance. Have a wonderful rest of your week.
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