Gatekeeper Systems Inc.

Good morning, ladies and gentlemen, and welcome to the Gatekeeper Systems Inc. shareholder call. At this time, all participants are in a listen-only mode. If at any time during this call you require needed assistance, please press star zero for the operator. Also note that this call is being recorded on January 30th, 2026. I would now like to turn the conference over to Doug Diamond. Please go ahead, sir.

Thank you, operator. I would like to remind everyone that our remarks today include forward-looking statements that are subject to risks and uncertainties. These statements are based on current management expectations and actual results could differ materially from those projected. These financial statements were prepared in accordance with IFRS accounting standards as issued by the International Accounting Standard Board. We may also use non-IFRS metrics like adjusted EBITDA. Please refer to our MD&A

filed on CDAR for full reconciliations. I'd like to turn the meeting over to our CFO, Kelsey Chin.

Thank you, Doug, and good morning, everyone. Gatekeeper filed our first quarter financial statements yesterday, which are available on CDAR Plus and Gatekeeper's website. I'll provide a brief review of our first quarter results, and then Doug will provide some comments and an update. Company revenue for the current quarter was 5.9 million compared to 7.3 million for the same prior year comparable period, representing a decrease of 19%. Cost of sales for the current quarter was 3.2 million compared to 4.1 million for the same prior year comparable period, representing a decrease of 22%. Gross profit for the current quarter was 2.7 million compared to 3.2 million for the same prior year comparable period representing a decrease of 15%. Growth margin as a percentage of revenue for the current quarter was 45% compared to 43% for the same prior year comparable period. Operating expenses for the current quarter was 4.3 million compared to 3.1 million for the same prior year comparable period representing an increase of 36%. Operating expenses increased in the current period primarily due to an increase in selling and marketing expenses, increase in research and development costs associated with new product development. Operating loss for the current quarter was 1.6 million compared to $33,000 for the same prior year comparable period. Total comprehensive loss for the current quarter was $783,000 compared to total comprehensive income of $576,000 for the same prior year comparable period. Adjusted EBITDA for the current quarter was a loss of $1.2 million. At the end of our first quarter, we had $18 million in cash compared to $15 million at year end. During the first quarter, we closed a bought deal, brokered financing, and we raised gross proceeds of $13.5 million at $2.10 per share. We had $2.8 million in payables and accrued liabilities at the end of the first quarter, compared to $10.8 million at year end, and total liabilities of $4.2 million at the end of the first quarter, compared to $12.4 million at year end. I will now turn it over to Doug to provide some further comments.

All right. Thank you, Kelsey. And just a reminder, everybody, I'll give a business update on a number of the things that are going on at Gatekeeper here, and then we'll open it up to a Q&A. So first of all, I want to remind everybody that the Q1 was quite successful. We've landed $46.3 million in new contracts that were announced during the quarter and subsequent to the quarter end. In the transit segment, we announced a $27 million contract with New York's MTA's Long Island Rail, and we've commenced work on that project, starting to invoice in smaller amounts. And if you read one of our press releases that we issued lately, you'll see how the management is projecting income to drop to the income statement moving forward on that large project. We also became an OEM transit video and data solutions provider for Alstom, one of the global leaders in the rail transport, and announced an Alstom contract to equip SEPTA streetcars with video. Our business also reached expanding globally with the announcement of the video contract with L&T Technology Services for Etihad Rail in the Middle East. and during the quarter and subsequent to the quarter, approximately 35 million in new contracts in the transit segment. In the school bus segment, we continue to make progress there. We announced a $9.3 million contract in California with a student transportation provider, which is a business relationship that is also contributing additional growth in our OEM school bus factory installation business model. I'm going to talk to you a little bit about how we're working with the OEMs, especially related to new legislation in Canada. Our business in California has shown solid growth as we have over 350 school districts as our customers, many of whom have completed full fleet installations. School districts are embracing our video management subscription offering for video analysis and storage. And most of our recent contract wins now include this recurring revenue component. And by the way, two years ago, that wasn't the case. So we're seeing a big adoption to our recurring revenue model, which has the potential to scale gross margins significantly as we turn on more mobile data collectors on our data center in Philadelphia. So during the quarter and subsequent to the quarter, we announced approximately $11 million in new contracts in the school bus segment. The school bus segment is an important piece to the component as we continue to protect children in and around school buses with our technology, which has layered in AI. The company also, as Kelsey said, raised a $13.5 million bought deal financing during the quarter allowing the company to strengthen overall financial position and execute large contracts. So just a little bit of information on where we are with our recurring revenue models. We are, as some of you may be aware, I talked a little bit about our strategy on our data center and how gross margins have the ability to scale. Because we partnered with Equinix and Gatekeepers and invested in owning our hardware. As we port more mobile data collectors to our data center, our gross margins have the ability on a monthly basis to scale from approximately 50% when we had 3,500 mobile data collectors turned on to approximately 90% as we continue to move towards 10,000. Currently, we're approaching... 7,000 mobile data collectors that will be delivering recurring revenue. And conservatively, we are projecting by the end of this fiscal year that we should be at approximately 10,000. So we're excited about that business model. It has the ability to scale our data portion of our business from approximately 50% to 90% gross margin. So that being said, I want to talk a little bit about our work with OEM manufacturers on the school bus side, which is an important component to meeting this new regulatory requirement in Canada, which represents, and this is a projected number by Transport Canada. And by the way, Gatekeeper participated in a three-year program with Transport Canada with various pieces of our technology. one of which was mandated moving forward, which will affect approximately 65,000 school buses up to the year 2036. And really what that means is that starting in 2027, every school bus in Canada, every new school bus in Canada must have a 360 system installed. Gatekeepers' relationships that we have across Canada with the school districts, in my opinion, is unparalleled to any of our competitors. On top of that, we're working with the OEM bus manufacturers to ensure that if our system gets specced by end users or provided by OEMs, that they're installed at the factory. We're going through that process now, and we're excited about that opportunity. Of course, the school bus market has approximately 3,500 customers, and we continue to add customers every day. Not everybody is buying, obviously. every year, but the projections that we have in the K-12 market protecting kids in and around school buses are pretty aggressive. And I also want to remind investors that we've seen a significant growth in the revenue per vehicle. Only a few years ago, we were about $1,500 on a system sale per bus. We're now seeing, in some cases... that number growing up to $8,000 per bus. And just as a reminder, if a school district was to outfit their school buses with all of our technology, then the revenue per bus would be upwards of approximately $15,000. So Gatekeeper is busy on the engineering side, engineering more and more safety solutions for the school bus market, while at the same time, we continue to invest in R&D sales and marketing to drive business. Back to the transit side of the business, we continue to add more horsepower on the sales side. We continue to drive more partnerships in order to assist with scaling our revenue and we're starting to see the results, at least in the sales funnel. There is approximately over $200 million in our sales funnel, and we are basically blocking and tackling, trying to drive that revenue into Gatekeeper. And quite frankly, the results on the back order, frankly, are pretty staggering with the amount of sales that we've landed. As I said earlier, $4.6 million in new contracts announced during the quarter. So that's a little bit of an update. I see there's a lot of shareholders that have come into the meeting here this morning. So I'm going to open it up to Q&A.

Thank you, sir. Ladies and gentlemen, as stated, we will now begin the question and answer session. Should you have one, please enter it on the web platform using the Q&A tab. Thank you.

One moment, please, for your first question.

Operator, the first question is, congrats on the $46 million backlog. Incredible. Also, congrats on holding your first earnings call. Can you provide an update on the largest TTC contract bid that closed?

Just hang on a sec. This system's updating. Just bear with me, investors.

So just a little bit of information on the TTC contract. Gatekeeper landed a fixed price contract with TTC to provide video systems outside of those trains, of the streetcars, and we continue to work with TTC to complete on that project. Things are going very well. we've got some analytics that are built in as well as we continue to work with TTC to refine those analytics to basically solve the problem outside those buses which are basically when the bus comes to a stop and a vehicle passes the bus, TTC at least is indicating that they may want to issue tickets. So they're looking at our cloud-based application to take the evidence from the edge, from our system, and potentially issue tickets in the future. As far as further business with TTC, there is an RFP on the street that basically states that the successful bidder for the internal camera systems on those trains must integrate with the winner of ACIS and Gatekeeper is the winner of ACIS. In addition to that, the RFP calls for integration with Genetech, which is arguably the largest enterprise software solution provider and access control as well as a whole host of other features in the security market today. And by the way, as part of our obligations with MTA, Long Island Rail, there is a request to integrate with Genetech. So we are working with Genetech vigorously to go through that process today. That is actually probably one of the more exciting things going on in our business because of the breadth of distribution and systems integrators that Genetech has. For potentially the first time in the company's history, once this integration is complete, We will have joined the largest transit agency in North America, their train video with Gatekeeper's technology backbone to enterprise software, which has the potential to open up significant distribution opportunities for us on a global basis.

Okay, next question.

With the recent equity financing completed, does Gatekeeper require additional financing in the near future with what you have in the sales contract pipeline? At the moment, we're sitting on 18 million in cash. And by the way, I'll just touch a little bit on that. You know, Gatekeeper, as everybody knows, you know, there's obviously with the U.S. Trump administration, and the escalating issues with respect to tariffs. In the spring of 2025, Gatekeeper had an opportunity based on a 90-day window set by the administration in the US to purchase a significant block of inventory. We did that. We committed to, in the fourth quarter, we committed to approximately $5 million in inventory, $5 million U.S., approximately $7 to $8 million Canadian. And the terms on that inventory had us paying for it in Q1 of 2025. So that's one of the reasons that you see the accounts payable reducing significantly, but we still finished with about $18 million in cash. So as far as our balance sheet goes, We've cleaned some things up on the balance sheet. It's clean. We believe that with our current build-out and our lines of credit, our letter of credit with specific suppliers, we don't have any requirement for any financing to take care of the current backlog that we have. Now, I will say this to investors that if there is... If there's any change or material change moving forward, and that might surround around acquisitions that we're looking at, that's also part of our growth model, not just the organic growth model, then there could be reasons to do some structured financing, which, by the way, doesn't necessarily mean that they would be equity-based. Gatekeeper, in my opinion, has done a phenomenal job building a business out, protecting shareholders with no bought money debt, minimal financings. Before this $25 million, the two bought deal financings that totaled approximately $25 million, which, by the way, came in at over $200 million market cap collectively. Gatekeeper had only done a $4.2 million financing back in 2017. So, In my opinion, we've done a phenomenal job protecting our shareholders against dilution while growing the business and landing some of the largest contracts in the company's history. Next question. Is there enough in the sales pipeline to achieve analyst revenue targets for fiscal 2027? I'll answer that question this way. At the moment, absolutely there is. In fact, there's more in the sales funnel to exceed analyst projection. But that doesn't necessarily mean that we're going to be able to execute on what's in the sales funnel. The reality is that what's in the sales funnel is not Excuse me. There's things that are just outside of our control and timing. And quite frankly, we were a little bit offside with our first quarter being only $6 million or $5.9 million in revenue. But that wasn't because we lost deals. That was simply because of the timing of the deals landing. And frankly, we would have hit our projections, exceeded our projections, if we would have had a little bit more inventory in place to deal with the large project, the $9.3 million project in California. So I encourage investors to not necessarily be too concerned about the lumpiness from quarter to quarter and stay laser focused on what is going on in this business as it relates to our increasing backlog and management's comments on what's happening in the sales funnel. Obviously, I'm not going to delve too much into the sales funnel because these comments are part of a public forum and we still have our competitors listening in. So I'll be a little bit close to the vest on some of the comments that I make. So I appreciate your patience there. So in 2025, small caps YouTube video, there were two bids mentioned, 70 and 100 million. Are these still in the pipeline and any updates? All right, so what we're seeing in our pipeline is an increase in deal flow size. And that is the result of our strategy in the transit market. So obviously when you land a contract the size of MTA, and by the way, when we started chasing after that contract, there were some comments internally, should we go after it? What is the probability of us landing a contract of that size? Not only what the size of company gatekeeper is, but also with the size of our balance sheet, how much cash we have. I was a little bit nervous about that. MTA would be a great example of myself thinking that we may have to actually do a top cash up on the balance sheet. But at the time, they looked at our balance sheet, they studied us closely, and they awarded the contract. So what's going on now is that I believe because of the nature of and the due diligence that these large transit agencies have executed on with Gatekeeper and in some cases made that due diligence public, we have large opportunities in front of us because of that. So that's where I've made comments that some of these projects that we have in our sales funnel are bigger than anything that Gatekeeper's ever seen before. And that's a combination, as I said, of some of the contract wins that we have had successful with. In addition to that, it's the nature of the train business, all right? Nature of the train business. So if you look at Alstom, for instance, they do business in 70 countries. I thought that Alstom would be We'd be on the back of Alstom and pushing out globally. But we are working with them to get that done. But L&T Technologies came in first. We weren't expecting that. A multi-billion dollar company conglomerate out of India with this Middle East rail contract. So we want to make sure that we block and tackle there very well because that could lead to other significant business larger projects with that systems integrator. So we're really excited about that opportunity. And we continue to look at other projects in different countries as we push out globally. And by the way, there is a major focus in North America. So our North American sales are our meat and potatoes of our business, but we cannot ignore where money is being spent in certain transportation segments in different countries around the world. And our platform is well-suited for those projects. So we currently work aggressively on some of those as we push out globally. Another question, what is the percentage of split in transit versus K-12 in the $200 million sales funnel? The $200 million US sales funnel, and by the way, that's growing every day, all right? So it's 200 million today. That's only transit. That has nothing to do with K-12. K-12 is a separate sales funnel. And two completely different, you know, makeup of divisions. Transit has fewer customers and in some cases bigger projects, whereas K-12 is a lot of customers. Projects could be anywhere from $25,000 to multiple millions of dollars as we expand our product line in the K-12 side. And this paradigm shift to wireless really brings alive our data play as we transition.

to a data company. Here's a good question.

Why did you need to do a $14 million money raise Wouldn't it have been more shareholder friendly to incur debt from a bank rather than dilute shareholders? All right. It wasn't so long ago that our stock price was down at 40 cents. All right. We are chasing after large contracts, as I said. MTA, we are very fortunate that the current working capital that we had sufficed in order for them to agree to issue a $27 million contract. I don't believe with a stock price approximately, what, 10 or 12 months ago at 40 cents, us raising not $14 million, but $25 million in a life offerings is detrimental to shareholders on a dilution basis. Not at all. Not in my books. That is actually prudent management. We took advantage of our currency. We raised as much as we could. And by the way, we significantly changed the shareholder base. We now have between 25 and 35 institutions that have a foothold in Gatekeeper and have appetite for more as the company grows and executes. So bringing on debt to take on these large projects when our currency was heading towards $300 million, which, by the way, was 60 times EBITDA. 60 times EBITDA is where we were at $300 million. That's a pretty healthy stock price. Now, yes, it's pulled back, and I know shareholders are not happy with that, but that's the reality. I don't think that has anything to do with the fact that we raised $25 million at an average market cap over $200 million. I believe that was a prudent thing to do to protect shareholders, give us the cash that we need to invest in the business at a time when that business needs investing. So that's my opinion on it, and I don't believe that that's dilutive. And we still today... we don't have any borrowed money debt. And not a lot of micro-caps can claim that to do what we've done with minimal financing and no debt. So can you elaborate, next question, can you elaborate on the L&T technology services relationship and how that could drive new business globally? So that's a good question. We are working with L&T to deliver into that project. There is an enormous amount of money spent, or being spent, projected to be spent, in the Middle East as it relates to the transportation sector, in particular the communications and video portion of that market, and Gatekeeper's current product line is well-suited to get on the back of an L&T. By the way, it's early days. We continue to build that relationship. But without putting a number on it, there's an enormous opportunity there in the Middle East. So for L&T Technology, a company of that size, and by the way, they came to us. We didn't reach out to them. They reached out to us. And I got to believe It's because of the good work that our transit team is doing. You have to have a strong engineering team, which we do, in order to execute in the train market. So the work that we've done with Southeast Pennsylvania Transit Authority and MTA and TTC, I think is the reason why the credibility that we have is starting to spread. So a lot of opportunity there. By the way, I'm going to touch on the SEPTA business. Gatekeeper is specced in three train deals there. We've probably installed more crash-hardened memory modules than any company in North America, we feel, because of our relationship with SEPTA. And the first train deal was won by Alston. We've obviously announced a contract there. The second train deal was won by Hitachi. We don't know if we're going to be doing business with Hitachi. or with their subcontractor on the communication and video side of things. But I will tell you that we're specced in two more train deals, which has significant more revenue attached to it than Long Island. I'm not going to throw a number at you because it's still its early days, but our projection on those two train deals is, as I said, it's significantly more than what MTA is. So we're excited about the work that we've done at SEPTA, and we continue to leverage that not just throughout North America, but also in various countries on a global scale. So hopefully here shortly, we'll have more information about what's happening or about potential in other areas.

So MDC growth, this is quite a jump in the number of MDCs under subscription.

So as the growth in the platform as a service segment will come from both new deals and conversions of existing MDC base, could you maybe provide some color on the rate of conversions from the legacy MDCs versus the attachment rate that comes with new deals? That's actually a really great question. So I'll answer it this way. When we launched our data center not so long ago, we had 300 MVCs delivering recurring revenue on that data center. So fast forward approximately 20 months, and we're already pushing, well, as of the, and this is published information in our financials, but at the end of 2020, end of 2025, we had 4,000 delivering revenue. Now we still have a backlog that is ready to turn on and that will obviously increase that number, but we are quickly heading towards 7,000. And as I said earlier, that number, we believe, conservatively, should be around 10,000 by the end of this fiscal. It should be. And as far as the conversion rate, this is just a ballpark number, but any new customers that are coming on that have invested in wireless infrastructure, approximately 90% of them, and you can see it in our news releases, approximately 90% of them or higher are taking our subscription model. What we're also finding is that If a customer doesn't necessarily want us to host on our data center and they want to host on their servers, what we're finding is that the IT departments quickly get bogged down with the amount of video that they're dealing with from their buses. And then they come back to us and ask us to host for them. And that's where our area of expertise lies. We feel like we can be quite a bit more productive with our data center than customers can be using their own servers, which quite frankly, they are not designed to take the enormous amounts of data that are recorded every day by every one of our MDCs, which in some cases has 12 cameras at high resolution connected to it. That's why we're excited about our strategy as we transition to a data company. Keep in mind, we've only been at this for a couple of years. It is escalating quickly. We launched a data center. We make a significant investment. We partner with Equinix. We own the hardware. We can scale margins. well over 100% as we move forward putting more, as we get over 10,000. We've got 65,000 mobile data collectors out there currently, and some of it is older technology, and they're upgrading their MDCs to larger MDCs as the requirement for more cameras escalates because of the safety issues in and around buses. And again, I'll shine the light on Canada. groundbreaking legislation that is going to see a 360 system installed on every school bus dated out to 2036. That is a fantastic legislation for Gatekeeper, especially given the work that we have done with the OEMs, the bus OEMs, being able to install our system, our technology at the factory. So this strategy of converting existing customers to our data center, and customers that are new, it's fantastic. I just think it's a beautiful model, and you marry that K-12 model with the large projects that we're chasing in transit, and it really sets Gatekeeper up to be a fantastic investment moving forward. Now, the quarters are going to be lumpy, folks. That's just the way it is. Those are things that we don't have control over. But I encourage investors to get a piece of this company, put it away, and watch us grow. Because what we're doing internally, it really is something that I've just never seen before. Our employees come to work every day jacked up, excited to build this business. We are in a great space. And yes, our stock's pulled back a little bit. But that doesn't have any reflection in what is going on inside this company as we transition to a data company, just like we put that plan in place back in 2018. And frankly, we are executing on it. Okay, we've got time for maybe one more question, and then I'll turn it over to the operator.

So just give me a moment here.

So I understand your partnership with LTTS is the first freight-oriented train program that you've secured. Are you seeing Gatekeeper gradually expanding in the end market freight train as well? And are there any visible opportunities you're currently working on that are on the horizon? So the answer to that is absolutely yes. Yeah, L&T Technology represents our first freight deal. You may see us start to add features specific to freight, you know, specific to that part of the market. But yes, wonderful opportunity with L&T Technology. And a little bit of a... a different opportunity in freight than it is in passenger rail, but I will tell you this. They came looking for us for one reason, and I believe it was obviously the credibility that we built with SEPTA and MTA and TTC, but they were looking for an FRA-compliant product line, and Gatekeeper has it. So we are going to continue to strengthen that product line and work with the OEMs on the train market. But the freight market is relatively new to us, and we believe opens up a significant opportunity for future growth. So the answer to that question is absolutely yes. Operator, we are out of time. The market is about to open here in four minutes, so I will hand it over to you to close things up. But in... One final comment. Listen, to all of our investors, to all of our investors, thank you so much for your support. It's not easy building out a micro cap with minimal capital, but I think that we've done a great job doing that. We have significant support from our investor base, and I couldn't be more excited to be shoulder to shoulder with our investment group building out Gatekeeper as we move forward into the future. So thank you for that and have a great day.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, you may disconnect your lines. Enjoy the rest of your day.