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spk00: Good morning, everyone. Let's get started. I'm Brian Stringer. I'm the Chief Financial Officer for Zero One Communique. And with me today is Andrew Chung, our President and CEO. And welcome to our second quarter results and business update conference call. Andrew, if I could have the next slide, please. Okay, if you would, part of this presentation, please take a moment to review our forward-looking statements, which form an integral part of this presentation. Now, the agenda today will be I'll turn it over to Andrew. Andrew will take us through our results for the quarter and prospects for the future. Following that, I will act as moderator for a Q&A session. We're on Zoom, and I think by now everybody understands how to use Q&A. There is a Q&A button at the bottom. Just click it, type your question, and I'll present it at the end of this session, Andrew's session. Okay, now, Andrew, with that, I'll turn it over to you.
spk01: Thank you, Brian. Welcome everyone. My name is Andrew Chung, president and CEO of Zero One Communicate. And welcome to our 2024 second quarter financial result and corporate update. I would say, I would start by saying that there are actually more and more evidence showing that attentions on the post-quantum cybersecurity are gathering momentums. First of all, we are already halfway into 2024, and that IBM is calling for a 1,400 qubit version delivering this year. So they are once again fulfilling their promise this year. The next step is 4,000 qubit, sometimes in 2025. Now, only three months ago, when Vitalik Buterin, the founder of Ethereum, had proposed a method to hard fork the Ethereum chain to save most Ethereum users' funds in a quantum emergency diagram. He called it quantum emergency. So before that, 99.99%, I would say, of the people in the cryptocurrencies market still believe they are safe. While this will likely take a long time to achieve in the consensus because it is a widely held spread community of open source developers, it is a huge alarm clock for the complacency. And right after Buterin's wake up call attentions, Google had also announced the Chrome version 124 will have post quantum encryption built in as a default security. I guess the most notable Q-Day preparation activity during this quarter is the latest action from the National Institute of Standard and Technology, or people call NIST in the US. To those who don't know NIST, actually NIST is a semi-government agencies in the US who independently standardized different study, I would say study and standardized different technologies for the US, which most of other country will follow suit. It is not a coincidence that NIST had started their PQC post-quantum cryptography standardization process in 2016, almost in line with the inception of our INCAP business unit. Originally, they proposed to have the standard finalized in 2024, but due to the faster than expected development in quantum computers, they had the first draft of standard, they call the FIPS 203, FIPS 204, and FIPS 205 in August last year. In April, less than two months ago, NIST had their fifth PQC conference held in Maryland and expected, they proposed to have one more recommendation from the code-based PQC category later this year to kind of wrap up the process. So, so far, there are three candidates in the run called Classic McAleese, BIKE and HQC. Our prediction since the inception of INCAP has been on Classic McAleese. And therefore, we have jumped the gun by having that included in INCAP already since day one of our encryption engine. If this turns out to be correct, we are indeed five out of five in our predictions. The other four preliminary recommendations in 2025 were already in the INCAP engine stack. So you can easily figure that with our ability to predict the standard is allowing us to be a few years ahead of the world in creating end-user quantum safe applications. While our competitors are busy creating their encryption or quantum safe cryptographic engines, according to the NIST standard, we are already conducting POC and end user applications for our partners, as well as creating the email applications. This gives us a lot of hands-on experience in the creation of post-quantum end users application, such as end-to-end email securities, quantum safe cryptocurrencies, quantum safe remote access, et cetera. Our business model is quite simple. We are planning to give away basically our encryption engine for free while making money in end users application as well as helping our partners in converting their applications to become quantum safe. Latest vertical we are exploring with potential partners are in the areas of AI, like quantum state AI, machine language, machine learning, cryptocurrencies, remote access, and file sharing, which we believe are the lower hanging fruits. So let me take this opportunity also to explain why AI machine learning requires encryptions. As we all know, AI today is like the early days of the internet when everything is naked. The machine learning process is fed with unencrypted knowledge and therefore the final query, the final trained knowledge are also unencrypted. And this actually raises a huge privacy and security issue because you can imagine, for example, an online retailer spending huge effort to train the AI about the customer behavior. This knowledge is essentially the crown jewel of the retailer. It will be a disaster, therefore, if a hacker managed to steal the trained knowledge and sell it to a competitor. So the problem is way bigger when applying in other AI applications, such as fraud detection, medical image analysis, and stuff like that. So adding encryption and privacy to AI machine learning essentially means you're feeding the machine learning process with encrypted data. What exactly does it mean? It's like as a result, the trained knowledge are also encrypted and therefore the query process is also encrypted. So let me give you a live example of what exactly that process is. Say when we were learning about one plus two equals three at the age of three or whatever, we were all being shown as like a one you know plus a two and equals three however if your whoever your trainer you know or you or how you train your kids is that you're giving instead of one you're giving your kid a mouse okay that's a one and then a eraser as a two and a pencil as a three. So you're training your kids like the mouse plus an eraser equals three. That to him, the one plus two equals three. So this trained knowledge of the kid is encrypted because knowledge is the mouse plus an eraser equals to a pencil. So in other words, there's no damage if the trained knowledge, the encrypted trained knowledge are being stolen by hackers because the query won't make any sense without The private key that decrypted, you know, that the mouse is actually one, the eraser is two, and pencil is three, right? So we have a special way of encryption, not only that it is quantum safe, but also allow the trained knowledge to be shared among competitors without disclosing the content. All right. So quantum-safe AI machine learning has a wide, ultra-wide application, just to name a few, like typical users would be like the large retailers, which I kind of alluded before, or secure multi-party computation, machine learning outsourcing, privacy-preserved machine learning, medical record learning, financial model learning, auto trading, image recognition learning, fraud detection, supply chain optimization, or even a smart contract within a blockchain. So the sky is the limit there. As mentioned during our last meeting, cryptocurrencies have apparently exited the crypto winter. So the renewed interest in our quantum state coin technology has been strong. Although we can't comment too much on our work in progress, I can comfortably talk about the technology we have that is now patent protected. Our technology indeed allow us to apply quantum safety on top of just about any existing blockchain, whether it is private, public, permissioned or permissionless, all applicable. I believe this represents a huge business opportunity. And even when anything happened, we will make timely announcement to the public. Now another opportunity in discussion involves file sharing on the cloud. This is very common to share files with colleagues over a cloud storage like iCloud, Google, Box, and et cetera. But some of them has AI available for integrators. So we can easily create a customized file sharing application that integrates with these cloud providers by encrypting files before uploading while decrypting after downloading. This essentially allows people to share very confidential files with colleagues over the cloud because only the intended recipient have the private key to decrypt them after downloading. So after all these, actually, I am very happy to report that the business plan execution has been progressing well and is proven in the financial figures. We continue to move towards the breakeven line as how I anticipated since we executed the plan several quarters ago. Our operating loss in this quarter was down to just about $28,000, which is essentially around the breakeven point. Revenue was more or less in line with a small uptick, and most importantly, we continue to operate debt-free. In other words, I expect to cross into profitability with any momentum picked up on the revenue side. And I kept reiterating that we have invested over $6 million cash into the development of IonCap, and 100% of that investment are being expensed in the accounting book. I think it is about time to begin reaping return for our investment when quantum safety market continues to gain momentum for the rest of 2024 and into 2025. As a summary, looking forward into the remainder of 2024 and beyond, as I always say, timing is everything. Things are changing very rapidly. But in closing, I would like to point out something to share with you. Today, which wasn't even like that three months ago, today, NVIDIA becomes the most valuable company in the world, surpassing everyone. Every overnight happening has seven to 10 years into the make. But for NVIDIA, this is actually 17 years in the make when they first invested to focus on hashing and linear regression in 2007. I remember vividly when I was an investor of Nvidia way back then and got fed up with the waiting. So I sold the stock a few years later with a break even. I don't need to tell you how I am kicking myself today. So I don't think it needs 17 years for our post-quantum market to hit the launch pad. The world is now white hot in the field of AI and cryptocurrencies where our technology fits squarely well into the trend.
spk00: Thank you, Andrew. And that about that wraps it up. Thank you all for attending and have a great day.
spk01: Yeah. In closing, thank you again for joining. the 2024 Q2 business update. I'm very happy about the continuation of the new phase of operation and can't wait to see what the rest of 2024 brings us. So please stay tuned and see you again next quarter.
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