01 Quantum Inc.

Okay, let's get going. Good morning, everyone. And welcome to our 2026 second quarter results and business update. I'm Brian Stringer. I'm the CFO for Zero One Quantum. And with me today is our CEO, who you all know is Andrew Chung. Now before we get started, I'd like to refer please Andrew to the next chart. Our disclaimer, which forms an integral part of this presentation, take a brief second to review it, please. And the agenda today will be, I'll turn it over to Andrew, and Andrew will give you an update on our financial results and our business perspective going forward. Following that, we'll have a Q&A. I will moderate the questions. And I think by now, everybody is very well familiar with Zoom. And the Q&A button is at the bottom. Just type your questions, and we'll answer them during the Q&A session. Andrew, over to you.

Well, thank you, Brian. How are you doing? I'm Andrew, the president and CEO of Zero One Quantum. We specialize in making everything quantum safe. We started the journey almost eight years ago, invested over $8 million to reach where we are today. We are the first one in the post-quantum cybersecurity space that has crossed into revenue generation last year. And we are carrying this advantage over into this current quarter and beyond. Now, I'll give you all the details later. Now, first of all, our value proposition is very simple. The excessive computing power of quantum computers. has created an unprecedented cybersecurity threat for the world, or ATA Q-Day, which is the day when the bad guys are using quantum computers to do the dirty work. So on and after Q-Day, everything we use today, whether it's AI, financials, cryptocurrency, email, everything, will become totally naked in front of quantum computers. So the tech giants like Apple, Google, Microsoft, et cetera, have already started their PQC conversion journey. And the government is no exception. So first of all, the U.S. president back, I mean, the office back in 2022 had already issued an official letter called NSM-10 National Security Memorandum-10, warning their agencies to be mindful about a famous attack called HNDL, Harvest Now, Decrypt Later, attack. Whereby the hackers are obtaining the encrypted data, they hold on to them, they cannot decrypt, but they wait until they get hold of a quantum computer powerful enough, then they do the hacking. So this means the problem is not a problem of tomorrow. Even the tomorrow is not that far away, but a problem of today or even yesterday. So no wonder why Howard Ludnick, the U.S. Secretary of Commerce, on a CNBC interview about eight, ten months ago, he openly said that the worldwide cybersecurity will be totally broken by quantum computers if we don't act immediately. So the trillion dollar question that most people ask me is when exactly QDA will hit the world. So really that there's no definitive answer to that question. But there are lots of writings on the wall that you can reference to. First of all, the founder of NVIDIA and Ethereum are all calling for a 2029 QDA possibility. And this is also dovetailed. but the announcement from IBM that they expect to have a full thought-tolerant quantum computer released by 2029 And the latest grader was that Microsoft last week also announced the Majorana 2 quantum chip and calling for 2029 a commercial availability. So I don't think it is a coincidence that 2029 seems to be the latest consensus of QDA, which is really only two and a half years away. But the most concerning fact to me is that all these things, all these writings on the wall are only from the open world. And there are some closed worlds such as Russia and China whose vendors never publish their roadmaps. So my biggest worry is kind of like a deep-sea life event in the quantum world that a day, you know, a company you never heard of the name suddenly announced a quantum computer beating everyone. So if you're not prepared by that date, you're toasted. So the bottom line is that you have to act now before it's too late because the difference between being two days ready two years too early versus two years or one day too late is everything. So unlike most of our competitors, here's our business model. We don't try to license our technology to others to do the P2C conversion journey. We simply give it away for free. So how do we make money? It is that we are leveraging our deep experience in building solutions in order to help our customers, top customers slash partners doing the work. So this kind of... the business model seems to be at least successful for us because they basically are saying that we don't want to handle PQC conversion. They want to give us their quantum vulnerable product and asking us to bid out on the other side, a quantum state version. So this business model, as I said, has proven early success, at least for us, you know, that we have created three PQC-compliant products, end-user products that people can pay and use. You know, this is like namely the email, digital currencies, and remote access. So The two of the three are really products of our partners. The first one, I think I have talked about it in brief during the AGM only one and a half months ago. The first one was with Hitachi head office in Japan. So earlier this year, they asked us, earlier last year, they asked us to help them converting their remote access offering to become quantum state. So we spent about, I would say, seven or eight months going through a very tough software engineering process, successfully completed the task. And a joint press release has been issued about this earlier this year. And the remote access is very simple. It is very susceptible to HNDL attack because your encrypted communication session can be recorded by hackers, which is kind of like a history book of all your corporate activities that will become naked when the hackers eventually get hold of a quantum computer powerful enough to do the dirty works. So being quantum safe gives Hitachi a huge edge against their competitors, and they are now actively selling and marketing this product in Japan to their customers. Hitachi is selling a server version at a starting price of $6,000 U.S., and a SaaS version subscription monthly subscription base for about $15 per month. So we receive a one-time development fee plus ongoing royalty revenue sharing with them. So this means we don't need to spend a dime in sales and marketing. We just sit back and support them as their SME subject matter experts and collecting royalties. a risk-free business. Now, the second application that we have created was to help a crypto foundation called QLabs Foundation. We have started working on the crypto POC proof of concept more than three years ago now, maybe three and a half years ago or more. because we believe cryptocurrency is the lowest hanging fruit for quantum attack because of the heavy financial incentive, as well as the totally open nature of the cryptocurrencies technology. So essentially, Crypto is the perfect storm for HMDL attack because hackers can easily obtain the public key of any crypto wallet anytime they want, including the original Satoshi wallets. So they simply hold on to the list of public key and then up to the mercy of which wallet they want first when they get hold of a powerful enough quantum computer. So CubeLabs Foundation asked us to, similar to Hitachi, they asked us to create for them a special token called Q1 to be used as a quantum gas fee for crypto users to pay to quantum lock and quantum unlock their layer 1 assets such as Hyperliquid, Ethereum, Solana, etc. against a QDA threat. So the market size, needless to say, is huge as the whole $4 trillion worth of digital asset market must be protected against QDA threat. So similar to Hitachi, we are receiving a one-time development fee plus $22.5 million of the Q1 token as the compensation. So... As a simple math, it is like for every $1 worth of Q1 token value, it represents $22.5 million to us in value. So, again, we don't need to spend the sales and marketing dollars. This is all on our partners. And we just sit back, basically, being their SMEs, subject matter experts, support them, similar to how we support Hitachi, and collect royalty and which is another risk-free business from here on. Now, the third one is our own product, which is the world's first truly quantum-safe end-to-end email security product we call IronCab X, and soon we'll call it Xmail. It complies with NIST FIPS 203 and 204 encryption and digital signature standards. With quantum safe digital signature, you can imagine that it really guarantees the authenticity of the senders. Therefore, it is actually effectively plugging 91% of the source of ransomware attack, which comes from a simple phishing email. So it's end-to-end encryption, also guarantee privacy, which is a big, blind spot, which I call in the usage of email since day one, especially for the highly confidential professional industry, such as financial, legal, accountants, et cetera. The most importantly, we made it operating as a plugin of Office Outlook, which means it is, you know, it's mainstream ready because Outlook, specifically Office Outlook is the de facto standard for corporate email. So the market size, you can imagine, is huge because they are very open information. There are 730 million business email addresses in the world. So if only 10% are serious and wanting some sort of quantum safety and paying $3 a month. By the way, our MSL fee is $10 a month. So if they are paying just a channel fee of $3 a month, it is already a potential $2.6 billion annual recurring revenue potential of a grant that we are kind of like tapping into, right? So besides the current three quantum state revenue generators that we have created, we don't stop here. This is what we've done in the last few years and reaching the point where we are beginning to write the revenue from the sales and marketing activities of our partners. But we don't stop here. Our immediate future is in the quantum safe AI space, which is a crossover between AI and quantum safety, which we actually have started the R&D about one and a half years ago. And this is something that we are contemplating, which we believe is even bigger than the combination of all three we mentioned. This is for this year and next year. And our unique invention that is I keep saying it's a crossover between AI and quantum safety. If there's one single obstacle about AI that is preventing it from achieving the maximum potential, it's privacy. Every people knows. So some organizations, such as a bank, they don't even allow their staff to use AI to ask questions and things like that. AI operations today are totally performed in unencrypted fashion. So privacy applies not only to the user data breaching, but also compliant national security and even the AI model IP value. So during most of 2024 and 2025 last year, we have invested heavily creating our, we call it QAW, Quantum AI Record Technology. And this is using fully homomorphic encryption technology to encrypt both the user data and the AI model before performing AI inference. So it's kind of like magical, you know, that what really happens is that the AI model really doesn't understand what the question is, but they can provide the answer, the encrypted answer that only the user has the privacy, he can decrypt the answer. So this is totally end-to-end privacy preserved AI operations. So together with quantum state communication, we have essentially protected the privacy of both the user data and AI model IP value while at the same time, Operating everything in a quantum safe fashion. This is very exciting, and it is very exciting that only about, I would say, three weeks ago, we have received a U.S. patent allowance of the patent we filed about a year ago. Needless to say, the total addressable market is huge, basically growing from virtually zero to 5.4 billion in 2030, 2032. And the subset of fully homomorphic encryption alone has a size of 850 million by 2028. while the sub-segment of finance, government, healthcare alone has a size of 650 million. So it's a huge market that we are tapping into. Just the tips of a iceberg. Our value proposition is very simple, very straightforward. It is to protect the user data and the IP of the AI model. So user data protection allows compliance and national security related users to take full advantage of public AI without worrying about privacy. This also opens for dedicated and on-premise deployment businesses. And finally, we will create an Amazon or eBay-alike AI marketplace where we allow AI model vendors to list their model for users to search and use in a, you know, like a total quantum safe platform. And we simply share, similar to, again, eBay and Amazon concept, we simply share 15% to 25% of the usage revenue back to our plans. And these value proposition also allows us to open to federal funding and procurement opportunities. Market channels are the life of the main generation events, such as the TMLS Toronto Machine Learning Summit next week, whereby we are a major sponsor alongside with the life of IBM, etc. And we will be conducting a live demo of our KOAW Quantum AI Wrapper technologies, at the event. And sales channel will typically be direct channels, indirect channels, government procurement, the channel partners, et cetera. So our timeline target is we're reaching every milestone so far. is calling for Q1, the first quarter of 2026 for the optimized FHE, which we reached already, and ready for demo to the various potential customers. We have also reached the second milestone of private AI, and then we will be followed by a hybrid FHE by Q1 of next year. Then the AI marketplace will be there in Q2 next year, and then AI marketplace for optimized FHD by Q3, culminated with AI marketplace for premium and hybrid FHD before the end of next year. Now, all of the above are basically reflected in our Q2 results. with a little less than 700,000 of engineering revenue, which is up more than 560% from last year. It is very encouraging. And despite ramping up our marketing, IR, and R&D expenses, we still spend less than $200,000 in a quarter ended up with a cash position of almost $3 million and increased by more than $2 million from last year. And we expect income generation from sales and marketing activities of our partners, which we talked about. And our partners are the likes of Hitachi, PwC, TARDIS, CGI, plus the new potential in the area of AI. So I would like to take a quick pause here, reserving time for Q&A. So please, like mentioned by Brian earlier, I'm sure that by the time everyone will be very familiar with the Q&A feature of Zoom. So I would hand over to Brian, who will moderate the question, and I would answer them one by one. Over to you, Brian.

Okay, thank you, Andrew. Several came in. Please keep them coming. The first one, Andrew, has to do with what we said in our Q2 press release. They say you added people to your senior executive team. Can you elaborate on their background and what you expect from them?

Yeah, sure. Well, you know, what we expect from them is very simple. We expect revenue. So we have added a very good SWOT team of senior executives headed by Tyson McCauley, who is wearing two hats. He is a board member for many years. And then recently we named him as our COO, Chief Operating Officer. So, Tyson has more than 20 years in the cybersecurity space. He is basically the dictionary in the cybersecurity space worldwide. Everyone knows him in the cybersecurity space. And he is managing a small team of three individual senior executives. One has more than 25 years experience in the Canadian finance market. And the other one also has similar 25 years plus experience in the Canadian federal and provincial level of procurement and the federal funding sectors. And then the third one is having more than 10 years experience to cover the remaining of the private sector. Oh, don't forget about me. I am also handling the Asian market in Japan. and Asia mostly related to all the PQC-related business. So, yeah, we got some very good things happening. Obviously, you know, all these things take time to complete, but, you know, we are well in the process. So, yeah.

And the second question, I'll handle this, Andrew, is, The comment is, you received 22.5 million tokens, Q1 tokens. And they've asked, can you elaborate on the accounting treatment? Yeah, you know, it can be a bit confusing. We follow IFRS in Canada, which can be different to US GAAP for US reporting companies. Yeah, for us, we received, yeah, 22.5 million tokens, and that was part of the founders round. These are in addition to the cash we receive for development fees and ongoing royalties going forward. So, you know, from our perspective, we look at them as a bonus with the potential, with the launch of the Q-Vault, which Andrew's talked about, coming up next week. We see that we've got a potential large gain. And now with respect to accounting treatment, we're required to value the modern balance sheet as a long-term asset, which we've done. And that's at the fair value on the day received. And the best value for this date, it was February 7th, by the way, was the value for the final financing round, which was one cent per token. Remember, that's at a preliminary time. The corresponding amount is treated as revenue, which we've done. And when we sell any of these tokens, we will recognize them as a gain in the income statement. So we feel overall there's lots of room for potential here. Okay. Now, more questions have just come in. The other one is just with Hitachi. Andrew, can you elaborate on your meetings with Hitachi? How are they progressing with their marketing plans?

Yeah, absolutely. This is a good question. As I mentioned earlier that the product has been completed and the joint press release has been released about, I would say, five months ago, a little less than five months ago. And they are actively marketing the remote access product called Duo Mobile in Japan to their customers. And their customers are the like of the university banks and government agencies and things like that. Being, as I said, being the first quantum safe remote access is really giving them a huge leg over the competitors. So, yeah, again, we are, we completed the job, we get the money paid and everything, and we just now sit back and enjoy the royalty payment whereby we are the, their support. They are spending sales and marketing dollars doing that. We sit back and support them enjoying the royalty payment ongoing. So, yeah, I'm very comfortable with that. We are on a very, very closely communications. Yeah, a lot of things are happening.

The next one, Andrew, is AI. And the comment is this is a huge market. How close are you to a demonstrable product for the pilot projects you've been talking about? And which ones do you expect to come first?

Yeah, I think this kind of like stuff challenges you what I talked about 10 minutes ago. How close are we? First of all, we are there already, as close as zero distance. Next week on the 16th of 18th is one of the largest AI events in the world called the TMLS, Toronto Machine Learning Summit, hosting in Toronto at the CIBC building in Lower Bay. And we are one of the major sponsors alongside with the like of IBM and other people. And this event is basically almost like a kick-launching slash demonstration of our QAW technology. So a short answer is it is demonstratable already, and it is going to be demonstrated next week at the TMLS event. And we are very excited about that.

The next one, you announced a large system integrator announcement yesterday. Can you tell us why they're not named in the press release, and what is the marketing plan going forward?

I think the first part is an easy answer. As many of you are a large system integrator, which means there's a vast difference in the company size between us and them that material to us may not be material to them, so they likely do not want to mention the name because of that, although their sales and marketing people really want as much exposure as possible, but their lawyer doesn't want to do that, which is understandable to me. And so in terms of the sales and marketing, we are conducting a joint social media campaign. So, yeah, stay tuned to that. There will be a very visible joint social media campaign between us and them in the immediate happening into the next few months. So, yeah, we are very excited about that.

Good. And the last question has to do with QVOLT. When is it coming? By that, I think they mean launch is June 16th, but what does that mean? And what are your expectations?

Yeah, I think I'd like to start from what I, you know, kind of like continue about what I have said about the Q1 token. The Q1 token was created for QLabs Foundation's as the currency to pay for quantum gas fee when the customers are performing quantum locking and quantum unlocking of the token, whether the token is hyperliquid and Ethereum and things like that. So the lock and unlock is called the QVault product. So essentially it is like a quantum state vault that we have created for them alongside with the Q1 token. So the token is the currency to pay for the action, and the product itself is Qvote. And again, as I said, we are the technology provider, and our partners are responsible for all the sales and marketing, so I cannot steal the thunder about exactly what they're doing, but I know that they are doing a lot of sales and marketing, planning, And the product launching will be very close. So you can look for their press release and our press release very, very soon. And then once it's ready, you know, that product is basically the driving force. for the Q1 token value because anyone who afraid of the quantum threat for the token would like to lock the token to prevent from quantum hacking and then unlock when they want to sell. So whenever they do the lock and unlock, they have to pay some fees in the currency of Q1 and that would drive the Q1 value. So yeah, I'm very excited about Again, as I mentioned, the project is technically completed, and we are now sitting back, similar to Hitachi, that we are supporting them as the SME subject matter expert, and they are doing all the sales and marketing to promotion. So, yeah, I think that's kind of like a long, wider answer to your question.

Thank you, Andrew. That about wraps it up. I've tried to group, we have a number of questions, so I tried to group them into categories here so we're not getting redundant. I hope we've answered all your questions. If not, and if you've got more, Andrew or myself are available. Our emails, you can use Investor Relations or call us directly. And with that, I'll turn it back to Andrew for closing comments.

Thank you again, Brian. So in closing, I would say that timing is anything. The quantum market is exactly like AI three years ago with a large total addressable market. And our goal or my goal is to have zero one becoming and coming out as the unicorn in this PQC market. And we are very well positioned to achieve this goal. So thank you again for attending our conference and see you soon in our next meeting.