Realbotix Corp.

Hello, and welcome to the Realbotics Financial Update call. My name is Nicholas Armand, and I'm a member of the finance team. Today, we are joined by CEO Andrew Kegel and CFO Scott Myers. At this time, everyone is in a listen-only mode. Later, we will be conducting a question-and-answer session. If you have a question, please submit it into the Q&A section located at the bottom of your screen. I will now turn the call over to Andrew.

Thanks, Nick. Thank you, everybody, for joining the call. The way I'm going to do this call is I think the way I've done the last few calls, which is sort of a little less formal, and rather than going through each number and all the various things, it's more of a conversation, and then we can move it to a Q&A. The way I would describe this quarter is that there's not a lot of progress that you can see in the actual numbers. However, we're making substantial progress, and I think you've got to read beyond the numbers to see what's happening with the business and what's going on. So I'm going to touch upon some of the things. With respect to the balance sheet, this is the first one where you can sort of see sort of the impact that it's now super clean. We've eliminated all the debt. We've got over 12 months of capital based on the current burn rate, and it's, you know, we're well-positioned. There's no fears here. We've sort of eliminated the risk by getting rid of the debt. That's good. On the revenue side, we're now starting to get to the areas where we've eliminated all the crypto stuff. So for people who recall, we used to still have a bunch of the crypto there and the crypto staking, and that had always contributed to some revenues and some gains. That's now gone. We've also, again, positioning, and this happens quarter to quarter, which is positioning more of our capital and our efforts into building this AI and robotics business, which we're all incredibly excited about. We're positioning the company for the future. And as I've always said, and for people who listen to my calls, we talk, this is not an overnight success. It's not a revenue story today. But it's also not a revenue story for anybody. And if you look at a lot of these robotics companies that are out there, even AI companies that are out there, the ones with the billion dollars plus the valuations, very few of them have any revenues at all. And so I do feel pretty good that we have revenues here. And I sort of mentioned here that the deliveries, we put out a press release on April 1st about the upcoming deliveries. Just so everybody is aware, this press release is as of today. before April. It's the first three months of this year, which is our Q2. We have a September year end, just to remind everybody. So, and continue to go through sort of through some of the items on the press release. I've explained sort of where we're going at revenues, we're positioned for the future. So, what are the things that we're excited about here? If you look at year to date, and especially in this first quarter, we've made significant grounds in terms of what I would call upscaling our staffing. We've been hiring and we continue to hire from other robotics companies. So the guys that have like the $10 billion plus valuations, the people that work there are contacting us. They want to come work for us. They're seeing something special and unique, not just in our culture, but in our product and where we're going. Our new COO, Eric Olson, has been working incredibly well. He started towards the beginning of this year, and we're making a tremendous amount of progress under him. Sue Ennis joined us as president to help on the – and lead the direct-to-consumer side of the business, and she's also just, you know, kicking ass and doing a great job. That's just two of the sort of higher-profile people at the company, but in general, we're continuing to hire. And one of the things that we emphasize here in this business is last year – The key AI and robotics business had about eight employees and now we're past, I think, surpassing 20 employees. I think in the next couple of months, we'll probably up to 25, 26. And these are all high-caliber engineers and devs. And everybody is excited because we're getting at that stage where we're starting to move from demos to deployment. And certainly, we have made some deployments. As people are aware, we've press released, we've sold a couple of robots to Ericsson. We have a bunch of other initiatives that are underway. And again, these are not things that you're going to see in the numbers right now. but are things that hopefully if you read the full press release, you'll see that are there. So I talked a little bit in the press release about the client delivery update. That's what's going on. Some of that is we've had some, as we, I guess, want to perfect as best we can the software. The hardware is all ready. We're starting to shift out some stuff. We're continuing to shift out, but the numbers and everything there is still good. I wanted to walk a little bit through the deck for a second, and I'm going to share my screen. And hopefully that works and people can see it. And it's really just because I want to make sure that people understand our positioning and where we are. And then maybe I'll go back and talk a little bit about how I see the market size and where we're at. So I'm going to share my screen. And this is a version of the deck that we have online. It's a little bit different because I sort of wake up sometimes at 2 o'clock in the morning because a new word or sentence pops into my head and I want to make sure that I don't forget it and put it into it. But where we are different is we're creating these expressive humanoid robots that really are giving physical form to AI. And to my knowledge, there's a few companies doing this in Asia and places like China that But in North America, no one's focused in on this. And I don't know why. Everybody's sort of competing at this sort of warehouse automated robot with what I would say very low AI component to it, very high mechanical cyborg-type robot stuff that's happening. You know, our robots have a voice, moving eyes, visual acuity, and reasoning to make autonomous responses. The way to think about it is we're giving AI an identity. We're making it relatable, approachable. And this is crucial in roles where building trust with a human user is essential. And that's education, hospitality, healthcare, and wellness. We do not make robots for the warehouse. You do not need a robot that looks like a human to move boxes around. And by the way, all of those companies with those multi-billion dollar valuations are They're not selling robots to public places. They're just not. They're not safe. They're not insured. They're not FCC compliant. And so where I think we're different is that we're heading in terms of that direction where we are selling robots into public spaces. Our robots are safe to be around. They plug into the wall. They don't have battery issues. And, again, this is important. You can't put a mechanical robot into a school or a hospital. It's just not going to work. You need an identity with a voice, a personality. eyes that can follow you and can talk to you. The problem that we solve is that service sector roles like this, they require a presence. AI is all over the place, but it's generally behind the screen. Some areas have more. For people who tested our Ask ARIA, we're going to be launching that in a few weeks again on the website. But what we do is we have these expressive facial features, moving eyes, synchronized speech, and our robots can convey emotion, and they make the interactions more natural and engaging. That, to me, is where AI is going. That, to me, is the use cases for AI. I posted recently that, you know, a robot that can pour coffee is a waste of human ingenuity. Why? Because humans have already solved that problem. Like, pouring billions of dollars into a robot that pours coffee or folds a napkin is a waste in my mind. What we have a problem in is that there's shortages in healthcare. There's a problem in equalizing the delivery of education to underprivileged kids. These are real issues. There's a loneliness issue around the world where we can provide companionship. And I've also talked about that, how AI, and I posted an article recently or just yesterday about how AI can help alleviate loneliness. These are real-world issues. Like, we're trying to solve real problems here beyond pouring coffee. So, again, people often talk about us as like, oh, are you guys a novelty robot? No. I think the robot that plays ping-pong and pours coffee is the novelty. We are the robot company that's trying to solve, like, world problems and make life better for people, and I'm quite adamant about that, and that's really what gets me excited about our business every day. Again, this is on our website. I'm not going to go through the other stuff, but there's one more slide I want to sort of go through because it's a little bit just about how we position ourselves. And the way, you know, I would say is we don't have the most capably physical robots out there, and we don't want to. And the reason why is the more of that mechanical capability that you put into a robot, the less likely you're going to be able to sell it into an environment that has humans in it. Of all these companies, none of these guys have sold or delivered a robot into a house or a mall or a school or a hospital. They haven't. Their robots aren't safe or approved for that kind of use. They go into warehouses where the layout is programmed and they do repetitive automated tasks. That's not what we're trying to do. We're not trying to out-muscle warehouse giants or do what they're doing. We're trying to create a new category here that somewhat exists in Asia, but nobody else is doing the way we're doing in North America, which is high realism, high autonomy, lifelike robots that people want to interact with in their everyday service and emotional roles. So, again, hospitals, schools, malls, resorts, hotels, casinos, our robots speak many languages. That's how we position ourselves, and that's how we're going to win, not by competing against these other guys, but by carving out our own niche in this area. I'm going to stop sharing now and just say a couple more points before maybe we head into questions, and I appreciate everybody being here. being patient and sort of listening to me in some senses rant. But, again, the market size for the robots today are small. I think I put in here there's only about 13,000 robots sold, humanoid robots sold all last year, and most of those are what I would call the more gimmicky type robots, which are small, cheap, not much you can do with them. They don't talk. The market that we're building I think is going to be absolutely massive. That's how everything is pointing, but it's not going to happen overnight. We're not going to wake up tomorrow and see a robot in every mall or every school. We're going from sort of demonstrations to deployment. We've shown that with some clients. We're going to be announcing more things soon. And I think overall, like, you know, we're making really great progress. Like, you see our robots in different places. There's a bunch of media coming out. It's pretty exciting for us. But, again, I want people to understand the size of the market today is small. We're not going to wake up tomorrow and have $100 million in revenue in the quarter. I think that will come. But this is a, you know, a three-, four-year plan to get there as the market develops. The last thing I'll say just in closing is with respect to the NASDAQ transaction, and to answer some questions. And I always try to respond to everybody who pings me, whether on LinkedIn or sends notes to our team. We're moving ahead with the transaction. We all know this is really great for our company. It's a non-dilutive way for us to get capital and a NASDAQ listing. This is good for Xbox shareholders. I talk to the people over there every day. We are not responsible for what happens at Onco with respect to their share price. We're not part of that management until the deal closes. We're not giving away our business. There's no, you know, anything like this is positive for our shareholders. We retain the upside. And eventually the goal will be once we have ownership and control of that shell, we're is subject to lawyers and accountants giving us the proper structure would be, if we're able to, to distribute those shares down to the existing shareholders so that you have the ability to own both. And each one, I think, has the potential to be its own billion-dollar company. So maybe with that, I'm going to turn it over to some questions. I see some coming in. How confident are you that the reversal into Onco for NASDAQ exposure will be successful? I'm 95% confident. Here's what worries me is the market right now for people who are at peak highs and whether it's like the semiconductors, the AI companies, all of this, the market is frothy in my opinion. Stocks hitting all-time highs. There's a lot of euphoria out there. The only thing that worries me here is if there's some kind of like global macro meltdown that occurs that could have some kind of an impact here. But to answer the question, I am 95% confident that the deal is going to happen. I spoke to that team today. We're in good shape. And I think once we're there, you know, one of the things, again, I posted, the money, one of our large shareholders who's become a friend messaged me yesterday, and he linked to me the BlackRock filed an ETF yesterday for a robotics ETF. And his message was, the money is coming to you. And I sort of did an AI search. I said, list me all the robotics ETFs that have come up. And it pulled up like six or seven that have sort of been formed in the last couple of years and more to come. If you're looking for the trend and sort of what is sort of the underlying where capital is going to flow, where markets are going to change, where you're going to see evolution, I think a lot of the value in AI is already built in, although I think obviously that's a great space. there's still a tremendous amount of value. I look at our company, and I'm like, we're severely undervalued. I'm hoping that changes once we get this NASDAQ listing, and then all of these ETFs that are looking for investments in the robotic space, like, they can't ignore us anymore. Is the rising cost of memory and chips having a material impact on cost development is negligible, is the next question. So the answer is, Where we're seeing the issue is less so because, you know, we're not making thousands of robots right now, so it's negligible on a cost perspective. Where it's impacting us is on speed. So where, you know, we use the NVIDIA Thor processor for the vision systems in our robots, and soon I think all the robots will have this vision system where they'll be able to recognize what's happening around them. They're harder to get. And so what's happened there is I think you can order one at a time. So each employee is kind of ordering each one individually that we're using for work. What we're finding is it's just more it's delaying things instead of creating costs. Next question from Jim. Why is the timeframe to reverse into Onco so long? November is the date. Why not sooner? So that's not actually the date. Here's what has to happen with Onco. With respect to Onco, there is some financial accounting that needs to happen between our company and their company, and then there's something called an S-4, which is the equivalent of a prospectus that needs to be filed with the SEC. We have essentially turned that document over to the lawyers today. It's a prospectus-level disclosure that goes to the SEC. It's held confidentially by them. It's not disclosed, but it is the proposed board. It is the description of the business, what the numbers look like together. The lawyers, I believe, will take, you know, it's lawyers. I believe they'll take one to two weeks before they sort of add their, you know, magic legal stuff to it sprinkle the magic legal dust on it then we submit it to the sec and at that point it's kind of out of our hands if the sec is not busy we could expect to get a reply from them very quickly um if they were to come back and be like hey this disclosure is great we have no questions the deal will close in july um The more likely thing is, and what I've been told to expect, is that you're probably going to have a back and forth with the SEC of two to four times, likely around three, where they ask you questions and you reply, you send it in, and that's how it goes. And that's sort of a normal process that they come back and want some clarification. It's all about disclosure, again, what we're told. So assuming there's a little bit of back and forth that occurs there, once they come back and they give us the thumbs up and they say, yes, you've got all the disclosure properly, then the document becomes public, and then we can close. So it's not that the deal is closing in November. The deal notionally could close at the end of June or early July if the SEC comes back and says we're good with this. We're working on putting together a solid document that will lead to very little questions, provides full and true proper disclosure that the accounting provided is all accurate between the two, the pro forma between the two companies. And that's what it is. So it's just a function of walking through that process, answering the questions, and then we close. So it could be soon or a little bit longer. Can you expand more on the progress of the Ask Aria app? So the idea here is that the new Ask ARIA app is ready with the vision system. I've been testing it. It's great. Basically, we've added some new functionality to it, including a mute button so you can talk. It has camera vision in the thing. So I've taken it and posted this. Taking it to my backyard, it can identify trees, different types of flora. Is that a football or a baseball? It can identify all of those things, which is pretty cool. And including, again, identifying what not, doesn't just say that's a tree. It told me, hey, that's a magnolia tree. And it looks like it's blooming, like it understood situation, what was happening. So we're going to make that available really as soon as we want. I think we're trying to time that. along with some other news and press releases. And also the new functionality on that has the ability to upload things. So you can upload, for example, a picture of your living room and ask, how can I make this look nicer or upload a mathematical problem and say, can you solve this for me? I think by fall, we'll be ready to start charging for that AI. We're sort of thinking something in the $10 a month range for people. And the idea is not necessarily that it's going to provide anything different than what other AI programs are providing, but it's going to put more of a digital avatar and a personality presence to it where it can actually see you, it can have a conversation. it just adds a little more functionality there for people than just a typical AI program. So it can do everything that a normal AI can do, but with some of these enhanced features. And we think for the people who are more, you know, call it an elderly person who's feeling lonely and needs advice or just wants to hear some jokes or talk in various different languages but doesn't want to be, you know, typing on their keyboard or talking aloud or not having a presence to it, we think that will be an interesting feature. We'll be launching some educational products as well. You know, one of the things that we've been discussing is creating a product to create sort of the new version of the high school shop. So while the traditional shop would be, you know, drills and saws and things like that, which is essential in education, in life today and even maybe more so today to have people with actual physical skills. But we want to sort of expand on that and say, hey, here's a robotic head that you can build where you can learn about servos and electronics and how this works. So it's kind of like modernizing the high school shop to take into account some other skills that people can have. Somebody's asking here about the new Las Vegas factory and when it will be finished and ready to start operating. I'm getting pictures daily. The paint job, the lighting has all gone in. We're going to start moving in slowly next week. I think everything there is moving really well. So the first phase of the move will be completed by the end of June, and the second phase will be completed by the end of June. We're super excited about that and working with our new COO, we believe that the increased capacity there will allow us to move substantially the amount of robots that we can build. As we sort of move forward, we're very focused on now starting to think about marketing, bringing on more salespeople to get out there and push more. In the past, we've always been sort of like, okay, Let's just be ready for the orders without really being too aggressive on it. Although, as you've seen in press releases, we have a lot of orders. But the idea is we want to make sure that when we're taking on an order, we have the ability to deliver it in a reasonable amount of time and it's a high-quality product. Somebody said, what about big customer that will boost the stock? Yeah, for sure. Like I said, right now we're sort of focused on getting positioning. We're looking at that. We're having conversations with many groups, and we're doing demos, including with some very large retailers. The idea here is most robotic companies, I would say, are in what I would call demo stage. And by demo stage means it's like what we've been doing, putting a robot in a mall, putting it in a store, putting it at a conference. demonstrating to people, but generally companies will order from us after they've seen a demo, and then you go to deployment. Obviously, we have our large telecom customer that's been ordering. We continue to have conversations with them. You don't know. We're talking to a lot of several other large players like that, but it's not a short sales cycle, and certainly, yeah, we're focused in on that. Trust me, we want the share price to go up. We want to land the big customers. We're in this new space, and we're working on it. Someone's asking for current XBOT stockholders, what will happen to their existing stock after the merger is completed? Will they still own the same number of shares under the XBOT F ticker or under the new name or how will that work? Here's what happens. Nothing. As if you own one XBOT share, you will continue to own one XBOT share. Here again, I've tried to, and it's, It's not super straightforward when you're hearing it for the first time, but we own, so Realbotics Corp., the parent, owns a subsidiary called Realbotics LLC. Let's just call it LLC for now. And that is where primarily we've been developing and building the engineering and the AI on the robotics side. That business we currently own as a fully owned subsidiary, we will continue to own that exact same business but a portion of it will be listed on the NASDAQ, and that deal with the NASDAQ shell will come with some capital. So what happens is that that business is going to require money. You can't build a billion-dollar business without raising more capital to grow and hire and do things. What we've essentially done here is been able to shift the capital market required to build that business into this NASDAQ vehicle. And that NASDAQ vehicle will be used for the financing. The XBOT shareholders will continue to own that business and keep the upside in that business, but we will now own shares in the NASDAQ list and bills will be the recipients of that. Like my shares are held at XBOT, the same place everybody else's are held. The goal there is that, you know, as that other business grows, that will flow through. And as I mentioned earlier on this call, eventually what will happen is if you own an Xbox share, you will receive a share in the equivalent of whatever Anka is. And we'll be, you know, renaming that business and changing the ticker symbol. I think the current ticker symbol proposes HBOT for human robots. But that's essentially the work. So there's nothing for you to do as an Xbox shareholder right now, I think, other than sort of just be patient and wait. We're getting there. As I said, the S4 has now been delivered or about to be delivered to the lawyers. They'll put their, you know, magic legal dust, whatever on it. Then we submit it to the SEC. Again, very likely there's going to be some back and forth. And then once they approve our disclosure, then the deal can close. And again, it's impossible for me to tell you how long that's going to take. I think when people are talking about November, we're talking about an outside date as opposed to an estimated date, just to be clear. There's a question here in Chinese. I can't understand Chinese. If I had enough time, I would pop it into AI. Is a buyout a possible solution to see Realbotics as a long-term company? So, yes and yes. It's kind of an odd question. I work here. I've got four kids and a family. I work here. I think I have a good background. I could probably find other jobs if I wanted to, but I'm passionate about working here. I believe in what we're doing. Do I think this company could get bought out? Yeah, damn straight. I'm actually, every time I talk to people, when I see investors or podcasters and they see what we're doing and how incredible it is, the first thing they say is like, you know, somebody like from these big companies should just come and buy you guys for three or 400 million bucks. Do I think as a long-term company, well, yeah, I mean, we're moving this thing to the NASDAQ. We're all committed. We're hiring. I've got people relocating to Las Vegas. So, yeah, definitely, yes, we think this is a good long-term company. I think we're just at the very beginning of where this company can go. I would encourage you, again, take a look at our deck. Take a look at sort of the statistics there and where the market's going. The fact that you see all these new, you know, BlackRock creating a new ETF is to focus on robotics, like, the money is going to start flowing in at some point, and in North America, there's nobody else doing what we do. In case of a buyout, what is a realistic value? I don't know. And I'm going to end this with the last question, which is to say, like, I don't control the share price. The share price is really just the buying and the selling that's out there. I think we're undervalued. I think in our deck, I list the valuations for some of our peers out there. And it does sort of strike me that they're getting higher valuations. But Those are private company VC valuations. I think when those companies start going public, people will see the gap between us and other businesses, and that will be beneficial for us. I think in a lot of those deals and valuations, they're run by VC companies that take a lot of control over what's going on. We don't have that, but obviously we want the share price to go up. In my estimation... based on where I see these companies and what I've heard and I compare the work and in talking to people that have visited us and other factors, what I generally have heard is your manufacturing capability is behind where some of these other guys are. Hey, that's understandable. Those guys have like $10 billion valuations. Ours is about 55 million. Um, so of course, yeah, they've raised a billion dollars. They can set up a big factory. We haven't done that. Um, But where the people come back and say, they say, number one, you've identified a niche that nobody else is seeing right now. And it's quite obvious. Your product, because our product is not a mechanical machine that needs to lift 200 pounds, lower physical capability, but that's a plus. Our robots plug into the wall. They give you continuous service. Like we're ready to deploy, whereas a lot of those guys are not. So I think that's a plus. And the other thing I hear is your technology around the AI memory, the personality layer, and the Vinci vision system, which is able to recognize things, including, you know, if there's danger or anything going on, is superior to what they've seen at our peers. So if you were to take all of this into account and I look around, I'm like, well, the next closest peer, like, you know, some of these guys that are saying, well, our goal is to build an open source robot that can handle many different kinds of AI. Well, we do that. Our role is we want to build an agentic AI that goes on your computer and can provide customer service and it has a memory. Well, we're already selling that. If those guys are commanding multi-billion dollar valuations, well, are we a billion dollar company? Not today, obviously. In my mind, we are. I think that the things we're doing definitely deserve to be spoken about and put in the same context as them. Even though our end market is different, I think our end market is larger and I think our product is cheaper to manufacture, and we have no North American competition. So maybe I'll just leave it with that. Thank you, everybody, for listening to me. And, again, we always answer questions. I encourage people to go to the website, look at the deck, which is on realbotics.ai. The product website is realbotics.com. We are building a new website currently for realbotics.com product website. Onco deal, going to NASDAQ, like I said, my confidence level is still very high, and it's also very high that this is the right deal for the company to become the first publicly listed pure play robotic, humanoid robot company on the NASDAQ. And, you know, again, not things that you're going to see in the quarter, but in terms of the numbers, but we're on the right track. So with that, thank you, everybody, and feel free to send questions. Bye-bye.