Medtronic Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 15, 2023

There are 19 speakers on the call.

Operator

In the spirit of continuing to engage our original investor base, welcome our new investors from the public markets and improve our communication with our friends on Wall Street, we're going to devote part of this town hall to reviewing some of the financial highlights from our recently filed quarterly report on Form 10Q for the Q1 of 2023, as well as share some current events that may be of interest to our stockholders and potential investors. This town hall format is intended to provide an informal forum for our audience to ask questions from Wall Street to Main Street, from Silicon Valley to Washington, D. C. If we're going to achieve our long term mission of making the U. S.

Operator

The safest country in the world, we're going to need the entire country engaged, and today is part of it. Of course, any and all figures presented today in this presentation should be read in the full context of the company's recent regulatory filings and risk factors, and those are available for you at ir.nightscope.com. Now let's get to the numbers. Last year in 2022, we recorded 5 point $6,000,000 in aggregate revenue, and that's from both service and product for the year, reflecting an over 60% growth rate from the prior year. Additionally, at the end of 2022, we built up a backlog of approximately $3,900,000 in new orders.

Operator

And by the 19th March of 2023, as reported in our 2022 10 ks, that number had increased significantly to $5,200,000 which is almost the same amount of the revenue for the entirety of 2022. The significant top line and backlog increases are attributed to our acquisition of Case Emergency Systems during the Q4 of 2022. With respect to the Q1 of 'twenty three, there are 3 key points. First, I am pleased to report that for the Q1 of 2023, we recorded approximately $2,900,000 in revenue over the 1st 3 months of the year, which is an over 300% improvement over the Q1 of 2022. This included a year over year increase in service revenue between 85%.

Operator

Service revenue includes our ASR machine as a service revenue as well as maintenance and support revenue related to the blue light towers and call boxes, which is the primary driver of the significant increase as compared to the Q1 of 2022. Product revenue relates to emergency communication device sales and contributed approximately $1,100,000 in the Q1 of 'twenty three. And despite the ongoing drag from supply chain issues, this reflects an annualized revenue run rate of approximately $11,000,000 2nd, with our focus on top line revenue growth and cost reductions taking effect during the Q1, we had a significant positive swing from a gross loss in Q1 of 2022 of $549,000 to a gross loss during Q1 of 2023 of $213,000 or nearly $336,000 improvement. The increase in gross margins is primarily attributable to positive margins generated by our product sales. On a percentage basis, gross margins moved from a negative 58% gross margin to a negative 7% gross margin and our plans are in place to continue to improve our service and product margins as we scale up.

Operator

Comparing Q1 of 2022 to Q1 of 2023 on a per share basis, we improved significantly from a $0.30 loss per common share to a $0.06 loss. Last year, we noted our plan was to achieve profitability in the next 24 months, and we have made positive movements in that direction. We plan to continue growing the company, and we believe our sales pipeline is strong and increasing sales will allow us to grow, drive economies of scale and better leverage our fixed cost base. 3rd, during the Q1 of 2023, despite supply chain challenges, we're able to reduce our backlog of new orders from its peak of dollars 5,200,000 reported in our 2022 10 ks down to $4,700,000 in about 30 days. However, given the ongoing positive demand for our technologies, our multimillion dollar backlog of orders is continuing to increase.

Operator

We are therefore focused on transitioning our production strategy from a work cell environment, which is appropriate for smaller volumes, to a more traditional assembly line process, set up to accommodate a larger volume of units with new processes to optimize throughput for the manufacturing of our autonomous security robots here in Silicon Valley. Our cash on hand at the end of 2022 was $4,800,000 and our cash and cash equivalents at the end of Q1 'twenty three was approximately 2,400,000 we seek to improve our cash position through a sevenfold plan, which is underway and includes the following: number 1, continuing to grow our top line revenue with new service contracts and product sales. Number 2, leveraging our financing partnerships with Dimension Funding and Balboa Capital to fund new orders upfront, improving our cash flow number 3, accelerating delivery of our backlog of orders number 4, continuing to use our at the market program managed by H. C. Wainwright number 5, realizing cost savings from the cost cuts implemented in January of 'twenty three number 6, reducing our variable costs related to our ASRs such as telecommunications, service and cloud costs to improve our margins.

Operator

And number 7, exploring a possible non dilutive debt offering to continue to fuel our growth. As a follow on to the 10 town hall marathon we conducted last month, we'll now transition to the live portion of the town hall for questions from our long time investors, new retail investors, institutions and analysts. Thank you. All right. Welcome, everybody.

Operator

We have a very large gathering. So let me do some ground rules first. But first and foremost, thanks to everybody for taking time out of your busy day to talk about all things Knightscope. For those of you who've gone through this with me a few times, just bear with me. I need to put the Forward looking statements disclaimer and looks like it might be too long, so I might need to do it in a couple of shots here.

Operator

But we need to put that in there just for safekeeping. And then the video that you just So we'll be on our YouTube channel here shortly and you'll be able to grab that and we can go over today again to answer any questions. And I need to talk to counsel to stop making these disclaimers so long. But anyway, so a few ground rules before we get going as I let people in here. This is intended to be questions from almost every angle.

Operator

But in some cases, obviously, I'm an officer of a publicly traded company. I may not be able to answer your question exactly the way you asked it. So I might rephrase it or I'll tell you I can't answer it, but I'll try to be as responsive as possible. As long as I can answer it, most likely, I will. Obviously, we wouldn't be sharing any MNPI or material non public information.

Operator

So we want to be mindful of that. And then Henry has already got his polite hand raised. I think beat me to the punch here. But because we have such a large group, the easiest way to This the track gets a little bit too much. It's just me on this side.

Operator

So the easiest way to ask a question, if you go all the way to the bottom Of your Zoom there, you can click on the little reactions button. And on that little reactions Emoji thing, there's a raise hand. If you click on raise hand, then I know that you've got a question and let's try to do this kind of one at a time, so we're not talking over each other. I will stay here as long as you need me. I want to make sure everyone's questions are answered.

Operator

So we'll just keep going through the easy softball questions and I'm sure somebody's got a zinger in there or 2, which is fine, which is why we're doing this. So with that, I'm going to prioritize the people with the hands up. And then if we have a lapse there, I'll go through the chat. But why don't we start with Henry since he was first in line there? So go for it.

Speaker 1

Hey, thank you so much for what you're doing. Really appreciate the work you're doing. I think it's so important for our communities. I was a little late tuning in. Sorry if I missed any of the initial information, family stuff happening.

Speaker 1

So no worries, no worries. For that. But thank you so much for the work you're doing. I think that's really that's what I wanted to lead off with. My question is, Let me introduce myself.

Speaker 1

I'm Henry Schuler. I'm an investor, early investor, and I'm also a Founder and CEO myself. I'm curious if you're interested in working with local communities, if you're already working with towns and governments. I'm sure that's part of your order backlog. And how would I sit on as a trustee On the city council in my city, so how would a trustee go about engaging with NightScope and helping to make our community safer in the places we live and take care of our families.

Operator

So appreciate the support and the question. The easy peasy is for me to share my screen if you go to nightscope.com. For that particular question, we do have something a little controversial that we started And I'm trying to find it here. If you go to innovate public safety at the bottom, there's literally a mayoral challenge, if you want to read about that. The concern I've got is a lot of the safest places in the country are really low population, are kind of higher income, medium income, 6 figures and for whatever reason, maybe it's the weather, likely in the Northeast.

Operator

If you want to read through that, that's probably the best and easy way to engage. And every city municipality is very different. In some cases sorry, let me let some people in here. Some cases, it's the mayor that really wants to drive something home. It might be the city council member, a single member who decides, okay, we need to do this and that's literally has happened.

Operator

It might be the Chief of Police, it might be the Sheriff, it might be a hospital administrator. Again, every town and city is so different. It's It's really difficult, Henry, to just say do X, Y, Z and then everything happens exactly right. But getting the dialogue going is Probably the best thing in getting a decision maker or 2 to sit with our team And now that we've done this a lot, more than 2,000,000 hours across the country, I don't know, 6, 7 winters and summers like we've learned a thing or 2. So usually, it's best to have a dialogue and be able to assess the situation and go, I don't think we can help you because you asked for this, this and this and we don't do that and just be super frank.

Operator

In some cases, it might be a perfect fit. And then we can have an initial use like what are you trying what is the problem that we can potentially solve and then we can get the decision makers in the process going. Honestly, some cities and municipalities have shocked us how fast they can move and some a complete opposite and it doesn't necessarily correlate to small, medium or large like what you would think, hasn't been our experience thus far. But I appreciate that, Henry.

Speaker 1

Great. Yes. Thank you so much, William. Thank you so much for all you do. I appreciate the answer.

Speaker 1

And I'll start digging deeper and bring it to the right people.

Operator

Awesome. Very much appreciate it. Thanks, Jon. Yvonne?

Speaker 2

Hey, Bill. First of all, thank you so much for being such a hands on guy. We love that.

Operator

I'm trying. I'm trying.

Speaker 2

Hey, I hope you never outgrow being hands on. Maybe I missed it. I'm a little concerned about this backlog. Is there a timeline for Catching up or being further along?

Operator

So this is good and bad and A little bit of humor, if you remember the old I Love Lucy episode where they're making chocolates.

Speaker 2

The bananas. Yes. And then they stopped

Operator

to start eating them because there's too many coming at the same time. It's been good news and bad news. Years ago, we would be sitting there going, will we get a sale? Will anything happen? And now we're getting closer to rinse and repeat.

Operator

So on the positive side, we have a backlog, right? To have multimillion dollars worth of Pending our potential revenue is wonderful. The team has started shipping stuff, but the sales team keeps putting more stuff in, right? So there's this tension. The primary root cause of the problem, I would say the primary one is the supply chain issues, and it's I've covered ad nauseam either it's a wiring issue problem, it's a chip problem, it's a resin problem, it's a transistor problem or something that holds things up.

Operator

So it's very lumpy. We are shipping. It's just not as kind of consistent that we want. And frankly, you want the backlog growing, but you want to make sure you're realizing the revenue. So one big thing that we mentioned in the video that we're doing is to change the production process So how we manufacture the robots at Nightscope headquarters here in Silicon Valley is I've said this before, our current machines take 100 to 120 hours to build 1 or crudely speaking, 1 a week, which is not good.

Operator

The new machine that we've now started building with big asterisk on the supply chain issues, targeting to build at 1 or 2 a day, and that's going to make a big difference. Staffing also makes a big For instance, needing to hire some additional folks once we make those big changes, the Board, myself, the team, everyone scrambling to try to get these out as fast as possible. I share your concern, Yvonne, because that's revenue that we want to recognize. I think the last point, if you didn't catch it in the video, we did $5,600,000 of revenue last year. We hold north of, from the figures that we shared, about $5,200,000 in the backlog.

Operator

So It's a little crazy to be ending the Q1 with almost the same amount of revenue that we had the entirety of all last year. So that's another more positive way to look at it, but it's a top of mind for all of us. We're working through it. We've hired a senior supply chain manager. We're out recruiting a plant manager, and we're working on it.

Operator

But it's certainly a concern.

Speaker 2

Thank you.

Operator

Of course. John Patrick?

Speaker 3

Hi, Bill. Hi. Hi. I wanted to ask you about social media. Yes.

Speaker 3

Well, it's top of mind for you to get the buzz going and

Speaker 4

you've done

Speaker 3

a great job in communicating with investors and a lot of the And a lot of the graphic and art and communications work looks really good to me.

Speaker 1

I thought about

Operator

Folks, If you're not on speaking, kindly please mute would be great. All right, sorry, John Packer.

Speaker 3

Yes, I'm back. So with the social media, a lot of it might be fun, but not necessarily helpful tonight's scope. But LinkedIn, as you know, is more of a professional kind of a social media Network.

Operator

Are you saying the others are unprofessional, John? Well,

Speaker 3

there are some signs of it. We'll see what's going to happen at Twitter. But LinkedIn is pretty serious stuff. And I took a look there today and I did find Knightscope, but the latest post there From yourself was, I think, 7 months ago. And so it looked like it was dormant.

Speaker 3

And Also

Operator

But if we can connect offline and you can show me like I post probably personally once a week, if not more. The company posts literally every day. So I'm not sure where you were looking.

Speaker 3

Okay. Well, the intersection then must be the company and you at the same place. So if you're posting to your own page as opposed to the NightScope page, I'm speculating on that, but it definitely did say it was 7 months since there was a post. So I'll have somebody take a look to see why it's saying that. But actually, my suggestion my point is, if you do a search on public safety On LinkedIn.

Speaker 3

Yes. There's a lot of stuff there, companies and people. And there's a section I found that says people that are talking about public safety. Right. And there's about a dozen of them and they're very senior people, Some in local government, some in industry.

Speaker 3

Connecting with some of them Might be helpful to try to spread the word because those people in turn are connected to people who are reporters.

Operator

Yes. We So if we go here to the this is the admin view for LinkedIn, you can see that we're posting literally every day. So I'm not sure where the issue might be. If you look at mine, I've got 11,000 almost followers and posting there all the time. So Must have been some disconnect, but our lead generation team certainly focuses on getting as many people engaged as possible, both offline and online.

Operator

Some of our team is pretty astute on the LinkedIn side of things. But take your point. And from what we found, it's never one thing. I always get challenged internally from my teams like what's the one thing we should be doing to like it all work. And I often go back to my days in Detroit where if you're trying to sell a car, you probably marketed it 17 times before you literally sold it.

Operator

Like You've got to think about the regional dealer, the local dealer, the automaker, the leasing finance company, the brand, the nameplate And then they have offline, online and the number of permutations. So to me, it's in order to be effective, it's got to be all the above. And we've got to be as within reason everywhere as much as possible to get the word out. And part of it's today of just engaging with our supporters and our investors to help get the word out.

Speaker 3

I was thinking the announcement about Rutgers, That's a very positive announcement. So on LinkedIn, every university is on LinkedIn.

Operator

Yes.

Speaker 3

So a blurb, A short article kind of like that Mayoral challenge you showed a little bit ago, if you could start posting that on university Pages.

Operator

Yes.

Speaker 3

Public people that if you get that intersection of public safety universities, there's got to be a lot of opportunity there.

Operator

Yes. And I think that goes the same with if you go under like what we do here, this is all new as well. And you can see the different verticals that we've got. And for example, having a major airport involved and then being able to have that blog there to be able to showcase kind of what we think should happen with a requisite client can also be helpful. But one of the key things I would like to Convey is us making that announcement, then our sales team and our marketing team for all the leads that they're working on, they can use that content.

Operator

It doesn't have to be online. It's like I've been talking to so and so University, look what probably a different way to say it is Landing our first hospital, our first casino was really hard. Getting the second one was a little bit easier, the third one a little bit easier, on and on and on. And then it becomes a little bit rinse and repeat. But yes, Rutgers is a huge deal for us through the acquisition of Case Emergency Systems.

Operator

I think That thesis of having some cross selling over time, because we're literally talking to the same folks is going to be a benefit, but it takes some time to get through the whole process.

Speaker 3

Right. Okay. You're on the case.

Operator

We're on it. We're on it. Not perfect, but we're doing the best of what we can with the resources we have.

Speaker 3

Right. Keep up the good job.

Operator

Thank you, sir.

Speaker 5

Mark? Hello, William. Hi.

Speaker 6

Thank you for doing these calls for us. We really appreciate it. My question is about the ATM. How many shares have we issued under it? And at what price?

Speaker 6

And what's the current total outstanding versus when we came public?

Operator

You're going to test my memory here. Hopefully, I get these roughly right. If I get them wrong, I have to refer you back to the regulatory filings at ir.nightscope.com to get the actual correct numbers, but just from memory here. Yes, Rob, Rob. Our recent filings.

Operator

So the ATM for the rest of the benefit of the group is an at the market facility and it's to draw down capital as efficiently as possible to kind of avoid a large huge financing that's highly dilutive. Remember, my entire net worth is in the company. I've got 7,000,000 shares. I don't want to see dilution as much as anyone on this call. But the company does need capital to continue to grow.

Operator

So we need to do it as efficiently as possible. If I stand if I'm correct, I believe The recent 10 Q filing we did on Friday for the Q1 of 2023, I think we drew down during the Q1 about 3,000,000 ish dollars or maybe $1,000,000 a month or so. And then in terms of outstanding shares, again from memory, I think we've got maybe 44,000,000 shares common outstanding. There's Probably 10,000,000 shares of Class B stock that doesn't trade. That's kind of the founders' shares.

Operator

And then there's probably another $10,000,000 of preferred stock that never converted as part of the public listing. Just a refresher, because we didn't do an underwritten S-one IPO like a normal company would have. We didn't have an automatic conversion for all those preferred shares to convert to common. So some people decided to keep their preferred shares, which Basically hold a 1x liquidation preference, but there's no other dividend or any other kind of financial benefit. And some people just decided not to put the shares at their broker or what have you.

Operator

So that's So the $44,000,000 plus $20,000,000 $64,000,000 I don't know the answer off the top of my head on the where were we 15 months ago, But hopefully, that's enough to get you started.

Speaker 6

Yes, I appreciate that. So $1,000,000 a month, are we actually getting at the money? So today, we would get $0.57 whatever it was or If we drew down on it. For the broker, yes.

Operator

If we drew down on it, It's at our discretion when we do it, how much we do it. And we try to obviously minimize the amount versus doing the opposite, which would be like, let's go raise $10,000,000 or $20,000,000 at these share prices is not something I get all too excited about. So we're trying to be Careful with it, but back to some of the earlier questions on the backlog, do you think it would be smart for us to draw down a little bit of capital so we could hire 2 more production technicians so we can get the backlog out faster. I think if everyone knew what I knew, you would go like, why are you even asking me this question? Just go do it.

Operator

And so we're trying to be very careful on how we go about doing it. And Remember, at the last part of the video, there were kind of 7 Key aspects to be able to improve the cash flow that you're in and it's not just the ATM. So a bunch of people joined before after the video. So let me just go through this, if that's okay, Mark. Of course, sir.

Operator

So there's the cash position needs to get improved, right? So there's 7 things that we're working on. One is just the sales growth. Obviously, you've seen that we've been putting out good positive news almost like clockwork on a weekly basis. So just continue to see the momentum.

Operator

Remember that we have financing Partnerships with both Balboa and Dimension Funding and how this works is for some of the orders that's appropriate, we would get that financed. So we actually have the cash in hand for obviously a fee, but it helps the cash flow side of things. Obviously, we need to buy materials to get through the backlog. There's deployment times and everything else, so that can help the cash position. We need to deliver on the backlog itself, right, wherever we're at $4,000,000 $5,000,000 or more dollars, that's cash coming into the company, the ATM we just spoke of, Mark.

Operator

Cost reductions, remember, we announced a 20% reduction in force at the beginning of the year, and some of those cost reductions and actions that we took there will continue to help us in reducing the amount of cash that we utilize. We also announced that we're targeting to get to profitability here in the next 24 months and part of that's improving all our Margins and getting our costs down. So the good news here on the telecom side is our clients are using the service and using it a lot, which means they're eating a lot of data. We've been taking a lot of actions to reduce the whatever we can control from a software standpoint to reduce those expenditures. And then we're also very hard pushing on getting the private LTE and lower types of costs for us to reduce that expenditure outright.

Operator

The service costs need a good amount of work in terms of parts and logistics and the amount of maintenance and service. But remember, if you drove your car 20 fourseven for 30 days in a row and never stopped and we took care of your fuel, you probably would need some service at the end of the month. And if you did that for 6 or 12 months, you definitely would void the automaker's warranty. So that's the level of The rest of these machines are going through, so you got to have some maintenance and service support. And then there's obviously cloud costs.

Operator

And then we're looking at a non dilutive debt And so the ATM is not the point here, Mark, is that the ATM is not the sole source to fix everything. We want to look at this kind of systemically.

Speaker 6

I appreciate all the conscious thought that you're giving to it. In a related question, a whole lot of chatter in the chat About delisting, are we going to be able to avoid that, do you think?

Operator

So delisting. So we actually Two things for NASDAQ were Knightscope is required to meet 2 financial metrics. 1 is you have to have a $50,000,000 market cap, which we did get a notice for. And then we also have to have a share price that's over $1 that is also an important point. If we're able to so a few points here.

Operator

If we're able to get above $1 or above $50,000,000 market cap for 10 trading days in a row, then that gets it cured. So NASDAQ gave us a notice of them, us and several 100 companies because obviously the economy is not doing all that great in some aspects of the markets. So we have 180 days from the day we got the notice to cure the problem. Typically, not always, but typically, if you're unable to secure the problem within those 180 days, you can ask NASDAQ and petition as to why you should get another 180 day extension. So whichever way you want to look at it, we have plus or minus 6 to 12 months to fix the problem.

Operator

We don't control. I get tons of e mails and text messages like, Bill, you need to fix the share price. I don't control the market. That's frankly not to be funny, but as everyone on this call, not me. And supply and demand, What I can do and what my team and I can do together is improve the financial performance of the company, keep it growing, Keep telling the story to whoever will listen, but the rest of it's kind of up to the market.

Operator

We don't control pandemics or bank failures or interest rates or inflation or the like. But I think we have more than a reasonable chance that over the next 6 to 12 months that continued performance, cold financial performance and getting to profitability and the company growing, it's kind of I don't know. From a personal standpoint, it's really hard for me to understand the company is growing double digits at the intersection of 4 important technologies, AI, autonomy, robotics and artificial and electric vehicle technology that we wouldn't have the eyes and ears of a good amount of investors. So we just need to kind of continue to prove ourselves. But we've got a shot to fix it, but This is a two way street and we don't control everything.

Operator

Part of it's the market, which frankly, Mark, you and the rest of the investors on here represent.

Speaker 6

Thanks very much for taking the tough questions, Bill. Really appreciate your straightforwardness.

Operator

Of course, of course. What we're doing is technically extremely difficult. And if We're not willing to engage with people and have a frank discussion like this is not going to happen by itself. So I appreciate you taking the time, Mark. So let's go on to Matt Hu to Lewry?

Speaker 7

Yes. Thanks for taking my call.

Speaker 8

So if I look at the

Speaker 7

The rounds we raised before you were public, I think the cost basis on that was around $8 or so. Just And the current price is around $57,000,000 I just want to figure out, was there any like Split or something that changes the cost basis? Or am I misreading how the previous investments work? And I have a follow-up question after that.

Operator

Of course. So the number $8 is one off. We had numerous rounds. So Again, don't quote me here, make sure you go back to the regulatory filings. But notionally speaking, the seed round was done at, I don't know, I want to say $0.33 a share.

Operator

We did something at $0.80 something a share. There was a buck something And then there's $3 there's $8 and there's $10 So you've got a and then you've got 35 just before the public listing, we had 35,000 investors, all the way down from $0.33 up to $10 So I wouldn't say that $8 is the number, 1. 2, there has not been any stock splits or the like.

Speaker 9

I guess, for For

Operator

the benefit of the group, I'm going to give you a slightly longer answer because I think a lot of people might have a similar question. So first and foremost, I just want to reiterate what I said earlier. We or Bill does not we don't control the stock price. It's literally supply and demand what's out in the marketplace. So if a bunch of investors that bought in at $0.33 a share decide to dump 500,000, 1,000,000, 2,000,000 shares into the market and there isn't a counterparty on the other side to buy a bunch of shares, well, what's going to happen?

Operator

The share price is going to go down, right? So that's one thing to consider. Another thing to consider is the overall market, especially for Micro caps or small cap companies, anything under $1,000,000,000 has been hurt pretty hard from the tech downturn. Frankly, the you can almost watch it, the interest rates go up and share prices go down. It's kind of almost tied directly together, it feels our way.

Operator

You've got inflation, you've got a bunch of issues, and then you've got a bunch of short sellers that are putting pressure on the stock. We don't control any of that. And I haven't sold it I took we took the company public. I didn't sell a single share. I haven't sold a Single share don't plan on selling a single share.

Operator

So all the pain and suffering that a lot of people are feeling, I'm literally on your side financially aligned. So I don't want anyone ever thinking that we're doing something odd that would be not in the best interest of the shareholders in the long term. It's really frustrating. I mean, we're trying to do something positive for the country and for someone to be out there shorting the stock like, I mean, okay, You legally have the right to do that, but you're probably going to end up on the wrong side of history for doing it. So all we could do is keep telling the story, get the financial performance and the way to cure it is you got to have more buyers for the stock than sellers.

Operator

I mean, that's it sounds to almost too simple. But that at the end of the day is what ends up happening. So hopefully, I answered your question. Probably not exactly what you want to hear, but it's not.

Speaker 7

That's fine. So as a follow-up question is, if the valuation Pre IPO was pretty high. Rather than trying to go through this listing and delisting process or whatever, it looks like Public markets are not valuing the stock as high as it was in the private market. Can you just take this back private?

Operator

So I guess there's 2 answers. 1, as an officer of the company, I legally have a fiduciary responsibility to look at everything regardless if I personally like it or not. I don't know how to do that basically. You would have In order to take it private like if I'll put myself so not to use you as an example, let's say I invested at $10 a share and then we took the company private at $1 a share, dollars 2 a share, dollars 0.50 a share, like I'd be pretty cranky. I don't know how to physically do that transaction and then you'd have to go raise some capital to go along with it.

Operator

Like everything has to be on the table. I don't think I'm speaking at a turn here. I don't know how that cures the problem unless you had a large financing source that would be willing to give the shareholders an appropriate price, right? And then have enough capital when you're private to grow the company. So as I said, everything needs to be on the table.

Operator

I don't know exactly physically how to do what you're suggesting. That would be in the best sorry, I need to caveat that. That would be in the best interest of the existing shareholders. That footnote is kind of really important, right?

Speaker 7

Got it. Yes. Thanks.

Speaker 10

Of course.

Operator

Kerry Dine?

Speaker 11

Yes. Hi, Bill. Thank you. I want to Echo the sentiments of everyone else. Thank you for your availability.

Speaker 11

It's refreshing to invest with a company where the CEO is so available To the shareholders, I did purchase in 2019, I believe it was Series S Preferred and considered a long term investment. Had it been up to me, I'm making a statement and then I do have a question. I would have loved to have seen the company stay private, Perfect world, right? Grow and grow and grow like you're doing as fast as you're able. You're pulling on the supply Jane, you're doing as much as you can.

Speaker 11

I appreciate that. And the whole team grow under the radar until Wall Street begs for you to go public. Perfect world, that's what I would have loved to have seen. So my question is, I kept the Preferred, I have not converted. I don't know what that exchange rate or even what that process would look like.

Speaker 11

I had never seen the type of public raise that you had where common shares were sold to the public. Could you maybe inform us how was that beneficial Initially and long term to both the company and to us as shareholders for having that last phrase where common shares were issued.

Operator

There is 3 words that got cut off and then I missed the sentiment of the question. Can you ask the question one more time?

Speaker 11

What is and what is okay, what is the benefit initially and long term to the company and to shareholders for having the come and share public fundraise to make it if we list it.

Speaker 5

Okay.

Operator

All right. So a different way to ask the question is like why the hell did you take the company Yes,

Speaker 11

I'm not without saying that because I figured

Operator

That's fine. That's fine. That's fine. That's why we're here. So at the time, we had a few things to consider.

Operator

One is the We had been private for 9 plus years and had raised, I don't know how much money through well, I do know, right before the public listing a total of probably north of $120,000,000 I didn't think it was possible or viable for us to do another Reg A offering and what we really needed was to raise the $40,000,000 while we were private on our don't quote me here, it would have been our 4th or 5th Reg A. And I just running a reggae is really expensive. It may or may not have gotten done. Was one thing to consider. The second thing to consider is because we had been doing Reg A since 2016, we had all the costs of being publicly traded without any of the benefits.

Operator

Like we couldn't there's some kinds of debt and debt offerings that we weren't able to do. We didn't have access to the wider capital markets, and we've got to think through the whole aspect. So at the time, not knowing you can never time the markets as much as people think you can, that path was viable for us to raise some additional capital and listing it was kind of one way to do it. We do have access to monies that probably we wouldn't have before, But now you're under scrutiny of the public markets every day, which is I I guess on a personal note, it's a little weird, right? You're like you're selling a house and everyone in every day is in your face going, This is how much your house is worth.

Operator

This is how much your house is worth. This is by the second. It's like kind of weird situation to be in. It is what it needs to be. There are some brand aspects.

Operator

There are some companies that rather prospective clients that could Prefer to work with a publicly traded company. Yes, rewriting history, I don't know. Would we have done it again? Probably. But because at the time, I didn't have confidence that doing another Reg A would get is probably the crux of the question.

Operator

But we're here now.

Speaker 11

Okay. Good. And one quick statement, and I appreciate the time. I'm going to channel a precious metal investor called Rick Rule and kind of speak to the rest of the investors. The delta between a stupid low stock price and the reality of a high growth company is where fortunes are made.

Speaker 11

Thank you so much for the time.

Operator

Thanks for that. I don't think I could say that, but you can. Oh my god, Sam. It's been a long time. Sam, are you there?

Speaker 2

I'm here. How are you, Bill?

Operator

I'm hanging in there, Sam.

Speaker 2

Yes. So am I. Original investor at less than the dollar, see it go all the way up and come back down, but that's not my question. That is as it is. My question, which I've asked you every year is, why are we not selling more Of the K3, K5 robots, which are revised, working very well, Problems all sorted out.

Speaker 2

It seems like the sales force are not just telling the story to the right people or there is no demand for it for some other reason.

Operator

Sam, I appreciate you being on the call and Thank you for being a long, long, long time investor. And yes, Sam asked me this question religiously almost every year, like why aren't the sales going up faster and higher. If I just step back just objectively, Sam, I think there's probably a few different factors. There isn't one thing. So the first one, I would say that the premise is a little bit off because we're sitting on, I don't know, somewhere near $3,000,000 of backlog of orders.

Operator

So that's to say that We're not selling anything is not good. Are we delivering? That's a separate problem. But we are selling. I think the second issue is how do I I got taught this by my co founder some time ago.

Operator

He's an ex law enforcement officer, as you know, Sam. And he warned me, and I think he's been right for all this time was, the law enforcement and security Market is not and I'm going to try to do this as politely as possible, not the most technologically progressive sector in the world. And it takes a really long time to convince people that changing is the kind of the right way. So I think we've got a little selling against the grain sandwich, investors and people don't want to hear that. But you're having to educate a market, which is in a lot of cases not good.

Operator

And then 3rd, Sam, just to be fair to the team, we've been strapped for resources. Up until recently, we never had a proper full sales and marketing team. Not that we're fully completely staffed right now, but we have enough people that are generating enough leads and enough demand that we've got The qualification process sorted out, we kind of know how to do this and we've got the right contract and we've done enough legal and cyber and everything else. So I think it's 3 things that have not helped us. But that is to say, this is not should not be viewed as the same conversation, Sam, that we've had for a few years back when like are we going to sell anything this month?

Operator

Is anything going to come in? That's not the case now. Now the problem is the shipping and delivering side of things. Should it go faster and higher? Yes, that's a little bit of frustration, Sam, because we've got clients that have renewed 4 years, 5 years, 6 years, 7 years, you don't get a client to pay you full price for 7 years or more than half a decade and you're not creating value for them.

Operator

So I think it's a combination of all those, Sam, and we're working the issue. But that's kind of my viewpoint, Sam.

Speaker 2

Okay. I hope the government steps in and fills the Offers.

Operator

Well, I think another way to look at it, Sam, if we want to forward without me getting out of step here. I think the federal government is a very large opportunity that will take some time. I think us landing New York City and NYPD 10 years in the making, And we're really excited to be deploying that machine hopefully here during the Q2 that opens up another large avenue. And I don't want to say it's cheap because it's not, but having the federal government and New York City as a client will help us with other clients. That's no doubt.

Operator

And I think if you look at Having several publicly traded companies as clients is a big deal. Lowe's is a client of ours. PG and E is a client of ours. Penn Entertainment is a client of ours. ABM is a client.

Operator

These are all multibillion dollar companies. And some may be able to scale as they have more and more time. But Sam, I'm frustrated as well, but we're working as hard as we can to try to pick up the pace here.

Speaker 2

Okay. Good luck.

Operator

Thank you, Sam. Barry Haynes.

Speaker 12

Yes. Hi, Bill. Thanks so much for doing this. So I had a couple of questions relating to the gross margin because solving the stock price problem requires kind of getting Free cash flow neutral and kind of starts with the gross margin. If you have a negative gross margin, you can't never get there.

Speaker 12

So I'd love to just drill down on that a little bit and maybe you could talk first

Speaker 13

of all about,

Speaker 12

you mentioned the production movement From sales to assembly line, how much could that add to the gross margin? What are the other key steps you see to get the gross margin up? And what's sort of the goal? If you go out 2, 3, 4 years, whatever, where do you think you can get to on the gross margin? Thanks.

Operator

Okay. So the gross margin for us as a company is a little convoluted. So the gross margin, as you can see in our regulatory filings for product related sales like through the acquisition for all our stationary stuff. It's more like a product sale, like you have you sell the Product you may sell a service contract or something to go along with it, but there's a margin on that product kind of like when I was back in Detroit, you sell a car to the dealer, you have a margin, there's variable cost, there's fixed cost and it's abundantly clear. In our case, with the machine as a service, it's a little odd, right?

Operator

We don't sell the machine outright. We don't sell the software outright. We don't sell the data transfer outright and everything else. You have a bill of material for the machine that gets depreciated over 3, 4, possibly 5 years at some point. And you're using that to calculate the gross margin of which The revenue is obviously a part of that.

Operator

The telecom costs, the service costs, the labor associated with the assembly of the machine and then the cloud costs, right? And So it's a little weird because you need some scale for this to work. And a good example might be the KNOC, the NightScope Network Operations Center, you need to run let's say, you have a staff of 4 people that can run 168 hours week, right? They need to run 20 fourseven. Just because you added the 3rd, 4th, 5th or 60th or 70th machine, it's not like we're adding additional people to monitor those machines.

Operator

So you need a little bit of scale, Barry, and that's the thing that doesn't always come across. And then the assembly portion also makes a huge difference. If us taking 120 hours and you can pick your hourly rate and we can build something with less than 20 hours, you can do the math real quick and go, okay, that's going to be material. But it's not going to be one thing. You're going to have to keep the revenue going up.

Operator

You need to get the telecommunications costs down, which are material, you need to get the service cost down, you need to get the cloud cost down and you need throughput. You need to get these things out the door faster. And because we kind of see how we could there's possibility to get there is why we have the nerve, I guess, to say that we can get it to profitability in the next 24 months. And obviously, at the end of the day, it's also fixed costs, right? You need to keep the team as small as possible, as efficient as possible, so that we're generating a good amount of revenue.

Operator

And you start getting there like if you go if you multiply by 4 our first quarter annual run rate and you annualize it, you're about $11,000,000 and we've got maybe 90 employees on staff. You can start seeing that if we can keep the team efficient and lean and get our costs down, we can get there. And then in terms of what it can look like longer term, in the interest of time, I want to make sure that everyone has a chance here. If you go to nightscope.com/rise, the investor deck, the updated investor deck is there, And there's literally a slide there that shows our target of what we're trying to get at.

Speaker 12

Okay, great. Thanks so much. Appreciate it. Thanks, Greg.

Speaker 3

Thanks a lot of

Operator

work. Thank you. Mr. Matthew Miller. Hey, Bill, you hear me?

Operator

I can hear you.

Speaker 10

All right. Sounds good. I'll say, before I get into my question, I just want to make a comment on the whole I see a lot of chat going on about reverse splits and delisting. The first thing I want to say is, I'm Undoubtedly, I'm sure NASDAQ will give you more time, the 180 day Extension if needed. I've been trading for a long time and I've never I've seen companies do reverse split after reverse split.

Speaker 10

And I just want to make the point that Nightscope has never needed an extension or asked for an extension beyond what they already had. So if it came down to the point where you did need an extension, I don't ever see them giving you a problem doing that. So I just wanted to kind of point that out just so there's not going to be that fear that 2 or 3 months down the line that we're going to be looking at a reverse split or a view listing. So I just kind of wanted to get that out of the way first. Hold on one second.

Speaker 10

Okay. So I'm going to start off my question just with a statement. So prior to myself becoming a full time investor, I was actually in operations and management for 1 of the largest security companies in the world, which is kind of why I have an authentic alacrity for So while there are plenty of hardworking qualified human security guards, I firsthand know the challenges, costs and inefficiencies In the security guard industry with constant callouts, turnover, perfunctory training for new hires, which then translates over to level of service, The average cost for a human security guard for a company outsourcing security measures is anywhere from $35 to $100 per hour depending on whether the guard is armed or not. NightScope is a cost saving efficient alternative to existing security measures and any company looking to cut down on costs without degradation of security efforts should look to NightScope as a solution. So any narrative contributing to a non favorable economic climate, kind of like we are now, should actually be beneficial to Nightscope as an investment.

Speaker 10

So my question is what can Knights Hope leadership do to communicate this message to existing and potential shareholders? So basically, NightScope is something you want to invest in as companies can save money on their existing security measures And crime obviously isn't something going away no matter what the economic climate we're in.

Operator

Was there a question in there, Matthew?

Speaker 10

That was basically my question. I apologize. So let me I know that was kind of a long winded statement, but there was a question in there. So what can Knightscope leadership do to communicate this message that basically You're investing into something that is going to be saving companies. Crime is going to go on no matter what And companies are going to be looking to be saving money.

Speaker 10

And currently, their existing security measures are probably outsourcing a company for Anywhere from $50 to $100 per hour, but investing in NightScope, you're getting a superior service for a fraction of a fraction of the cost. And this is why it's a beneficiary of this is why it's an investment or this is what's why you want to invest in NYSTO.

Operator

So I think I'm the do all the above kind of guy. If you want something done, the Colin Powell's doctrine of overwhelming force usually is the one I want to go towards, which is you need to spend time on everything. You need to spend time on calls here with our investors and supporters. You need to take every podcast opportunity that you have. You need to post on social media, you need to be on the robot roadshow, you need to have some of our existing clients be able to speak to a prospective client.

Operator

You need to write white papers. You need to get a board member to write a blog. You can issue press releases. Basically, you got to do everything. And one of the reasons why We did the financings the way we did is I think it would be very foolish to think that a company by itself with a handful of large institutional investors who's going to make this massive change for the country.

Operator

We've gotten so lucky with so many of our investors who've introduced us to a possible recruit, who've made a phone call to a mayor, who called sitting congressmen who've been able to get a mayor engaged, who got a school administrator to take a call, to get a health hospital administrator to engage us as a client. And we can't do this by ourselves. And I think it's not just what management can do, it's what our supporters do to get the word out. There are some things that I would love to say that you should do, but I can't and all I can do is continue to improve the financial performance of the company and communicate and communicate and communicate and communicate. And that's why I'm willing to put the inordinate amount of effort in answering questions online, offline, text, voicemail, whatever it is.

Operator

And our CFO, Our co founder, everyone has been trying to be as responsive as possible, and we can try to just continue to get the message out. But part of it's delivering on results. And we said we're going to continue to grow the company. And I hope the graphs we put up this afternoon show that we are. Do we want to accelerate that?

Operator

Yes, absolutely. But at this point, it's We need to put numbers on the Board and we need everyone's help to do it.

Speaker 10

Thank you so much, Bill.

Operator

Okay. Is that Brian? He's back.

Speaker 5

Hey, Bill back.

Operator

I'm back. I'm back. How are you doing?

Speaker 10

How are you?

Operator

I'm good. I'm good.

Speaker 12

Okay. Well, I'm going to hit you with some questions here. So

Speaker 9

All right. Well,

Operator

All right. So full disclosure, I kind of threw out my back over the weekend. So don't freak out, but I got to stand up here for whatever jaw dropping nightmare questions you're going to ask, so go

Speaker 5

for it.

Speaker 12

Well, you're ruining my image. So the inquiring minds want to know, Are you

Speaker 5

do you identify yourself with

Speaker 12

the Millennium Falcon in the background or the Empire Fighters?

Operator

You're going to ask me that, Brian? It's evil good against evil. Of course, it's I mean, technologically, the TIE fighters are really cool, but you got to be the Han Solo Millennium Falcon guy.

Speaker 12

Okay. Well, I know that you can't control the stock price. And I'm being an advocate for you here and I'm not a financial advisor. But NightScope went public Right at the tail end of what I would call the great bull market and the qualitative easing and then the market turned. And if you looked at a lot of high-tech companies like you mentioned, their valuations have been crushed over the past 6 months.

Speaker 12

I mean, It's never good to see, for example, bank stocks go under. It's never good to see bank stocks swing 50% in a day, 20% in a day. Were you guys caught up in the Silicon Valley Bank failure at all?

Operator

Yes, we've disclosed this. That was a or a fine weekend. We had all our money tied up there. Fortunately, they got resolved after the weekend. We have since pulled our the funds over to a different bank.

Operator

But yes, and it sets up Investors want confidence, right? That kind of stuff going on does not instill confidence, instilled a lot of stress on us. But fortunately, we came away unscathed and stuff like that where we don't control. But we can't sit here and whine and complain either. Like it's a problem, all right, how do we fix the problem?

Operator

And And you just got to move on to the next issue. We can't woe is me, the market, woe is me, the short sellers, woe is me. And it's like, Listen, nobody cares. Put the numbers up, get the work done, get the revenue up, get the cost down, the rest of the stuff Like it's entertaining, it's interesting, it's what have you, but the markets can be pretty rough. And what they want to see as results and growth, and that's what we're working on.

Speaker 12

I think I mentioned previously, I think your Case Acquisition was very timely and a very long term strategically well planned acquisition Based on the synergies that you have with the customer base, existing customer base, The potential for upsells, obviously, acquiring a new customer In the public studies room is the hardest thing. Case had a set of customers where you could go back to And refurbish or do new installs like your Rutgers announcement today. A question I always get from people is, well, don't you have a Telephone and I'm like, well, if unfortunately you're in a situation where You're in and you get attacked or someone steals your cell phone from you or you're disoriented, the first thing you're looking for is that call. And I think the case offers that solution and then it also offers NightScope, the opportunity to offer the K5 or the Hemisphere or other product lines, are you seeing that opportunity Starting to grow?

Operator

I think there's a lot of cross synergies because we're basically going after the same clientele in a lot of cases, I guess pun intended. I think 1st and foremost, the folks working on blue light towers will tell you Part of the solution is literally the physical presence of having that light there in the first place can stop Some negative behavior. 2nd, your phone isn't always charged. Your phone isn't always have connectivity and just having the GPS location, we know exactly where that call came from, not I think it's over here, can be really helpful. And I think selfishly for Nightscrope and our And through the acquisition, there's a lot of synergies for us to grow together and likely some product pipeline, new things for us to do in the future.

Operator

But if you look at it, 7,000 devices that are out there in the field, What happens when you're able to do a massive nationwide upgrade and add All the AI capabilities that we have and in the long term be able to have all these machines moving or not moving, See, feel, hear, smell and speak like there's inherent value creation and it's a little bit of a land grab. It's not like in some of these places where these devices that Case had installed over the years, it's not like it's easy to just Show up and I'm going to go stick this on the highway somewhere. It's a pretty intense process. And yes, it's a long term play. It's also I think if you reflect on the financials that we just put up, We asserted there was an accretive transaction, and you can see the positive impact it's had.

Operator

And the team there has been doing rather well growing, and there's a lot more growth to be had.

Speaker 12

And then I'll just finish up here. I mean, I think having a backlog is fantastic as Long as you're able to get the products out the door and then recognize that revenue, because you really have 2 parts of the business, the subscription model As a service and then like the case model looks more of a point of sale type of service. Any update on the government security review and also the hemisphere product launch?

Operator

The ATO with the U. S. Federal Government, we're a little in the dark here. So we're we don't know anything more than you already know. And I'm going to need to put somebody on mute here.

Operator

And in terms of the hemisphere, we're working through some last minute supply chain and technical stuff, but We've got orders come in and hopefully, we'll start shipping that one soon.

Speaker 12

All right, Bill. Well, again, I know everyone asks you about the stock price. And if you're successful In growing the company, growing the top line as well as getting cash flow positive, and it's all about getting the number of installs. And if this economy can just kind of trend along, I think you'll be in a good position. You've been very transparent.

Speaker 12

Finally, on that non dilutive offering that you kind of had on your slide there, can you give Any details of what that might entail? Because typically, companies, when they want to raise money, they issue more stock, it becomes diluted to existing shareholders Or they'll do a convertible type of offering of preferred shares that get converted to common. Anything that you can elaborate

Operator

on that? I think I can hey folks, If you're not speaking, if you can go on mute, kindly would be great. I think one thing that I've learned Without commenting directly on possible offering or anything like that, on the private market side of things, prior to the Jobs Act, From 1930 whatever till 2015 ish, it was illegal for The general population to invest in a startup, like you can go to Vegas and do whatever the heck you wanted, but it was literally illegal for you to participate in our Reg A offering or Reg CF or anything like that because none of it existed. And it was kind of an injustice where The general population couldn't invest in promising startups, some cause that they were behind, some entrepreneur they wanted to back or what have you. And as I reflect generally on the markets on the public markets.

Operator

You look at a lot of micro capsmall cap companies that are dealing with larger institutional investors with some whichever way you want to look at it, highly lucrative for them or obnoxiously expensive for the issuer. And the general public typically doesn't have access to that. So to me, that feels like a little bit of an injustice. So we're exploring to see if there is an opportunity for our supporters and for the company. Obviously, we're growing.

Operator

Obviously, we need the additional capital. So to see if there's an interesting way for us to do something non dilutive, which remember, again, I don't want any dilution either. So let's just be abundantly clear here. So we'll see. We're still on exploratory base.

Speaker 12

Well, obviously, you have the route of accredited investors, you have those preferred shares sitting over in the sidelines. There's different things you can do. But Unfortunately, crime is not going anywhere. So you're a public safety company. Your mission is to make America the safest country.

Speaker 12

It breaks my heart every time I see something happening at schools impacting families and children in our communities. So you're right on mission, long night scope, short the criminals

Speaker 4

and

Speaker 12

may the force be with you.

Operator

Thank you, Brian. I appreciate that. I appreciate that.

Speaker 4

Thank

Operator

you. Kevin Hines.

Speaker 14

Hey, Bill, can you hear me?

Operator

Yes, go for it.

Speaker 14

Hey, first off, yes, thank you for your time. We'll try to be short and to the point here, so some of the other people can get their questions in. So as far as blue towers versus K5s, it seems to me as if the Sales on the blue light towers have sort of been ramping up a little quicker than those of the K-5s. I was just wondering if maybe you could Touch on sort of that trend and do you think that, that trend may reverse On the side of K5s anytime soon or if that makes any sense?

Operator

Yes, I understand the question, Kevin. I think Because Case was a private company and no one heard when they got their sales, now all of a sudden because we give it some due publicity, then it looks like it's a big trend. I mean, I think the easier way to look at it and this is roughly speaking, so don't quote me here. If you look at the backlog, it's I don't want to say it's fifty-fifty, but it's pretty close to split. So if it was like 90% backlog on Blue Light Towers and the rest were autonomous security robots and it'd be different, but that's not the case.

Operator

So I long term, that's a great question. How does this play out over time in terms of either quantity, which is very different. That's the other thing to think about, Kevin. Quantity, a per unit revenue for an autonomous security robot is materially different than a call box or an e phone. So we're in uncharted territory.

Operator

No one in the history of mankind has done this before. So for me to sit here, Kevin, and tell you, oh, yes, we know exactly what's going to happen. It's like there's no credibility there. I think we just need to keep pushing forward. I think the positive thing I can share is it's green lights on both sides.

Operator

And in a lot of cases, I'm looking for synergies across the portfolio. And we want to be able to tell a client yes as much as we can as opposed to no, we don't do that. So I think things are looking up and the numbers reflect

Speaker 14

it. Okay. And just a couple more quick things. I think you already mentioned maybe and I just want to make sure that the There's no new update on the FedRAMP process yet or the federal government status?

Operator

Yes, I wish. Unfortunately, Kevin, I don't have anything I to share it's not the most I'm going to be polite here.

Speaker 14

I know the government's slow.

Operator

It's not the most transparent process.

Speaker 1

How about that?

Speaker 14

Yes, the government moves slow. It irritates me. I deal with them all the time, too. And then my last little piece of my question was just, Are we seeing any relief in terms of parts supply and manufacturing You know producing additional units to get out in the field?

Operator

Yes, no and maybe. I mean, Kevin, I'm not trying to be Funny, but every day is like a new drama. We thought we were good over here and then all of a sudden it's a problem or we have an intermittent problem. It's For 2 weeks, we're going to be stuck here. I'm hoping it starts leveling out.

Operator

We did hire, I think I mentioned earlier, a full time supply Senior supply chain manager who can keep a closer eye on it and try to plan ahead better. It's stuff that we never thought we'd have a supply chain issue, ends up being a massive problem. It could be a wiring harness, it could be a connector, it could be a resistor. I mean, it's all over the map. We're working through it.

Operator

Obviously, you can see that we've been shipping and reflecting it on the revenue side of things. But I don't I wouldn't want to say that, yes, it's all green lights going ahead. It's I think the best thing we can say is it's going to be choppy. And it's that's not necessarily healthy for us or the clients to have a mad rush of stuff come in. It doesn't help on the production quality, deployment, client experience type of things, but we kind of just need to work through it.

Speaker 14

Okay. So we don't necessarily expect any Drastic improvement to that like within the next, I don't know, 12, 24 months or anything like that? I mean, do we expect it to be an ongoing issue for a while?

Operator

I hope it's not Kevin. I can't forecast that.

Speaker 4

And the

Operator

problem Kevin is that we get caught by surprise. It's not that it's something we internally did. It's and sometimes it's a Tier 3 supplier, the guy who gave another part to another part and then ends up affecting us. And We don't have visibility and it's happening across it's not just us across a number of sectors. And I don't know if the next 12 or 24 I'm hoping the next 12 or 24 months are going to be a lot better than what the hell we just went through, but I can't promise that, Kevin.

Speaker 14

Okay. Well, I appreciate your time. I'll let you move on to the next one. Thanks, Bill.

Operator

Yes, sir. Thank you, Kevin. Alan Stone.

Speaker 13

Yes. Hey, Bill. How are you? It's been a couple of years since we last spoke. Yes.

Speaker 13

And you might recall, we did a webinar with you a couple of years ago.

Operator

Yes. It's been some time.

Speaker 13

Yes. But yes, I've been following Your progress and congratulations on your growth. And I've just got to say, you've probably been The best person ever in the U. S. Under raising money under Reg A, I can't think of any company That's been more successful in raising money under crowdfunding or Reg A than you.

Speaker 13

I always tell people when they're considering a Rege, look at Knightscope, how well they did. So I wanted to say that. And then congratulations on Building the business and thanks for the town hall. I think it's very transparent what you're doing and it's Good for your shareholders. I guess people are asking a lot of questions about the stock price.

Speaker 13

I didn't hear you address the potential for a reverse split. Is that something You'd consider I guess, obviously, you'd prefer not to have to do it, but Yes.

Operator

I think, Alan, one important point that you may have missed. Where we sit on the NASDAQ exchange, we actually have 2 requirements, a $50,000,000 market cap department and a dollar share price. A reversal would not cure a market cap issue.

Speaker 13

Okay. So yes, so right now your market cap Seems to be about $25,000,000 Someone one day needs

Operator

to explain to me like if I go to 5 different sources of the market cap, You have 5 different numbers, but yes, it's

Speaker 13

not it's south of 50. Yes. So I guess we got to double the price

Operator

to get there. If you're not speaking, can you kindly go on mute?

Speaker 13

Yes. So it looks like at least I'm just looking at the Yahoo Finance, but Yahoo! Finance saying you have a $25,000,000 market cap. So the shares outstanding times the price of stock.

Operator

Yes. I think if you go on Robinhood or somewhere else, that's exactly the same. Yes.

Speaker 13

So You've got what, 30 how many shares are outstanding now?

Operator

That trade about don't quote me again, You need to refer to the filings, as you know, dollars 44,000,000 off the top of my head on Class A common and then there is Plus or minus $10,000,000 of Class B common that does not trade and then another $10,000,000 of preferred that does not trade.

Speaker 13

Right. Yes. I think they just look at the It's

Operator

Class A common trades, correct.

Speaker 13

Right. Yes. So basically you got to double the price of the shares to get to that $50 number and that would get you over the dollar also. So, yes, I mean, we have some ideas to that could help you. Certainly, we could help you with a research report in Circulation to our subscribers, we have 200,000 subscribers to Wall Street Research and we'd love to I'll help you by doing a report and distributing it to our global investors.

Operator

Always happy to take a look. So if you want to comment on

Speaker 9

that, we're happy to do that.

Speaker 13

Okay. Yes, let's follow-up on that. And again, congratulations for building.

Operator

Thank you, John. I appreciate it.

Speaker 10

Yes. Sure. Oliver? Yes. Can you hear me?

Operator

Yes, go ahead.

Speaker 9

Yes. I'm sorry, I came up quietly and had some emergency, but I might have missed quite a lot. But I wanted to ask if granting the A lot of issues going on with crimes with schools. I don't know if The leadership has a particular plan to market now NYSCO to public schools And then secondly to private schools.

Operator

So Oliver, we do have clients that are public and private schools, if I'm correct, already. I think one cautionary note I usually have for the sales team, especially on the Public side of things is budgets are highly problematic. I think it's fair to say our country doesn't necessarily pay our teachers appropriately and some are in dire need of supplies to show up there with a significant budget increase for something that they don't have right now becomes a really difficult sales issue. I think medium term, we probably need to work with Congress and the Department of Education to try to figure out a different path. On the private side of things, it's a little bit better.

Operator

Obviously, if you didn't see our announcement this morning, Rutgers University signed a $1,250,000 contract with us, and we have several other existing clients that are, I I believe high schools and some other universities and college campuses. But yes, it's an opportunity, but need to be a little careful.

Speaker 9

Yes. So with private schools, I'm thinking I went to a lot of Catholic schools. So the Catholic, they have so many nationwide. So the right approach for it will be to now look [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] The leadership of the Catholic education in the various diocese, that way you are able to cover a whole area once you get The contract, that would be the strategy.

Operator

Yes. The other concern, Oliver, I forgot to mention is remember the business model for us typically works better if we're running 20 fourseven. We do at times do part time shifts, But most schools don't run 12 months out of the year and most schools certainly don't run 20 fourseven. So it's still an opportunity, but maybe less attractive in the short term versus, let's say, a hospital or commercial real estate or Sino and the like. Just something else to keep in mind.

Speaker 9

Yes, yes, yes, I understand that. That would be the same case with the malls [SPEAKER

Speaker 4

UNIDENTIFIED COMPANY REPRESENTATIVE:] That's why I discussed

Speaker 9

it around 20 fourseven.

Operator

Yes.

Speaker 9

Okay. Yes, I heard you say that [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] You're thinking that NYSCO will be profitable in 1 year. That 1 year, does this start May 2023 to May 2024?

Operator

No, that's not what I said. I said Q4 of last year, we announced that we targeted to be profitable in the next 24 months. So that would mean we are targeting to get to the Q4 of 2024. So Q4 of next year is our target to get to profitability by then.

Speaker 9

Okay. Thanks for that clarification. But the I'm doing my own part because I'm buying a lot more stuffs right now Because since I bought them over a year ago when the company was seeing the woods, it just makes a lot more sense To buy a lot more stocks now to help the companies go forward, because I believe a lot in my scope, having been in security Right from the bottom all the way to quality control. So I know what this is. And [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] I know that it's going to be profitable.

Speaker 9

And once it starts, it will just be unstoppable. So The shareholders have not been security professionals. At least I heard some other security professionals. So we know that This is an opportunity that is going to be tremendous. So it just takes it's a matter of time.

Speaker 9

This year, these shares will go back to maybe $8 that where when the IPO came out. So I just wanted to make that statement. Thank you very much, Oliver.

Operator

Thank you, Oliver. And as I often say, Wall Street can be wrong typically in the short term. It's typically right over the long term. And kind of what we need to do is Just keep growing the company, get the company profitability, keep growing and hopefully the stock takes care of itself, but we can't control that. That's kind of up to all of you.

Operator

Marco,

Speaker 13

You're up.

Speaker 4

Bill, how's it going?

Operator

It's going. It's a big roller coaster over here.

Speaker 4

Well, first, let me just say congratulations on the Rutgers contract. That was a big milestone for us. It was a Big American University and hopefully it's just the first of many. So definitely we'll help with credibility on the college and university side. My Question is, since the pilot started in New York, have we gotten any feedback how that's going or if the city has shown any interest to expand on their initial contract?

Operator

So as the Mayor told the world, we are targeting to deploy the machine in June, July timeframe. So we're working on getting that first machine shipped out and want to make sure we do a tremendous job for the Mayor, for the City and for our friends at NYPD. So stay tuned. Hopefully, we'll deliver the machine here in the Q2 and you might hear about it.

Speaker 4

No, definitely. Just I don't know if any other cities as As large New York, we're close to have any sort of similar interest to a pilot program. Obviously, we've had other cities, other mayors obviously had interest I don't know if we had any similar situation such as New York since the initial public release, they

Operator

So the City of Huntington Park, if you go to nightscope.com/crime, They had a successful pilot the 1st year and then on a unanimous vote by the City Council decided to extend the contract for 2 more years. So that would be a city that has had a positive experience. And I guess my comments remain similar to the security and law enforcement professionals, local government also takes a bit of time. And I'm hopeful that assuming we do well in New York City, that's going to help set the tone or reset the tone.

Speaker 4

Got you. That makes sense. I think my last question is, obviously, with people in law firms, you said they're not Always most technologically forward thinking in terms of how they view security and law enforcement. Have you noticed anything with like After a certain amount of time, we're speaking to these type of individuals that eventually they come around. Is there like any key parts of the messaging that the sales team and marketing Maybe adjust to maybe get more people to at least have a better likelihood of at least giving us a try.

Operator

Nothing clarifies the mind than a sore point of a need. And I'm not saying anything that's not been public, but the City of New York had 33,000 officers or so, and they're losing 3000 to 4000 a year. And so they they're short staffed, they have budget and they have a problem. And that really crystallized, I think the city to really start rethinking, reimagining public safety. And I think the best thing you can do with a client is just have them realize that they have a problem on their own.

Operator

I think one of the other reasons we've done well with casinos, for example, is if they can't hire the staff to do the security, I mean, that's a problem. And I think the more time we spend fixing actual problems than trying to convince someone that might be skeptical is the best time that we can utilize our resources.

Speaker 4

Got it. That makes sense. But again, I speak for the rest of the shareholders. I know they've said this several times. I appreciate all your transparency With all the hard work you and your team are putting in, I know like myself, I actually initially invested while Xycecope was still private, it was prior to the IPO.

Speaker 4

So Again, I share people's frustrations when you had that first initial investment to see where it's at. But again, this is a long term where you long nights go and short the criminals. It's not something that's going to be overnight, where it's going to turn around. So I think you and the team have a good overall Plan, it seems like you're at least executing in terms of revenue growth to get into bigger contracts. So I think this momentum continuing, it will eventually financially turn itself around.

Speaker 4

So thank you again for all the work you're doing for us. We appreciate it.

Operator

Marco, thank you for The remarks and the sentiment, you have no idea what that means to the team on this side. We got punched in the face for breakfast most of the days and just trying to get this all to work. It's technologically very challenging. We're somewhat resource constraints, but we continue to make progress. So without your support, we literally couldn't be doing this.

Operator

So we really appreciate that, Marco.

Speaker 4

Thank you, sir.

Operator

All right. Thank you. Fernando.

Speaker 9

Hi, Bill. How are you?

Speaker 15

Good morning. Thanks so much for this and congrats on the showcase in New York. I got to see it in Times Square. A lot of interest by NYPD. There was I mean, it was teeming with officers.

Operator

That was surreal. We get a police escort into town, which is I was just speechless.

Speaker 15

Yes, and a lot of tourists From all over the place, Germany, and I mean, when I was in there, they were asking about the robots and the robots coming to almost like greet them. So that was very cool. My question is and you talked about sourcing and Construction, etcetera, throughput. On the software, in our robotic Stack and AI, what access do you have to the top Quality, right? So I'm talking about the frontier technology of the likes of NVIDIA.

Speaker 15

And or is the technology that you are selling perhaps not the premium, But then, of course, it's cost benefit to the customers. So I just wanted to understand a little bit, What is what are you selling? What is needed out there? Is it the top Of the technology or is it a wrong or 2 below that? And What are you developing on the software side, right, with the likes of NVIDIA and others really that are at the frontier I'd be very interested to hear.

Speaker 15

When you talk about casinos and even the NYPD, I mean, again, frontier technology is very expensive, right, much more. So what is that balance? And what are your what's your vision on technology? I know that we've Spoken before on AI, right, and how to leverage that.

Operator

I think a few points and for the audience's benefit. So There's all this rage about AI and when's the night scope going to use AI? And I just like, what are you talking about? How could we possibly operate across the country 20 fourseven hands off fully autonomous level 5 without the use of AI is mind blowing. Like These machines literally are not remote controlled, so you need AI for that.

Operator

These machines recharge themselves when they need more juice. That's AI, you can't detect a person in the middle of the night autonomously without AI. Try to do some One good example, Fernando, and the answers to your question is it's a mixed bag. So I think the first thing is Just an example of there's a lot of license plate recognition stuff out there, right? And if you're At an airport coming in and the gates closed and the cars pulls in and there's all these lights that come on and shine onto the plate and you get a Perfect, crisp picture of that plate and you can run the optical character recognition like That's kind of easy.

Operator

Now go do that at 4 in the morning in Kentucky when it's raining and foggy and you got half a picture and you're covered like at a weird angle, now read that plate. Like you kind of need to build some different models to be able to do that. So in some cases, Fernando, it's older technology that's working and it's likely that If we can't ship it in 3, 6, 9, 12 months, we're probably not working on it. Our clients don't necessarily need or want the latest cutting edge absolute thing that may or may not work. They have specific requirements.

Operator

That said, If you want to say cutting edge in terms of autonomy, if you didn't catch the Bloomberg article from a few months ago, they total up was like, I don't know, dollars 100,000,000,000 invested in self driving autonomous stuff, 200 companies working on it and no one shipped anything, like you can We've operated more than 2,000,000 hours in the field fully autonomous. I think you could argue we're at the cutting edge and it actually works. Then we have a different issue, Fernando, is the company is growing And there's always this technical challenge of you have technology out in the fleet, out in the field, but you have a shiny new object over here, how do you either migrate or now you're going to remove and replace? Doing high end cool technology in the laboratory or prototype with no customers is really fun. But in the real world, You've got to be able to service everything.

Operator

And that's where a little bit of the challenge comes in as to when you release a new product and the like. By the way, we do use NVIDIA GPUs, so I don't want you thinking that we're not up to speed on that side of things. But Frankly, there are new chips in the works that other people are working on that combine, I don't know, some level of A vision and SLAM and AI that some of these other chips are either too power hungry or too expensive. So Like everything, it changes really fast, which makes it exciting and also very frustrating to work on. But it's a mixed bag, Fernando.

Operator

Oh, my God, Bertrand. How are you? I haven't seen you in

Speaker 16

Pre COVID, I think, Bill. It has been a while.

Operator

Yes. 5 years maybe?

Speaker 1

It's been a while.

Speaker 9

It's been

Speaker 16

a while, but I am following diligently So what's going on, obviously,

Operator

I'm probably going forward.

Speaker 4

It's all

Operator

going smoothly exactly according to plan. Everything went exactly according to plan. It's incredible.

Speaker 16

Absolutely. Yes, I might have been one of your first investors. And if not,

Speaker 6

I'll just check for

Operator

Bertrand invested, he's being modest. He invested at a very opportune critical period in 2013,

Speaker 15

I think.

Speaker 16

Yes, that was a few days ago. So first of all, thanks for spending the time here. It's really great to hear the progress. And I know it's It's Rocky Road, but nothing is ever easy. You talked a little bit about, obviously, cost management to improve margins, which Obviously, I'm sure it's one of the reasons why a lot of stocks are getting beat up, including NightScope right now.

Speaker 16

I'm not too concerned by that personally. But could you Comment a little bit about competition. In terms of feature offerings out there, maybe possibly Price pressure, I mean, I tend to view competition as a good thing in a market that's growing because it means that, obviously, you're not the only ones recognizing there's a need for this. But Obviously, in terms of practical in terms of sales and closing sales, especially when it comes to pricing or price pressure, I think it would be great to to understand a little bit the overall landscape there.

Operator

Okay. So a few comments. I think 1st and foremost, and I mean this in earnest. Our mission is to make the U. S.

Operator

The safest country in the world. We would be profoundly arrogant and naive to think that We're going to do that by ourselves. So we absolutely applaud anyone and everyone working on public safety, security, law enforcement, because you need everything to be working in order for us to not be appalled by our news feed every morning. I think second, there's been multiple attempts by major corporations to build Stuff to compete against us. I guess most notably it was Sharp Electronics dumped $35,000,000 into into an internal division that they staffed up.

Operator

And they have since shut that down some time ago and failed and we're unable to Basically ship anything at scale. Conveniently, I think Switch, which is a Publicly traded data center folks also attempted to do one and then now have since disappeared for a couple of years. There's a number of folks in laboratories and R and D and that sort of thing around the world. The only meaningful competition that I see on stuff that moves is a partial competitor, which would be Cobalt Robotics, who are indoors only.

Speaker 16

Yes. Well, actually, I've seen them locally. This is actually why this is the first one that came to mind actually.

Operator

Yes. So we don't they're actually been kind to us to refer outdoor business to us because we don't they don't do that. And We don't minority a small minority of our businesses indoors. We don't really see them in the marketplace too often competing head to head. There's a lot more activity, I would say, on the fixed stationary side of things.

Operator

I think if you go to nightscope.com/rise, r I s e, the investor deck has a few comparables. One of them will be flock safety. It's primarily a very low cost automatic license plate recognition camera that's stationary. There is a penny stock on the OTC, robotic assistance devices, AITX, that also maybe is doing $1,000,000 a year in business or so, primarily on the stationary side, if I recall correctly. But price pressure in terms of our autonomous stuff, we don't really have a lot of competition out there.

Operator

I think that also speaks to how difficult this is. This is Not necessarily easy, but price pressure, we have not seen yet. Will it happen? I'm sure it might. But for trend, we haven't really experienced that.

Speaker 16

Okay. Yes, that's great to hear. Thank you, Bill, and good to see you.

Operator

Hey, good to see you too. Thanks for stopping in. Doctor. Modyalla?

Speaker 8

Hey, Bill. How are you?

Operator

I'm good. How are you, sir?

Speaker 8

Yes. I understand you cannot control the stock price Our supply and demand, but I would say you can not directly, but indirectly can help the stock price. What my suggestion is, if you spend just $500 or $600 buy just 1,000 sales in the open market, That would go a long way. Not only you, you can ask your colleagues like doctors and the Obviously, just invest about less than $1,000 and buy something that will put everywhere all over the world. See, these people, your sellers are buying.

Speaker 8

That would help a lot. That's my suggestion.

Operator

Yes. We since I'm an officer of the company, the council wanted us to set up a proper buying program for officers and I'm only allowed to buy in certain windows and that sort of thing. And it's going to cost more money to set up the thing than help the company. So The best thing I can do is just keep telling everyone like, okay, my entire net worth is in here. I haven't sold a single share.

Operator

I don't plan to sell a single share. I've got $7,000,000 of them. So if you think the pain from $10 down to less than $1 is painful on your side, I'm literally right there next to you and doing everything I can to try to fix the problem. I do appreciate the sentiment. I'm not dismissing it.

Operator

But they actually physically doing it ended up being not so exciting.

Speaker 8

Yes. I understand When stock drops from $10 to $0.50 when you own the $7,000,000 I can understand you are paying. But at the same time, when you when management buys, also, they think they believe in the company, they are not going under. That's going to help a long way, Just putting $1,000 in, all guys you can find out Yes,

Operator

respectfully, I don't for all the investors, including Bertrand that was just on the call, I don't I think everyone would pretty much understand that I'm not going anywhere. If I put 10 years into this to get it to this point, I think people realize that We're not going away. We will fight to the end to make sure that we're successful and do whatever it takes. So I don't think $1,000 is going to hit it. I think it's legal for me

Speaker 4

to say

Operator

this. If I had won the lottery and had a few $1,000,000 Sitting in the account, would I love to go buy some shares right now? Personally, I would love to. I'd have to go through all the normal regulatory stuff, But I'm all in, so I don't have the capability to do that right now.

Speaker 8

Okay. That's up to you, but that would help a lot because I have my company. Whenever something happens, I'll go and buy. That's what we do. That encourages others to put their money.

Speaker 8

Anyway, that's up to you. I cannot force you. That's my advice. If not now think about it,

Speaker 5

it's a

Speaker 8

good strategy for any CEO or any founder to support the company.

Speaker 4

Thank you.

Speaker 8

Anyway, thank you.

Speaker 2

All right.

Operator

Kerry Dye.

Speaker 11

Yes. Hi. Quick question. Appreciate it. Oh, Yes, thank you.

Speaker 11

You mentioned there may be a non dilutive fundraise or a debt offering. I know you can't speak with absolute certainty, but do you at this point foresee that that might be The last like external fundraise necessary for the company is really kind of standing on its own revenue and maintaining itself To profitability?

Operator

2 things there, Kerry. 1, I don't think legally I should comment on something like that on

Speaker 11

Did I ask maybe

Operator

sorry to interrupt, but I think just in terms of practicality, I think you as a shareholder, if we got to a point that you know, all right, we're profitable or whatever. And then we got a huge opportunity to grow the company and we needed some financing to do it. Would you want me to have committed today to not do ever any more ever financing? Like go look at

Speaker 9

I don't know what's public.

Operator

Go look at Tesla's financings, right? From inception in 2003 till now, and they got some positive cash Flow, were they still doing financings? You're probably going to find that they likely did, because you still want to and that's what you entrust the management team and the Board to do is to see how we could generate more return for the investors depending on the cost of capital, right?

Speaker 11

Okay. Thank you. That answers the question. Appreciate it.

Speaker 7

Okay.

Operator

Abdulle?

Speaker 17

Hey, Bill. How are you?

Operator

Good, good.

Speaker 17

Yes. Thank you so much for trying to keep us safe in America. With the current trend of prime rate increasing in America, Every time that I hear something on the news that I can help it, but to think about Knightscope. And Knightscope is That's the solution. I mean, every time, every time literally on either on the radio, on TV, it's just why not That is the best in night scope.

Speaker 17

So that leads to my questions like with this crime rate in the U. S. Just Increasing, increasing by really high percentage like based on like previous years. Why we're not seeing more sales? It seems like with this trend that The solution is Knightscope.

Speaker 17

For example, I'll just give an example. Yes, MGM In the DMV area in Maryland where the side I am and is where they've seen Lots of, lots of theft in the garage casino there. I mean, it's just like every week, why will the Casino invests in Mexico, right, product, right? It just makes sense to me and a higher return on investment compared to like really losing customers because of fear that something is going to happen when they come there. And so that's really my question and then start thinking why we're not seeing trimming in the sales.

Operator

So I think it's a mixed bag. So you can't say that we have a $5,000,000 backlog of new orders and then say we have no sales, right? Those 2 don't go together. You may not like the it's not going as fast like you wanted to see $10,000,000 or $15,000,000 or $20,000,000 but we are trending the right way. I think it's part of what I mentioned before, and I'm going

Speaker 13

to put this graph up

Operator

for you. I think a lot of people joined a little bit later. But you look at this curve, we're targeting if we just multiply our first quarter growth from 2023, which is a 300% improvement from last year. You can't literally say that we're not growing, because that curve starts looking a little steep. But could it grow faster?

Operator

Yes. What are we short of? Staff. And how do you get more staff, like more salespeople, more marketing people, more production people, more technicians, more QA people, you need capital. And so that's why you can't You got to think through the whole business of how do I grow this company.

Operator

You need additional resources just because you get the sale doesn't mean it's going to show up. Also, we have a backlog. Could things go faster? Yes. If we had a bigger team, things could go faster.

Operator

If we had a Larger marketing budget probably could go faster. If my CFO, if she's on, who will kill me. If we had more than 1 robot roadshow pod, probably things would go faster. And but you can't you're looking at us Growing 60% from last year, right now we're looking like we're trending towards doubling the size of the company. Is it going as fast as we want?

Operator

No. And then we also have the supply chain issues. And then lastly, I think I mentioned earlier, if you weren't on the call to one of the other investors, is you've got a sector that doesn't want to change. It's law enforcement, security, a lot of our friends and loved ones that in that industry are not the most technologically advanced, savvy or welcoming of folks. And that's why to me it was a huge massive deal for the Mayor of New York City, the largest city in the country with the largest police department of 33,000 officers to have the entire NYPD brass and the mayor go there in front of a robot roadshow and speak to the world at a press conference that they called because that I hope the Mayor is right and we're right that that's going to help set the tone for others.

Operator

And I we're trying to go as fast as we can, but we can't create magic either. So all of it needs to work, Right. You can't just have one thing work. Although you have great marketing, but you don't have enough staff or you don't have enough staff, but you can't you don't have enough Supply, we haven't fixed the supply chain issues. So it's frustrating.

Operator

So I'll more than concede the point that If you don't know the numbers, a violent crime occurs every 26 seconds and a property crime literally every 4 seconds. It's a massive market, if you want to look at that way or a massive problem, which is why I think NightScope has a huge, huge potential long term. Like if you can go fix this problem with some of the most advanced technologies out there, how can this not be priceless for society? But no one's ever done this before. So it's not like, oh, well, they did it.

Operator

So therefore, we should just follow what they did. So we're learning and part of this is me also spending the time today. We're on 2 hours now getting feedback from the market and trying to understand where investors are thinking as well. So not sure that answers your question exactly, but at least gives you some perspective.

Speaker 17

Yes, it does. Thank you so much. Adrien, see the graph that you just shared with us. I missed it. But thank you so much for your leadership, your availability.

Speaker 17

I know that you probably don't remember me. You took some time to Meet with me, so I really, really appreciate it and then your flexibility and know that we are all here to support We know that this is a solution. There is no doubt about it. So we're here to support you, and we can wait to see NYSCO all over the U. Thank you.

Operator

Man, you just gave me some fuel. Thank you. All right. Hany? Hany, if you need to come up for mute.

Speaker 15

Yes. Hi, Bill. Thanks for the update. I missed a big chunk of it in the beginning.

Operator

Sorry to interrupt. The quick 7 minute video is on our YouTube channel. We'll get it out later tonight or tomorrow. But if you need to see it, it should be published by now. Sorry, go ahead.

Speaker 15

No, sounds very good. My main question is, do you currently or will you be seeking Sort of non GAAP funding in the interim period here, at least until the markets in general recover. What I mean is things like, I guess, DARPA, DoD or Department of Interior Funding, that sort of thing?

Operator

We other than working on in case you didn't see this part, other than working on the FedRAMP process, which has been very costly and taking a lot of time, we're likely not spending more time on those. Part of the issue, Honey, is that it's a little weird. In a lot of cases, not all the federal authorities, but I would say 95%. Someone wrote down a specification of what they want and they're asking someone to bid on it, right? And so no one's sitting over in the Fed I need an autonomous security robot that does X, Y, Z type of thing other than our sponsor, the U.

Operator

S. Department of Veterans Affairs. So we've kind of over invested in the short term on the federal side of things and likely not going after grants and that sort of thing. I think the better idea would be after we get the authority to operate with the U. S.

Operator

Federal government, then going to go seek those kind of grants. There's a ton of opportunities, don't get me wrong. I think after getting that cyber review check off, that would be the utmost opportune time. In case you missed it, so also included in the video that's on the Just the thing, where we're getting additional cash, you can see there are 7 kind of avenues as to where we can improve Our cash position that we covered earlier in the session, but you can Check out that on the video when you have a moment.

Speaker 15

Thanks, Bill. Thanks. Appreciate everything you guys are doing.

Speaker 10

Thanks. Adam?

Speaker 18

Good afternoon. How are you?

Operator

I'm good. I'm good.

Speaker 18

What's your back?

Operator

I'm standing and I'm I got my nice coat mug, so all is fine.

Speaker 18

I have a question. This is sort of a follow-up from the discussion we had last month and that has to do with the Caisse Acquisition, your 2 stationary emergency posts, the phone systems and emergency communication. Yes. And again, it sounds like you really hit success with the Sale of those to Rutgers, am I correct?

Operator

I mean, the one of the reasons we're excited to buy Caisse Last year was they had some market traction that was material in nature. They are profitable. They have a complementary portfolio of products and they have a massive footprint that I desperately want to do a massive nationwide upgrade. And the teams continue to deliver and putting up the numbers that We were hoping and hopefully they continue to do so. I know a lot of folks are like, well, it's not a robot and I'm like, You were not a robotics company.

Operator

I told you for 10 years that we're here to make the U. S. The safest country in the world. If you told me we could do it with rubber bands and paper clips, then we're going to go invest in rubber bands and paper clips, right? So we really need to have a large portfolio products, because terrorists and criminals can be anywhere.

Operator

So we have to be everywhere. Right.

Speaker 18

I understand, Bill. The question I have is in terms of that particular product group, Of your backlog, what proportion of your backlog is are those products

Operator

versus the robotics. So Adam, I because it changes daily and I'm not trying to be wishy washy about it, crudely speaking, it's half and half. And it can change dramatically because we signed a huge contract that could switch either way. But roughly speaking, it's about half and half.

Speaker 18

Okay. And being here in Hollywood, I've seen your the 5 series at the Kaiser At the Kaiser Hospital and also

Operator

at The 5 Series, I'm going to call my friends in Munich at BMW and they're going to have a field day, tell them what you said.

Speaker 18

Yes, better than the 3 series.

Speaker 13

You met the K5.

Speaker 18

Yes. But I've seen the robotics your Security system at Kaiser here at the hospital as well as the stationary and the moving product at LAX in the parking deck. And so and those look really nice and it's a very nice system.

Operator

Took some doing to get them there, but we're there's a few more hospitals in the U. S. And there's a few more airports, right?

Speaker 18

Am I correct that when you sell versus lease, when you sell the stationary These stationary case systems that you're selling them and you're not leasing them or are those both sale and lease?

Operator

I hate the term lease because it implies you have a financial interest in the particular asset and Our subscription model isn't exactly that, right? If you get a BMW 5 Series, you're releasing that VIN number. And in our case, That's certainly not the case, but I understand your point. So it's delineated in our regulatory filings. Most of the stuff that we inherited from the Caisse acquisition, I shouldn't say most, all of the stuff is sold outright and the intellectual property of the asset is owned by the client.

Operator

However, in a lot of cases and a good number of cases, they come with a Service, support and or maintenance agreements. So it's a little bit of a combo. On the autonomous Surety robot side, it's all machine as a service, and we're not selling any of the assets outright.

Speaker 2

Thank you.

Speaker 10

Of course.

Operator

Tom Schwartz?

Speaker 5

Hello, Bill.

Operator

Howdy.

Speaker 5

Thank you for your time today and for being on and sharing all this information with us. It's helpful to me as an investor to know where we're at. I'm an early investor. I think my first was in 2020, Pre IPO, your Caisse acquisition was a brilliant idea. I think that was a great In addition, it certainly seems like so Reasonable and set like a perfect idea for what you're trying to accomplish.

Speaker 5

So I was glad to hear that. I wanted to let you know, You're working on a federal acquisition to get on acquisitions for VA?

Operator

We're working through yes, we're trying to get through a cybersecurity review with The federal authorities and the sponsorclient is the U. S. Department of Veterans Affairs.

Speaker 5

Got it. Well, they're building a new hospital here in Louisville, Kentucky.

Operator

So the Chief Security Officer there, he's got 143 police departments, I think he told me, that he has to manage. And it's just he can't keep throwing bodies at it and he needs help, which is why Him and his staff has spent now north of 2 years working with us to try to get us through the system.

Speaker 5

Well, I hope you're successful

Speaker 2

Soon enough to

Speaker 5

put it in here because it would be a really smart thing to do while they're building.

Operator

Yes, you and me both. I thought it would take a long time, but Yes, just a bit of a nightmare. I think the only kind of saving grace is, as a lot of folks that I know on the defense side of things is, Getting into the Department of Defense is a complete nightmare, but once you're in, you it's hard to get kicked out. I guess it's not a great way to say it, but it's a much stickier client, which is why we were willing to Take the calculated long term risk. If I were to go work on this for 10 years and go take the company public, sell my shares and go sit on a beach, like I would never have signed off on that because I knew it was going to take forever and put our team through a lot of pain and suffering.

Operator

But because that's not the case And I hope everyone understands that we're serious about what we're trying to do here, which should be willing to take calculated, sometimes controversial risks that put a bit of investment in something that we think could be really big for us. And I'm hoping, Tom, that when and if we get that ATO or authority to operate, it's going to spill over to the private sector. Like, I don't know how many times Our team ends up with these massive cybersecurity questionnaires and what have you. And if we can just go, hey, The Feds just put us through hell for 2.5 years or 3 years or whatever the number ends up being. What is it that you're going to ask me it's really going to be not covered.

Operator

I'm hoping that's going to expedite some of the sales, especially in the healthcare and financial institution and I'll say larger city government side?

Speaker 5

Well, yes, it would just be nothing but add to your credibility, which New York does too. I understand the whole stock price thing and Stacks get valued inaccurately all the time, and it's something that happens. And I understand the profitability, path to profitability that you outlined. How about your cash till you get there? When would you project having At least get you close to a positive cash flow in that period or even just Where you're not burning?

Operator

I think it's appropriate to say, if you read carefully the 10 Q that we filed on Friday for our Q1 results, Our CFO went out and kind of did some, I'll say, loose projections. And We're prior we're burning a lot more money and we're probably on the order of or less than $1,000,000 a month, which is what was reflected in the 10 Q. And we've got, as I mentioned, and I'll put it back for folks. There's 7 avenues for us to be able to address those. So I'm not sure we've gotten that sophisticated to delineate between cash flow positive and profitability, but plus or minus Q4 of 2024 is we're hopeful to get to that point, if not much sooner.

Operator

And it's very product It's product mix. It's our costs and both on the variable side and the fixed side. I mean, We just need to continue to grow the company and we need to get some of these costs down and that'll get us home. And fortunately, we've had enough growth to hopefully show everyone on this call and The Street that The company is growing double digit growth. It's a pure AI play like this is not Someone's R and D project somewhere were literally operated over 2,000,000 hours in the field with paying clients.

Operator

So if you want to play on Autonomy on robotics, on AI and electric vehicles like NightScope is literally at the intersection and working on a huge problem. And so I think we need a little support and help from our investors and supporters. We need The team to continue to work extremely hard, we continue to need to execute and hopefully the stock price will take care of itself in the future.

Speaker 8

Well, thank

Speaker 5

you for answering your question.

Operator

Of course, of course. I've been attempting to monitor the chat on the side. And I'm sorry, folks, there's some Inappropriate stuff in here and there's a lot of spam. And if you're still on and I don't answer your question on here, if I could guys kindly ask you to raise your hand and ask me directly, because trying to go through this chat is going to be an impossibility. So Tom, if you had another question, feel free.

Operator

But unfortunately, we've got some people here that Probably shouldn't have been on the call. Anybody ask a question that wasn't answered today? And you'd like a moment, please raise your hand. If not, we're at 2 hours and 15 minutes, and I'm still standing. All right.

Operator

Going once, Going twice?

Speaker 3

I think Tom has his hand raised, Bill.

Speaker 5

I can take it down.

Operator

He'll take it down? Okay. Anyone else? Okay. If not, thank you, everyone, for taking the time.

Operator

If You didn't want to ask the question and you still need an answer, you can write to me directly at investnightscope.com. I literally and that answers the questions. So again, invest@nightscope.com. If you need any of the latest, go to nightscope.com/rise, r I s e, And you've got the latest videos, updated deck and the like. All righty.

Operator

Well, thanks everyone for taking the time out of your busy schedules. And as I often say and will continue to say, long night scope and short to criminals. We'll see you on the other side. Thanks, everybody.

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Medtronic Q1 2023
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