Realbotix Corp

XTSX:XBOT

Earnings Call Transcript

[ARIA]

Hello. Welcome to Tokens.com second quarter conference call. Today, we have Andrew and Matt to present and answer questions. Over to you, guys.

[Andrew Kiguel, executive]

Thanks, Aria. That is a digital avatar. She is one of the robots that we have been building and building AI and robotics presence for.

Welcome, everybody, to the Q2 investor conference call for Tokens.com.

On the call today, we have Matt McMullen. He is the founder and creative mind behind Simulacra, a recent acquisition. Martin Bui, our CFO; Eric Abrahams, our COO; and Jennifer, our Head of Communications.

[Operator Instructions] And at some point, I will turn this back over to Jennifer, and we will be available to take calls.

One note that at this call, I'll be speaking to and are going to be focused on Q2, which was prior to the acquisition of our robotics and AI initiative, and so it's going to be focused on that. However, with Matt on the call, if people have questions with respect to that business, we are here and happy to answer those.

So maybe just to get started, from a revenue perspective, nothing unexpected here. Our revenue for the quarter was $286,000 from staking and $505,000 for the 6 months. That's a small piece of the legacy business that we sold off, but primarily, that is from staking.

We have $4 million in a revaluation of our digital assets and $6.6 million for the 6 months. Again, that's just a reflection of the assets that we're holding and that the crypto market has generally had a pretty good 6 months here. So we've been the beneficiaries of that. The assets that we hold, in fact, have had over 100% increase in the value since the end of September, which is our year-end.

In terms of earnings, because of the way the accounting rules are set, the gains on cryptocurrencies actually flow through our net income statement. As a result, we had net income of $3.8 million for the quarter and $5.9 million for the 6 months ended March. That equates to $0.03 and $0.05 per share.

Lastly, a big part of our initiative, as part of this strategic review that we were doing, was really to cut costs. And I think we've been successful at that. You can see in our numbers, we cut cost by 55%. That's primarily since moving the costs associated with Metaverse Group and Hulk through to a different party, being StoryFire.

That leads me into a little bit of the strategic review. As a company, we've now concluded the strategic review. We started it in November last year. And one of the things that was a key priority for us was to minimize operating costs while still retaining upside to some of the assets that we had. We were successful in doing that, and I know we've received a lot of questions, but ultimately, Metaverse Group and Hulk required massive investments and really should have been part of a larger entity.

Today, through the transaction with StoryFire, we own 15.5% of StoryFire, we retain upside to those entities and those entities now provide in-house content to StoryFire, which has over 2.5 million users. It is a very interesting platform, a combination of TikTok and YouTube in the Web3 and gaming environment. We press released that they recently launched a token that has been highly successful for them and, as a result, highly successful for us. We are so far recognizing about a 300% gain on our investment -- it's not an investment, I guess, it's part of that transaction, what we received.

So to review what we did through the strategic review. Number one, we determined that our name was too crypto-centric. It is, in my opinion, probably the best name in crypto right now as a domain name, Tokens.com. We determined that it's probably more valuable to somebody that has a retail-facing operations. And so we listed that with one of the top brokers in the world. It's currently for sale.

Number two, we looked at the assets at Metaverse Group and Hulk Labs. And while we're very fond of those assets, the capital requirement to continue to build those assets was beyond where we felt comfortable as a management team and as a Board. And as well, we felt there would be more complementary synergies with those assets if they were part of a larger group, such as StoryFire. So we were able to move up those assets. And again, we retain the upside, but we do not have the costs.

Three, we moved from the Cboe exchange to TSX Venture. There were a few reasons for that, but generally speaking, I think we felt that the rules on TSXV were a little more amenable to what we've become, which is really a very small cap company. We think our upside is tremendous, and we will, I think, continue to pursue things like moving up to the senior board, and possibly the NASDAQ, as the company grows. But for the stage we're at now, the Toronto Stock Exchange really just fit our profile better.

The last piece of the strategic review that concluded it was the acquisition of Simulacra. Again, we were sitting as a company with, what I would say, access to capital via our Token inventory, cash and really looking for something unique. What Token has always done has really been at the forefront of finding these unique things. And I think us moving into this AI and robotics sector, which we can talk more about through questions, is really complementary to what we've done in the past, which is this use of technology. In the Metaverse, there's this use of technology through avatars and digital representations. We're now taking some of that and using it for AI and physical and digital representations.

We're super excited about this transaction. Matt and I speak several times a day, and like the excitement is bouncing off the walls in terms of the various things that we're working on and doing.

So maybe with that, I'll close off the formal part of this call. And if anybody has any questions, again, financial for Martin, overall high level for me, or specific to robotics and AI for Matt, this would be the right time.

[Jennifer Karkula, executive]

We have a question from Michael Donovan.

[Michael Donovan, analyst]

I noticed that you guys unstaked Polkadot during Q2. So can you discuss that? Was that just to have more liquidity? Or did you switch Polkadot over to another asset?

[Andrew Kiguel, executive]

Thanks. No, we haven't switched it. We still own it. Here's the thing. We want to be able to manage our crypto inventory as our treasury. So if you think about us, we're a little bit of a unique company, but we're even more unique that instead of holding and sitting on cash, we're sitting and holding crypto as our treasury. Polkadot has a 28-day unstaking process.

And so for us, it was like, okay, if we were to require capital here as part of growing the AI and robotics, do we want to sell Ethereum or do we want to sell Polkadot? For us, our preference would be, longer term, to hold the Ethereum over the Polkadot. We didn't want to be in a situation where we have to -- let's say, Polkadot hit $15 or $16 per dot, we didn't want to wait 28 days and take the risk of locking that in. And so as we pivot from being a staking entity to this robotics/AI initiative, we wanted to have the flexibility to sell it at a moment's notice. Does that answer the question?

[Michael Donovan, analyst]

Yes, sir, totally. I appreciate that. For your new venture, I know you don't like giving guidance, but are you able to kind of help us look at the rest of 2024, what to expect? I get the robotics side of it, but the digital avatar side, AI-enabled avatars, which applications are you hitting? And what can we expect in terms of your customers would be and growth opportunities there?

[Andrew Kiguel, executive]

I'm going to answer sort of the top line question and maybe turn it over to Matt. And Matt, maybe if you can just talk about what opportunities you're seeing high level without giving any specific guidance.

But as part of this transaction, there is an earn-out if the company hits an $8 million revenue mark, and there's also an earn-out if the company hits a $10 million revenue mark. What I would say is that we structured that in ways that they were achievable for the Simulacra shareholders to hit. That is kind of, I think, high level where we expect revenues to come in over the course of the next 12 months, in that range.

In terms of specific opportunities, we're looking at a ton. Matt, I don't know, I mean, if you want to talk a little bit on the AI and the robotics, what you're seeing.

[Matthew McMullen, executive]

Certainly, yes. So essentially, as you saw at the beginning of this call, there was a digital representation of Aria. Aria is, at her core, an AI-generated personality. And the idea is that she can be expressed through digital means, such as an avatar, and she can also be connected to a physical robotic body to actually interact that way. I think that the specifics of what we do is quite unique in the space of tech, in general. We're doing something that's more tailored for personal interaction versus primary functions being some kind of work-related task or a repetitive task. That typically is where people's heads go with AI and robotics.

I think the opportunities are massive. I think we're going to see quite a bit of this making its way into various types of entertainment. We just signed a deal to build animatronics and robotic figures for a theme park, for example. We've done projects for celebrities and things like that. And I think there will be a lot more opportunities coming down the pike, in that same vein. I also think that we're going to be pushing really hard into the R&D space to build out our AI systems and to build in the capabilities for third-party developers who may be developing their own specific AI systems, to be able to easily plug into our controllers and use our hardware as a means for researching and developing their own technology. So I hope that answers the question.

[Andrew Kiguel, executive]

One thing, Michael, that I would add, and you saw the initial Aria clip, we've been having conversations with someone that has built a therapeutic AI product but doesn't have an avatar or a representation for it. And so where you might see a health care angle there is a figure that you can create, interact with voice-to-voice, that can hear you, provide responses, therapeutic therapy, and you might have a subscription model where you pay $50 a month for as much therapy as you want. Those are the types of things we're contemplating.

But again, I want you to keep in mind we're breaking ground here. This is similar to the Metaverse stuff we did a few years ago. We're breaking ground here. These are not established industries. We're not going into the cookie-making business or something. We're finding the different areas. Right now, we're quite full with the people that are reaching out to us, and there's a lot of low-hanging fruit. But I think further to the e-mail you guys sent me is I have yet still to find any company in the world that is doing, what I would say, the realistic humanoid hardware, on the one side, and we still, I believe, have what is the most realistic skin technology in the world, but integrating that in as well with an AI platform that is centered around not reading your legal agreements but on having companionship and other forms of human interaction.

[Michael Donovan, analyst]

That's very helpful. Now a follow-up, I think when people think about sort of AI-enabled robots, that they think about Sophia by Hanson Robotics. So in terms of sophistication, how much more sophisticated are your models versus when we think about the run-of-the-mill robotics and your competition? You touched upon this a little bit, Andrew. Just I want to get a better understanding of the tech moat that you guys have.

[Andrew Kiguel, executive]

I would leave that to Matt.

[Matthew McMullen, executive]

Sure. So very similar technologies. In fact, some of my founders on my team have done extensive work with Hanson Robotics. I know Dave Hanson, personally. So the worlds are very similar. I think one of the biggest differences is the aesthetic and the approach. Most of the robots that we build kind of come from a backwards approach when you compare to other robotics companies. Typically, the engineering happens first and they build the robot, and then they try to figure out how to put skin on it. Whereas I've already perfected the human-like look that I want and I worked my way inward. And in an opposite way, how do I get robotics to fit inside of this envelope that I've created. So I think the aesthetic is huge.

Secondly, we have patents that apply to the modularity of our components. So basically, Sophia is a robot and they make copies of that robot. What we do is we build robotic hardware that has modular components, meaning the face can be interchanged with other characters, and that applies also to the body, the sort of body components, the panels that fit onto the base of the robot. So we're able to very quickly change from, say, our character Aria to a completely different character, say, Bill, who's a salesman. And we can switch the AI settings and the voice and you have the same robot hardware, running 2 distinctly different AIs, 2 distinctly different characters. So those are kind of, high level, some pretty major differences between our platform and something like Hanson Robotics.

[Andrew Kiguel, executive]

The other piece, what we'll say, if you've ever seen this done, and we're going to be posting videos on this soon, but you can change the entire look and personality of a robot through this modularity in a function of, what, 30 seconds, Matt?

[Matthew McMullen, executive]

Yes. Basically, if you're talking just the face, yes, you can change the face in 30 seconds. And with the body, you clearly have some wardrobe and whatever else to peel off. But literally, within 15 to 20 minutes, you could completely change the entire robot that you're looking at. And you could take it out of the room and then come back in and people would think it was a different robot completely.

[Michael Donovan, analyst]

Best of luck. Look forward to 3Q's call.

[Andrew Kiguel, executive]

Thank you.

[Jennifer Karkula, executive]

Thanks, Michael. Does anybody else have any questions? [Operator Instructions] It doesn't look like we have any more questions today.

[Andrew Kiguel, executive]

Okay. Well, silence is golden. Well, thank you very much to everybody who tuned in. Again, we're super excited about what we're doing here and various things to come that we're working on. I can actually say that as a team here, this is the busiest that we've been in a long time, and a lot to do.

The last piece I would add is we are doing a whole bunch of stuff here and looking at a rebrand. We recognize that the name Tokens.com is not symbolic or representative of where the business is headed. And so that is something that is definitely in our radar and we are looking at.

So maybe with that, I'll close it off, and thank you, everybody.