Good afternoon, ladies and gentlemen. Welcome everyone to the Nextech3D.ai second quarter 2023 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Instructions will be provided at that time for you to queue up for questions. I'd like to remind everyone that this call is being recorded today, August 22nd, 2023. I will now turn the call over to Julia Viola, Investor Relations at Nextech3D.ai.
Hello, welcome to the Nextech3D.ai Q2 2023 earnings call. With me on the call are Evan Gappelberg, Chief Executive Officer, and Andrew Chan, Chief Financial Officer. Today, after markets closed, Nextech3D.ai released its unaudited financial and operating results for its second quarter, ended June 30, 2023. A copy of the earnings disclosure is available on our website and on Sedar. Some of the information discussed on this call is based on information as of today, August 22, 2023, and contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statements disclosure in the earnings press release, as well as in our Sedar filings. During this call, we will discuss IFRS results and key performance indicators.
Neither this call nor the webcast archives may be recorded or otherwise reproduced or distributed without prior written permission from Nextech3D.ai. To begin our call, Evan Gappelberg, CEO, will discuss Q2 2023 highlights, as well as recent business developments, followed by Andrew Chan, CFO, who will review our financial results and outlook. Finally, Evan will provide closing remarks before opening up the line for a question and answer period. I'll now turn over the call to CEO and founder of Nextech3D.ai, Evan Gappelberg.
Thank you, Julia. Hello, everyone, and thank you for joining us for our Q2 earnings call. In 2023, we are at, you know, we're a little past the halfway mark because we're in Q3 now, but as far as today's numbers go, this represents the 50-yard line for 2023. In 2023, it's important to underline that Nextech3D.ai became a pure play technology company. That transition has yet to be recognized by our investors as we see our AI capabilities, as we see the demand for 3D models, and as we see our production capabilities continuing to ratchet up in 2023 and beyond. 3D models, as I've said many times before, but now I'm going to lean in even stronger, they are no longer a nice to have.
They are a necessity in E-commerce and even beyond E-commerce, into gaming and manufacturing, which we are starting to gain momentum in. These industries, which are massive, multi-trillion-dollar industries, are all pivoting to 3D. It should not be underestimated how huge an opportunity this represents for early investors in NextTech. Amazon is the leader in the E-commerce space. They have roughly a 70% market share. They are by far the single largest enterprise customer. If you add everybody else up in the entire e-com ecosystem, it only adds up to 30% of the market. Amazon is the giant. They are our largest customer for 3D models, and they are going all in on 3D. The world has pivoted, make no mistake about it, to 3D models, and 3D models are the future of E-commerce.
To compete in the next decade in e-com, in medicine, in education, in events, you will need a 3D model, and that is what Nextech3D.ai makes, 3D models, which positions us for rapid growth for many years to come. It was a huge challenge getting here. It took five years, but we are here now, and we see nothing but blue sky opportunities in the market going forward. Supplying Amazon demonstrates Nextech3D.ai's technical proficiency and leadership in 3D modeling for E-commerce, and really sets us up for success with other big enterprise accounts. Because if it's good enough for Amazon, it's good enough for everybody. We are still hunting. Amazon is not the last stop for us. We are still hunting. We have a large number of enterprise deals that are moving forward...
We already service Target, we already service Kohl's, we already service CB2, Procter & Gamble, Aisin, and many others. We're not done. We're still hunting, and we still have very, very large enterprise deals, as I said, that are moving forward. This industry is massive. It's a massive, massive opportunity for the company, and it is starting to accelerate in Q3 2023. We're 8 months in, and we are seeing a ramp up for demand continuing in 2023, especially starting now, which we're in Q3. This is, you know, another week will be two-thirds of the way done with Q3, and we see Q3 accelerating, and Q4 actually accelerating even further in 2023. The demand for 3D models in E-commerce, we believe, is only just really getting started, and it's going to shift into overdrive.
In my opinion, we're gonna see the demand get to a frenzy, where just like during COVID, you had everybody that was in, in any kind of business searching for virtual events and virtual event platforms. That was back during 2020, which had a significant impact on our business because we were in that business at the time. I believe that it is starting to happen again. Only this time, it's for 3D models, and it's a much, much more sustainable, decade-long megatrend. I believe that right now, starting in Q3 2023, we are starting to see lift off in the demand for 3D models.
If you look at the potential future catalysts, we're signing more contracts with major players, and Nextech really is cementing itself as the world's leading supplier for 3D models, and we believe that more companies are gonna become our customers in the next 6 months and the next 12 months. If you look at E-commerce, the business opportunity and demand for us to produce 3D models has never been greater, and we are extremely, extremely excited about E-commerce. The reason why E-commerce is having such a dramatic impact on our business is because with 3D models in E-commerce, you see a tremendous ROI. You're, you're seeing a 40% reduction in returns, you're seeing a 93% higher click-through rate, and up to a 250% increase in conversions. Nothing comes close to that. Nothing.
Not video, not direct messaging, not even next-day delivery, by Amazon. With 3D modeling technology, we at Nextech are perfectly positioned for this next phase of growth in E-commerce, which is widely called, Web 3.0. 3D models can be used for virtual photography. You can use them as, try-ons. So you can have a 3D model, and you can literally see what a product looks like in your space. You could see what they look like on your face, on your feet, on your wrist. It, it, it opens up a whole new, opportunity for consumers to feel more confident buying products online. It's predicted that over the next, decade or two, that 95% of all commerce, that's right, 95%, that's pretty much everything, will be conducted online. That's only possible because of 3D models.
If companies don't adopt this technology, if they sit on their hands, they will be left behind. Everything is perfectly aligned for Nextech, as we are going to experience this dramatic growth over the coming years and decades. As our AI improves, our 3D production capabilities improve, and that hits our bottom line, and our profits improve. If we shift our attention to our portfolio of companies, apart from ARitize 3D and our 3D modeling business, we own two other public companies. Nextech owns some very valuable breakthrough technology in industry-disrupting products. ARway, which the symbol is ARWY in Canada, ARWYF in the U.S., is an augmented reality experience platform that we own roughly 49% of the shares outstanding. It's an easy-to-use, out-of-the-box AR platform. We are targeting the indoor navigation market.
Just like Google owns outdoor navigation with GPS-... ARway, we are anticipating is going to own the indoor navigation using its proprietary technology. ARway is having quite a year in 2023. We have over 30 pilots underway with big brands. Some of them are governments, some of them we talk about, some of them we can't talk about. We did announce just I think it was a week ago, that we signed a deal with the Irvine Spectrum Center Mall in Irvine, California, a massive 1 million sq ft mall that's a paid-for deal. They are rolling out ARway, and that is just an enormous, enormous opportunity for ARway to become a leader in the mall industry, which is, you know, massive, obviously. We also recently signed a deal with Localiza.
Localiza is the largest car rental company in South America. They're like Enterprise or Hertz in North America. They have over 500 locations in airports. You know, ARway is doing quite well. The share price, I believe, is extremely undervalued. We are in talks with major AR glass companies about using ARway in their ecosystem. We, we have some very, very high hopes, and we think that ARway is going to be the dominant indoor navigation system that people are gonna use. Just like you use your Google Maps to drive, you're gonna use ARway as you walk indoors and you navigate, whether it's a museum, whether it's a theme park, whether it's a trade show, a hospital, an airport, a, a warehouse, a mall.
All of those, all of those require some kind of navigation, and ARway is perfectly, perfectly suited for that. So we're expecting quite significant contracts for ARway, and we expect that business to do quite well in 2023 and beyond. If we look at Map Dynamics, we licensed our ARway platform to Map D, and we expect to see significant growth because it's just a perfect product-market fit. You have navigation capabilities inside the Map Dynamics app, so that when people go to trade shows and events, they click on a navigation button, and it opens up a map. Using augmented reality navigation, you can navigate to a booth, and you'll see sponsorship, you'll see a, a product offering. It's just the next level experience for events, and we have some big news that we expect to announce in the near future related to that.
As we look at, you know, Toggle3D.ai. Toggle3D.ai is another one of our spin-outs, symbols, TGGL in Canada, TGGLF in the U.S. We've announced that it's had huge success with sign-ups, showing over 300% growth. That's just the beginning. That's just the tip of the iceberg. We recently hired Anita Matte as Director of Growth Marketing from Amazon, which is just a coincidence, but she is an experienced marketer, and she now is tasked with focusing on converting users to paid SaaS subscribers. It is too early to really talk numbers because we just launched in June, and it takes a little while to ramp up, but it's fair to say that we are very, very confident with the business use cases we are seeing.
We're in discussions with large enterprise customers for Toggle that have come knocking on our door, that have a dire need for its technology. I, I would just say to our investors, "Be a little patient with Toggle. It's only been public since June of 2023." In closing, 2023 has been challenging as a shareholder. Again, I am the single largest shareholder with 11 million shares. There's nobody that's taking it on the chin more than I am, but I don't stress about it. I am not stressed. In fact, I see opportunity. I see huge opportunity. In my opinion, and this is just my opinion, that 2023 is going to be a year of significant growth for our business.
I believe that the strong companies, which Nextech is one of, bounce back, and I think we will see a rip-your-face-off bounce back for Nextech. I'm not gonna say the day, I'm not gonna say the week, but I believe Nextech is going to bounce back, quite significantly. We are fully focused as a company on becoming the world's leading 3D modeling company. To do this, we've made critical business decisions, as mentioned, by becoming a pure play tech company and jettisoning our legacy business. Just as importantly, our revenues are ratcheting up, and even more importantly, our burn rate has come down to only $300,000 a month. That is a huge improvement compared to where we were in the previous years, and it gives us the runway to be able to build our business to become a profitable technology company.
We are continuing to integrate AR, ARitize 3D with third-party e-com platforms. We're rolling out a SaaS product, and I believe that all these decisions that we've been making over the past year, specifically, is going to be paying significant dividends for Nextech shareholders. Nextech is capturing market share in the early days. It's seen its customers come back for more and more 3D models and more and more renewals. And, with Amazon, we believe that we have a very, very bright future. I've never been more excited and confident about the position that our company is in and the opportunity that we have in front of us.
Before turning the call over, I'd like to thank our experienced executive leadership team for their hard work and dedication, and thank every Nextech3D.ai employee working day in and day out, striving for success to achieve our company's goals. I also want to thank our new board members, Nidhi Kumra and Anthony Pizzonia, that have recently joined us, adding greater board independence. I also want to thank our loyal shareholders for sticking with Nextech3D.ai through the ups and downs. I have full confidence in our company's direction, and I'm looking forward to continuing growth in 2023 and beyond. With that, I'll turn the call over to Nextech3D.ai's Chief Financial Officer, Andrew Chan, to provide full commentary on the financials. Andrew, take it away.
Thank you, Evan. Good afternoon. As a reminder, unless otherwise noted, all figures reported on today's call are in Canadian dollars and under IFRS. All the preceding information are unaudited and was made available through today's press release, and also available on our website and on Sedar. This is the second quarter outside of our recently filed annual results, where we are preparing and presenting our financials, excluding our discontinued operations and removal of our legacy business. With that, I'd like to say our total revenue for the quarter was CAD 1.4 million, up 8% sequentially from Q1 2023, and up 155% compared to the same quarter last year.
3D modeling revenue year-to-date increased over 460% from the same six-month period last year, contributing to close to $1 million this quarter and $2 million year-to-date. Our Map D revenue has also increased 22% year-to-date compared to the same period last year. We continue to expand our relationship with marquee customers such as Amazon, with increased 3D model production requests for Q3 and Q4, and continue to see consistent repeat revenue from growth from our hybrid events platform, Map D, throughout this quarter. Gross profit remained consistent near the 40% mark consistent with the last few quarters. We anticipate gross profit margins to increase as we continue to implement AI technologies in our 3D model production process to allow us to increase our model creation capacity at scale.
Operating expenses for the quarter was $6.5 million, which includes $1.5 million from ARway.ai through the consolidation and some contributions from Toggle 3D, from our recently spun out company, Toggle 3D. Overall, expenditure levels were consistent with Q1 2023 across sales and marketing, general and admin, R&D categories, and stock-based compensation. Non-stock-based compensation expenses were down $1 million this quarter compared to the same time last year, and down $2 million year-to-date compared to the same period last year. This is mainly due to lower salary and wages and other compensation costs incurred last year. To help offset the cash outlay for these expenses, our previously announced Employee Shares for Services compensation plan contributed $700,000 this quarter and $2.3 million year-to-date.
Net loss from continuing operations for the period was $6.6 million, consistent with the immediate preceding quarter, with a net loss per share of $0.06 per quarter. As of June 30th, 2023, we had a cash balance of $3.8 million. In addition, we raised net proceeds of $2.2 million in July to fund our future growth efforts. We continue to hold 13 million shares in each of ARway and Toggle3D, with a total market value of over $18 million. This quarter continues to reflect our push towards our growing 3D modeling, making abilities and the adoption of AI as we continues to scale our business. With that, I would like to return the call back to Evan.
Thank you, Andrew. On behalf of Nextech, I wanna thank everyone for taking the time to join us. Operator, we're ready to answer questions.
Thank you, sir. If you would like to ask a question on the phone lines today, you can press star one on the telephone keypad. To remove yourself from the queue, it is star one again. We do have some questions that were submitted from Lisa Thompson, from Zacks Research, and that is: "What % of Q2 revenues are from Amazon? Do you expect that to increase or decrease?" The second question is: "Is the 3D model business just-
Hold on, hold on, let's go one by one. Andrew, can you answer that, please?
Yep. Cumulatively, up until Q2, Amazon's contributed a little under 450%, so around 49% year-to-date of our revenue. We continue to expect that to increase until Seller Central opens, in which we'll be directly dealing with our customers, with the customers rather than through Amazon. I don't know if you wanna add anything further to that, Evan?
Yeah. Just, just to add a little more to that, Andrew, that, once Amazon Seller Central opens, technically, the merchants will be buying direct from, Nextech, not, Amazon. In theory, our dependence on Amazon is likely to go down in the future, even though our revenue is likely to go up, if that makes sense. Operator, we're ready for the next question.
Thank you. Her next question is: "Is the 3D model business just E-commerce websites? Are there any customers doing any other than that?
It's not just E-commerce websites, although that is the, the lion's share, for sure.
Thank you. Her third question is: "How is Q3 going? I would imagine customers are eager to get models up before Black Friday and have them available through the shopping season. Is there a push for that deadline, or is most of what you do furniture and such, and not Christmas items?
Yeah, I, I would say that, there's some seasonality, but not, not, not like a traditional, E-com site owner's, seasonality. We are seeing an uptick in business in Q3, and as, mentioned previously, we are projecting, a jump to, $1.7 million in revenue for our Q3. Yes, we're seeing an increase in demand.
Thank you, sir. Our next question comes from Scott Buck with H.C. Wainwright. Please go ahead.
Hi, good afternoon, guys. Thanks for taking my questions. quickly, Evan, first one, what is the timing around Seller Central, and when that opens up to you guys?
That is the billion-dollar question, Scott. We've been geared up and, and gearing up for it for quite some time. I still believe it's going to happen Q3, so that would make it, you know, in the next five weeks, we expect it to open up.
Great. Thanks for that, Evan. I wanted to ask about, where are you today in terms of, 3D models generating capacity, and where will you be kind of exiting the year once the AI is implemented?
The, in terms of capacity, we are getting, let's just say, stretched a little, but we are ramping up our team and our capabilities. It is constantly this kind of push-pull that's happening. As far as where we end up at the end of the year, it's a, it's a tough, you know, tough answer. I would just say that our technology is getting significantly better, and our profit margins are going to get significantly better in Q4. You know, it, it, it we expect the business to be significantly more profitable and to be able to do more, more volume. I just can't give you an exact number for Q4.
No, that, that's helpful, Evan. Just to clarify, it sounds like gross margins for the fourth quarter could potentially be higher than what you've guided for the third quarter?
Andrew, am I right in saying yes?
Yeah, for, yeah, for sure. I mean, I think with technology, you know, it, it's a, it's, it's, it's a ramp-up period. You know, the longer you kind of run with it, the more efficient you become with it.
Yep. No, it makes a ton of sense. Last one, Evan, if you could just touch on, if there's any kind of update around Nasdaq and what you guys might do there in terms of an Uplisting, that'd be great.
...Yeah, as you know, we applied. There's been some comments, which, we've been answering, nothing earth-shattering. You know, it's, it's moving forward. There's nothing, at this point, to report other than it's, it's on track.
All right, super. Appreciate the time, guys. Thank you very much.
Thank you, Scott.
We'll take our next questions from Christopher Sakai with Singular Research.
Hey there, this is Christopher. I was wondering if you could give us a little bit flavor in terms of three models you have delivered, if I remember correctly, for 60% growth in terms of complexity, level of those models that you delivered.
Say that again, you're asking about the complexity?
The, the, the three, yeah, the three models that you deliver, if you can kind of a little bit parse out the complexity level. You know, it's like more complex ones are growing faster or less complex or, you know, a little bit if you can parse it out.
Yeah.
that'll be great.
Yeah. So every single, you know, batch of 3D models we make, has simple, medium, complex, complex one, complex two, super complex. So there's multiple reasons for all those, those different categories. I would say that, you know, at least 50% of the models are complex and above. 50%-60% are complex and above, and, and, the balance is you know, more of the simple and medium.
That trend is, what it was, you know, last few quarters, or that is changing as we go forward?
I'd say it's pretty steady.
Okay. I see that you guys were able to decrease selling and marketing expense. There is more a factor of cost control, or you think you're getting better utilization of your selling and marketing dollars?
Well, you know, because, because we're dealing with Amazon, we, we've, you know, we haven't had to spend as much on getting new customers, right? Because Amazon keeps on keeping us busy.
Okay. That's, that's good, unless you're kind of trying to, go into new customers or verticals, that sort of would be the trend, at least for the short period.
Correct.
Perfect. Thank you.
Thank you.
As a reminder, everyone, that is star one to ask a question. We'll take our next question from Akash Makava, a private investor.
Thank you, operator, and good afternoon, gentlemen. I wanted to ask you, I know a previous question you just talked about was in regards to Amazon Seller Central and when that might be opening up. You, Evan, you, you mentioned that the possibility could be, could still be by the end of this quarter, in the next five weeks.
Mm-hmm.
One of your recent interviews that you and Reza had done, and in commenting on this topic, one of you mentioned that it was either gonna be quarter three or, but unlikely to be Q4 because that was Amazon, that's traditionally Amazon's busiest quarter, so they would not, you know, perhaps, wanna take a chance with trying something, you know, kind of, opening up a new, a new avenue, in that very important, critical quarter for them. In the event, if perhaps it does not occur by the end of Q3, do you think may perhaps, it would be more realistic that it may happen, say, more like maybe towards late Q1, maybe early Q2? What are your thoughts on that?
Let's be clear, it's conjecture, that, you know, what I'm saying is what I think. It's not necessarily, what, what's gonna play out, but, but I am on the front lines along with Reza, we do have some visibility. My thinking and, and in conversations with Amazon is, i-is they want to open it sooner rather than later. It's really, I think there's some pressure internally at Amazon building, and as I said, I still think it'll be Q3. I don't believe that Q4, and that was me who said that, would make sense, but I could be wrong. They could be like, "You know what? It's go time. Let's just go with Q4."... If they did wait, I think it would be early Q1.
I don't think they would slow roll it because, you know, Q1 kind of sets the stage for a whole 2024 year, where they can, you know, really accelerate the 3D modeling business. That's my thinking on that. Again, this is conjecture. This is, till they, till they actually come out with an announcement, nobody really can predict, right?
Okay, thank you. Sure. I know in your, the other topic I wanted to cover was in regards to, you know, your kind of, your capital structure, and, I know in, in your announcement today, you, you announced that your latest capital raise should be sufficient and does not appear likely that you will need to do any further raises, perhaps for the next 12 months, I believe, as was stated.
Mm-hmm.
That, that's great to hear. Can you, one thing, you know, this latest raise, in the grand scheme of things, you know, raise/dilution, it was not, you know, it was not very big. It was not a very big dilution, but then correspondingly, perhaps that's because it was not, you know, really a very large capital raise, $2.2 million, as you guys have pointed out. Do you feel... Could you say a little bit about, I mean, are you confident that that is gonna meet Nextech's, you know, capital requirements, going through this coming year or, let's say, the next 12 months, or at least until revenue ramps up to a level where, you know, few further raises would not be necessary?
Could you give us some outlook on that?
Yeah, you know, if you think about the capital raise, and you think about the backdrop of, you know, our revenue starting to scale from $1.3 million in Q1, $1.4 million in Q2, now we're predicting $1.7 million in Q3, maybe Q4 pops above $2 million, you know, and you put that into the equation of this lower burn, right? Where $300, as we start to see revenue come in, that $300 could turn into $200, could turn into $100, can turn into break even, and then going cash flow positive. As the revenue ramps up, as our margins ramp up, our ability to not have to dip into our cash account and finance our business through our business, right, through our revenue and cash flow goes up.
You know, there's a pendulum that's swinging, you know, in the right direction for Nextech, and that's why I, you know, I said that we don't think we're gonna need to raise capital over the next 12 months. If you just follow what I'm saying, that, you know, we're not far away from, you know, being cash flow break even, and going cash flow positive. It's not gonna take that much more 3D model production to get there.
Okay, great. Great to hear that. Finally, I just wanted to touch upon, sort of the competitive landscape for Nextech3D.ai. Could you, and this is sort of a two-parter, the first part being, you know, obviously, this is a pretty, you know, a very, fairly exciting new space, in, in tech. Do you- i-is there- could you say a little bit about, i-is there any, initiatives, going on at the, the, you know, at what, what would traditionally be sort of the, the big, large tech companies, let's say, you know, traditionally in this space, for example, Adobe is kind of the 800-pound gorilla here.
You know, this is also an area that, you know, in terms of publishing that is, is also an area, you know, where you have, where Microsoft has been a player, and then, you know, you can... This is also a, a natural extension for a company like Google. Can you 1, first comment on, are any of the big giant companies, you know, tech companies, are they in this space? And is there any competitive threat from them, as far as you can see? And if not, could you just also say, like, why haven't they gotten into this space if this is such a, you know, exciting space? And once you answer that, I, I have a follow-up.
Yeah. A couple of things. One is big tech companies are not pioneers. I mean, they might have been when they started, but they're not today. They wait for some pioneering company to have a breakout with new technology, and then they acquire them. That's just their business model. Having said that, when you look at Adobe, they supply software. The big tech companies supply the software that allows the smaller tech companies to do the heavy lifting. Of making these, these 3D models. There's a lot of, there's an ecosystem that the big companies are essentially, you know, the pick and shovel kind of suppliers. We're going into the mines, and we're mining, we're doing the, the, the heavy lifting.
That's maybe one way to think about it, but the other thing is, is we're creating our own technology. You know, the AI is the game changer, and, and that really only exploded in 2023. We've been working at it for quite a while, but it's gotten a lot, lot better in 2023, and it's gonna continue in 2024. Again, the business model for big tech is they, they, they're not trying to, you know, be, be pioneers. There's just too many, too many companies that, that, you know, fail at that. That's just like R&D for them. They, you know, they might invest in little companies, but they, they wait for a company to break out, and then they acquire them. There are eyes on the industry from big tech, but they're not competing with us.
Okay. That, that, that's definitely, as a long, that's, that's definitely nice to hear. So in, in that regard, since you're not, you know, we, I guess for at least for the time being, we don't have to necessarily focus on or perhaps worry about competition from big tech. Lately, I've been, you know, seeing on, on, in, in the, in the kind of the community and, and in the press and, and so forth, that, like you had mentioned that, on, on a recent interview, that, you know, Walmart, was also getting into 3D. When I looked that up, what I found was that, you know, there's a company called Hexa.
Then I, upon investigating further, I see that, in fact, they also, I guess, have some partnership or deal with Walmart, but then I also saw that they, apparently are also doing work for Amazon. In fact, not only that, they in fact have a, you know, a pretty attractive press release detailing. Can you talk about, I guess, you know, where they fit in into the overall picture and, and, you know, you and, and Reza have repeatedly, you know, mentioned that, you know, you are not only a supplier to Amazon, but your more relationship is, is essentially, you know, more deeper. It's much more of a, a partnership.
You know, if you have, as, as you've indicated in the past, that you guys are the dominant kind of player in this space, can you, can you talk about where Hexa fits into all of that?
Yeah, I could talk about Hexa -peripherally. They're an Israeli company that has been at this for, I think, twice as long as Nextech. They have a very different business model than we have, number one. Number two, they don't deal with high volume 3D model production, Nextech. They're essentially offering a SaaS solution, what they offer is an array of software, meaning they'll host your 3D models. They have, like, virtual try-on for 3D models. They, I think, outsource 3D model production. I don't know if they make them in-house or not, but that's not their main business. Their main business is offering all the ancillary stuff that you do with a 3D model. It's a quite different business model.
It's a SaaS model, and what they don't do is high volume production of 3D models for Amazon. That's what Amazon told us. If you read their press release, which I did, they are working with a different division inside of Amazon, and it's not the division that we're working with. Amazon, you know, has 1.5 million employees. They're a $1 trillion tech company. They have lots of divisions, lots of people, lots of stuff happening there. We're not, according to, you know, everything I know, we are not competing with them directly at Amazon, meaning we are the number 1 supplier of high volume 3D models for Amazon. We have a $multi-million contract with Amazon, for 3 years, and my understanding, what I've been told by our, you know, contact over at Amazon, is they do not.
You know, I can't speak beyond that. I, I'm not in their business, meaning I don't work there, but I am aware of them. You know, the market, if you think about it, nobody should panic when there's a competitor. It's a good sign. I know it, it's hard for you to, to think that way, but if they're in the same business we're in, then we must not be that crazy.
Thank you.
You, as an investor, and you as an investor, aren't wrong to be invested, right? If these guys are in it, and you guys are so enamored by them, then, you know, okay, I guess there's something happening in this space that's exciting enough for them. I think, you know, they raised, like, $20 million in the last year or 2 or something. I, I don't know. There's investing capital flowing into the space. There's going to be competition. That's actually a good thing.
Thank you. We'll take our next question from Asad Rashid, investor.
Hi, good afternoon, everyone. Good afternoon, Evan. Evan, I just had a question pertaining to the AI on the gaming side of the business. Just wondering.
Mm-hmm
... will the current inventory in your parts library assist you in developing the 3D models? You know, I mean, is it something, you know, you build on, or will this require another set of archives?
That's a good question. It's somewhat unrelated technology, meaning the, the parts library, as you obviously are correct, is geared towards home furnishings and not games. You know, they wouldn't, it wouldn't overlap. The thing about, you know, gaming gaming assets is that they, believe it or not, use TVs, couches, chairs in scenes in games. While, you know, maybe some of the stuff that's in a game like, you know, a weapon, for instance, we wouldn't have that. Not to say we can't make one, but it wouldn't be from our AI parts-based library. The point is, is that there's plenty of opportunity for us to populate scenes with 3D models from our existing inventory.
Understood. Understood. I guess with the, the scenario that you currently have with Amazon, for example, it's, it's not really I guess with the gaming side, it's not really like a mass production of the 3D models. It's more, more of a case-by-case basis. Is that correct?
It could be mass production. It's, it's still, you know, the, the there is an opportunity there for mass production, but, let's just say that it hasn't quite shown up yet. Yeah, in, right now, it's not mass production, but it, it could become that.
Makes sense. Makes sense. Just last question. I'm just wondering, is a MapD spin out still on the cards for 2023, or I remember there was a news earlier on this year that it may be a potential?
Yeah, I, I would say that, that's not something that I'm focused on today.
Mm-hmm
... there are other things that, that have taken center stage, and, you know, really, it's growing our, our, our business with, with Amazon right now that, that we're focused on, and, and profitability.
Makes sense. Well, appreciate it. Thank you for your time.
Thank you.
We'll take our next question from Yan Long Wang, investor.
Hey, Evan. I have a quick question regarding the uplisting to the Nasdaq. You know, there is a minimum price per share, around $3 or $4. Will Nextech3D.ai do a reverse split to uplisting to the Nasdaq? Thanks.
Yes, you're correct. There is a minimum price requirement, we have not decided to do a reverse stock split as of today. As of today, we're not doing a reverse stock split. That doesn't mean that it's 100% off the table. It just means that today, we're not gonna do it from these, these levels.
Okay. Thank you, Evan.
You're welcome.
We'll take our next question from Michael Farah, Investor.
Hey, good afternoon, everybody, and good afternoon to you, Evan.
Thank you.
Quick question. I, yeah, I hope you guys are doing great. Please tell the team, as I've told you offline a few times, that you guys are doing a great job. Market price, stock price doesn't really reflect that at the moment. Quick question about the employee stock compensation plan. I'm not sure I heard it all, but maybe $700,000 a month. Can you tell me, is that kind of the high number that it would be, and is there stock dilution, say, by the end of this year or, or however long that program runs? In other words, yeah, we'll be at break even, you know, if not now, certainly in the next Q4. Then there's the stock compensation plan that is potentially taking some shares as well.
Could you, maybe, explain that a little bit more?
Yeah. A good question. The, the, you know, the stock comp plan is a way for us to preserve our cash and be able to pay people with stock. It, it does have some minor dilution, a couple of percentage points. You know, we, we see the, the greater good in, you know, being able to preserve our cash and, and ultimately-
Right
... go cash, cash flow positive. There is some dilution, absolutely. There, you know, but, you know, it's, it's either, you know, small dilution through the.
Right
the share services or bigger dilution through stock offerings. You know, we're trying to not do-
Right
... any additional stock offerings, which, you know, seems to, to hammer the stock to no end. You know, which we don't-
Yeah
... which nobody likes, but, you know, so, so, you know, we're trying to do what we can for our shareholders, of course, as I've said many, many times, you know, me being the largest, so.
Could I ask one more question?
Yeah, sure.
Oh, okay. Okay. I apologize if this has been asked before, and it's a very difficult question to answer, but, as of August, what is our capacity to turn out 3D models, and what, in theory, you know, I won't even make you answer the future one. It's obviously, you know, the more efficient the AI program becomes, obviously, that, that scales down into a lot of different expenses and production capacities, et cetera. Yeah, I mean, do you have a figure kind of on that, at least right now?
Here's what it comes down to. You know, if Amazon said to us, "We want 10,000 3D models in, let's say, the month of September," we, we would not be able to deliver in the month of September. We would say to Amazon, "Can you give us to, you know, December?" There's a ramp-up period, is my point. Right now, we're able to meet the demand, and if the demand ratchets up, we're gonna be able to meet the demand again, but we'll have a bit of a backlog, which isn't a bad thing, right?
Right.
Right, so, you know, we're keeping up with demand, and we, we can flex up. You know, that's, that's really the key, is that as demand continues to come in, we're able to meet the demand, and that's being, you know, that's being evidenced by our rising revenue. As you see the revenue go up, what that tells you-
Sure
... is that we're meeting the demand. So that's the key, you know, metric that's gonna give you an indication. You know, and a lot of this is, is, you know, driven by the demand side of the equation from Amazon, and, you know, we think when Amazon Seller Central opens up, as we've said a number of times, demand's gonna increase dramatically. We will meet that demand with additional volumes from our factory, but it will take a bit of a ramp-up period. That's okay, 'cause as we ramp up, the revenue will ramp up with it.
I know that there's an amazing amount of complexity, provided, and/or detailed in terms of what each customer wants, whether it's a super 3D model or the, you know, "Hey, just, you know, just get me a stick-
Mm-hmm
... a stick figure with a little bit of facial hair.
Yeah, yeah, yeah.
Do you think that the, Let's see. How do you put this? What is the hold up with being able to, say, produce, you know, 100,000 a month? There must be something in the AI algorithm and the way that it's working, whether it's doing inter and intro, you know, layered connected nets. You know, there's something inside of that algorithm that could be improved in terms of efficiency. Is that basically-
Well-
... what's happening?
Well, now, I mean, a lot of it is because each 3D model has, like you said, some uniqueness to it.
Right.
The AI is learning, and if it hasn't seen something, it can't just produce it out of thin air. It has to, you know, pull it from somewhere. Some of the AI, so AI can actually produce some from thin air, but it's not always accurate. Right? Just like ChatGPT.
I'm very familiar with AI technology, believe me.
Right.
I get it. It's great. It's almost gray math, if you will.
Right. Sometimes it hallucinates, right? The ChatGPT-
Yeah
... sometimes. Right. Okay, so same thing-
It depends on where you put your data, that you put in for the inputs and, and the expected outputs.
Right
and the layers that you have in the neurons, et cetera. Yeah.
Yeah. So, so a lot of the same stuff happens with, you know, to, with 3D modeling. The bottom line is that we still need to QA. That's really the thing, right? We still need to have a human actually do the QA, and so there's just limits to what the AI can do independently. What, you know, we're doing is essentially assembling different parts of the 3D model. Some of it's human, some of it's AI.
Right.
At the end of it, we, we, we put it all together into a photorealistic, amazing, you know, 4K 3D model. It, it's just kind of, it's that. It's, it's just not fully formed yet. The, the machine isn't fully, fully capable of autonomous production.
No, no, I understand. It, it's a matter of putting in, say, 500, 1,000 weights, you know, per neuron, different kinds of, you know, configurations for different client needs. I had more questions, but I'll take that offline with you, Evan, and thank you so much. You guys, keep up the great work. Thank you so much.
Thank you. Thank you. Thank you.
Thank you. That does conclude the question and answer session. I'd like to turn the call back over to Evan Gappelberg for closing remarks.
Well, I'll have to say that this Q2 Q&A session was quite good for me. I, I was actually pleasantly surprised with the quality of the questions, and I hope I answered everybody's questions in a way that, that makes sense for them. I am available if there's additional questions. My opinion on the stock price is that it is not reflecting the value of the company, and it, the, the upside from here is massive, just like the opportunity of 3D modeling is massive, just like Amazon and Seller Central opening up is, is, you know, new, massive demand. If you connect all the dots, and you think it through logically and not emotionally, I think brighter days are, sunnier days are just around the corner. With that, we will conclude the call.
Thank you, everyone.
Thank you. That does conclude today's presentation. Thank you for your participation. You may now disconnect.