Good morning, hello, everyone. My name is Pardeep Sangha, head of investor relations at INEO Tech Corp. Thank you everyone for joining us today, and welcome to INEO Tech Corp's corporate update and fiscal Q1 2023 conference call. Joining me on the call today are Greg Watkin, Chairman, President, and Founder of INEO, and Kyle Hall, the company CEO. This call is being recorded. We will be having a question-and-answer session at the end of the call. You can submit your questions through the Q&A button at the bottom of the screen. I trust that everyone has received a copy of our fiscal Q1 results press release that was issued last week. Please note, portions of today's call other than historical performance include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the Safe Harbor provisions of those laws.
Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors, many of which are outside of INEO's control that may cause the actual results, performance or achievements to differ materially from the anticipated results, performance or achievements implied by such forward-looking statements. These factors are further outlined in last week's corporate update press release and in our previous quarter management discussion and analysis. We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future.
We don't undertake to accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements or reflect any changes in our expectations or any change in events, conditions, assumptions or circumstances on which any such statement is based, except as required by law. With that, let me turn the call over to Mr. Greg Watkin, Chairman and President, INEO Tech Corp Greg.
Thank you, Pardeep. Before we get started, I just wanna say I've got a bit of a cough right now, so hopefully I can get through this presentation without coughing too much. Thank you, Pardeep, and good day, everyone. We truly appreciate everyone for joining us today. Before we begin, I wanna mention that unfortunately we are not able to use the names of the retail chains that we're working with due to non-disclosure agreements with these large companies. We'd love to share the names of these companies that we're working with, but regrettably, we're not able to. For the benefit of our shareholders, analysts, and potential new investors on the call today, we'll do our best to provide plenty of commentary on the nature of our role without actually naming the retail chains.
On today's call, INEO CEO, Kyle Hall, will provide a financial summary of our results and an outlook for the business. First, I'd like to provide some brief commentary on the quarter and an update on our recent sales activities. Once again, I'd like to start by thanking our employees, customers and partners of INEO. Despite the current macroeconomic conditions, including high inflation, increasing interest rates and uncertain economic conditions, I'm proud to report that INEO's outlook is better than ever. The company has a growing pipeline of opportunities, including several very large retailers. We're increasing revenue each quarter, and the company has patented intellectual property that provides a moat around our business. We're thrilled with our fiscal 2023 first quarter results, in which we reported record quarter with a 74% increase in revenue compared to fiscal Q1 in the prior year.
INEO has also experienced a 90% increase in gross profit in Q1 2023. We're extremely excited for fiscal 2023 as we continue to diligently roll out additional systems to our large retail customers. INEO has not experienced any recessionary impacts. I'm pleased to report the company is growing faster than ever as we begin to see new retail customers join the INEO Media Network. With regards to the current macroeconomic conditions, thus far INEO has not experienced any impacts to its business from supply chain disruptions, inflation and other macroeconomic challenges. Kyle will provide more details about our customer activities. I'd like to give an update on two key developments. First, I'm very happy to announce the company is making significant progress with a large retailer in the United States.
By the end of this week, we will have completed a full-scale walk-in system rollout in a second separate geographic metropolitan center in the United States with this large retailer. In addition to the numerous gate system installations at stores across the United States, which we expect to be upgrading to walk-in systems in the coming quarters. Secondly, I'm proud to announce our strategic partnership with Prosegur is progressing very well, and the pilot trial with a large South American grocery store chain has resulted in the conversion from a pilot trial to a customer order, rolling out INEO's walk-in systems to over 20 systems initially, with additional locations being added in the second half of 2023. Excuse me. This grocery retailer has almost 100 grocery store locations, while its parent company has over 1,000 grocery store locations across Central and South America.
Overall, INEO is continuing to increase its sales activity, with our sales pipeline now increasing to over 9,500 store locations, including both our direct sales efforts and our partner, Prosegur. Combined, the company's total sales pipeline from direct sales and Prosegur partnership now represents over CAD 40 million in annual recurring revenue once fully deployed. The sales pipeline is based on the full potential of contract values with retail chains that have currently installed or committed pilot installations. I'd like to now comment on our recent financing. Despite the difficult capital market conditions on November 17th, INEO was able to complete a public offering and private placement for total proceeds of CAD 2.74 million. This financing strengthens INEO's balance sheet and allows us to continue to execute on our existing commitments with our large retail chain customers and accomplish our growth plans for 2023.
This financing represents a key component of INEO's rollout and expansion plans across the globe. We're very appreciative of our shareholders which support us in this financing. We welcome new investors to the INEO family. The fact that we're able to close this financing under such challenging market conditions is a reflection on the faith that investors have placed in us. For that, we are grateful and committed to delivering on our growth and expansion plans. With that, before I cough anymore, I'd like to turn it over to our CEO, Kyle Hall, who will review the financials for the quarter and provide additional commentary on our outlook.
Great. Thanks, Greg. Hi, everyone. I'm gonna start off with our Q1 results. In Q1 2023, INEO achieved revenues of CAD 416,000 that compared to CAD 239,000 in Q1 2022. That's a 74% year-over-year increase, that was driven a lot by sales of our loss prevention products to existing customers. In the quarter, we achieved CAD 208,000 in gross profit compared to gross profit of CAD 109,000 in Q1 2022, an increase of 90%. This substantial increase was again primarily due to the revenue mix of greater higher margin products that we were able to sell in the quarter.
During fiscal Q1 2023, INEO had an adjusted EBITDA loss of CAD 512,000 , compared to an EBITDA loss of CAD 630,000 in Q1 2022. As of September 30th, 2022, INEO had 60,190,138 shares issued and outstanding. As at September 30th, 2022, INEO had CAD 939 ,000 in cash and cash equivalents compared to CAD 1.7 million in cash and cash equivalents at the end of June 30th, 2022. Subsequent to the end of the quarter, we strengthened the balance sheet with an equity and debt financing for total gross proceeds of CAD 2.74 million.
Furthermore, we wanted to let everybody know that we recognize the need to control our operating expenses in the current capital markets environment and hence INEO's taking appropriate cost reduction measures while ensuring we do not jeopardize our future growth. Our plan for future growth is in place. We've been executing on it, and we'll continue to execute on it. We do not expect the need to initiate another financing in 2023 as our ramping revenue, improving gross margins and our recent cost structure are assisting our cash flow profile in the coming quarters. In summary, INEO is in an enviable financial position with a healthy balance sheet, and our revenues are beginning to ramp up. That concludes the financial update, and I'll now move into the business highlights over the last quarter.
A couple of significant highlights that we have are some partnerships that we've signed. On July 26, 2022, we signed a programmatic partnership with Broadsign. Broadsign is one of the three large programmatic advertising partnerships. The other two, which we've already signed, are Hivestack and Vistar. Adding Broadsign will really add to our position of being a true solutions provider to the digital out-of-home advertising market, where they can find the INEO screens, the INEO Welcoming System screens that are in the stores. They can find them on any screen that they go to within those three large majors to buy advertising on. We're seeing an uptick on advertising coming from these programmatic partnerships. It's a growing part of the market, and we're happy to be integrated with these companies.
On August 18th, 2022, we signed a strategic partnership with Adapt Media. Adapt is a Toronto-based company. Quite large presence in the out-of-home advertising market, especially in the digital market. It's a major advancement for us to add them to increase our pipeline for our fill rates for our advertising network in the liquor store network that we have in Western Canada. It'll give us increased access to national advertising campaigns that we're missing right now because we're isolated a little bit on the West Coast. It gives us a Toronto presence and a broader range of potential customers. On October 19th, we initiated a global priority patent filing for our previously announced design patent that we'd filed for the INEO Welcoming G.A.T.E.
We originally filed that in Canada. With the global priority patent filing, it now includes United States and Europe. It's pending in Canada, the United States and Europe, but it is filed, and we have a priority filing to get that through. We'll update as we get confirmation on the issuances of those patents. I want to dig a little bit deeper into the sales pipeline. You know, as Greg mentioned, our sales pipeline is now over CAD 40 million in annual recurring revenue on both the direct and through the Prosegur channel. In the pipeline, we are only including retailers that we either have a contract, a pilot that's already installed, or a pilot's committed.
That full value, the CAD 40 million would be is if we rolled out every location in all of those. Obviously, that's the upper side of those locations. It's gonna take a bit of time to roll those out even once we get full contracts. Within two to three years, we could achieve full rollout in those locations once contracts are signed. Once we have a pilot installation, we're very, very confident in our ability to land the full contract. There's no competitive products that we encounter in the market. It's really about us proving to the retailer, one, you know, we're really good at loss prevention. Two, our screens are exceptional at providing messaging and marketing at the front of the store. Three, that we can operationally run the system for them.
We get a pilot, so far our track record is about 1,000 being able to complete them into a contract. Some of the pilots take a little bit of time, as everybody has been around us for a while knows. It takes, you know, maybe probably five to six months or a bit more, some of the larger retailers, but we will convert a fair number of these over to contracts. As far as our direct sales pipeline, we've been moving quite fast on this. Our large retail customer in U.S., as Greg mentioned, has several cities now rolled out, with several more to go.
We're pretty buoyed by the response that we're getting in the stores and with the organization overall. Canadian retailer with approximately 500 franchise locations, we've previously said in the past that we have pilot location installed, and we have several more systems going in the new year. Holidays kind of slowed us up a little bit on that. In the new year you'll see more installations with them. We have multi-system pilot already installed at a store in Surrey, BC for a large Canadian grocery chain. We have our previously installed 140 independent store network, liquor store network.
Due to our focus on the large chains, we're now not installing many liquor stores going forward, a few here and there, but our focus is really on the large retail clients. The 140 independent liquor store has done what we want to do. It's very valuable to build it out, test our products, test our technology, showcase it for the large retailers, and it was especially valuable during the pandemic lockdowns. It's a part of our plan going forward, but it won't grow much more from where it's at. As for the Prosegur channel, Greg mentioned earlier that we have a South American supermarket chain that completed the pilot stage and is moving into full rollout. 20 additional units to be deployed in early 2023.
With the remainder of the almost 100 stores to be followed thereafter. We're excited about this customer win because the parent company is literally over 1,000 locations across South America. Very strong retailer. We're, you know, we're proud to be working with them. The pilots we have installed with other prominent chains with Prosegur, five prominent chains in the pharmacy, department store, agriculture supplies, sports franchise, warehouse club chains, all going well. You know, Prosegur is making good progress in Canada at the same time, with many trials with an agriculture supply store and a Canadian pharmacy drug store chain. Hopefully, be able to announce more on those in the near future.
Total pipeline overall, 1,500 locations direct, with another 8,000 through our Prosegur channel for 9,500 store locations combined. We're really happy with the progress Prosegur has made. It's now been just a little over a year that we've had the contract with them, a year, probably two, three weeks ago. They're presenting to retailers around the globe. We're confident in their ability to land these large retailers and, you know, we'll be looking forward to sharing some of these wins in the future. As far as our key objectives, we're very focused. We haven't changed these much in the last little while. You know, it's all about us, one, increasing our revenue deployment of our systems, right? We've got two direct customers, leading retailers we're deploying at.
Our future revenue is based on scaling those customers. The number of systems in the market will scale our revenue. We're very focused on that. The other, of course, is taking the INEO Media Network in more geographical regions in North America, South America, adding more retailers, which then flows right into our third, that's supporting Prosegur negotiation initiatives. Key retailers around the globe, converting those large retailers from trials and pilots over to full contracted customer rollouts. Our future revenue, our future capabilities are all about the scaling of those numbers. Those locations at those large retailers. The overall outlook for INEO remains very positive. You know, the company is now actively deploying systems, ramping up our installations with our contracted customers.
The next phase is really the development and commercialization of this technology with landing wins with more large customers, expanding that footprint, ramping the revenues. Our focus is really about accelerating these deployments now as best we can. You know, getting more in sooner, getting that critical mass of systems up within the INEO Media Network so that we are a recognized national name in retail media advertising. There's so much, so much going on in retail media, in the online space, in the app space. It's pushing into the stores now. We're gonna have the systems in place and really be in place to take advantage of it when the retail media networks realize that most of the traffic is still in the retail store versus even online.
We're gonna be in a good position with that with our systems in the stores. Our technology has really been proven out and validated by Prosegur. You know, we couldn't have asked for a better partner at this point in time. You know, they've created a healthy sales pipeline across a multitude of, you know, different retail segments. They've seeded the market with trial systems and, you know, that's what we want. As I said earlier, we get a trial system, we generally convert those to full scale rollouts, we'll have more coming in coming quarters. As retailers continue investing in retail technology to improve the customer experience, advertising analytics are gonna become really important to them. It's part of the modern retail environment.
We are right in the driver's seat for delivering advertising and analytics features to the stores. We'll take advantage of these trends. We'll jump on top of them in terms of our technology and our advertising partners, that'll really enhance our future growth. Once again, just to reiterate, you know, the macroeconomic environment is challenging right now. It's, you know, I think we see it every day on the news. We are not experiencing any slowdown in our sales activity because of this. If anything, retailers learned a lesson early in the pandemic that they didn't invest enough in tech, retailers are investing in tech still. We look forward to increasing, you know, the quarterly revenue of the company based upon our ability to push forward in this environment.
Coming quarters, we should be able to announce substantially expansion of our network. In summary, I feel that the outlook for fiscal 2023, given our unique distribution partnership with Prosegur, our numerous customer trials and our large pipeline of additional opportunities, it's a very strong reason for optimism for us going forward. Before we take some questions, I just wanted to give a little bit of additional commentary on the share price. As most of you on the call are aware, our share price experienced a decline over the last year. We believe the general poor capital market conditions are the primary cause for the weakening in our share price. Small-cap tech stocks have certainly been hurt more than the overall market in the market correction.
We do not believe the drop in our share price is warranted given the size of our sales opportunities and our future positive outlook. As management, as a significant ownership in the company, our interests are aligned with shareholders. We are not happy with the current share price, and we're working diligently to sign up customers and expand the network, prove this company out, take us into a much larger environment of more people knowing about us and knowing what we're doing, get those revenues up and we believe the share price will follow. With that, I want to thank you all for joining us on the call today. We look forward to providing an update next quarter. With that, I'll now turn it back to Pardeep.
Thank you. We will now open the call for questions. Please send your questions through the Q&A button at the bottom of your screen. We will be giving priority to questions from analysts. First question here coming in from Daniel Rosenberg of Paradigm Capital. Have you seen any slowdown in advertising demand as it relates to broader industry trends?
No. I'll take that one, Pardeep. Dan, no. At this point in time, you know, our network obviously is still small and, you know, it's centered around our liquor store network on the West Coast here. We're seeing gains in it right now just from the simple fact of, you know, we're starting small and we're getting big. Talking with advertisers, there has been some pullback in the advertising market, generally, but not in any significant extent. Companies are still putting, you know, their major plans in place, rolling out products, positioning products, branding products. And I think, if anything, there's more money being shifted around than it is taken away. We're seeing money come into retail media.
That again, that is one of the growing trends in the overall market. If you look at the shift in money from Google and Meta and some other areas into retail media, that is definitely benefiting us.
Another question from Daniel Rosenberg of Paradigm Capital. Any changes to the competitive landscape that you're seeing? Any new entrants?
No, not at this time. Interestingly, you know, we expect at some point to have to go out and defend our patents a little bit, but we have not seen anything at this point in time. Our patents are strong. I think, anybody that looks at those will realize we are in a really well, you know, highly defensible position on our systems. Combining loss prevention with RF and RFID technologies is our exclusive domain. I think because of that, we're not seeing that. It gives us some great advantages over the incumbents on the loss prevention side. Of course, that gets us that space at the front entrance for our advertising and our analytics.
Another question from Daniel Rosenberg. Just with regards to the recent raise, can you comment on where you'll be spending the money in terms of CapEx or increasing in materials or people, et cetera?
Greg, you want to take that?
I can. Sure can.
If you don't mind.
Okay. I'll take it. No problem. Sorry. Yeah, you know, we outlined in the prospectus offering, most of the CapEx that we're gonna be deploying is around the deployment of customers. We've got a little bit in terms of internal tooling and materials that we need to build systems and that type of thing. The large majority of it is all about deployment of customers. That's where the capital will be used.
Okay. Turning to some of the call questions from people on the call here. Since you are talking about the prospectus, there is a question here about in the prospectus it says something about 50 Welcoming Systems by June 30, 2023. Can you provide some color on this and, you know, what's the larger ramp up beyond that?
Yeah. You know, it's interesting when you read the prospectus offering, you have to get a little bit detailed and outline some stuff. We still tried to keep it fairly general, because we expect with our one large US customer to be in the 200+ units by this time next year. Our other customer we expect to be over 100. Those are the direct ones. We add in the Prosegur one. You know, the rollout schedules are a little bit fluid, but we have the next four months, five months already planned. Those systems will be going to market. It's gonna be fast and furious in January, February, once the New Year's, the holiday season's over.
You know, as far as clarity around that schedule, Yeah, I think it's just the big numbers that you have to look at in the end. We raised this money so that we could deploy systems for these customers. That's what we'll be doing.
Also I think maybe what might be useful is just to add some clarity with regards to direct, you know, you have to, you know, fund the hardware for direct, but with Prosegur, you do not fund the hardware. That hardware is funded by Prosegur, right? Maybe just offer some clarity on that so that people are clear that, you know, anything coming to the Prosegur channel is not gonna be capital drain.
Yeah. Good, good timing for that, Pardeep. Yes. Just so everybody is clear, I think, we talk about this often, so I kind of assume that people know what I'm talking about. Just to be clear, when we deploy a direct customer, we incur the cost of the hardware that goes in store. The hardware, the deployment, the shipping to get it there. Of course, we amortize these systems over time, but the cash has to go out the door right away. We recover that through our monthly fees and the advertising fees coming from the systems. The return is still good, but of course, it takes a little time, so we have capital at the door. When we do an installation with Prosegur, they actually fund that capital.
They fund the hardware going in the systems in the store. We do not have that expense up front. Our capital needs are, you know, virtually, I shouldn't say nonexistent, but they're quite small in regards to going at a Prosegur location. Our fees, of course, are a little bit lower because they're taking fees as well because they have to cover the cost of the capital, the hardware that they put in. It's a nice model for us because we don't have to keep raising money to put systems out there. We raise the money to look after the direct customers that we signed up. With those, we get higher fees. Prosegur pays for hardware on their side and then slightly lower fees.
Okay. another question from listeners on the call today. Could you provide some color on how the sales cycle works and who is the point of contact and the decision-maker at the customer?
Yeah. We generally, we generally still enter the retail through the loss prevention department, because it's a vital service that they have, a vital need that they have in the retail environment. If they don't have these loss prevention systems at front of their stores, it's almost, you know, an open season for them to lose, for their shrinkages to go up overnight, to double. They have to have these systems, and they have to have the programs in store to do that. We have to be good at loss prevention. That's our first step in there.
Immediately we get crossed over into the operation side, you know, because the store operations are gonna have to be able to get into technology, IT teams, because we actually have systems that are smart systems. They're connected systems. They have to go on the corporate network. The third, of course, is or the fourth is the marketing department. That's kind of the progression through there. When it gets to the marketing department, that's when we know we're there because the marketing department actually, you know, they're making money, they're spending money, and that's where the business side of the systems really take off.
Sales cycle, generally, if you look at some of our major customers, we put a pilot in, six months later, we install more locations, six months later had a contract, start rolling out. You know, whether it's six months or eight months or nine months, I think that's the cycle you'll see inside the retailer. You know, big retailers aren't moving fast in terms of some of the stuff. Again, we're putting stuff on the corporate network. They have to be very comfortable with how it works and what it does. They have to be very comfortable that we're as good as we say we are on the loss prevention.
Just so everybody know that anytime we do get in on that and they make a comparison on loss prevention, we win every time. Our capabilities on video capture, on the analytics side, the data that we give the retailer around what's going on when they have alarm events is amazing. We win with that quite easily. We have to move through and get the marketing team very comfortable with it. You know, how do we look at the rest of the retail media that they're doing? How are we looking in terms of the brand alignment and everything else they're doing? It takes a bit of time. But once you start moving, it's just a machine that starts moving. That's what we're seeing now with a couple of these retailers.
Another question. Next question. Can you share a bit more details on the cost reduction initiatives that you're currently starting to take?
Yeah. I don't know Greg can speak here, but I'll take it, Greg, jump in if you need to. For a while there, we were having to take much more inventory than we wanted just because of supply chain stuff. Supply chain seems to be settling a bit right now, but we're still having to carry a bit more inventory than we were comfortable with. Greg's really built the back end of INEO on new manufacturing, being able to do things at, you know, just-in-time manufacturing, low cost, keeping, you know, the numbers down. We remake revisions. We haven't built 100 systems we have to go and rebuild, that kind of thing. It's worked really well for us.
We can get an order in the morning and have a system going out the door in the afternoon. In order to make sure we had parts, we had to carry much more than we wanted to. We also, we were spending fairly heavily on some customer acquisition methodologies. Also to be frank, we spent a bit more last year on capital markets presence and increasing our profile. You know, the way capital markets are right now, I think spend any money over there right now would just be wasting some dollars. We have some plans to do some initiatives later in the year around some material events that we've got coming up.
We're gonna do some big pushes then, but we're gonna be very meticulous on just where those dollars go and when we spend them. Anything to add, Greg?
Sorry, no.
Okay. I keep talking. I'll just keep talking.
Question once again on the, what you can expect in the upcoming year in terms of growth. I think we talked about that in the outlook, maybe just cover that up again, maybe.
Again, our scaling from this point forward is not so much, you know, what's happening with the liquor store network and, you know, the loss prevention stuff. It is really about getting the systems out there with these large retailers and scaling the numbers from there. You know, if we can add 300 direct systems and a bunch more through Prosegur here, that's where our revenue is gonna scale. I think you've seen the trend for the last couple quarters. This quarter, we were up 74%. The previous quarter, 90%. We're, you know, a bit of fluctuation depending on, you know, when systems go in, what the revenue was year before. We're on that trend right now. We're making good quarter-over-quarter increases, we hope to be able to even ramp that up a bit more.
Okay. There was a question here with regards to management buying shares. Now, I think it's worth mentioning that there was a, you know, presence list in the recent financing in which members of the board and others participated as well as the friends and family class. Maybe just comment on that. Even though it might not involve part of the open market, it was in the financing, right?
Correct. I think everybody, you know. Actually, I haven't looked at the numbers since the finance. Prior to the financing, we were 29% of the float. We worked very hard for that 29%. I believe we're in line with our shareholders on that, you know, that we are large shareholders that everything we do, we keep in mind what it means to our shareholders going forward. We didn't take it lightly to do the financing right now. You know, the growth of the company is paramount to get where we wanna go. You know, participation in person list was virtually all insiders. You know, we continue to add to the position, but there's no.
We're not really at the stage right now where we're just like openly buying the market. We're just managing the business. We, we parked our shares away, and we see that the end result is gonna be out there for us. The company valuation is where we wanna take, you know. We wanna increase the valuation of this company immensely.
A question around the integration, you know, after the pilots happen. Can you just comment on that?
Yeah. You know, pilots are, you know, they set the tempo, I guess, or, you know, the procedures that we have with the retailers and how we work. As far as after that, Greg's done a great job of working through, you know, just systematically how we do things, how we ship things out, how they get to the store, how they get installed. We do detailed installation diagrams for every store so that installers, when they get there, they know exactly what goes where, what port they plug into, where to bolt things down. It's a well-oiled machine at this point. Every retail is a little different, though. You know, those pilots, you really learn a few things. We learn where different aspects of our system go.
You know, we have an insight edge processing device that has to go somewhere. It goes in the network. In some places, it's in the telco room, sometimes it's in the electrical room. Somewhere, some people have we built elsewhere. We learn a lot on those pilots, and we figure the plan for them for the go forward.
If I could add just a little bit to that. Back at the beginning of October, I had the opportunity to spend some time out in the field with one of the large implementations where we did a nine-store rollout in the North Carolina area. Part of that was to actually go through and observe what it took to do the install and how we could integrate and how we could deploy our systems faster, more efficiently, carry information back to our group internally, as Kyle Hall was mentioning, for creating installation guides, site prep guides, et cetera like that. I think that the proof of that is actually paying off right now.
We have a team out there in Virginia doing another set of installs, and we expect to be done much faster than we did the last time. The integration of our systems and deployment and installation, we work on improving that for every install that we do.
Okay. A question around the exclusivity arrangements with retailers, as part of your direct sales or is there any exclusivity? Maybe you comment on that.
We would love to lock everybody in exclusively, but large retailers by and large will not sign exclusive deals. We get, you know, premier partner deals, and we get priority type things. Exclusive is a bad word out there. We would love it, of course, if they just said, "No, we're never gonna deal with anybody else." The good news is, the contracts we sign have life to them. We put systems in that it's not we're gonna get replaced for a better offer tomorrow. There's ramifications for having to not proceed. There's, you know, built-in safeguards for, you know, capital costs that we've spent to get back if something were to happen.
I think, yeah, I don't think anybody should get too hung up over that. I know I don't see too many companies signing exclusivity deals unless they're a very small retailer.
Yeah. I would add to that there's a high degree of stickiness to the systems that we put in there. It's not like you can just come in and replace something on a whim. As Kyle said, that they send out a long life to them once the systems actually do get installed there. There's a lot of stickiness to the clients once we install something.
You have to remember that the systems we're replacing basically plugged into a wall and they beep. That was the extent of the technology, right? We're giving so many features over and above that now. We're giving new capabilities to their organization that they've never had before. Could somebody come along and replace, you know, replicate some of those? Possibly. We've got a good head start on it, and we're getting inside the organization. We're giving them detailed, I would say, customized reporting that they want for retailers. We're really doing a lot to allow them to utilize the technology and the information coming from the technology better. Of course, you have the advertising and the... on top of it, which, you know, our patents protect.
Yeah. Yeah. I mean, the patents seem to be a big part of it as well, right? I mean, in terms of your protection of preventing other competitors coming in and trying to displace you.
Definitely. Definitely. It comes up a lot in the initial selling process. The retailers really feel the same on those. They feel very protected by them as well because they know that this is unique technology owned by us. They're not gonna be infringing on anybody else either.
First of all, in terms of the exclusivity part, you're not limited from selling to other retailers either, though? I mean, if you're working with a department store chain or a grocery store chain, that doesn't stop you from working with other department store or grocery chains, right?
Correct. We'll not sign exclusive deals either. The only deal that has some aspects of that would be Prosegur, where we've committed to them. There's out clauses within that contract, but we're not. With any retailer, we are not signing exclusivity deals either. We, you know, we can deal with everybody and anybody.
Okay. question around the who actually builds the systems yourself or Prosegur? Just maybe just clarify on that. I know you done some work in Czech Republic as well, getting their, getting their manufacturing facility in place. Maybe just give me the highlight on that and just sort of help us at least to understand who builds the systems and.
Yeah. We manufacture all of the systems for the North American and South American markets here in our facilities in Surrey, BC. We've got sufficient manufacturing capabilities both on our machining facility, which we're going to be expanding over the coming weeks, and at our system here. We believe that we've got the capability to meet our short-term demands for both our own customers and for Prosegur for the North American market for the foreseeable future. We spent some time last year in the Czech Republic doing technology transfer with a manufacturing partner over there, and we expect that as the volumes start to increase in the European market, that they will do the manufacturing at this location.
For everything in North and South America, we believe that we're positioned to be able to meet the demand of the market, over the foreseeable future.
That seems to be it in terms of questions. I will turn it back to Greg and Kyle if there's any other comments or anything else that you want to share.
No, I think it was a good Q&A, everyone. Appreciate the questions. Again, we're open. If people have follow-up questions, please contact Pardeep, contact myself. We want to keep lines of communication going with our shareholders and investors. I wanna thank everybody for joining the call today. Thank you to the analysts for your questions, shareholders for your support that you provide us. It means the world to us, you know, to take this company forward, do what we've outlined that we're gonna do and be successful for ourselves and for you. It's really is something that we're proud that we're doing this and we're building this company, and we believe we'll be highly successful. Wish everybody to stay safe. Thank you, and we'll provide an update next quarter. Greg, any closing?
Yeah, I'd just like to reiterate, wanna thank the shareholders for the support. We continue to work diligently every day to make sure that the company is going to be successful, and we really appreciate your ongoing support. Thankfully, somebody brought me a coffee while I was muted on this call, so I've been able to get a taste from some of the coffee. Thanks again, folks.
With that, Pardeep, leave it to you to end the call.
Thank you all. We end the call here. Thanks for joining us today.