Good morning, and welcome to our Q4 Conference Call. I'm Brian Stringer. I'm Chief Financial Officer of 01, and with me today is Andrew Cheung, our President and CEO. The format for today's call will be a brief presentation by Andrew Cheung, followed by Q&A. I'll be moderating the questions, so please, throughout the presentation, everybody knows how to use Zoom now. If you could just click on the Q&A button at the bottom, type your questions and submit them to me. Now, before we get started, if you would take a minute to read our disclaimer of forward-looking statements, as these are an important part of the presentation. Now, I'll turn it over to Andrew, and then, for his presentation. Over to you, Andrew.
Thank you, Brian. Welcome, everyone. Again, my name is Andrew Cheung, President and CEO of 01 Communique. Welcome to our 2023 Q4 Financial Result and Corporate Update. First of all, activities in the post-quantum cryptographic market continue to move in light speed. I think the most notable happening since the last quarter was the breaking of the 1,000-qubit barrier by IBM. In December, just about a month ago, IBM announced the latest quantum computer, Condor, with 1,121 qubits. This is not only a major milestone, but also because, you know, it has fulfilled their roadmap they post a few years ago. So, the roadmap becomes a reliable item, you know, for the quantum computer industry by itself.
According to their roadmap, they are going to deliver 1,400 qubits later this year, followed by 4,000 qubits next year, and then 100,000+ the year after. It cannot be more obvious that the tsunami is already within visible distance. The reasons are very simple. It takes time, first of all, to convert application to become quantum-safe. This can take a minimum of, like, six months to an upward of three years to fulfill the conversion. And number two, even more importantly, is that hackers can conduct something called a HNDL attack, Harvest Now, Decrypt Later, or some people call it HNDL attacks. This essentially has fast-tracked the effective queue date for those industry with data with long lifespan, such as financial, healthcare, et cetera, et cetera.
I always fall back to this famous formula, X being the number of years your encrypted data needs to be secured, and Y being the number of years that it would take for you to implement quantum safety, and Z being the time that it would take for the hackers to get hold of a powerful quantum computer. So if anywhere X plus Y is greater than Z, then you're toasted. Now, X and Y are different for each industry, and as mentioned earlier, it doesn't need a rocket scientist to figure that X plus Y is indeed a big number already. And with the announcement from IBM, which I just talked about, Z is about 1-2 years away.
In other words, we are already crossing the red line that X plus Y is almost guaranteed to be larger than Z as of today. Now, this doesn't even include the competitors of IBM, who are all striving to beat them in their quantum computer deliveries. And on top of that, it is always a known fact that technologies on the national level, such as U.S., Russia, China, are at least five years ahead of the commercial level. What does it mean? It means that logically, the national level already had what we will have two to three years from now. So no wonder why the White House is also not sitting still, as they know too well about what's going on.
In late 2022, the Executive Office of the President had already issued a memorandum directing all federal agencies to adhere to the NSM-10, National Security Memorandum number 10. They set a deadline of October 18, 2023, which is only a few months ago, to assess funding requirements to achieve quantum safety. The memorandum also mentioned about the HNDL attack, which I talked about earlier, Harvest Now, Decrypt Later. This is jointly overseen by the National Institute of Standards and Technology, or short form, NIST, N-I-S-T, in the U.S. They have started the PQC standardization process in 2016, a few months ago. That was almost in line with when we started the IronCAP division.
Originally, NIST proposed to have the standard finalized in 2024, but due to the faster-than-expected development of quantum computers, they had the first draft of standard FIPS 203, 204, and 205, just about five months ago in August. They expect to add one more standard later this year to wrap up the process. Our in-depth knowledge in PQC, post-quantum cryptography, allowed us to study the original 82 NIST submissions and try to predict the five final winners, so that we can build our crypto engine ahead of the curve. So far, four out of five predictions have been correct. If the last one we have predicted, which we have already included in our IronCAP engine, we will be the leader. NIST will come out later this year, 2024.
If that is also come out to be the winner, we are five out of five. Now, because, you know, of our ability to predict the standard, this actually allowed us to be a few years ahead of the world in creating end-user quantum safe applications. While our competitors are busy creating their quantum safe cryptographic engine according to the NIST standard, we have already created the world's first quantum safe end-to-end email security product that everyone can download and use it as of today, actually, as of, like, almost a year ago. And while the whole quantum safe industry was still largely in this pre-money stage, we believe the tipping point is imminent. We also believe real revenues will be coming from end-user application rather than the encryption engine, for a simple reason.
You know, we all know that we're paying for the car, not the engine, you know, itself. So, as a result, our go-to-market plan is to generate revenue from both end-user applications and quantum safe professional services, while our competitors are only doing the latter. We all know that Business 101 says you don't need to do or be everything at the same time to begin with, as long as you are doing just one thing and doing it better than all your competitors. And the reason why we picked email to be the first quantum safe end-user solution is not only because the market of email is huge, but also because email is indeed the most insecure, but yet a globally adopted business tool.
Since its inception, all email are virtually sent unencrypted, and even though there is a small percentage of emails being sent encrypted, the encryption is not end-to-end. This means it is really not secure because people other than the recipient can also decrypt your messages. We took this opportunity to leapfrog an email encryption product that is not only quantum-safe, but also end-to-end encrypted. Now, end-to-end really means no one can decrypt your messages other than the targeted recipient. In other words, it is 100% guaranteed privacy that even government authority are unable to tap into your messages. And even more important than encryption is the authenticity of the sender. So, authenticity is also built into our email post-quantum email applications.
We all, the knowing that, like, virtually email senders are unauthenticated, and that's why 91%, statistically, of all ransomware attacks in the world are initiated by a simple phishing email. The end-to-end email signature in IronCAP X, our product, is not only quantum safe, but also allow the sender to digitally sign the message. What does it mean? It means that recipient can determine if this is the real person who sent the email. In other words, this alone can plug 91% of the source of ransomware. To capture the mass market, we have a free version for personal usage and a business version at $99.95 per user, per month. Another huge market that, that we, we have tapped into is cryptocurrency.
While this is not our core product, we have conducted a proof of concept, POC project, for a partner in 2022. The project was to use an existing blockchain called Solana as the sandbox to plug quantum safety into the chain. Just like anything in technology, the concept is a yank out the elliptic curve and replace with quantum safe signature for the payers and validator to sign and endorse the transactions. Very simple, right? Maybe not. After digging deep into the code, we found that the Solana smart contract has been hard-coded to elliptic curve and cannot be expanded.
We have invented, at the end, a special technique to perform the quantum safe validation outside the chain, and this invention has eventually successfully obtained a U.S. patent protection, and it can be applied to create a quantum-safe version of just about any token in the world, such as we can create a qBTC for Bitcoin, a qETH for Ethereum, or a qSOL for Solana, et cetera, et cetera. And public demonstration is available at qnt-demo.ironcap.ca, just clearly written on this slide. The good thing never happens easily. Crypto winter actually hit at a time when this project was completed at the end of 2022. But now with the cryptocurrency market scene showing signs of coming back, this project has been rejuvenated because theoretically, all coins will be victim of the upcoming quantum threat.
This potentially is a multi-billion-dollar market that we can tap into with our partners, okay? Now, we all know that remote access is our existing revenue-generating business. So, it is essentially a zero-trust remote access solution. So naturally, coming soon, we will integrate IronCAP into a remote access and VPN solution to become the first in the world in this quantum-safe category. Even though remote access market is not as big as email or cryptocurrencies, it is still a sizable market of $200 million a year. So it's really good that we can tap into this too. Last but not least, we came up with a technology using the soon-to-be standardized code-based cryptographic technology by NIST to effectively hide sensitive data into unsuspicious media.
I'm sure many of you have watched the movie Da Vinci Code, and really, that's the idea, only that in the 18th century, steganography was basically watermark. But in the post-quantum world of the 21st century, we are using code-based technology to randomly insert the sensitive data to be hidden as error syndrome into an unsuspicious media, such as a simple family picture, a JPEG file, or a simple Taylor Swift music MP3 file, or a Oppenheimer video MP4 file, et cetera, et cetera, that only with the private key that the hidden data can be retrieved. This can be widely applied, such as the private key retrieval process in cryptocurrency, replacing the current way that they are using, which is an 18th-century paper with a 24 English word. If anyone use the hardware wallet, you know what I'm talking about.
A patent application has also been submitted, you know, for this technology. The fact that we can or we are leading the world in the creation of quantum state end user products also gave us the knowledge to help other organizations to convert their existing applications to become quantum safe. Typically, we are charging $250-$400 an hour, which equates to about $35,000-$56,000 per man-month as a PQC consultant. Our strategy is to act as the SME, subject matter expert, behind our partners, such as CGI, PricewaterhouseCoopers, Thales, Hitachi, et cetera, et cetera, to help their customers doing PQC conversion. While revenue potential is not as big as that of PQC product, it can be very profitable with minimal marketing cost.
Finally, the execution of our business plan was clearly reflected in our financials. While revenue was less than a year ago, without a one-time project at that time, the adjusted loss has actually been reduced to $125,000, down from $161,000 of last year. The more notable item is that we have reduced cash usage to only $17,000 in this quarter from $65,000 of the last quarter. I guess, most importantly, we have invested over $6 million hard cash into the development of IronCAP. And since majority of the R&D work have been completed in this quarter and were 100% expensed from our balance sheet, we managed to continue our plan to reduce operating loss quarter after quarter.
The goal is to hover around, break even, and cross into profitability as soon as PQC monies kicks in. So as a summary, looking forward to 2024 and beyond, I guess timing is everything. We believe 2024 will be the historic reflection point for the PQC market. I will take a pause from here to allow more time for question and answer. As mentioned earlier by Brian, please use the R and the Q&A feature of Zoom, and Brian will moderate your questions accordingly. So, there you go. Back to you, Brian, Brian.
Okay, thank you. Andrew, we already have a couple of questions that came in through the presentation, so I'll get started on those. The first one has to do the background, is in regards to our investment in Talon Summit and development of a crypto project involving a Quantum Safe coin and secure wallet. And the question is: with Bitcoin and other cryptocurrencies coming back, is this project a go, and what is the future with respect to this project?
Yeah, thank you, Brian. It's long, but it's a very simple and good question. I think I mentioned briefly during the presentation this kind of answer half already, that, as I said, we had a POC project for Solana using Solana as the sandbox. And just it was a very interesting timing. Just about at the time when the project was finished in the late 2022, the crypto winter hits. You know, that was the famous implosion of FTX, and that was hitting everywhere, you know, in the crypto industry. And now, you know, everyone also know, if you follow crypto in the last few months, it actually seems showing signs of coming back.
So as I said, the project was done, and patent application has been successfully completed with U.S. patent protection already. So this project seems to be rejuvenated at the same time. So when I said, we can use the technology to create, like, a quantum version of just any coin, the concept is very simple, you know. The concept is that, today we have... Let's use Bitcoin as an example. Bitcoin today is trading at $40,000, and if there's a Q version of Bitcoin, say, qBTC, starting trading at $1 today, there's a gap of $40,000 between the BTC and the qBTC. But as time goes on, day after day, the gap is supposed to be, in theory, narrowing. Okay?
And then on Q day, when people can crack the original, the Bitcoin, the original BTC is supposed to go down to 0, and then the QBTC is supposed to be the $40,000 or whatever price, you know, is supposed to be there. So it's going to be moving in opposite direction and eventually replacing each other. So that is the concept we believe, you know, is survival. So yeah, that's a long-winded answer to your question, that because we said every coin in the crypto world is supposed to be affected by quantum safety, you know, this is a really lucrative project in my point of view.
Okay. Thank you, Andrew. The next question has to do with our partnerships, and the question is: You set up a number of partnerships in PQC, and we just happen to have them on this particular screen. Andrew, the question is, when will they pay off?
That's a, that's a billion-dollar question. You know, as I, as I said, at the end of the presentation, we are setting ourself up at a point where we're waiting, you know, like, we're minimizing our operating costs, okay? So that we can extend the runway indefinitely to wait for the PQC money to kick in. And this question is actually asked by each one of those, name, by their investors, saying, you know, like, "When would it pay off? When would end user really opening their wallets and start paying for either PQC conversion or PQC product?" You know, then, and we're setting up, you know, here. Once they are opening up the wallet, doing that, you know, it will start, the payoff. And I...
You know, my personal belief is, 2024, as I said, will be an interesting year, that is very likely that if you're looking back, you know, say, 10 years from now, this is likely the year of the inflection point where people are beginning to open the wallets, seeing the tsunami. Like last year or year before, you know, we're hearing the siren of the tsunami, and now they are beginning to see, visually, visible, seeing the tsunami. And I keep using that analogy because they're saying, you know, if it has arrived, you just cannot run.
There's no time to run, you know, not to mention about the Harvest Now, Decrypt Later attack, which is really fast-forwarding the real threat or the effective date of the quantum threat.
and the next one, and returning to, financial side a bit, is: Given our cash constraints, how much R&D is actually getting done? And, extend that a bit, is: How are we gonna make the, how are you gonna make the cash last, until these, partnerships start to pay off?
Yeah, as mentioned also in one of the slides, we have spent more than $6 million cash into the IronCAP development, which is significant. And that's done. And as I said, that's the majority of the development. So if anyone have been in the high-tech world, we all know that the spending on technology was the most intensive during the first few years when you are pouring resources into developing from ground zero. Okay? So that process is done. And after that process, the expected resources going to spend on R&D would be a small percentage of it. Is going to be enhancing the product and doing, like, new version or something.
We don't expect the R&D would be ramping back to that kind of a level, but really, like, level off of what we are at today. So, I'm very confident that with the existing cash flow, we are going to manage the runway to hover around, like I said, the breakeven point. And then embrace the upcoming for the PQC, the money to kick in.
Okay, thank you, Andrew. Let's see. Oh, and this one is from John, and it's, he sees that you've been speaking at a number of quantum and cybersecurity events. Can you share a bit about what these have involved and who you've been speaking with?
Yes, this is a very good one, too. Recently, I would say one of the reasons I believe that 2024 will be the reflection point is because I actually saw the intensity of these kind of conferences. Conferences happen a lot more frequent, you know, in 2023 than in previous years. So the last one that I was invited as a speaker was the Global PKI conference, the Public Key Infrastructure Conference. And their members are just about all the names you know in the world of business, such as even as big as the ECB, European Central Bank, to someone as small as you don't never know about the name. You know, that was the...
A conference happened in November, just a few months ago in Amsterdam, and I was invited to talk about the actual hands-on experience in converting PQC applications to become quantum safe. Okay? So, they also recognize that everyone in the industry, basically, our competitors, are really just providing the engine, okay? And they are just, "Hey, you know, this is the engine. Do whatever you want, right? With your car." But the reality is, people touch that level of encryption for 40 years already, and they don't know how to touch it, okay?
And our experience, digging our hand deep into helping or even converting our application or helping our partners to convert their applications, becomes a very important technique or experience that we can help them understanding the process of PQC conversion. So in that conference, I was basically presenting about what we did for using the Solana sandbox, and what we did for email and what we did for steganography and stuff like that. So it was a very intriguing experience for the audience because this is the first one, you know, in the whole conference, a two-day conference, that they hear about hands-on conversion, rather than just technology and the PhD papers and things like that. So yeah.
So, a short answer to your question is, those conferences are really accelerating and, becoming the kind of like yardstick, you know, for me to kind of having a feeling that 2024 will be the reflection point in PQC markets.
Okay. Okay, thank you, Andrew. Probably percent of time, it's, I believe, all questions. Let me just check. Yeah, there are no open questions. Thank you very much for attending, everybody, and now I'll turn it back to Andrew for closing comments.
Well, thank you again for joining our 2023 Q4 business update. I am very happy about the continuation of the new phase of operation, and I really can't wait to see what 2024 brings us. So, please stay tuned, and see you again next quarter.