Nextech Ar Solutions Corp

CNSX:NTAR

Earnings Call Transcript 2023-Q2

[Operator]

Good afternoon, ladies and gentlemen. Welcome, everyone, to the NexTech3D.ai Second Quarter 2023 Results Conference Call. [Operator Instructions] I'd like to remind everyone that this call is being recorded today, August 22, 2023.

I will now turn the call over to Julia Viola, Investor Relations at NexTech3D.ai.

[Julia Viola, IR]

Hello, and 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 market close, 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 archive may be recorded or otherwise reproduced or distributed without prior 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 Nextexh3D.ai, Evan Gappelberg.

[Evan Gappelberg, CEO]

Thank you, Julia. So hello, everyone, and thank you for joining us for our Q2 earnings call.

In 2023, we are at - 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. And 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, maybe even beyond e-commerce, into gaming and manufacturing, which we are starting to gain momentum in. These industries, which are massive multitrillion dollar industries are all pivoting to 3D and it should not be underestimated how huge an opportunity this represents for early investors in NexTech.

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-comm ecosystem, it only adds up to 30% of the market. Amazon is the giant. They are our largest customer for 3D models. And they're 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-comm, in medicine, in education, any events, you will need a 3D model.

And that is what NexTech 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.

Supply and Amazon demonstrates NexTech 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. But we are still hunting. With Amazon is not the last stop for us. we are still hunting and we have a large number of enterprise deals that are moving forward. We already service Target, we already service Kohl's, we ready service CB2, Procter & Gamble, [Hysen] and many others.

But 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. So we're eight months in and we are seeing a ramp-up for demand continuing in 2023, especially starting now, which were in Q3. This is another week will be two-thirds of the way done with Q3. And we see Q3 accelerating in 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 going to see the demand get to a frenzy where just like during COVID, you had everybody that was 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. And 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 going to become our customers in the next six 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 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 on, so you can have a 3D model, and you could literally see what a product looks like in your space. You can see what they look like face, on your feet, on your wrist. It opens up a whole new opportunity for consumers to feel more confident buying products online. And 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. And 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. So 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.

Now if we shift our attention to our portfolio of companies, apart from AR ties 3D and our 3D modeling business, we own two other public companies NexTech owns some very valuable breakthrough technology, industry-disrupting products and ARWay which assembles 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.

So 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, but 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 million square foot 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 massive, obviously.

We also recently signed a deal with Localiza. Localiza is the largest car rental company in South America, like enterprise or Hertz in North America. They have over 500 locations in airports, so 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.

So we have some very, very high hopes, and we think that ARWay is going to be the dominant indoor navigation system that people are going to use, just like you use your Google maps to drive, you're going to use ARWay as you walk indoors and you navigate, whether it's museum, whether it's a theme park, whether it's a trade show, a hospital, an airport, a warehouse, a mall. 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 and using an augmented reality navigation, you can navigate to a boost and you'll see sponsorship, you'll see a product offering. It's just the next level of 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 Toggle. Toggle 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. But that's just the beginning. It'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 pay 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 and we are in discussions with large enterprise customers for Toggle that have come knocking on our door that have a dire need for its technology. So 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 but I don't stress about it. I'm 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. And I believe that the strong companies, which NexTech is one of bounce back. And I think we will see the rip your face of bounce back for NexTech. I'm not going to say the day. I'm not going to 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 ARitize 3D with third-party e-comm 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 NexTech 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 NexTech 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 NexTech's Chief Financial Officer; Andrew Chan to provide full commentary on the financials. Andrew, take it away.

[Andrew Chan, CFO]

Thank you, Evan, and 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 remove of our legacy business. With that, I'd like to say our total revenue for the quarter was $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 a hybrid events platform, MAP D throughout this quarter. Gross profit remained consistent near the 40% mark over the last few - 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 from our recently spun out company Toggle 3D.

Overall, expenditure levels were consistent with Q1 2023 across sales and marketing, general and admin, research and development 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 and with a net loss per share of $0.06 per quarter.

As of June 30, 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, and we continue to hold 13 million shares in each of ARWay and Toggle 3D 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, on the adoption of AI as we continue to scale our business.

With that, I would like to return the call back to Evan.

[Evan Gappelberg, CEO]

Thank you, Andrew. On behalf of NexTech, I want to thank everyone for taking the time to join us. And operator, we're ready to answer questions.

[Operator]

Thank you, sir. [Operator Instructions] We do have some questions that were submitted from Lisa Thompson from Zacks Research.

And that is what percent of Q2 revenues are from Amazon. Do you expect that to increase or decrease? The second question is, is the 3D model business just…?

[Evan Gappelberg, CEO]

Hold on. Hold on. Let's go one-by-one. Andrew, can you answer that, please.

[Andrew Chan, CFO]

Yes. So, cumulatively, up until Q2, Amazon's contributed a little under, 50%. 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 want to add anything further to that, Evan.

[Evan Gappelberg, CEO]

Yes. So just to add a little more to that, Andrew, that once Solar Central opens, technically, the merchants will be buying direct from NexTech, not Amazon. And so 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.

[Operator]

Thank you. Her next question is, is the 3D model business just e-commerce websites? Are there any customers doing any other than that?

[Evan Gappelberg, CEO]

It's not just, e-commerce websites, although that is the lion share for sure.

[Operator]

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?

[Evan Gappelberg, CEO]

Yes. I would say that there's some seasonality, but not like a traditional e-comm site owners' seasonality, but 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 so yes, we're seeing an increase in demand.

[Operator]

Thank you, sir. Our next question comes from Scott Buck with H.C. Wainright.

[Scott Buck, H.C. Wainright]

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?

[Evan Gappelberg, CEO]

That is the billion dollar question, Scott. We've been geared up and gearing up for it for quite some time. I still believe it's going to happen in Q3. So that would make it in the next five weeks, we expect it to open up.

[Scott Buck, H.C. Wainright]

Great. Thanks for that. And then I want to ask about where are you today in terms of 3D model generating capacity? And where will you be kind of exiting the year once the AI is implemented?

[Evan Gappelberg, CEO]

In terms of capacity, we are getting, let's just say, stretched a little, but we are ramping up our team and our capabilities. So, 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 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. And so we expect the business to be significantly more profitable, and to be able to do more volume. So, I just can't give you an exact number for Q4.

[Scott Buck, H.C. Wainright]

No, that's helpful, Evan. And 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?

[Evan Gappelberg, CEO]

Andrew, am I right in saying, yes.

[Andrew Chan, CFO]

Yes, for sure. I mean I think with technology, it's a ramp-up period, and the longer you kind of run with it, the more efficient you become with.

[Scott Buck, H.C. Wainright]

Yes. No, that makes a ton of sense. And then 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 enough listing that would be great?

[Evan Gappelberg, CEO]

Yes. As you know, we applied, there's been some comments, which we've been answering, nothing earth shattering. And it's moving forward. There's nothing at this point to report other than it's on track.

[Scott Buck, H.C. Wainright]

All right. Super. Appreciate the time, guys. Thank you very much.

[Evan Gappelberg, CEO]

Thank you, Scott.

[Operator]

We'll take our next question from Christopher Sakai with Singular Research.

[Unidentified Analyst]

Yes. This is [Singh] for Christopher. I was wondering if you could give us a little bit flavor in terms of 3D models you have delivered, if I remember correctly, for 60% growth in terms of complexity, level of those models that you delivered?

[Evan Gappelberg, CEO]

Say that again, you're asking the...

[Unidentified Analyst]

The 3D models that you delivered, if you can kind of little bit parse out the complexity level, it's like more complex ones are growing faster or less complex, or a little bit if you can parse it out - that would be great?

[Evan Gappelberg, CEO]

Yes. So every single batch of 3D models we make has simple, medium, complex 1, complex 2 super complex. So there's multiple reasons for all those different categories, I would say that at least 50% of the models are complex and above. So 50% to 60% are complex, and above and the balance is more of the simple meeting.

[Unidentified Analyst]

And that trend is about in last few quarters or that is changing as we go forward?

[Evan Gappelberg, CEO]

I'd say it's pretty steady.

[Unidentified Analyst]

Okay. And 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 are getting better utilization of your selling and marketing dollars?

[Evan Gappelberg, CEO]

Well, because of - because we're dealing with Amazon, we've kind of, we haven't had to spend as much on getting new customers, right, because Amazon keeps on keeping us.

[Unidentified Analyst]

Okay. And so 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?

[Evan Gappelberg, CEO]

Correct.

[Unidentified Analyst]

Okay. Thank you.

[Evan Gappelberg, CEO]

Thank you.

[Operator]

[Operator Instructions]. We'll take our next question from Akash Mikeva, a Private Investor.

[Unidentified Analyst]

Thank you, operator, and good afternoon, gentlemen. So 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 mentioned that the possibility could be -- could still be by the end of this quarter in the next five weeks, on a recent - one of your recent interviews that you and Reza had done and in commenting on this topic. It was -- one of you mentioned that it was either going to be quarter three, or but unlikely to be Q4, because that was Amazon, that's traditionally Amazon's busiest quarter. So, they would not perhaps want to take a chance with trying something kind of opening up, a new avenue in that very important critical quarter for them. So in the event, if perhaps it does not occur by the end of Q3, do you think 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?

[Evan Gappelberg, CEO]

So let's be clear, it's conjecture that what I'm saying is what I think it's not necessarily what's going to play out. But I am on the front lines along with Reza, and so we do have some visibility. My thinking and in conversations with Amazon is they want to open it sooner rather than later. So it's really I think there's some pressure internally at Amazon building. And as I said, I still think it will be Q3. I don't believe that Q4, that was me who said that would make sense, but I could be wrong.

They could be like, you know what its go time. Let's just go with Q4. But if they did wait, I think it would be early Q1. I don't think they would slow roll it, because Q1 kind of sets the stage for a whole 2024 year where they can really accelerate the 3D modeling business. So that's my thinking on that. Again, this is conjecture - till they actually come out with an announcement, nobody really can predict, right?

[Unidentified Analyst]

Okay. Sure. And I know in your - the other topic I wanted to cover was in regards to your kind of your capital structure and I know in your announcement today, 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. So that's great to hear. Can you - one thing this latest raise in the grand scheme of things raise/dilution, it was not very big?

It was not a very big dilution, but then correspondingly, perhaps that's because it was not really a very large capital raise $2.2 million, as you guys have pointed out, so do you feel - could you say a little bit about - I mean, are you confident that, that is going to meet NexTech's 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 further raises would not be necessary. Could you give us some outlook on that?

[Evan Gappelberg, CEO]

Yes. So if you think about the capital raise and you think about the backdrop of our revenue starting to scale from $1.3 million in Q1, $1.5 million in Q2. Now we're predicting $1.7 million in maybe Q4 pops above $2 million. And you put that into the equation of this lower burn, right, where 300 as we start to see revenue come in, that 300 million could turn into 200, can turn it to 100.

Can turn into breakeven, and then going cash flow positive. So 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. So there's a pendulum that's swinging in the right direction for NexTech. And that's why I said that - we don't think we're going to need to raise capital over the next 12 months.

If you just follow what I'm saying - that we're not far away from being cash flow breakeven, and going cash flow positive. It's not going to take that much more 3D model production to get there.

[Unidentified Analyst]

Okay. Great. Great to hear that. And finally, I just wanted to touch upon sort of the competitive landscape for NexTech. Could you - and this is sort of a two-parter, the first part being obviously, this is a pretty fairly exciting new space in tech and do you - is there - could you say a little bit about is there any initiatives going on - at what would traditionally be sort of the big large tech companies. Let's say, traditionally in this space, for example, Adobe is kind of the 800-pound gorilla here. But then this is also an area that in terms of publishing that is also an area where you have - where Microsoft has been a player, and then you can - this is also a natural extension for a company like Google? So - can you, one, first comment on, are any of the big giant companies, tech companies, are they in the 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 an exciting space. And once you answer that, I have a follow-up?

[Evan Gappelberg, CEO]

Yes. So 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. So, 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 3D models.

So there's a lot of - there's an ecosystem that the big companies are essentially, the pick and shovel kind of suppliers. But we're going into the mines and we're mining, we're doing the heavy lifting. And so, that's maybe one way to think about it. But the other thing is, we're creating our own technology. So, the AI is the game changer, 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 going to continue in 2024.

So again, the business model for big tech is they're not trying to be pioneers. There's just too many companies that fail at that. That's just like R&D for them. They might invest in little companies, but they wait for a company to break out, and then they acquire them. So there are eyes on the industry from big tech, but they're not competing with us.

[Unidentified Analyst]

Okay. That's definitely as a long, that's definitely nice to hear. So in that regard, since your - I guess, at least for the time being, we don't have to necessarily focus on or perhaps worry about competition from big tech. Lately I have been seeing on - in the kind of the community, and in the press and so forth that - like you had mentioned that on a recent interview that Walmart was also getting into 3D. And when I look that up, what I found was that there's a company called [Hexa]. And then I - upon investigating further. I see that in fact. So 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. And in fact, not only that, they, in fact, have a pretty attractive press release detailing?

So can you talk about, I guess, where they fit in, into the overall picture? And you and Reza have repeatedly mentioned that you are not only a supplier to Amazon, but your more relationship is essentially more, deeper it's much more a partnership. So if you have - as you've indicated in the past that you guys are the dominant kind of player in this space, can you talk about where Hexa fits into all of that?

[Evan Gappelberg, CEO]

Yes. I could talk about Hexa peripherally. There's an Israeli company that has been at this for, I think, twice as long as NexTech. And they have a very different business model than we have, number one. Number two, they don't deal with high-volume 3D model production as NexTech. So, there essentially offering a SaaS solution. And what they offer is an array of software, meaning they'll host your 3D models.

They'll - 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 the 3D model. And so, 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.

And 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. And Amazon has 1.5 million employees. They are truly the company. They have lots of divisions, lots of people, lots of stuff happening there. So, we're not according to we think I know. We are not competing with them directly at Amazon, meaning we are the number one supplier of high-volume 3D models for Amazon.

We have a multimillion dollar contract with Amazon for three years. And my understanding, what I've been told by our contact over at Amazon is they do not. And so, I can't speak beyond that. I'm not in their business, meaning I don't work there, but I am aware of them. And the market, if you think about it, nobody should panic when there's a competitor, it's a good sign. I know you - it's hard for you to think that way. But if they're in the same business we're in, then we must not be that greedy.

And 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 I guess there's something happening in this space that's exciting enough for them. And I think they raised like $20 million in the last year or two or something, I don't know. So, there's investing capital flowing into the space. There's going to be competition that's actually a good thing.

[Operator]

We'll take our next question from Asad Rashid, Investor.

[Unidentified Analyst]

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, will the current inventory in your parts library assist you in developing the 3D models? I mean, is it something you build on will this require another set of archives?

[Evan Gappelberg, CEO]

That's a good question. It's somewhat unrelated technology, meaning the parts library, as you obviously are correct, is geared towards home furnishings and not games. So it wouldn't overlap. But the thing about gaming assets is that they - believe it or not, you, TVs, couches, chairs in scenes in games. So while maybe some of the stuff that's in a game like a weapon, for instance.

We would have that, not to say we can't make one, but it wouldn't be from our AI parts-based library. But the point is, is that there's plenty of opportunity for us to populate scenes with 3D models from our existing inventory.

[Unidentified Analyst]

Understood. Understood. So I guess with the scenario that you currently have with Amazon, for example, it's not really, I guess, with again, if it's not really like a mass production of the 3D models, it's more of a case-by-case basis. Is that correct?

[Evan Gappelberg, CEO]

It could be mass production it's still - there is an opportunity there for mass production. But let's just say that it hasn't quite shown up yet. So yes, right now, it's not mass production, but it could become that.

[Unidentified Analyst]

Makes sense. Makes sense. And just last question. I'm just wondering, is Maps the spin out still on the cards for 2023? Or I remember there was news earlier on this year that it may be a potential.

[Evan Gappelberg, CEO]

Yes. I would say that that's not something that I'm focused on today. There are other things that have taken center stage. And really, it's growing our business with Amazon right now that we're focused on and profitability.

[Unidentified Analyst]

Makes sense. Well appreciate it. Thank you for your time.

[Evan Gappelberg, CEO]

Thank you.

[Operator]

We'll take our next question from Jan Long Wong, Investor.

[Unidentified Analyst]

Hi Evan. So I have a quick question regarding the up-listing to the NASDAQ. So there is a minimum price per share around $3 or $4. So we, you, NexTech3D.ai do a reverse fleet up listing to the NASDAQ? Thanks.

[Evan Gappelberg, CEO]

Yes. You're correct. There is a minimum price requirement, and we have not decided to do a reverse stock split as of today. So 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 going to do it from these levels.

[Unidentified Analyst]

Okay. Thank you, Evan.

[Evan Gappelberg, CEO]

You're welcome.

[Operator]

We'll take our next question from Michael Fera, Investor.

[Unidentified Analyst]

Hi. Good afternoon, everybody, and good afternoon to you, Evan.

[Evan Gappelberg, CEO]

Thank you.

[Unidentified Analyst]

Yes, because you're 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. But a quick question about the employee stock compensation plan. I'm not sure I heard at 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 however long that program runs. So in other words, yes, we'll be at breakeven, if not now, certainly in the next Q4. But then there's the stock compensation plan that is potentially taking some shares as well. Could you maybe explain that a little bit more?

[Evan Gappelberg, CEO]

Yes. So it's a good question. The stock comp plan is a way for us to preserve our cash and be able to people with stock. It does have some minor dilution, a couple of percentage points, but we see the greater good in being able to preserve our cash, and ultimately still cash flow positive. So there is some solution, absolutely.

But it's either small dilution through the shares services or bigger dilution through stock offerings. We're trying to not do any additional stock offerings, which seems to hammer the stock to no end which nobody likes. But so, we're trying to do what we can for our shareholders, of course, as I've said many, many times, may being the largest.

[Unidentified Analyst]

Could I ask one more question?

[Evan Gappelberg, CEO]

Yes.

[Unidentified Analyst]

Okay. Okay. What - I know this is such a - I apologize if this has been asked for 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, I won't even make you answer to the future when it's obviously the more efficient the AI program becomes, obviously, that scales down into a lot of different expenses and production capacities, et cetera. But yes, I mean do you have a figure kind of on that, at least right now?

[Evan Gappelberg, CEO]

So, here's what it comes down to, if Amazon said to us, we want 10,000 3D models in, let's say, the month of September. We would not be able to deliver in the month of September. We would say to Amazon, can you give us to December. So there's a ramp-up period is my point. And so right now, we're able to meet the demand. And if the demand ratchets up, we're going to be able to meet the demand again.

But we'll have a bit of a backlog, which isn't a bad thing, right? So, we're keeping up with demand. And we can flex up. And that's really the key that as demand continues to come in, we're able to meet the demand, and that's been evident by our rising revenue. As you see the revenue go up, what that tells you is that we're meeting the demand. And so, that's the key metric that's going to give you an indication.

And a lot of this is driven by the demand side of the equation from Amazon. And we think when Seller Central opens up, as we've said a number of times, demand is going to increased dramatically, we will meet that demand with additional volumes from our factory, but it will take a bit of a ramp-up period. But that's okay, because as we ramp up the revenue, we'll ramp up with it.

[Unidentified Analyst]

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 that, hi, just give me a stick figure with a little bit of facial hair?

[Evan Gappelberg, CEO]

Yes. Yes, yes.

[Unidentified Analyst]

Do you think that the - let's say, how do you put this, what is the holdup with being able to, say, produce 100,000 a month. There must be something in the AI algorithm in the way that it's working, whether it's doing intern and intra-layered connected nets, there's something inside of that algorithm that could be improved in terms of efficiency? Is that basically what's happening?

[Evan Gappelberg, CEO]

Well, no, I mean a lot of it is because each 3D model has, like you said, some uniqueness to it. So the AI is learning that it has - if it hasn't seen something can't just produce it out of thin air. It has to pull it from somewhere. Now some of the AI, AI can actually produce some from thin air, but it's not always accurate, right? Just like ChatGPT.

[Unidentified Analyst]

We're very familiar with AI technology, believe me. Right. It's almost gray mouth, if you will.

[Evan Gappelberg, CEO]

Right. So sometimes, right, it hallucinates, the ChatGPT sometimes. Okay.

[Unidentified Analyst]

Your data that you put in for the inputs and the expected output and the layers that you have in the neurons, et cetera, yes?

[Evan Gappelberg, CEO]

Yes. A lot of the same stuff happens 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 to do the QA. And so, this just limits to what the AI can do independently. And so, what we're doing is essentially assembling different parts of the 3D model, some of it's human.

Some of it's AI. At the end of it, we put it all together into a photorealistic amazing 4K 3D model. But it's just kind of, it's that. It's just not fully formed yet. The machine isn't fully capable of autonomous production.

[Unidentified Analyst]

No, no, I understand it. It's a matter of putting in, say, 500, 1,000 weights per neuron different kinds of 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.

[Evan Gappelberg, CEO]

Thank you. Thank you.

[Operator]

Thank you. And that does conclude the question-and-answer session. I'd like to turn the call back over to Evan Gappelberg for closing remarks.

[Evan Gappelberg, CEO]

Well, I'll have to say that this Q2 Q&A session was quite good for me. I was actually pleasantly surprised with the quality of the questions. And I hope I answered everybody's questions in a way 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 the upside from here is massive.

Just like the opportunity of 3D modeling, it's massive, just like Amazon, and Seller Central opening up is new massive demand. So, if you connect all the dots, and you think it through logically and not emotionally, I think brighter days are not of your days are just around the corner. And with that, we will conclude the call. Thank you, everyone.

[Operator]

Thank you. That does conclude today's presentation. Thank you for your participation, and you may now disconnect.