Good morning, and welcome to Datavault AI's Third Quarter Conference Call. With us today are Nathaniel Bradley, CEO, and Brett Moyer, CFO. This call will include forward-looking statements that reflect management's current judgment, including our expectations for the financial performance in fiscal years 2025 and 2026. However, these are subject to risks and uncertainties that could lead to actual results differing significantly. I do not have the rest of the information, and I apologize for that. It is now my pleasure to turn the call over to management. Please proceed.

Yes, I am Nathaniel Bradley. Thank you all for joining the call today. We have prepared a brief presentation. We had an incredible Q3. Our results really speak for themselves. This quarter highlighted the performance of WiSA, transitioning to a more scalable and nimble business model within our Acoustic division. We saw a significant increase in our ADIO technology revenues and laid the groundwork for an explosive Q4 around our flagship Datavault platform, which performed impressively in Q4, building on the momentum from Q3. Special thanks to Jeff Jones and our team for successfully integrating the necessary technological resources to scale globally. We are now positioned with the Datavault platform for Q4 and can provide aggressive revenue guidance for 2026. Based on Datavault's performance, as well as the progress in WiSA, ADIO technologies, and our Acoustic divisions, we are increasing our guidance from $50 million to at least $200 million for next year. This increase unfolds our ongoing process of tokenizing real-world assets globally and reflects the advancements made in our Acoustic division and WiSA technology, which we see as having a highly scalable future, potentially involving robotics and data delivery via sound. We see our global expansion supported by a growing footprint, now including Zurich, London, Taiwan, Japan, Korea, and Hong Kong. Strategic partnerships play a crucial role; we are proud of our alliance with IBM, as well as our partners at NYIAX and Scilex, which is helping us innovate in biotech and scientific research. Burke Products is facilitating our contracts with the federal government and areas requiring specialized sensor technologies, particularly through developments led by Sonia Choi and our team. Our ability to tokenize assets hinges on our deep understanding of various resources. We’ve recently announced efforts in geothermal and anticipate further announcements in areas of significant value. Our patent position is gaining global recognition, particularly through our collaboration with IBM, enhancing our engineering and sales capabilities. We are preparing to launch an American political exchange in time for the 2026 midterm elections, along with an international elements exchange that highlights our revenue generation potential. This includes the elements of Earth, such as commodities, agriculture, and biotech, powered by our technology. Our exchange operates similarly to the New York Stock Exchange, allowing us to trade tokenized assets securely using top-tier infrastructure. We also plan to make significant announcements regarding our NIL Exchange and our advancements in quantum and high-performance computing, which are crucial for optimizing our operations. Our focus includes various innovative technologies and the capacity to monetize experiences on our exchanges, while our ADIO and WiSA technologies will significantly influence the future of robotics and audio delivery. Our pipeline supports our revised guidance from $50 million to $200 million next year, driven by significant projects in mining and tokenization, such as an $8 million geothermal deal. We are also exploring various opportunities in the commodities market. Events like the Kentucky Derby and PGA Tour will be key for us due to our collaboration with API Media, reinforcing our new management and corporate governance. Our updated strategic guidance centers around launching these exchanges and driving revenue, recognizing the challenges but also the immense opportunities ahead. We are committed to scalable licensing models and have enhanced our financial outlook, continuing to innovate in the RWA and tokenomics space, thanks in part to our dedicated patent development team. That concludes my prepared remarks. We appreciate your interest in our company, and I wish everyone happy holidays and gratitude to our shareholders and everyone involved in driving our progress. Thank you.

Our first question today is coming from Ken Londoner from Endicott Partners.

That was a comprehensive update. Can you give us some detail on the scope of contracts you're talking about regarding the tokenization of real-world assets? You mentioned quite a few, but what are sort of the big focuses for you going forward?

The strategy is centered around the quality of the assets being tokenized, such as gold, diamonds, and silver. We have strong faith in copper due to its conductivity. As we focus on global infrastructure development, including data centers, we see significant value in copper and various other elements. We're open to opportunities worldwide and have been welcomed into governors' mansions and international governments to understand where the most valuable assets are and how we can facilitate their movement. We are working on establishing a Swiss exchange from our Zurich office, ensuring we handle all legalities carefully. After that, we plan to launch internationally from our Philadelphia headquarters, expanding our token exchanges. In short, we're tracking financial opportunities by listening to our customers and identifying valuable assets that we can focus on tokenizing this year for revenue generation. We're also looking to increase trading volume on our exchanges, where revenue is earned with each trade. Our priority is on the most valuable real-world assets, and our announcement today about geothermal projects reflects our commitment to this goal.

Next question today is coming from Jack Vander Aarde from Maxim Group.

Okay. Great. I appreciate the update. You covered quite a lot of ground there. Where do I start? The guidance is jumped off the page to me. So revenue guidance raised in 2025 to over $30 million and $200 million plus revenue for 2026. So maybe, Nate, I mean, this is really leveled up here, I mean, clearly. So maybe help us understand what's sort of locked in that 2026 guidance versus how much is kind of are you working towards locking in? Just so we have a sense of maybe stress testing that a little bit.

I had to negotiate extensively with my financial team, particularly Brett Moyer, who deserves significant recognition for helping to uncover this opportunity. The key is to underpromise and overdeliver. I don’t view that target of 200 as something to be intimidated by. I want my team to feel motivated and energized about our shared mission. At the same time, I didn’t want to set an easily achievable goal that we could surpass simply by going through the motions. I want us to set ambitious targets in our public guidance as well as internally. As a leader, I aim for us to exceed that figure. Our competitors may have higher numbers, but they are well-established and somewhat entrenched. In contrast, we have a flexible AI strategy and a top partnership with IBM for our development and quantum systems, which is a pressing issue for any tech-reliant organization. Our fourth quarter will be a significant test as we navigate this new terrain. We are collaborating with our auditors and utilizing advanced systems worldwide, and we need to be mindful of revenue recognition and other important factors. Therefore, the fourth quarter will pose the greatest challenges for us, particularly due to our technological resources and the demands being placed on our Georgia Development Center. We plan to expand development there to meet international interest in tokenomics. Additionally, we have a new facility in Philadelphia to consolidate our team, many of whom have been working in separate locations. Bringing everyone together should enhance our focus and make our goals more attainable. I aim to adjust our guidance accordingly because I don’t want it to be too easy to hit what we aspire to achieve. This is our inaugural year on the NASDAQ, and as our data improves, we’re showcasing our exceptional technology from WiSA and a strong presence on the NASDAQ reflected in our volume and global recognition. We're also securing significant government projects that have a meaningful impact. I want to express my gratitude for your early confidence in us and for recognizing our potential at $3. As we surpass that guidance, I hope people acknowledge your insight, and we appreciate your long-term support for our company.

Great, I appreciate that. There's a lot to discuss here, Nate. I want to ensure I fully understand and set appropriate expectations. If Brett is available, it might also be helpful to include him. Regarding the gross margin line, looking ahead, I assume these are currently high-margin licensing agreements on paper, but I haven't seen this reflected in your income statement with the tokenization. This is something we need to look at in the future. Can you help us understand what to expect on the gross margin line, considering these revenues appear to be significant, especially compared to historical figures?

Yes, I’ll let Brett answer that. What I can say is that we put in a lot of effort into data refinement, and on a good day, you might achieve significant improvements. We aim to avoid getting our customers tied into large capital expenditure contracts that involve slow board-level decisions. Instead, we adopt a cost-effective method. We prefer to refine data at our customers' locations and provide them with a data refinery, effectively allowing them to manage their data like a vending machine. Our goal is to enable buying and selling data through our Datavault on the exchange. Our SaaS operations offer solid margins, but our exchange operations have even better margins, potentially reaching the upper 80s. It's a part of the Refinery Vault exchange model. As you navigate through this, you’ll notice varying margin levels in the business. Additionally, our Acoustic division focuses on the traditional analysis of cost of goods versus product pricing. With that said, I’ll hand it over to you, Brett.

Yes. Jack, if you consider what Nate mentioned, when we look at the businesses we've acquired or are acquiring, including CSI, API, and eventually NYIAX, we believe there is an opportunity to achieve $35 million to $50 million next year. This is expected to yield more traditional margins in the range of 35% to 45%. However, if we examine the announced deals, they all include a licensing component. Therefore, I anticipate that the remaining revenue will be more heavily weighted towards the $60 million range. When we combine it all, the overall margin across the company should be around 55% to 60%.

Those are excellent margins. Can I get an update on the balance sheet? The third quarter doesn't fully reflect the situation. It sounds like there's a significant Bitcoin investment coming in from Scilex, and there have been several recent acquisitions that closed after the quarter. Considering the debt and fiat cash, could we get a rough idea of our cash position and the status of the investment from Scilex?

From Scilex? Yes, Nate, do you want me to answer this?

Yes, yes please.

Let's discuss the investment from Scilex, which amounts to $150 million. We received the aid at the end of the quarter, and this investment is secured and documented. The only requirement left is the shareholder vote on November 24 during the Annual Shareholder Meeting. We expect to have quorum, and we have prior voting agreements from the Scilex deal that should yield over 40 million affirmative votes. Therefore, we are very confident that the majority of votes will approve the authorized increase, allowing us to finalize the $150 million on November 24 or 25. Regarding the balance sheet, this deal has triggered a few changes. By the end of the year, we anticipate having more than $130 million in liquid assets, possibly around $125 million due to the API purchase. Additionally, the convertible debt from Q3 has been settled and is now off our balance sheet. Currently, the only remaining debt relates to the strategic acquisitions of CSI and Datavault Holdings, now EOS Technologies. Overall, we believe our balance sheet will appear quite strong as we finalize our report at the end of the year.

That's very helpful. Just one more follow-up to that. With the Bitcoin investment, assuming the shareholder vote is approved and you now have $150 worth of Bitcoin, how much of that will remain in Bitcoin, and how much will be used to fund other initiatives?

I believe it's crucial for investors to understand that when we signed the financing deal for $150 million, there are no treasury restrictions associated with it. From management's perspective, that $150 million is essentially equivalent to cash, although it may have slightly more volatility. However, we consider it as cash, which means we don't feel any immediate pressure to raise funds for the company over the next several years, allowing us to fundamentally transform our platform.

Yes. So for all effective purposes, it's both working capital or it's an investment. It's kind of whatever you need it to be when it's in the door.

Exactly.

Our next question today is coming from Peter Ruggieri from a private investor.

I'm going to share a bit about my background. I initially got involved as an investor in Sorrento, which owns Scilex, and Scilex owns Semnur. They are connected to Celularity, and I understand that Semnur or Scilex has invested $150 million into Datavault, which is new to me. I have many questions because with the involvement of IPMC and Robert Hariri from Celularity in precision medicine on a global scale, you're managing a comprehensive platform with advancing medicine through AI. It's a significant development. I'm also quite impressed by the revenue guidance and would like to know what the current revenue contract backlog is.

It's significant. It's one of the toughest challenges to navigate, especially internationally, as we prepare the company for that. Our Philadelphia headquarters will focus on legal, governance, and various other aspects. These exchanges have complex governance structures, and we adhere to a governance-first model that has proven effective for us. We aim to be the iTunes of this space rather than the Napsters. Regarding your question about the biotech sector and Scilex's investment or interest in us, Scilex aligns perfectly with our strategy. We've previously announced our interest in developing technology around digital twinning and digital twins as a marketplace. This involves transforming data into experiences, holograms, and models, enabling management teams to better grasp the challenges they face through experiential insights. This concept is central to the Datavault, which encompasses experiences that include sustainable valuation and scoring. In the biotech field, our collaboration with Brookhaven National Laboratory is noteworthy. Scilex has observed our progress there and has reviewed our cooperative research agreements currently under consideration. We are privileged to work in an environment rich with supercomputers and trustworthy partners. We've developed a system leveraging insights from federal laboratories and various collaborators in the U.S. and abroad, such as BAE, General Dynamics, Raytheon, and Boeing. This collaboration facilitates global technological advancement across multiple sectors, particularly in biotech, which is robustly funded. Scilex leads in this area, with exceptional individuals like Dr. Henry Ji and Stephen Ma, who has been a mentor to me. Their expertise in biotech science and technologies enriches our investment, allowing us to build a strong platform. We envision ourselves as a platform of platforms, creating multiple exchanges, including a dedicated biotech exchange that will be very special. Regarding your questions about size and the increasing popularity of this space leading to a raised revenue guidance, it's only partially attributed to the real-world assets in biotech. The biotech sector holds tremendous potential, with applications and utility spanning all medical disciplines, healthcare, oncology, and more. This space is not just a market; it's the core of the healthcare industry. Everyone will be affected by it at some point, and many are already spending significant amounts annually to manage their health. The compound nature of healthcare expenses reveals an international crisis that requires technology to tackle. We are proud to contribute to solutions like the creation of digital twins, which can greatly assist healthcare management. Visualizing one's digital twin can have a profound impact, similar to how management interacts with their data. Healthcare is exceptionally well-funded yet faces crises, making it a uniquely significant sector. We are pleased to be part of this solution.

Our next question is from Tyrell Pruitt, a private investor. We have come to the end of our question-and-answer session. This call contains forward-looking statements that reflect management's current judgment, including our expectations for financial performance in fiscal years 2025 and 2026. However, these statements are subject to risks and uncertainties that could lead to actual results differing significantly. Risk factors that might affect our actual results compared to our projections and forecasts are detailed in our periodic filings with the SEC. This concludes today's teleconference and webcast. We appreciate your participation today.