Good day, and welcome to the iAccess Alpha Virtual Best Ideas Fall Investment Conference 2026. Our next presenting company is Xtract One Technologies. If you would like to ask a question during the webcast, you may do so at any point during the presentation by clicking the "Ask Question" button on the left side of your screen. Type your question into the box and click send. I'd now like to turn the floor over to today's host, Peter Evans, Chief Executive Officer, Xtract One Technologies. Please go ahead. Good morning, everyone. It's Peter Evans here from Xtract One. Thank you so much for everyone for joining us today. We're going to talk to you a little bit about everything that we do here at Xtract One and how we think we're delivering differentiated value in an environment that's a little concerning for the world today. The headline is we build a purpose-built weapons detection solution, which is delivering great value to our customers and great outcomes for them as they continue to think about creating safer environments in their schools, their workplaces, their places of entertainment, such as arenas and stadiums, and other places. We'll be taking questions towards the end, and we'll run through the presentation fairly quickly here. As always, we have our normal disclaimer about our business and what we'll see in this presentation today. I invite everyone to understand the normal kind of disclaimers that are provided. Fundamentally, what do we do? Xtract One is disrupting the physical security marketplace. Everyone is very familiar with the concerns about weapons getting into places where we meet, where we're educated, where we're entertained, where we conduct business. The challenge with that is that as these places become more and more unsafe, the historical approach to solving these problems in the industry was through more guns or walk-through metal detectors, which are not reflective of what we see in industries today and the market's requirements for a more embracing and a more seamless kind of frictionless entry experience. In the same way that digital technologies have disrupted the way we do banking, the way we do retail and purchasing everything online, we're disrupting the physical security industry with digital technologies that are addressing this problem. A little bit of background on what's happening in the market and the market trends, and we'll talk a little bit about why us, why Xtract One, and what our differentiated value is. I think everyone on this call would agree that the weapons issues in society are proliferating. There isn't a day that goes by when we don't hear about yet another tragedy of a shooting in a school or some other venue. This is happening around the world, and it's not limited to just North America. We're also seeing a rise in societal unrest with more and more expectations as a society, but more and more challenges with things like drug use, homelessness, and mental illness that are causing society to be a little more concerned about their safety in these public environments. The declining labor force, particularly in security areas, is putting more pressure on the ability for organizations to use some of the traditional and historical methods for protecting their environments. No longer can you get access to the number of FTEs that you might need in order to provide security guards for your environment. Like many other industries, we're seeing the rise of pragmatic applications of AI to provide scalability and indeed proactive approaches to dealing with security issues, and particularly in the space that we play. Let me give a little bit of a stare and compare about historically what one might experience versus what we're delivering to the world and the promise and the value that we bring to the marketplace as Xtract One. Historically, we're all familiar with walk-through metal detectors. This is an obsolete technology that was delivered about 50 years ago into the marketplace at a time when the average person walked around with a leather wallet, perhaps a key to their front door. These walk-through metal detectors now, for example, an NFL game, as we're seeing here on the left, are not meeting the expectation of society to get into environments fast and to enjoy their favorite NFL team play. In fact, these large crowds waiting to push and shove their way through those metal detectors in themselves are a security risk. We've delivered a purpose-built weapon screening solution where the average person could just walk right in with a complete frictionless experience with their personal items, their cell phone, their watch, their wallet, their keys, and indeed their backpack with their laptop in such a manner that it's transparent to them that they've actually been screened Yet if that individual does have a weapon, they will be alerted, and the system will alert to the security guards that indeed a weapon has passed through, whether that's a firearm, bomb-making components, or a knife. Let's talk a little bit more in detail about what does that mean to you as an investor, and specifically, what does that mean as outcomes to our customers and to our business so far. Investors typically choose Xtract One because, first off, we are applying that digital disruption approach to an industry that heretofore has not changed the way that it has delivered security and safer environments for dozens and dozens of years. As a company, as we continue to engage in the marketplace, you'll see in our financials, we've built a very strong order backlog, which is a nice predictor of future success for the business and continuing future success for the business. With technology that's been independently verified by organizations like the TSA, like the Federal Aviation Administration, like the U.S. Marshals Service, who are responsible for perimeter security, and in places like England by the NPSA, which is the government-funded organization that tests and verifies certain technologies to be effective at their intended use. We play in a marketplace that's about CAD 135 billion and is still in its early stages of early adoption with very small numbers of percent of penetration. All of this has delivered a business model that we're very pleased with and a solution that we're very pleased with that's delivering predictable recurring revenues and a lot of order backlog to our customers. Most importantly to us, though, is our customers' customers who are seeing the guest experience. I personally was at an event a few weeks ago with a very large football club, and it was the customers who had previously waited in line for 45 minutes- 60 minutes to get in, who are stopping us and insisting to their favorite team that they choose us and use us permanently based on their experience of just walking right in with under two minutes. Let's dig into the details just a little bit more here. Historically, what we see is that security to enter into a facility married with guest experience has created a friction point. As we've increased more and more security in society to create more and more safer environments, as we see more and more of that societal unrest, we're seeing that that's created a lot of experience with very slow entry and very poor guest experiences. These two situations are at loggerheads with each other as we try and provide or apply traditional security approaches to a new problem and a new demand from society. What does that mean? We're taking digital technologies to disrupt the industry and play into a very large marketplace. The marketplace that we're playing into, and we originally started down this journey about five years ago. We focused on arenas and stadiums primarily, with the idea being that they had a great ROI for getting their fans in faster and saving on the cost of excessive security processes that no longer met the customer's demand. While we had great success in that initial market target that we were going after with arenas and stadiums, we found the market wasn't willing to wait for us, and we were drawn very quickly into manufacturing. We were drawn very quickly into healthcare, into schools, into distribution centers, into hospitals, where they were also experiencing the threat from weapons. 76% of workplace violence with a weapon occurs in a healthcare environment, and those are markets that pulled us very quickly into a CAD 40 billion marketplace. As we start to see some of the same issues with weapons concerns internationally, we're now starting to find demand in Europe, in the U.K., in Japan, in Singapore and Australia, and that's drawing us faster into CAD 135 billion marketplace, where we have unique, competitive, differentiated value to deliver capabilities that are unique to those marketplaces. While firearms are a major concern in North America, outside of North America, and indeed in North America in places like hospitals or arenas, knives are the predominant issue. For each market segment we play into, there is a predominant requirement. Don't alert on the laptops in schools, don't alert on steel-toe boots in manufacturing environments, and simple things like that that can make or break the success of a product. In a case with what we've done with our innovation, we've been able to deliver on those must-have features for each of those organizations so that their operations continue to operate in the way they have previously without having to be jury-rigged around the shortcomings of a technology solution. Our solutions fit right into the business operations, and they do so in a manner that they can address the must-have feature sets for each new unique marketplace requirement. What has this resulted in? We're very proud over the last five years that those customers who look for the best in security, not just looking for a check mark in a box, but actually require security to protect their environments. Places like Madison Square Garden or the British Museum in the U.K., large auto manufacturing organizations or healthcare organizations have chosen Xtract One solutions to deal with their unique security needs while providing a great guest experience, whether that is for their students, their patrons, or their patients. We do this through two key products, each one purpose-built to solve different problems. Those products are the SmartGateway, as shown here on the left, purpose-built for sports stadiums, arenas, healthcare environments, and other environments, which has been certified by organizations like the Department of Homeland Security through the SAFETY Act designation. We've also introduced a new product called the Xtract One Gateway, which has created further tailwinds and momentum for our business beyond the aggressive growth that we were already seeing with our SmartGateway product over the last five years. The Xtract One Gateway works extremely well in environments where the average person is walking with a backpack, a laptop, a charger, a metal water bottle. Schools, convention centers, and office buildings. As an example, in North America, there's 130,000 K-12 schools, many of which we're starting to see legislation come to the forefront to protect children in those school environments. I think everyone would recognize there's a real challenge with guns in schools right now. With the Xtract One Gateway, students can simply walk right into their classroom with their whole backpack full of paraphernalia and simply go enjoy a welcoming education environment. Versus historical alternatives, which would have put in a people screening system like a walk-through metal detector and X-ray machines, turning those environments into essentially a TSA checkpoint, which I don't think any parent would want. I'm going to move forward a little bit and talk a bit about what does this mean in certain applications and environments. As an example, when we think about our SmartGateway product, there's a compelling ROI for our customers. Specifically in an arena, like an environment like a Madison Square Garden, one of our customers, they might have historically used 40 walk-through metal detectors and 80 security staff to facilitate ingress of patrons into the venue. That would be the traditional approach with the average walk-through metal detector passing six people through it a minute. With an Xtract One SmartGateway, what we're seeing now is up to 75 people per minute flowing through our system transparently as if nothing was there. In side-by-side testing, oftentimes catching more weapons than prior solutions that they could've been using. This allows the venue to drop the number of systems, perhaps moving from 40 to a dozen of our systems, significantly reducing their security staff or reallocating those staff to places where they don't have enough staff. The average guest, instead of waiting in line for 45 minutes or 60 minutes, as one professional sports team told us, is now inside the building in three minutes, which in some cases is actually causing more people to buy merchandise and food and beverage. So a great revenue generation opportunity, an opportunity to reduce OpEx costs, and ultimately the biggest outcome is a much better guest experience of people just simply walking right into a venue instead of standing in line for 45 minutes or 60 minutes. We see similar sorts of compelling ROIs, whether we're talking about auto manufacturing companies that might have taken 20 seconds per shift worker for 10,000 shift workers to get into a building, where now it takes two. That it's improved productivity such that that auto manufacturing company is now driving our solutions down their supply chain so they can keep up on the improved productivity. This applies to almost every vertical segment that we play in, and we're very pleased we're able to deliver unique values that address each segment's needs. What has this meant for us as a company? Well, Karen, our CFO, who's also on the line with me today, and I joined the company about five years ago, and in that first year, we did about CAD 200,000 of paid pilots with customers for our Gateway solutions. Our last fiscal quarter that we announced, our Q3, which we announced several months ago, we did about CAD 10 million of business. So we've seen aggressive top-line growth in terms of bookings and revenues while continuing to build an order backlog of about CAD 45 million, which are contracts that are signed and either systems yet to be installed because the customers are delivering in a phased manner, or they've chosen a subscription model. So we'll recognize that revenue over time as that subscription works its way through its term. We're also very pleased that we've been able to get the business in that period of time to a cash flow breakeven position, and we expect that to be the new norm for us and our new standard as we go forward and continue to grow the business. We're also very pleased that we continue to improve upon our gross margins, adding a percent point or two every quarter as we go forward. We expect that with the experience we've had with the SmartGateway, we should continue to be able to add more gross margin value to our shareholders in the company. Moving forward just a little bit, I talked about a couple of things that were critical to the company previously. The first being, we take security seriously, and our customers tend to be those who take security seriously. Fortune 500 companies who have a Chief Security Officer whose mandate is to protect the environment. As such, they demand the best of our technology, and therefore we demand that of ourselves also. Accordingly, we've taken our technologies to organizations like the Transportation Security Administration, like the Federal Aviation Administration, like the NPSA in the U.K., that we had them rigorously exercise our equipment to validate that it indeed does meet the requirements of these customers and their high security needs, while simultaneously providing that fast, frictionless, transparent entry experience for the patients, the students, or the employees. Moving forward, our vision for the future is very simple. We think about the end-to-end journey of an individual as they walk into a building, whether that's to their school or to their favorite hockey team or to their local hospital. While we're building out this platform to fundamentally focus on weapon screening upon entry, the platform itself has demonstrated extensibility to deal with more and more of a customer's problems. As customers think about things like authentication and credentialization of an individual moving into a building or integrating ticketing so that you can walk from the sidewalk to your seat without having to stand in one line for ticketing, another line for bag check, and another line for weapon screening. Our vision here is to continue to add more and more value to our customers based on what they see as their highest priority needs and the places where they see the most value as software that will continue to stack on top of our existing incumbency and create recurring revenues, high-margin recurring revenues for ourselves and our shareholders. Ultimately, our go-to-market for the business falls into a couple of categories. We have many customers who are on a subscription basis with us because that lines up with their OpEx spend and how they run their business. We have a number of customers who will also purchase on an upfront basis. For example, schools. In this manner, we're somewhat indifferent because both contribute to our business in a very healthy manner, and both could add some recurring revenue value that continues to grow and add value to our customers, and essentially at one point will cover our OpEx as a business. I'd like to stop and pause at this point and just kind of go back to one of the original charts and talk about why do people invest in Xtract One, and then open up for Q&A. Again, reiterating, we're solving a problem that has significant tailwinds behind it. We're seeing the tailwinds of more and more weapons threat in society, and that's not going away, and it's becoming a global problem. We're seeing the tailwinds of more and more legislative organizations starting to mandate weapon screening in different environments. In the U.K., Martyn's Law has been recently passed that mandates every organization with over 800 people in attendance will now screen for weapons, and there's significant penalties if they don't. In California, they've passed a law that by next year, all healthcare organizations will have to screen for weapons on the way in the door. We're seeing similar legislation starting to work its way through half a dozen different states, or other states who are looking at mandating that schools will screen for weapons for all the students. We believe that this will become a norm in society, just in the same way that sprinkler systems, in the same way that smoke detectors became a standard in the business, and we see the same thing happening for weapon screening solutions. As a business, again, we've shown that we can create predictable recurring revenue, a strong order backlog, and we've shown that we've got an operational model that scales in a single digit or teens digit while we're growing top line much more faster, more aggressively. We've created a very leverageable operational model that allows for significant growth without having to invest in our OpEx model in the same manner. This allows us to continue to grow margins and drive more profitability to the bottom line. Most importantly for all of us is that we're in a marketplace that is very large, very growing, and has not been penetrated with technology that has a very nice moat around it, which is very difficult to replicate. Our Xtract One Gateway platform is getting great uptake in the schools right now because the alternative is a TSA-like checkpoint, and we're very pleased that we're playing into that market alone, let alone the other key segments that we play into. Because the school market in the U.S. by itself is a CAD 25 billion market where we have a unique technology that here today has been unable to be copied by any competitors. At this point, we're about 20 minutes into the presentation. I'd like to stop for a moment and see what kind of questions that we have on the line. I'm happy to jump in. Hello, everyone. Please, Karen. Good afternoon. I'm Karen Hersh, I'm the Chief Financial Officer at Xtract One, and it looks like we have a couple of questions here. Particularly the first one I'm happy to answer. The question is: What percentage of revenue in 2026 is from subscription revenue? What percentage is from hardware revenue? I think what the person is asking is more the subscription versus our upfront arrangement. As a reminder to everyone, the subscription revenue that we have, that we offer our customers means that that revenue would be recognized over the life of the term of the contract, whereas for an upfront deal, that person or the customer would own the actual equipment, and we would recognize at least 2/3 of that upfront. The remaining 1/3 of the maintenance piece to be recognized over time. I think that this person asking the question is rightly saying how fast will the revenue be recognized once we have bookings? As Peter mentioned, we're very happy to have both. The subscription provides some continuity and some predictability to our revenue. On the other hand, an upfront arrangement gives us quick revenue pass-through, which is also very nice for us. In terms of what that percentage split is, by this person's question, it varies very much from quarter-to-quarter. For example, in one quarter, we had 20% upfront versus 80% subscription, and the next quarter, we had completely the opposite. Why does that happen? That's mostly related to who the customers are in the booking. Peter mentioned that education very much likes an upfront arrangement, whereas live entertainment and arenas very much enjoy the subscription model. So it's going to change from quarter-to-quarter. But overall, we are finding more of a 60/40 split with about 60% of our customers preferring the upfront arrangement and the remaining 40% using that subscription revenue. There's another good question here, Karen, about what are some milestones investors should be looking for company growth and profitability. I have a few thoughts. Why don't you start, and I'll add to your thoughts. Well, I think that slide that you had, Peter, on slide 13 that showed our bookings, the backlog and our revenue is really the best indicators of how we're growing, how we're achieving key milestones for us. Certainly as the Chief Financial Officer, those are the obvious ones that I look for. How fast are we converting our backlog? What is our book-to-bill ratio? How are we tracking in terms of new bookings? As a company that has very large customers, we do tend to have a little bit of variability from quarter-to-quarter, and I would say that you'd have to look at the trending is really the best way to look at our company. The other piece that I would say is really the expansion of the total addressable market. We started in just stadiums and arenas, and we've moved to a variety of not just market verticals, but also to new geographies. When you see press releases that are for the Metro Toronto Convention Centre, for example, where we're moving into the convention center space is very key for us. Or when you see something with the British Museum where we're moving into European market. These are really great signs for us that we're achieving some important milestones as a company. But I'll put it back to you. What are your thoughts? Yeah, I would agree, Karen, and at the end of the day, for me, bookings is the fuel that drives the engine for our company. We've built the operational scale such that we can convert bookings to revenues as fast as the customers can consume that. The only thing that holds back is if the customer is not ready. They're building a new building, or they want to deploy in phases. Bookings is a great early indicator of future business success. On top of that then, the things that you mentioned in chart 13 around growth of gross margins, and what we don't report on, but I think is still viable, is our churn ratio. We have a very happy customer group. We don't like to call them customers, we call them advocates, and many of those have become our strongest source of new business as they become great advocates for us to other customers. As a result, our churn is 1/3 of what the industry standard is, and we're seeing fantastic repeat business from both subscription and upfront customers. We have another question here, Karen, which I'll start with, which is the industry getting more competitive, or is the market just so large it doesn't matter? I think that's a very interesting question, and there's sort of two or three key thoughts in response. The marketplace is very, very large, and I think the penetration is still 2% or 3% overall, if that. There is a huge upside opportunity for the marketplace, and we have established ourselves as a company with great references such as the British Museum or the Metro Toronto Convention Centre or Madison Square Garden or similar organizations, or very large auto manufacturing companies. The brand recognition and the referenceability is there to go serve that market as it matures. Is the market CAD 135 billion today? No. There is a degree of market that is the early adopters, and they have buying intent right now, and there are those who are still in the exploring stage. But we are moving towards that mass part of the market and the technology adoption curve fairly quickly. We really do not see the competition changing. There is a couple of key players, and they all have their space, and they all do well in their space. There are some organizations who are the low-cost providers. There are others who are probably better-known brand names, but not known for innovation. Xtract One's game here is to constantly be the innovative leader who is solving the most complex problems for the customers in their market segments and delivering on those must-have features. As such, that is why we say that we win a large majority of, for example, Fortune 500 companies who take security seriously and may have additional capabilities not served by a typical standardized product for all marketplaces. So the market is still very early. It is still very large. Interesting enough, we are not seeing a lot of new competition entering into it, and we are seeing each competitor establish their position and become well-known for their position. Where we established our position, we are very well-known for what we do, and we have seen that turn into great referenceability for future growth of the business. Excellent. There is another question here, Karen. I think we have time. Yeah. Sure. I think we have time for just maybe one more. What is your capacity? Do you struggle to meet demand? That is a great question. I can address it very quickly. In our Xtract One Gateway product, which was launched a little bit over a year ago, we had a forecast based on market expectations and our expectations for how many units of that we would deliver in the first year. We were very pleased that the market demand far outstripped what we had originally forecast, and as such, we got very focused on scaling out our manufacturing capacity for that solution in the fall of last year. We have more than enough capacity to deal with the demand, even if that demand doubles or triples. That is really not of any concern right now. Fantastic. I think with that, Karen, we have addressed all the questions that are on the Q&A session, and we have come to the end of the 30-minute period. I want to thank everyone for taking their time to listen in to us today. We can be found at xtractone.com, X-T-R-A-C-T-O-N-E.com. We are traded publicly on the Toronto Stock Exchange and over-the-counter in the U.S. We are very pleased to have everyone join us today, spend their time hearing our story. For more information, reach out to us through our website. We would be very happy to take your calls.