Q2 2023 Inpixon Earnings Call

Dozens of vertical takeoff and landing aircraft concepts for passengers have been tested in flight throughout the last century.

Many if not most of these concepts are actually rooted in military designs and applications for.

For instance, the Marine Corps' V 22, Osprey tilt rotor is an aircraft. Many of you may have heard of <unk>.

<unk> engine thruster aircrafts, such as the British carrier or the U S. F 35 fighter Jets have been around for a number of years.

And the Augusta Westland six or nine tilt rotor a very expensive VTOL aircrafts is reporting that after years of design and testing its certification and entry into service will occur sometime over the next year.

Each of these aircrafts solves different flight issues and serve diverse mission objectives. However, we believe they all have limitations and inefficiencies with a common theme of being very expensive designs, which in turn require costly manufacturing processes.

And certifications.

None of these historical solutions or configurations have met the challenge of developing a commercial VTOL aircrafts that has high forward speed relatively easy to fly very safe cost effective and with an empty weight low enough and a maximum gross weight high enough to allow for it.

Optimized range to payload profile.

While the concept of Vito has been around for decades today much of the conversation around the sector is largely dominated by companies in the E or what we call electric VTOL sector.

As evidence of the significant growth of the sector. The vertical flight society, the worlds, leading nonprofit organization working to advanced vertical flight mainly.

<unk> maintains a directory of you'd be told designs, which now number in the hundreds.

Some of the larger E mutual companies in this E aviation sector took full advantage of the robust spot market in 2021 to advance the development of their aircraft by entering the public markets.

Allowing them to raise capital from a new source.

Five prominent E veto companies completed spec merger transactions during that year with a combined valuation at the time of the merger in excess of $10 billion. According to articles published on NASDAQ Dot com.

The companies in the <unk> sector are currently at various stages of completing the full FAA review process involving certifications for design production airworthiness and operation.

None of the Ito companies have achieved the required certifications to date.

So as I noted earlier, some are indicating that they expect some of those certifications over the next couple of years.

While we believe these E. VTOL aircrafts will eventually have significant utility there are noteworthy differences between them and us as well as challenges they still need to overcome.

The most significant differentiators range and speed.

The <unk> market is essentially comprised of air taxis that fly a short distance generally under 100 miles compared to our 700 mile range there.

There are challenges include an undefined regulatory environment, the nascent infrastructures such as charging stations Verder ports, Atlanta sites and final certifications involving new battery under hydrogen technologies.

The limitations are largely imposed by the current technical readiness of battery or hydrogen power sources limiting range air speed altitude and payload taken.

Taking off and landing vertically consumes a lot of energy and today's current technology simply limits a number of key aircraft performance capabilities.

And while the Tri band 600 can certainly compete with any of these leading E. VTOL aircrafts. It has been designed for a much broader use case.

So much so that we have begun to refer to the aircraft in a more hybrid sets.

Our vertical lift crossover airplane or B L. C. A as we like to call it.

<unk> is much more of a business aircraft versus the air taxis that dominate the E. VTOL space. The dry van is targeted for regional inner city capability, such as Manhattan, Hello courts to Washington D C versus.

Versus the more local short range utility of the EV tools.

The Tryfan makes a point to point regional air travel possible over distances of 700 miles that are speeds of nearly 350 miles per hour accommodating up to six people.

And most importantly, using existing infrastructure with no additional flight regulations required.

The aircraft is ushering in a new utility for VTOL true regional air travel or medevac missions.

Taking off and landing like a helicopter, while maintaining the comfort and speed of our business airplanes.

For those of you that have not had a chance yet to take a look the following video is a computer simulations with <unk> 600.

Life is full of choices do I take the airplane with its high speed and long range or the helicopter with its ability if it takes off and lands anywhere Fedex see I would say take both.

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As reflected in the video the crossover Tryfan elegantly blends the best of business aircraft with a convenience and efficiency of helicopters.

Over 700 miles of range at speeds of 350 miles per hour reduced high because of the point to point capability, no new infrastructure or regulation required.

And given the inherent limitations of clean energy power. The Tri band has been intentionally designed to incorporate proven aircraft systems and assemblies like the two turboshaft engines, Dr fans for hover at cruise and fly by wire.

Or computer regulated flight controls.

No new manufacturing systems are required the Tri band is essentially proven parts systems and sub assemblies and a newly conceived configuration and design.

The <unk> versatility, one airplane able to perform the role of to a fixed wing aircraft and helicopter truly expands and enhances our addressable market.

<unk> business aircraft sector, such as the King Air turboprops airplane from Beechcraft or airplanes from Cessna.

<unk> and even some light jets are clear areas of the market in which we will compete.

The emerging regional air mobility market, such as the Leonardo AWS six or nine tilt rotor that I referred to earlier by the way Leonardo is just the new name for a goose. The Westland is another prime target for us as we seek to compete on both price and performance basis.

Listing the helicopter market is also a logical market for us in situations, where existing solutions are pushing the envelope of the range and comfort of our helicopters utility.

And as I noted earlier the E veto urban air mobility sector is one in which we can also clearly compete although we are certainly subject to the same issues of immature infrastructure and regulatory environment that will play the pure play E beats all competitors.

The strategy is to bring a solution to the market to provide a better alternative for existing regional carriers corporations private owners medical transport et cetera. We also expect to introduce our aircraft into situations and circumstances that have never before envisioned air travel as an option.

In total the existing and emerging addressable markets are currently estimated to be in excess of a trillion dollars.

As I previously mentioned one of the fundamental benefits of the <unk> is that it will require no new infrastructure for placement into service.

The aircraft will be able to operate from existing helipads and airports as well as firm ground such as parking lots open fields erodes wherever it safe and legal.

In addition to the speed and range, we've already touched on the aircraft as altitude capabilities of up to 25000 feet above most weather in a pressurized cabin and will be certified ifr instrument flight rules for flight and inclement weather as well as being safe under known icing conditions.

The mat reflected here has a couple of examples of dry vans range capability centered in Los Angeles, and New York and as you can see the 700 mile radius provides for very practical and efficient regional trial.

When we dial in our map to the greater New York area and contemplate the metrics and what we what will be the mission objectives of the intra city EV Tau competitors you can see here the clear performance benefits of the <unk> 600 the.

To highlight just one all EV tools will require the development of an entirely new and widespread battery charging network to allow them to have useful route structure.

However, our tri band can deploy rapidly worldwide using existing infrastructure.

Because of the Tri pads designed primarily for where speed and range. We will compete initially in the existing and emerging business aircraft and medevac markets and look to adopt full electric capability as a battery and our hydrogen technologies mature and evolve.

As we take a different vantage point and zoom out a bit to a broader aircraft competitive set that includes helicopters in business airplanes.

And look at some of the same characteristics and attributes the Tri band continues to showcase very well.

From its range speed and payload to proven propulsion and other mechanical systems to the ability to place the aircraft into service without having to build new technologies or infrastructure. We believe the tryfan will offer the best of a helicopter combined with the best of our fixed wing business airplanes when it enters service.

With that let me turn it over to Mike.

Thanks, Scott what makes the try five 600 possible today this technology either didn't exist or wasn't mature previously.

Today, we use advanced computational fluid dynamics for the aerodynamic design after optimize the vehicle for hover transition and crews with the aid of a rear fan we have vertical lift capability. The rear fan doors will open during vertical flight operations and close for the cruise portion.

Providing for a very efficient play.

We plan to initially certify with two proven turboshaft engines capable running on 100% sustainable aviation fuel.

Use of which will result in a lifecycle C O two emissions reduction of about 80%.

The aircraft will incorporate fly by wire controls to aid the pilot during takeoff landing and transitioned to conventional flight.

While the pilot will initiate a maneuver through control stick the fly by wire system will ensure continued safe and stable operation for the passengers.

Try fab 600 is designed to fly above the weather with comfortable pressurized cabin similar to most business aircraft today.

For takeoff and landing we will have excellent pilot visibility through the use of optimized windows camera systems and lighting.

At <unk>, we are fully committed to sustainability.

Mike short range E VTOL aircrafts for our regional mission requirements of 700 miles range and 350 miles per hour speed battery and hybrid technology just doesn't yet exist.

Therefore, we're taking a phased approach a practical approach first certifying with turboshaft engines and later introducing a hybrid configuration as the technology regulatory guidance.

Infrastructure mature.

This considerably Derisked the program.

Okay.

The trial and 600 VLCC is a beautiful airplane its length and wingspan are both less than 50 feet to ensure access to standard yearly pads.

Is it a takeoff weight of about 10500 pounds with six documents.

It's designed to take off vertically, but it has the added flexibility to rotate the front fans to intermediate positions or facing forward to use any evaluable runway to increase the payload and the range.

We have three main interior configurations, the standard business in terror with club seating for four plus an additional passenger upfront.

We have an air taxi variant that will accommodate up to six passengers with bags and also an air medical configuration.

Between 2017 and 2020.

We've developed a small version of the airplane.

65% to be exact that.

We used to validate hover capability of the vehicle.

This battery powered demonstrator validated the power required the weight and balance of the aircraft and as you can see in the lower right hand picture, we did execute a series of successful hovers.

Initial hoverflies are tethered at this stage of the program, which is why you see the aircrafts only a few inches off the ground in this photograph.

Unfortunately further testing of this aircraft was significantly hampered due to the Covid pandemic, we have since been focusing on development of the full scale pilot version.

The Tri band as a versatile aircraft that we project will reduce time cost and emissions compared to today's choices.

For example, compared to a helicopter out a 200 mile trip say Wall Street Halo Port to Boston Flying.

Flying at twice the speed, we can arrive in half the time, hence about half the cost and have the emissions.

This then allows the tri fan to be available to conduct twice as many flights hence twice the revenue potential.

Okay.

<unk> also saves the aircraft's owner money over a long period. The five year cost of ownership is in line with today's business aircraft, but of course, they need a runway.

So the tri fans vertical takeoff ability affords time savings.

Compared to helicopters are cost of ownership as you can see is quite a bit less.

So what does all this mean to <unk> value proposition.

We estimate the total addressable market to be over one trillion.

Today, we have over 700 conditional preorders, which will yield over $7 billion in gross revenue based on our current list price of $10 million per aircraft, assuming the company is able to execute on the development program with the track them secure FAA certification and deliver these aircrafts.

As detailed in this presentation, we believe our projected superior range and speed and our attractive cost of ownership coupled with a measure reduce rest approach aligned with the current infrastructure and regulatory environment provide strong competitive advantages.

And independent financial advisory firm Ascertaining, the underwriters the enterprise values of STI to be within the range of $252 million and $343 million.

And with that I'll turn it back to you in the Dear Thank you.

Alright, Thanks, Michael.

So you'll note on the left of this slide we've set up a merger information portal, where you can keep up to date on the latest merger related news. So I encourage you to look at that bookmark and bookmark that site for future access.

Alright Alexandra would you please lead us through the Q&A discussion.

Thanks Nadir.

Like last quarter, and our conference call announcement press release, we suggested interested parties submit their questions in advance.

I'd like to address those questions for you know.

Some questions were duplicative, so we did our best to reconcile those where possible.

Any further questions. After the call. Please feel free to follow up with Investor Relations and we'll be sure to respond as quickly as possible.

Let's start with the transaction related questions or not.

Our first question why is infection pursuing this market.

Alright, well, so as I discussed earlier in the presentation.

We believe that the value of infection is not properly reflected in our current share price or market cap and so as a result, we explored and evaluated strategic alternatives with the goal of really unlocking value for shareholders. This strategies resulted in our CX App transaction, which we completed in March and now we've got this definitive merger agreements with SCR.

So we believe we found the right opportunity with X July .

For variety of reasons, starting with the competitive advantage of their unique aircrafts their go to market strategy the market size and the industry that they're in we believe is the future of aviation.

We believe their existing preorders.

Validate the potential they have for continuing to grow shareholder value in the future. So because of all these factors, we see the potential opportunity for significant upside with this transaction for our shareholders.

Thank you. Our next question what will be the ratio of stock ownership following the merger.

Yes, so we covered this in our recent press release and disclosed that we anticipate that the <unk> shareholders will own about 60% of the outstanding shares of common stock of <unk>.

Post combination company and in fixing shareholders will retain approximately 40%.

This ratio is subject to adjustment and determination of the final exchange ratio will be in accordance with the terms of the merger agreement. So we will provide further details as we move forward towards a closing, but that's where we are today.

Thank you next.

Next question well my infection shares be automatically converted into shares of the new company.

Actually so for injection shareholders nothing will change if you hold onto your current share position in pictures and fiction shares will stay the same.

Our name and our ticker symbol will be changing.

But there will be no conversion or exchanges of your shares.

Thank you and why was the shareholder meeting.

Good question. So the meeting shall remain that so it was recently germs, there's really to allow shareholders more time to respond and vote. As we do have important proposals within our proxy materials that will help us execute on our strategy now.

Now we plan to host the shareholder meeting on Friday September eight at one P M Eastern and we encourage all our investors to take this opportunity to vote.

Great. Thank you matter now lets shift system ex Ti related questions.

Scott. Our first question is why is X Jaguar in this deal.

Thanks, and great question.

And fundamentally we believe the transaction enhances our ability to execute on our business plan.

It allows us to maintain our production roadmap formalized partnerships with suppliers and really accelerate the aircraft development further allows us to expand our world class team.

And really enhance our profile as a NASDAQ listed company.

Thank you Scott next question.

Preorder pipeline of more than 700 aircrafts as substantial how.

How would you characterize these customers and their use cases.

Our customers are spread across the world and our mix of business aircraft and helicopter fleet operators individuals businesses and regional Airlines.

Because of the specific attribute of one tryfan being able to perform the role of both business aircraft and helicopter at a competitive price. We believe our customers actually see the unique value of this offers to transport customers point to point.

No forget that you can buy just one tryfan rather than both an airplane and a helicopter with all the attendant savings that that delivers.

Our contacts have told us they anticipate being able to use the tri band for business travel.

Air taxi shut in and shuttle Air medical connect.

Connecting communities communities with geographic challenges, we're lacking effector transport infrastructure and even for military applications.

And we've pointed out the tri fans unique abilities to potential customers their eyes kind of light up when they start to see the the opportunities that were previously unimaginable for various use cases.

Thank you next question could you. Please explain your sustainability path and why you are not using electric propulsion like all the EV cars aircrafts being developed.

Yes really good question.

Simply put our mission is just very different from theirs, we're targeting a longer range regional market.

The dry van is able to fly as we've set up to 700 miles helipad to have helipads.

At speeds of up to 350 miles. The missions are these missions are just not possible with the battery technology that exists today.

But we are committed to sustainability as a matter of fact, we spent about five years working on hybrid electric propulsion, both with batteries and with hydrogen.

Last year, we concluded that there are too many variables outside our control such as tech maturity.

Of these novel propulsion systems evolving regulatory guidance lack of charging infrastructure to name a few.

And we really felt that that would lead to delays and cost escalation of the project.

So we're therefore, starting with a reliable certified turboshaft engine capable of operating on 100% SaaS as Mike pointed out which significantly reduces C. O two missions, while greatly derisked the program in terms of cost and timeline.

We will transition to hybrid electric and finally to all electric propulsion. Once these technologies mature and the other factors are evolve sufficiently.

Thank you Scott and who are your main competitors.

In terms of commercial or civilian VTOL aircrafts.

That have almost similar performance to the Tryfan I'd have to say, it's the Leonardo AWS six to nine tilt rotor.

Which is projected certification sometime next year as we mentioned earlier so given publicly available information. We believe we have significant advantages in terms of both acquisition and operating costs.

We also sporadically here are a few others, but they appear to be lagging in development compared to the dry van.

And of course, the all electric short range low speed E beam tool manufacturers, we've mentioned quite extensively here on the other hand number in the hundreds.

Alright. Thank you gentlemen that does conclude the Q&A session.

Mentioned in the opening of this call you are advised to read and contemplate the information regarding forward looking statements risk factors and where to find more information about the proposed transaction.

This information has been published on the SEC website.

Definitive merger announcement press release, and this conference call update announcement press release and in this presentation.

Now I'll turn it back over to <unk> for the cloud.

Alright, Thanks Alexandra and thank you all for joining us today as always we appreciate the support of all of our shareholders and look forward to providing you with more updates as developments unfold on this exciting news.

And as I mentioned earlier, we do plan to have another call in the near future. So keep an eye out for that.

And you can also bookmark our merger information portal at <unk> Dash I N T X dash merger Dot com.

Okay. Thank you everyone and take care.