MDB Capital Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 21, 2025

There are 2 speakers on the call.

Operator

This conference call is being recorded. Before we begin the formal presentation, I'd like to remind everyone that statements made on this call and webcast may contain provisions, estimates or other information that might be considered forward looking. While these forward looking statements represent our current judgment of what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward looking statements, which reflect our opinions only as of the date of this presentation. Also, keep in mind that we are not obligating ourselves to revise or publicly release results of any revisions to these forward looking statements in light of new information or future events.

Operator

Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. So you should also review our most recent Form 10 Q for a more complete discussion of these factors and other risks, particularly under the heading Risk Factors. A press release detailing these results, which crossed the wire this morning, is available in the Investor Relations section of our company's website, mdb.com. Also, a replay of this call will be provided on mdb.com. Your host today is Chris Marlett, CEO and Founder of MDB.

Operator

Chris will present an update on the first quarter ending 03/31/2025. At this time, I'd like to turn the call over to MDB Capital Holdings chief executive officer, Chris Marlette.

Speaker 1

Thanks, Kevin. Thanks, everyone, for joining today. Well, each one of our calls, I start with sort of a a little bit of a different spin on, our business strategy, how we create value, and really just to reinforce with all of our shareholders where we're at, the way we look at things, and, and and, basically, you know, how we currently view the future. So, some of this is gonna be a little bit of a repeat, but, you know, hopefully, you'll get for the new people, you know, they'll get a better flavor for what we do. For the people that have watched a few other of these conference calls, the first first five minutes may be a bit of a repeat.

Speaker 1

So just to remind everybody, what do we do? We curate public venture capital. It's pretty simple. We're looking for asymmetrical return potential with public market liquidity. We're you know, we've we've tried to really set ourselves apart from everybody else with this whole idea of public venture capital, being a preferred alternative to traditional venture capital, and we'll get into a little bit more of that later in the presentation.

Speaker 1

Again, what do we do? We transform these big ideas into valuable public companies. That's where we create all of our value. That's where, you know, we see what we're really good at is making big ideas financeable. A lot of things that we have taken public and had a lot of success with actually weren't seen as investable assets by most people.

Speaker 1

So we actually, created that transformation that we're very proud about. Again, you gotta look through thousands of them. We've done this. We've built the team to basically look through thousands. We've talked about this before, but we've we've really got a great team that's doing a great job of curating new new big ideas.

Speaker 1

And and I would tell you that now is probably the best time in the history of us doing this for twenty some odd years or close to thirty years, actually, and that we're seeing better ideas and better valuations we've ever seen. That has a lot to do with the current environment, which is obviously not not has not been great for small companies trading in the public markets. I'll get to that in a in a bit. Again, what do we do? We have a platform to stand them up.

Speaker 1

PatentVest really helps us to guide these companies and position them properly. We have this, broker dealer that is now a clearing firm that gives us a lot of flexibility to basically, you know, take these companies public when it's very, very hard for other underwriters and other people to to do this clearing through other, you know, traditional type clearing firms. And we've got, you know, a growing community of investors that understand what we do. We think we have a very unique platform that really represents an unbelievable opportunity to extraordinary business opportunities that that, feel that the public markets is a great place for them to, to be. This is some updated data, which, you know, we we rely on Carta for data on the venture market.

Speaker 1

And and I think this this this chart's gonna, you know, sort of have a different flavor to it today than it usually has in in the sense that those venture companies that have that have that are still active, not, you know, gone public, there are literally thousands of those. And you can see just in 02/2018, there was 4,300 of them. I would say because of the boom in financing that happened post COVID, there there has to be, I don't know, thirty, forty, 50 thousand companies that have been funded by VCs that have not gone public. I mean, you can see, here that of this class, only 15 have exited via IPO since 02/2018. So over the last seven years, only 15 of them made it made it public.

Speaker 1

That means that there are, I would say, at least tens of thousands of companies that have been funded that see no exit. And right now, what we're seeing in the venture market is is really quite interesting because we're getting approached by lots of venture firms with opportunities to take things public because they're not they're not positioned to be able to continue to fund these companies. They're not new fund formation is way down, etcetera. So what's happening is, you know, nobody really wants to invest in a you know you know, be locked up in a traditional venture fund. So what I see is a huge opportunity is, you know, literally thousands and thousands of companies that could come public and probably should come public.

Speaker 1

If you take the top, you know, 5% of of of all those ones that are still alive, there's a lot of great companies there, and we're getting to see a lot of them. And I'm pretty excited about it because, you know, the valuation expectations are changing as the market's gotten worse. And I think there's this mismatch that is gonna enable, you know, them to accept the valuation and leave something on the table for public investors to participate in the future growth. So I'll talk a little bit more about that in a minute. And, of course, our track record helps.

Speaker 1

You know, we we had a call with a a VC or a a last week, and we proposed to take the their company public. And they were they were quite frankly you know, I I I expected them to walk away. We offered them a valuation that was lower than than you know, much lower than their most recent financing, and I expected them to just tell us, you know, they're not interested. And what they said was, you know, the fact that you're 17 for 17 of taking companies public, you know, gives us the certainty, and we're willing to accept this lower valuation as a result of the certainty of getting public. And, hopefully, we'll get it back, meaning their their their return you know, their the value of that company will come back to the values they funded it at previously, you know, in the public markets.

Speaker 1

So I think that our track record not only benefits us from being able to tell investors that that, you know, we're good at getting these things public and judging what we can get public, but it's now, I think, you know, reaching, you know, beyond that to either founders or VCs that say, wow. MDB really does have a model that works. And so what I'm excited about is the pent up demand for IPOs, I think, is is not only getting strong, but I think it's it's bigger than it's ever been. And what's happening is the backlog or the I would call it what's what's kept it from really being unleashed in my mind is sort of the changing market dynamics. And the changing market dynamics are really that investors don't wanna buy, I would say, green bananas anymore.

Speaker 1

They wanna buy stuff that's closer to, you know, commercial realization where they're not worried about big dilution downstream from, you know, from future financing. So they wanna see that these companies don't need to raise a lot of capital, so they need to be capital light, and they need to, look like there's gonna be a business where there could be some profitability. That's having a big impact on what we're curating as well. So this this backlog, of opportunities in my mind is getting rationalized, and I think for the first time, we're seeing, you know, we're seeing, more of a match where we can take some of these companies public that will actually be well valued in the public markets like we've never seen before. I would I would tell you that when I started in the business, wouldn't look at anything that we didn't think was gonna be profitable pretty soon.

Speaker 1

And we took, you know, companies public way before I started MDB, and they all had to have some sort of profit profile in the not too distant future. I think we're going back to those times. I think, there's a whole another presentation we could do about that, sort of the changing market dynamics, interest rates, etcetera, that I think is gonna change the sort of forty five year downtrend in interest rates that's caused the growth of private equity and and traditional venture. And I think we're gonna see, these companies come public. And if you look at the company and the reason why I think this is gonna happen is that the companies that are public, that are profitable, are trading at very big valuations.

Speaker 1

So I think that, it for me, this means, you know, this that I believe that the small IPO market's gonna be very robust and which is gonna basically see a reversal of the downtrends that we've seen for for now decades. So, I just I already kinda covered this, but the valuation mismatch is really the, in my mind, the biggest impact on micro cap IPOs. And we see that, again, leveling up right now, and our pipeline is pretty thick with companies that wanna go public that we think will do well in the public markets. So we're we're excited about it. It does mean there's a bit of of a bit of a product mix, if you will, change.

Speaker 1

We have, you know, other companies that we're looking at in public that are actually profitable, which is, you know, really a new thing to us. Again, it's not something that we've even looked at and, you know, since I was, you know, just a baby in the business, just starting out in my twenties. And so I think, it's kind of a a very unique, time, and, you know, we're we're pivoting not completely away from, you know, big, huge, you know, deep tech ideas, but we're pivoting to make sure that everything we bring public is gonna is gonna resonate in in the changing marketplace. And and, really, you know, what do we do? It's really about curating deals, the right companies that, you know, could really make a difference at the right valuation.

Speaker 1

Valuation is critical. If we can't find them and that's been, you know, a big problem, you know, in the last couple years is that expectations were so high. But now we see that, you know, we see that dynamic changing. So I'm very excited that that, you know, we're gonna find really extraordinary businesses at the right values that'll leave you know you know, that'll represent great return opportunities for investors. So we've got LOIs with three companies.

Speaker 1

One is actually a a biotech that we've exposed to a number of people in our community already. Very exciting. Again, biotech has been the worst space to be in recently, but this is a team that we've worked with before, with the formation of, prevention that, that, we sold to Sanofi for 2,900,000,000.0. So we we took it from the back of an envelope to 2,900,000,000.0, and the team, which we love, has has come back to us to do another IPO. And what's exciting about this one, it's a relatively small amount of capital to a really, really big inflection point, which is could we could we give somebody a pill that would get the pancreas to produce insulin again?

Speaker 1

We think that it's got a good shot. We think that that, if that happens, it's a monumental inflection point, much like the other the the other drug that got us bought for 2,900,000,000.0. So pretty exciting. Even though it's biotech, we're we're very excited about it. It's also we're pricing it right.

Speaker 1

It's gonna be at about a $20,000,000 pre money valuation. We've got a company that that was going to more than likely take money from private equity, and it's a it's a beverage company that is, you know, very profitable, growing at a very fast rate. And they, you they could see that an IPO made actually a lot more sense than private equity. Private equity, I think, is is going through a real transition. I think private equity is gonna be very difficult for a lot of, you know, a lot of companies have not had good experience with private equity.

Speaker 1

In in fact, the the founders of this company have have, you know, had experience with private equity before and really felt that IPO was a was a was a better alternative. I think this company will trade for a really nice valuation in the public market, one, because it's growing, two, because it's profitable, and it's something that everybody can identify with. And I think that these kind of companies have not been coming public over the last, you know, five to ten years. So I'm pretty excited about about that one. We have another, health care software company, has revenue growing, really big upside, potential, and, we're looking forward to exposing that one to you as well.

Speaker 1

Great management team. And, again, you know, these are companies that don't need much capital to get to, you know, get to very big inflection points. So what we've, you know, seen is our mission after going public, which is really scaling up what we did before. You know, everything has gone great operationally. The backdrop for what we do has been the worst environment that we've been in in the history of our firm.

Speaker 1

So, you know, the good news and the bad news. The good news is is that all the things we thought we were gonna be able to do, we've been able to do. So we've trained our analyst team. We've, you know, got unbelievable analytical capability. I can tell you right now that I would put up our our analyst team against anybody in the business.

Speaker 1

The clearing firm's working great. Our operational team did an awesome job of getting that up and running. That's not an easy thing to do. It's also become a really major asset for us, and a lot of other people, you know, are are looking at us because of our capability to do clearing, and we have a lot of opportunities potentially to add some additional really interesting products to our mix because of our clearing platform, and we're we're in discussions with a lot of people that see the value of aligning with us because of our clearing platform. And we're our relationships with new investor groups.

Speaker 1

You know, one of the things that we, you know, had done is we really spent a lot of time with, you know, a relatively small group of people because we didn't have that many companies. So why go broaden broaden your investor group? But now we're really broadening that, which I'll talk about here in a second. And our community service team is doing great. You've probably heard from some of them.

Speaker 1

And and our back office platform in Managua is is really doing great. You know, our our our leaders here in The US have done a great job training. They've you know, everyone's licensed, doing a great job. It's it's really a lot of fun to see what this public offering has enabled from, you know, building the platform. In last quarter, we, we closed the HeartBeam deal.

Speaker 1

HeartBeam, was the only financing we did. Like I said, we've got three new LOIs in in the in the hopper and and, you know, look forward to, presenting those here shortly. Our shareholder base moved up modestly. We onboarded a number of new accounts, that wanted to invest in the HeartBeam offering. What I thought was really great about what what happened was it was, you know, a lot of smaller investors.

Speaker 1

So we we had, you know, really, you know, a lot of small investors, you know, as opposed to big lead investors, which many times we've had in our deals historically. I think that that really is exciting for us. And I I I wouldn't say that we're getting, you know, close to crowdfunding, but it's sort of like curated public venture but with a broader broader group of people. And so what we've been doing is talking to angel groups and RIAs, and that's kind of exciting for us because we've gotten really great reception from these people even in a even in a really difficult marketplace. And so, as I mentioned, we're looking at, you know, leveraging our platform and broadening our IPO offerings.

Speaker 1

That's that's, you know, in the works, and I think you're gonna see that evidence of that here shortly. Other thing we did was recognize that our executive comp plan for our four top executives, which was, you know, really heavily based on RSUs, which means, you know, we get stock even if, you know, the shareholders aren't winning, that we had to change that. And we realigned our compensation and convert them to options. We gave up, I don't know, $21,000,000 worth of stock. So I think it was the the number.

Speaker 1

Don't don't hold me to that number, but it was a it was a large number. And and if we just we assumed that we were gonna be hugely successful coming out of the shoot, and we were wrong. You know, the market did not cooperate, and things did not cooperate. So we we recognize that we can't be winning if the shareholders aren't winning. And and, you know, so we're realigning comp across the board to make sure it's it's, you know, perfectly aligned with with the shareholders.

Speaker 1

So this is sort of the the, what we call our enterprise value calculation, which is if you look at that we we we're now, you know, presenting every quarter. To simplify, we take net current assets, which is largely cash, and then we take our big ID investments and to give you sort of what our balance sheet looks like. And then we take our stock price, shares outstanding to give you a market value and then sort of calculate the enterprise value. Turns out that at, you know, at year end, we were trading at a at a large discount to our enterprise value. As of the end of the quarter, it's gone down a bit, and that was largely due to the volatility in HeartBeam and Exozymes.

Speaker 1

Exozymes is, you know, is is I think it was $10 then. It's up to, what, 15. So if you did the calculation today, the enterprise value disc you know, the enterprise value, you know, discount to market would be a little bit bigger because I think it was it says in there it was $10. I think it's 15 today or something. So, anyways, you know, that's that's an easy way to look at it.

Speaker 1

And I think that, you know, anybody that that wants to create a model or something, we can we can help you to create the model, but that's where it stands today. If you look at net current assets, dropped by about 2,300,000.0. So we utilized we actually utilized less than 2,000,000 in cash for the quarter. You know, I think that with our with our backlog of financings and whatever, again, what we're trying to do is is, you know, is be relatively cash flow neutral when you take, you know, the cash from financings and other revenue from patent vest, etcetera. And so we're not there.

Speaker 1

Obviously, we're pivoting on the, know, the type of companies that we're gonna fund, and, that'll increase our activity and get us closer to that. But, obviously, what you can see is the the big valuation differences are gonna be in our big idea investments. So talked a little bit about the transformation, which is, you know, we were in the business of selling deals we've curated. So if we only had one deal every 18, it we had a relatively small group of investors, four to 500 that that, you know, can know, we're looking to invest with us and what have you. But as we scale this up to where we think we can do four or five companies a year, we're working with investors and advisers that can allocate to this public venture asset class.

Speaker 1

So it's pretty important to sell people on the public venture asset class or, more importantly, a curated public venture asset class, which is what we do. So, we we, started talking with these various folks, and they gave us a lot of suggestions about, you know, how to how to sell this as an asset class. And and and it got pretty exciting in the last month or so as we, started to have more discussions with them, which I'll talk about in a second. So one of them said, well, why don't you go back and actually tell us how to invest in public venture? And I said, well, jeez, how do you do that?

Speaker 1

And so we got our analyst team together, and we started saying, okay. Why don't we go back to all 17 of the companies that we launched, you know, as after we started MDB and go back and really look at each one and look at depending on how you how you invested, what would your return profile be. So not only not only demonstrate, okay, MDB's companies always gave you sort of the opportunity to make money, but also, you know, what was the best strategy to invest in them. And and the results were pretty were pretty interesting. And so what we we did is we said, okay.

Speaker 1

Why don't we break it into three kind of, you know, models? One was sort of a buy and hold, kinda hold long term. One was more balanced, you know, and more was sort of more active management. And and the results were were interesting, but it it it was kind of like, I didn't know how they were gonna turn out. I had a I had a sense of it because, you know, we we obviously invest in these companies ourselves, plus, you know, you you know which of your investors kinda do better than others, but the, you know, the results were were sort of interesting.

Speaker 1

So if you took sort of a buy and hold, which is really not, you know, too practical, but you could have and just kind of held it forever, you woulda had, you know, a great return, but your IRR would be actually lower because of the time frame. Because we've been in business for twenty seven years, if, you know, the return would would be would be much lower if you just took that approach. And then if you took a balanced strategy, which, again, this publication will be out. You can read all the details of what a balanced strategy is. You would have had an IRR of 49%.

Speaker 1

If you had active management, you would have had an IRR of 44%. So, basically, with active management, you took a little bit more off the table earlier and etcetera. So I I encourage you all to read the report, which we'll be putting on our website. If it's not on the website already, it'll be on the website in the next few days. But this data and this report, now that we've presented to RIAs and angel groups, they sort of are understanding the difference between public venture and private venture.

Speaker 1

And and the real difference is is that because of the liquidity, a lot of these companies, you know, not the ones that went and were sold, you know, not the preventions or the motivations that were sold to to big pharma for huge numbers. But a lot of the companies that did well, you know, for a few years, you had the opportunity to take money off the table. You generally don't have that opportunity, in private venture, and that's a huge difference from a return perspective and why I think our story is really resonating with a with a larger group of people. So the keys, you know, really for us are, you know, scaling, and we we need to really, you know, bring forth three or four new investment opportunities, not just ones that we like, but that that really will will will do well in the public market. So that's why we're having to pivot because we do see things changing, and we do see that this may not be a market like we've seen before.

Speaker 1

We've gotten you know, a lot of our really sophisticated investors are calling up and saying, hey. You you guys need to to pivot your your product mix, and we're listening. And so but I'm super confident we can bring three or four of those opportunities every year. And, you know, maybe more, but I I think we can commit to three or four of those opportunities every year. Think that should be fairly easy.

Speaker 1

You know, the the ability for our you know, for us to to really scale and take advantage of our clearing platform to broaden out this community of investors is really gonna be important, and we're working really hard to do that. And that's our probably our number one initiative because I think that our deal flow is is is is certainly sufficient to find really, really good stuff. So, you know, I think the good news is I don't see that we need to bring on a lot of people unless we really, for whatever reason, scale the number of investors, you know, materially. We really our our level of expenses right now can handle, you know, thousands of more investors without having to scale organization. So we have a lot of scalability currently from our current people platform.

Speaker 1

Now it's just getting more getting more companies through the pipeline. You know, talking about our existing companies, you know, Exozymes is is really focused on getting, you know, really valuable products that are really meaningful, and I think NCT, which they recently announced, is really a big one. As you dig into it and you learn more about it, I think you're gonna find out that NCT is a big opportunity for exozymes. And I think there's, you know, other big opportunities right behind that. HeartBeam, you know, with any luck, we'll have good news from the FDA on the 12 lead synthesis software.

Speaker 1

I think that's gonna be a, really big value creating event in that now, you know, this this card really can be in the hands of every every consumer that, you know, is worried about their heart or other things. And, and, you know, we're getting unbelievable reception from not only cardiac patients and and concierge docs and cardiologists that really see that there's gonna be a huge market for this, soon. ClearSign, company, you know, they're continuing to scale revenues, and and I think that they are, continuing to to to build a business and, you know, evaluation has really been volatile. But, you know, we see them continue to make, you know, good progress. And Q recently had some news where they they brought in a partner, and they're now really, you know, making a move into autoimmune.

Speaker 1

And, you know, the I would call the depression in biotech. The the company's got a good runway cash wise, and I think that, you know, the platform has, you know, done everything that we always hoped it would do, which was having a, you know, really effectively a t cell management platform to modulate the immune system to either, you know, effectively, you know, increase length of life if you have cancer or or mitigate, autoimmune disease. So we're still hopeful. Again, couldn't you couldn't ask for a worse biotech market in my career, but we're so hopeful that q, that the value of q becomes realized in the not too distant future. So our key priorities coming forward are really just execute on these financings for our existing three three big idea companies and really get, you know, new ones in the pipe, which I think we have a number of candidates that are close behind it.

Speaker 1

Continue to expand our investor community, really focusing on on folks that are capital allocators as opposed to deal buyers. And I think that that's, you know, happening in our conversations with ROAs and family offices, the angel groups. And, you know, we're what are we good at? We're good at curating great opportunities. That's pivoting a bit to, companies that are a little bit closer to, product revenue and and value creation.

Speaker 1

And, you know, we're continuing to scale our capabilities across the board to help these companies. These companies are are all struggling right now in the marketplace, but I think but I think that's gonna change. And I also think that there's a lot of emerging growth companies that could go public that we're gonna be able to be a great platform for them to go public with. And I and I don't really see that we have any effective competition. There's really very few firm firms left that could take small companies public.

Speaker 1

So I'm super excited about what we've built, and, you know, we've gotta respond and just, you know, find the right the right things for this market. And but we have a really experienced team that's been doing this for a long time. You know, I'm tenacious. I can tell you that I'm gonna I'm gonna always fight to find find the best opportunities. That's what I'm good at.

Speaker 1

I'm spending more time, you know, than I've ever have really just diving in to make sure that happens. And and I'm having a lot of fun, you know, in these challenging times because I really do believe we we've got a special special place for companies to go public that are the most exciting companies in the world. So with that, Kevin, I'll turn over questions. I I took exactly half an hour, so I'm glad I didn't go too long. So

Operator

Great. Oh, perfect, Chris. Thanks. And you wanna put my video on, please? It just went off.

Operator

So if you have perfect. If you have quite if you have questions, use the chat on the bottom. We're actually starting to get a couple in. The first question, actually came in, Chris. Can you just talk about the, the one company that you have that you're financing, the 20,000,000 for the potential cure for diabetes?

Operator

Question was, what's the name of that? And that's PaulX Bio.

Speaker 1

Yes.

Operator

The other question that we have right now is how does management interpret the persistent discount of the MDBH stock price relative to the IPO price? Is it execution, macro conditions, or market misunderstanding, or

Speaker 1

other? Well, it's always supply and demand. So it's, so I've been doing this for a long time. So I have perhaps a little bit more perspective than the average investor. And so we had two inspirational companies that were that were critical of the formation of MDB.

Speaker 1

One was one was called Thermal Electron. It was started in the sixties, and they took 60 they spun out 68 new public companies out of Thermoelectron. They're sort of really unbelievable and prolific, birthers of new technology companies. And there was other company called Safeguard Scientifics. I knew the founders of both these companies, and they they were both kind of mentors of mine.

Speaker 1

So I watched their stocks religiously. You know, Thermoelectron was when I got when it was very, very early in the business, and then, Safeguard Scientifics in the nineties. When the markets were were not good for new technology companies or early stage companies, it always traded at a discount to net asset value, almost a %. No one believed that their platform was worth anything because the market was bad for those kind of equities. Ironically, when things were good and their stocks were moving, they always traded a premium to net asset value.

Speaker 1

And so I'm philosophical about it in the sense that I believe that the market really you know, people will will always over overdo it, and they'll just say, you know, why buy it now? You know, MDBs, you know, selling stuff that nobody wants right now, and and, you know, and I could see how people would think that. And but that changes. And so I'm like I said, I'm having seen these cycles and having seen it before, it doesn't trouble me too much. And I also think that, you know, I think that the most important thing is is that the companies that we're birthing are doing well.

Speaker 1

That if if the companies we're birthing are doing well, then our stock's gonna do well. And, and I think that that's that's really what it is. And so much of it is geared towards Exozymes right now, and we get very little credit for our platform. But, again, when things are going well, that'll that'll change and go in the other direction. So

Operator

Perfect. And as an LLC, you've structured your company to be able to distribute dividends without double taxation. Could you discuss what your future dividend policy might be and how you would go forward with that down the road?

Speaker 1

Sure. So our dividend policy is really about, you know, there's two major factors, which is one is, you know, if we were to distribute those shares, how does it impact the company that that we're distributing? So if we were to distribute Exozymes stock to the shareholders today, how would that impact Exozymes? And, you know, the company is still relatively, lightly traded. And and right now, if we were to distribute out those shares, it it it you know, until more people understand the company and and are, you know, in tune with the company and its prospects, we'd like to get the company to get a little bit more legs before we do a distribution.

Speaker 1

Mind you, being the largest shareholder, I would love to have a distribution. So my my my interests are aligned with yours. I just don't wanna I just don't wanna hurt the companies by distributing shares, and and so I think that's part of it. The other part of it is, you know, we just what our what our cash flows are. At some point, you know, we have to, look at, do we invest more money in a new big idea, or do we just, you know, fund it and and and take it public?

Speaker 1

Obviously, if we put money into a new big idea, we get a bigger equity stake. So at some point, we might look at, you know, selling some of the shares, again, only if the shares of these companies are doing well and pull a bit of that money into a new big idea, to kinda keep the the flywheel going, if you will. So but I would say the the biggest factor is really just, you know, you know, how's it gonna impact the company, you know, that we're, the subject company that we would distribute. So but my hope is is that, you know, if Exozymes, you know, catches, like, all of our companies eventually or all 17 of our companies at some point caught fire, right, where they traded millions of shares and and, you know, it didn't matter, you know, what we did. You know, they were broadly held, and everybody wanted to be in them.

Speaker 1

That's a great time to distribute shares. It's just now is not the right time.

Operator

Got it. Thanks. Also, just a question here kind of like on the mechanics. So when we take a venture public company public, how do we make our money, and how does the shareholder of MDB make their money?

Speaker 1

Sure. Well, a lot of these companies were if we're doing a pre IPO financing, we earn equity because we're also helping put that company together and prepare it for for a public entry. And so we get we get, you know, let's call it carried equity in in in the company. So we we earn a piece of equity. Plus, if we put any capital in, we also earn, get equity for that as well.

Speaker 1

And then, generally, when we take them public, we're gonna be charging cash fees and, in many cases, getting warrants. So, you know, it's really always a blend of cash and some some equity. And in some cases, it's more equity if we're a founder like we were in Exozymes. In some other cases, it'll be less equity where may it may just come in the form of warrants on the extreme case where it would just be cash and warrants. And so, it's it's a bit of a blend.

Speaker 1

And, but, obviously, we're really in this for the equity upside because that's where the real returns are for for shareholders.

Operator

Yep. Perfect. And then just to go back to that PaulX question, and we're gonna have some equity. Right? Chris and PaulX, just to let everybody know, we do have a recording, of that presentation.

Operator

So if you have any questions on that, we're gonna close it over the next couple months. Indications are already coming in. We'll keep everybody updated on the PPM. It should be out sometime next week. So don't hesitate to give us a call if you'd like to see information on PaulX.

Operator

Then another quest question, Chris, is, can you tell us more about PatentVest and what you believe its potential is for how it will bring value to MDB?

Speaker 1

Sure. Well, PatentVest brings side to MDB every day. It's a question of from a independent business perspective and revenue generation that we're we're we're basically really working to figure out what the right business model is for PatentVest. Currently, what PatentVest does is takes a company like a HeartBeam, helps trans you know, really transform the business model and and position it correctly. And that's where you know, not only are we able to see things other people don't see, but also position it in a unique way.

Speaker 1

We're very deep involved in business development, very much in strategy development, business model development, and IP development. And so to us, that's critical to value creation. And very few companies, especially small companies, have the resources to do that well. And so, you know, initially, we looked at Pat Invest and our team there as critical to the go forward, you know, path. Company like ExoZyme is a great example.

Speaker 1

You know, there's there's thousands of chemicals you can make potentially with, with Exozymes platforms. Which ones should you make? Which ones can be protected? Which ones can you, you know, reasonably make great margins on? Who are the players in those spaces?

Speaker 1

Who could potentially block you? Who could potentially license from you, who could potentially purchase you. All of those things are again, when especially when you have a platform technology, these are not these companies are not staffed to be able to answer those questions. We're providing those critical answers for those companies and the go forward strategy. So that's where PatentVest brings value, and it's a key part of how we earn value through MDB.

Speaker 1

But as an independent business where we're charging for it, we're, you know, we're continuing to grow revenues. It's still it's still, as an independent entity, loses a bit of money. But I think, you know, realistically, it provides a really important value creation part of what we do. So I I don't know how to look at it as an independent business, you know, because we really can't do without it for our own companies. So, but my hope is is that we can really grow revenues.

Speaker 1

And so we're looking at some new initiatives to really see how we could scale revenues in a in a meaningful way, and, and we've even looked at the idea of spinning it off as a new business. So it's got a very unique platform. It's a, you know, it's a law firm, which is you know, now is really getting exciting because a lot of the big accounting firms are now going to Arizona and following us to become law law firms. And we've had a lot of people interested in either merging with us or talking to us about how do we leverage our law firm platform along with PatentVest to grow a substantial business. And so I think there could be a lot of interesting business opportunities that come of that as well.

Speaker 1

And so yet to be seen, but as of right now, it's, it's it's it's not a huge factor in revenue generation, but I think it it it very well could be once we find that sort of rich vein to push it forward. I would also ask you to look at some of the patent best pulse things have been published, and we're getting a lot of notice from big tech companies. We published on the brain computer interface. We published recently on the humanoid robotic space, and it's kind of exciting. You should you should look at some of those.

Speaker 1

It's getting a lot of, you know, notice on, you know, platforms like LinkedIn and social media and what have you, and we're getting a lot of inbound in inquiries from a lot of these companies. So it's getting noticed. It's getting, you know, it's getting it's getting some momentum, and we're just learning how to really propel that business now.

Operator

Perfect. Thanks. Next question is, can you share how much of MDB's value is due to its share of ownership of the companies you've taken public? I guess that's probably a better one if it was you know, if you had been if, you know, if we had been public when we did Q, we did Prevention, and Pulse and all became multibillion dollar companies.

Speaker 1

Yeah. No. I think that I think that I think that listen. It's you know, we went public at the absolute worst time. You could probably go public for for, you know, what we do.

Speaker 1

I would say that, you know, had we, you know, had the strategy before we you know, and we were public before we launched, you know, you know, Pulse queue and and and prevention, you know, we'd I I don't know where we'd be, but we'd probably be we'd probably be close to a billion dollar evaluation or something. You know, it'd be it would have been pretty substantial. But but yeah. So, you know, we we have exozymes, and we have, you know, a smallish position in HeartBeam. But, you know, if either one of those things really take off, it's gonna it's gonna impact our stock price.

Speaker 1

And we've got but, you what I I don't think people appreciate is our ability to find the new ones, to find the next, you know, pulses and and and preventions. And, you know, when you look at our whole when you look at our whole pipeline, they're all they all have maybe even greater potential than our historical ones did because I think we're getting smarter about what we do and how we do it. So

Operator

Yeah. Perfect. And it looks like the last question here no. There's two more, actually. Do you ever consider acquisition of companies, you know, acquisition of companies instead of IPOs?

Speaker 1

Well, we've we've we've had we've had some interesting offers presented to us where we could effectively acquire something and then take it public later or spin it out as an independent pub public company. But as far as acquisitions, I would say, as of right now, you know, we're we're very focused on public venture. And if it was very accretive to what we do in public venture, we would, you know, we would certainly entertain it. But I I really don't want to, you know, create a distraction by merging in some other business that isn't really, connected to what we're doing in public venture.

Operator

Got it. And, how many firms do you see out there that are doing what we are MDB Capital is doing currently at this point in time?

Speaker 1

I I don't see that really I don't view that there really is anybody that does what we do. There are companies that take small companies public. I think the the number of those companies have gone down pretty dramatically. I think that, you know, they unfortunately, the industry has devolved. And, like, we saw a biotech deal that went out last week by a by a, you know, by a small underwriter that you know, they they did a $13,000,000 offering, I think, at $4, and it's trading like a dollar 83 or something.

Speaker 1

So is it you know, that happens because you don't have good investors or people that believe in what you're doing. Right? And I think that we've had there's so many firms that focus on transactional investors as opposed to, I would call it, real investors. And and I just think that that stands out. Like, I don't that's why I don't view that we have any effective competition.

Speaker 1

I also think that the curation capabilities that we have are second to none, so we do more work. We we and we provide more value. We we can stand these companies up. You know, I'm I'm a firm believer of those 17 companies we've taken public. I'm not so sure that any of those companies would have been companies or even got public unless they met us.

Speaker 1

And, I think that's a really key differentiator. You know, underwriters don't provide much value, and so I just believe that our value proposition is so strong that I just I don't view that we have any effective competition.

Operator

Yeah. Perfect. Well, that's the end, the end of, the q and a, Chris, if you have any closing comments.

Speaker 1

No. All I can say is hang in there. I I appreciate you all from having you know, keeping the faith, and and it's this has been a really, really tough time. Believe me, I've I didn't think at this age and and everything that we've accomplished historically that I'd be as, you know, I wouldn't say sleepless nights, but but at least, you know, preoccupied nights, if you will. But I'm you know, I I've accepted it, and we're working we're working our ass off to make sure we perform.

Speaker 1

And and we find we find those companies that are meaningful and that the market will appreciate. And and, you know, the great thing about bad times is is it provides a lot of opportunity. And so we're we're, we're opportunistic, and we're gonna keep fighting to to, fight through a bad tape, and get through to the other side. So I appreciate all your faith in us, and I and thanks for, you know, taking the time to listen today. Right.

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Key Takeaways

  • MDB’s core strategy is curating “public venture capital” by sourcing asymmetrical-return, big-idea companies and using its PatentVest-powered platform, in-house clearing firm and investor community to take them public.
  • Shifting market dynamics favor profitable, capital-light companies closer to commercialization, prompting MDB to pivot its deal mix toward businesses with clear revenue and path to profitability.
  • MDB has three signed LOIs in its pipeline: PaulX Bio (a potential insulin-restoring diabetes pill at a $20 million pre-money valuation), a fast-growing profitable beverage company opting for an IPO over private equity, and a high-upside healthcare software firm.
  • Key platform milestones include the launch of its in-house clearing firm, expansion into a broader RIA/angel network, and realignment of executive compensation into options fully tied to shareholder value.
  • Despite trading at a discount to enterprise value amid challenging market conditions, MDB relies on its 17-for-17 IPO track record and anticipates a rebound in the small-cap IPO market.
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Earnings Conference Call
MDB Capital Q1 2025
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