Thank you to everyone who attended our webinar with COO, Dr. Michael Schmitt yesterday. With a background building multiple factories from the ground up and a track record of developing impactful leaders, Dr. Schmitt offered great insights during the livestream.

For those that missed it, here's a recording 👆

We had so many questions before and during the webinar that we didn't have a chance to answer everyone's questions live. We'll be posting an update here on Wefunder with all of the questions and answers soon. Stay tuned!

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Transcript:

David Monson (00:00:00):

This is awesome. And then we had so many people register for this. We have a separate stream going on YouTube live, and so I know there's a lot of comments that are coming in there as well. Tuba City. All right, Fiji. Alright, excellent. Alright, well we are going to go ahead and get started. I know some people will be trickling in, but we don't want to keep everybody waiting too long. So thank you all again for joining. We're really excited to introduce everybody today to Dr. Michael Schmidt. To start, I just want to set a little bit of context, give a little bit of background. First, I just want to start by thanking all of our current investors in the company. Many, many names in the RSVPs for today that I know have invested both through accredited. I'm really

David Monson (00:01:15):

Excited to introduce everybody today to Dr. Michael Sch. To start, I just want to set a little bit of context, give a little bit of background.

David Monson (00:01:25):

Kenna, can you help us mute?

David Monson (00:01:28):

First, I just want to start by thanking.

David Monson (00:01:30):

There we go. Apologize for the background noise and I think I have it set to keep everything muted now. All right, so yeah, again, just want to say thank you to everybody that has been an investor so far. So much of our momentum over this last year has been because of those people that we've met through this fundraising process. Many, many of these key initiatives that we have announced recently have actually been heavily impacted by those that have joined the Zenni Home family. So I do want to give a lot of credit to so many of you that are on this call. And then I know there are many that have joined this call also that are looking at investing and contributing.

(00:02:23):

And so I will do a quick intro in a second. For those that don't know anything about Zen Home, this may be your first exposure, but just by way of some quick details, our We Funder campaign is coming to an end. We will be closing without any sort of extension on April 29th at midnight eastern time. And so we do want to invite anybody that hasn't joined yet to join us there. We'll post the link in the chat for anybody that is interested in participating. So to start, I'm going to share my screen and share a quick bit about our homes and our product and our company. And I think we're going to start with a quick sizzle reel.

(00:04:25):

So that was a quick look at one of our units, the citizen unit, our two bedroom, 640 square foot unit leveraging robotic furniture. I always start smiling every time I watch it. Haven't gotten sick of it yet. At a high level we do like to say that with our same units, this is what's highly unique about what we are doing. You can take our same units, you can drop, you can stack. This is a rendering of a real project that we are in process right now in Mesa. You can also ramble for a larger single family home type of an experience.

(00:05:03):

These units we're optimizing to build the same unit over and over again and be able to deliver these at scale. This next video I'm showing you is a hot off the press. I just got sent these videos from a call who's handling installation of these homes down in Elgin earlier this week. So what's really unique about this is we are seeing high, high levels of interest from volume buyers, people that want to deploy these units, not just in one or twos. This one is a grouping of nine homes that are being installed over the next week. And we have buyers that are looking at a hundred, 200, 400, 500 plus units at a time. And we were finding that to be I think kind of our sweet spot in this market, which is really exciting. So this is a high-end winery with a full hospitality experience. So their customers, it is called Los Mill. So huge shout out to Los Mills. They've been great to work with down near Tucson in Elgin specifically. So soon you will be able to book an experience down here, stay in these units in a nightly rental type of an experience, eat at their award-winning restaurant experience, their vineyards, their wines. So we couldn't be more excited for this new relationship and this customer. So anyway, you are the first people external to our employees here at the company that are seeing this video and seeing these units being installed.

(00:06:45):

One other quick highlight, we are trying to emulate car manufacturing. We are, this is a big reason why we wanted to introduce Dr. Michael Schmidt today. His background is heavy into automobile manufacturing and so we'll get more into that in a minute and then I'm going to stop there. And so before we jump into the discussion, I'm going to just give an intro on Michael Schmidt. He's a humble man and I don't think he would brag as much as I will brag about him. So I'm just going to tell you a little bit about who he is and why it's so crucial that he's here. So Dr. Michael Schmidt, he is our new COO at Zenni home. Start with his education. He earned his doctorate in physics. He has 27 years of global industrial and automotive manufacturing leadership experience at some of the biggest names in automotive manufacturing at Tesla and Bosch.

(00:07:50):

While at Tesla, he was integral to launching the Tesla cyber truck production at the Austin Gigafactory in five months and also reduced model Y operational costs Significantly. He has built and led multiple factories in five different countries, United States, China, Mexico, Germany, and Hungary. And then one other thing that I consider to be one of the greatest traits of an amazing leader, he has an incredible track record of developing his team members into impactful leaders and executives. It was amazing in the interview process learning about what he did with his team members at Bosch, growing them into future leaders at that company. So with that, Dr. Schmidt, welcome. Thank you so much for taking time out of your busy schedule at the factory to join us today.

Michael Schmitt (00:08:39):

Thank you David.

David Monson (00:08:42):

So Michael, can you start us out with a bit of an overview on your career? Can you highlight some of the key roles and projects that you have been involved in?

Michael Schmitt (00:08:54):

Yeah, I'm more happy to do those. Many thanks for the introduction. Welcome to everybody joining us here. Yeah, you mentioned I studied physics and actually this is one of, I think the important part in my whole career. I like problem solving and I like to understand the fundamentals of things, how things interact with each other in my eyes, a very important thing to make changes in the business. I started my career in Bosch automotive electronics, worked there in several operational functions, functional roles in Germany, Hungary, and China. And got responsible for the division's operation in China with the task to scale a greenfield operation and triple the sales. In three years. We did this as a team and we become even the divisional operational benchmark in this time. What I learned then afterwards in the next steps of my career was not only to grow but also to restructure in the role as senior vice president operations in Bosch Re in Beijing later as in Bosch electrical drives and power train solution in Mexico as COO for North America for Bosch ros. And in the last role before I joined, sending home as COO, as operation director for the giga factory, Texas and Tesla. Why do I tell you all this? Because I think what operation needs to be efficient and profitable is the right footprint starting from the market and customer through operations and then back or forward to the supply base. Customers have problem to solve and operation is supposed to solve these problems with the right products, with the right services, the right lead time, the right quality, and the right on-time delivery for this product.

(00:10:59):

I did something like to improve this whole story in North America in the area of factory automation. It was not working at all. So I made a supply chain modeling for exactly the chain, what I mentioned before. We implemented a lot of changes, a better service towards customer, where we sourced material, where we produced our products from where we ship them and how we ship them. And yeah, we changed on time delivery from 50 to 85% and achieved the lead time. And I think customers appreciate these things was actually an industrial product, not automotive. You need to have the right products developed and designed for manufacturability, which enables then operation to be efficient, you need standards, you need automation, you need digitization. I did these things in Mexico and we improved the year over year cost by 10% and we did it even in the indirect area.

(00:12:05):

So there is a lot of things to do and I come in a minute and also later why I believe we can do this in the housing industry. You need an efficient production system, radio stream, design work, balance work instructions and the continuous improvement running on this. It was part of what I did in Testa for model Y. In three months we could take out 30% of the cost just applying the standards and measures and get the team convinced to do this in the area. In certain areas, I would say not in all, you need a high motivated operational team, but you also need strong collaboration with sales and with design.

(00:12:50):

Mexico was a masterpiece actually what I did, I used the EFQM excellence model, European Foundation of Quality Management. We got the five star recognition there, but also we got enlight customers. So I'm used to set up as David you mentioned throughout my whole career, set up factories, get things turned around. I did it in automotive and I did it in industrial and now four weeks in sunny home, four weeks here on the floor, in page in Arizona. The folks are a bit upside down, but Elgin you mentioned it. Yeah, it's on the road. Three units are out, six units will leave next week.

David Monson (00:13:39):

Amazing, amazing. Well Michael, it's been a pleasure working with you. Even in the short time that you've been here, your experience definitely shines through. You've already been moving and shaking and getting some amazing things done to, I think it's not every day that folks that are joining on this call get to hear from a high level manufacturing executive. But I think something that may be a little bit relatable is most people are familiar with Tesla, with Cybert truck, with Model Y. Can you talk a little bit about what that was like to spin up Cybert truck production in just a matter of months?

Michael Schmitt (00:14:23):

Yeah, cyber went to market and actually cyber went to market and went to market as it was still in development and then went to market as it was still in a factory, which was a construction place all over. And I don't tell the secret there because you could read it everywhere. So the challenge was really we needed to get it launched because we wanted to get it out of the door. We had a lot of changes in between, we had construction folks walking around while we were setting up lines. We did it because it was collaboration between all units, all departments there and finally we could celebrate. And you see the vehicles on the street now?

David Monson (00:15:11):

Yeah, yeah, it's unbelievable. I mean it's definitely one of the coolest vehicles I've seen driving around. Cool can be interpreted in a number of different ways by different people, but man, I think it's so fun to see something so striking in different driving around out there. And from everything I've read, it's one of the most transformational vehicles ever manufactured moving to, what is it, the 48 volt system and things like that. So it must have been a very, very unique thing to work on. Talk now on the model Y. You guys reduced some operational costs significantly. Tell me a little bit about that. So that was a vehicle already being produced. Tell me about that challenge and how you guys pulled that off.

Michael Schmitt (00:16:00):

Yeah, I mean first there was a need to do this. After Covid we had inflation coming up and then the interest rates were just exploding and people hesitate to buy a new vehicle and we thought we need to bring the model Y really into broad and this works only if you make it affordable. So there was really pressure to do this and also very high interest. And as mentioned before, it was just applying at the very beginning Tesla and we as Tesla, we had the problem to deliver what we needed to deliver after we solved this one, we could really focus on the second thing you do in operation after you have your delivery problem solved, you look on costs and you apply the standards, what I mentioned before, a production system stopping simply and not continue producing scrap and waste but improve. As soon as you find a failure, you stop, you improve, you set it up, you increase your first party, you increase your quality and then things are running

David Monson (00:17:12):

Amazing. Now, one thing I do want to touch on is obviously the global leadership side of your background. So we mentioned experience in building factories in five different countries. What are some of the unique challenges and achievements in these diverse settings? How were each of these locations different people, processes maybe what were some of the interesting things you learned in each country?

Michael Schmitt (00:17:48):

Mean running something in different cultures is very interesting because I can tell you nine years in China and you learn to know that the Chinese, they live to work, you change back to Mexico and you find out, oh, these people work to live. So there is a different interest in culture for sure, but there is one thing culture has in common. People are getting used to what they do, what we call legacy and whatever. And this is in broad what people really have difficulties with doing and having a change around them. So the most important part is convince people that there is a change coming and do this. And I learned to notice actually there is a method which even an American method, which is called edca, you create awareness, desire, you need to have the knowledge, you have to have the ability to change and then you need to reinforce it.

(00:18:53):

This is where this capital letters stand for. So it's not so complex and you need to run it in this sequence. And interesting wise, this runs in every agriculture. So implementing a new factory is a change and people don't want to go to a new factory. Getting a product out of production and getting a new product in is a change. But people want to stay with their old product because it's so nice and they're used to their workplace. So running this really through and making them aware of it must happen and do it in a kind of scientific way, running it through and measuring even this makes you able to do all these changes and get them buying in and being successful. And from my leadership understanding I don't want to be a boss, I want to be a coach and a mentor. Let people shine, bring the right people at the right place and lever their strengths. So by doing this people win and then they do this changes and it worked everywhere.

David Monson (00:19:57):

I love that, I love that. Yeah, I think that starts to touch on one of my favorite things during the interview process was your approach to people at least myself, I don't know if other people echo this sentiment, but I think of operations and factories, I think of systems and machines and things like that. But really at the end of the day it is the people that are making a difference, that are doing the work, that are then creating the processes and the systems. Can you dig in a little bit on your ability to build leaders? So I think this is hugely important to us. We're an early stage startup and yet we have enough traction with our pipeline that we have a vision to scale large and very rapidly. And you can't do all that work yourself. I can't do all that work myself, but we need the ability to train and build people up and build our new level of leaders for tomorrow. So tell me about your approach to building new leaders.

Michael Schmitt (00:21:00):

Yeah, the first thing is in my eyes to see what strengths does everybody really add to the organization and to the team. If you look forward to improving weaknesses, then we start finger pointing and make people really feeling bad. But if we lever their strengths, we get them buying in. And if you use the strengths to delegate tasks and these tasks become their own things and they start to actually contribute their own things to the organization and it makes it self running, it sounds very easy. It's not because you need to understand the individual, you need to give them the right portion of task and of responsibility and then let them really grow on this. And I understand my role always in not being, as I mentioned before, a boss and trying the same thing over and over again, which is the definition of insanity and never lead to something but to help and to support that people can do things.

(00:22:05):

And I can give you an example. I mean we had this problem in North America where operation went down after Covid related to plenty of things which were covid related. People left, people worked from home office and we're not on the shop floor and whatever. We lost all this production system, competencies and so on. And if you go now and say to your plant manager, make it better, then he says, yeah, I try already. So you would come to this insanity loop, which doesn't help. So what I did actually is I built this capability again with a small group of people who had the knowledge and then I brought these people to the locations where they needed to have the support and help decide then with the knowledge that they could build up this topics, the leader could grow because he got what he was missing. So you need to support in short words and add this piece what is missing to make a person successful. And it worked out. If I go back in what I did in Bosch at the moment, we have 11 plans in Mexico from Bosch and as they still we, because 25 years was a long time and you still need to erase it. But from this 11 plan seven are people who were reporting to me and were working with me. So it works.

David Monson (00:23:28):

Amazing, amazing. Love to hear it. I am saving most questions till the end that are coming in, but there was a great one that came in and I thought we ought to just take an opportunity to answer it. It just scrolled out of the way. I don't know if it's George or Jorge. Ceto had a question on your perspective on Zenni homes differentiators versus other competitors. And maybe you can kind of answer this in tell us a little bit why you joined Zenni home versus going somewhere else.

Michael Schmitt (00:24:05):

Yeah, I answered the first one, the last one because it's faster. I learned through my career that you really need to make an impact and my impact was always on people because I developed people and I'm still in contact with these people, even with the leaders I developed in China, they still talk to me and they ask me for support if they need something or even an advice or whatever. I found out throughout my career I'm doing the same thing over and over again. And I had always a dream to work with a startup, make a startup successful, but also it needs to be sustainable. And this was one of the reasons why I left Bosch and I joined Tesla because they built sustainable vehicles. And this is also one reason why I went to Sunny home because the homes we built, they are sustainable and what makes us really different, it makes us different.

(00:25:01):

Number one that we have a product which is highly standardized but it serves different purposes because you saw at the beginning what David has shown has shown, yeah we can do a 29 west, but we also can do another homes with this product. And the product is highly standardized, which means we can also easily produce it and we start to do this now in our manual factory and later can also elaborate a bit what we do in the second factory, which is the high volume factory to come. This is one thing, they are sustainable because they're not made out of wood and not made out of something which you put in the trash can after 20 or 25 years. This is steel, this is stone, this is technical, technical generated material like wood but not really wood and it really lasts for a long time.

(00:25:59):

And the other thing which I really like on it is, and we think also the same thing for our new factory, the unit itself is built for that. You can put a water generator inside, you can build a autonomous sewer system inside and with this one you can generate water and you are independent from any place in the world. You can generate water, you can clean it and you can reuse it. The second thing is you can do this with solar panels on the roof, which means then you have to power what you need to do. So and you can use in this home because it's also designed for, you can use heat pumps or whatever and generate heat. It is still a bit complex with air condition because it needs a lot of power. But we work on these things and this is one of the reasons why I joined the company and one of the reason what differentiates us a bit from a mass manufacturer who says I build cheap homes or a manufacturer who is telling, I serve all customer with all different things, this is what we not do. We want to be really in a niche of the market where we produce high quality homes for a low cost which comes via the standard and they need to be sustainable for the footprint we really want to leave.

David Monson (00:27:33):

Yeah, I love that there was a follow-up to the end of this question asking specifically about what are we going to do different to say, I think a lot of people on this call will know that backstory and yeah, I think just to echo what you said, we are standardized right now around our two units, one bedroom and a two bedroom. We are not trying to build and everything building system. We are not trying to say give us a custom floor plan and we will manufacture it. We really are trying to build cars and standardize. So I think with that I want to transition into now you have been in the automotive sector for decades and you now have an opportunity to take lessons learned from automotive manufacturing and apply them to home building. So can you talk about one, why is that important and then two get into some of the specifics. What skills approaches from your automotive background do you see as maybe most impactful in building homes?

Michael Schmitt (00:28:37):

Lemme answer before I go into quickly the question. What differentiates us from those companies who were not successful? I think what differentiates us is, and what you can learn from automotive. First understand what kind of product you want to build. And I think we do this very well then try it out in a manual way and learn from it before you start to invest in machinery and things which we call in the language of a manufacturer, fixed cost because fixed cost, they are really painful. If your volume is not coming they are just simply killing you because they cost and they're fixed, you cannot remove them. And I think following the sequence, this is something I learned in the automotive industry. If a new product is coming, we spend a lot of time in really designing the right production environment for this product. And you need to understand if it's a volatile low volume market where I would never automize or it is a stable and high volume market where you say I automize it like an iPhone or whatever simple to say or like a Tesla model Y or whatever.

(00:30:00):

And I think we do this carefully. We are not burning money, we are taking really the money we have very carefully and invested very carefully in what we believe is the right thing, which is in my eyes a differentiation to the other companies which just thought they built a manufacturing system, they make the product and then the customer will come. And I mentioned before also customers have problems and they look for solutions. So don't offer a solution and look for a problem, it won't work. And I think we do it in the right sequence. To your question, David, a vehicle is not so much different or a car. An auto is not so much different to a home because it has a lot of user experience. People spend a lot of time in their vehicle and they have expectations and how it steers, how it drives, how the cooling system, the heating system is working, how the seed feels, how it functions if you need to load something, how you get your family in or whatever. So it's actually a moving and a living place. So the purpose is not so far from each other and partly it's also protecting you and your family. Yeah, the cyber track particular, you can shoot with bullets on it.

David Monson (00:31:21):

Are we going to do that with Zenni homes, Michael?

Michael Schmitt (00:31:25):

Maybe I didn't try it so far, but

(00:31:28):

Okay, let's elaborate a bit more on it. And a home and a car has two things. A car has a lot of things the customer doesn't feel. It's all this technical thing which is under the bonnet, inside the seed, what I produced in my history everywhere hidden. But there are things which customer feel and it's the same in a home. So you need to look and take care of this user experience pretty much. And on the other hand, what is technique and not related to user experience? You can produce cheap and this is actually what is the same in a house and a car. A house has a kind of a chassis, a car has a kind of chassis, a house has a kind of interior and the car has a kind of interior, everything you can produce in a mass production and you can standardize it and build it the same way and then comes the user experience where you choose. And I went with the guys here through and I said, look how to build electrical, how to buy a car and click through and choose what you want to have inside and what you actually can choose and what is very standardized and it's quite familiar. And also from a production process, I said it, you have a chassis, you weld it, you do the same, you need to move things so you can weigh them. There is so much similarities which you can build in. It's cool.

David Monson (00:32:52):

Yeah. Hey, what do you think? We'll throw some wheels in a windshield on our zenni home and maybe we got a new product line. No, I still remember some of our early conversations, our theory was always it's maybe harder to build a card than it is to build a home. We're dealing with a rectangular type of a footprint and all those things to pump cars out every minute of every day. We just thought, man, this would be amazing if we could do the same thing with home building. And so fun when we were talking early and connected on that and it was like, yeah, I think this might be the right approach.

(00:33:38):

Let's see. So next I want to talk a little bit about, and I'm going to just share my screen again and show this fly through. So we've talked with our investors and our audiences on our plan factory 2.0 that is coming down the line. So for those that don't know our current factory, we are based in page Arizona on Navajo nation land, on the old Navajo generating station site. We have a great facility there and due to just physical limitations, we will hit an upper bound of what we can actually produce out of that factory. And with the volume of orders that we have had, we know that we need to crank our production up. So we've talked about this factory 2.0. I'm going to share my screen really quickly so that you can see this. This was some of our early fly-throughs, some conceptual ideas of what our factory could look like. Obviously without a roof on it. We're very focused on this idea of digital twin design. But Michael, I think you've now had your hands in in the planning stages. Can you talk a little bit more specifically about what everybody on this call can expect from this new factory?

Michael Schmitt (00:35:07):

Yeah, first I said we are still learning and I think in the next couple of days and weeks we are going to have several rounds of workshops because one thing is really important, the design of the product before you automize and produce it. I mentioned it before, the good thing on it is we are going to have two factories so we can keep this manual factory for large approaching customization, but the other factory is more standardization to make it really efficient. You saw it in the picture actually David, what you have shown, if I would build vehicles like I construct houses to today, I would lead the area of where Tesla is and I would get an output of maybe 5% what they do because you have in every place one vehicle where you have plenty of people, you have no idea how to get this material there because you need to get every material to every place.

(00:36:13):

And this is actually the difference what we do in an automized factory. So you move the product and you create during the moving, you put more value add in the product until you have a finished one, which means conveying is taking place and not you're not sitting in one place and then you think about what you build manually. Does it make sense to do it automized and I mean the chassis for this building is standard. It's a six 40 and a three 20. So this one can be automized and you can actually automize also the handling of steel, the welding of it, and then the transportation of the chassis to the next station. Then you can do pots, it's called in the industry like the dashboard and the seats and whatever what you put inside the vehicle. You can preassemble this at a separate place.

(00:37:08):

You can put manual content in and automation what is possible and then you just build it in and assemble a house like you do with a car while you do manufacturing. And this preassemble is offsite of this main line and this is actually what's going to happen. So we will change a bit the design, what we do now make a bit more design of manufacturability and automize processes like this welding like a wall built like a kitchen assembly, like building a bathroom pot or whatever and put it inside the house. Never forgetting that we come from what customers really expect. And it sounds crazy, but I mean if you think back in the vehicle industry and the beginning of the 20th century vehicles actually looked like coaches because they came from horse coaches and people were sitting in horse coaches with a motor inside, but it looked like a horse coach.

(00:38:10):

And if you look today in the electrification of vehicles, they still look like a combustion engine car. This will change. I'm absolutely convinced because this kind of transportation has a bit a different requirement and if we start to drive autonomous, it'll change again because there's a different thing to it. And the same will actually for these vehicles. And I was stumbling over a book, now I need to look up what the name of this lady were. I hope I find it very fast. If not, I come in a minute to it, Cheryl Ney or something.

(00:38:56):

I don't find it. Now the interesting thing is here, yeah, pre fabulous for everyone, Sherry Kuni and she's actually writing about modular homes, showing pictures and showing projects which were realized and I think that the audience know it better than I. And I got by accident a book in my hand from 2023 and then I was searching, what did she do before? And I got a book in the hand from 2016 and you look inside what was built and what is built today. So there is very, very visible, a much more professional building of manufactured houses than it was even eight years ago. And the technology which is available in manufacturing really houses inside the factory will also change the appearance, the design of the house and will give a total different functionality to the user and the customer. And so the new factory will be a bit like constructing a house but more producing elements of a house. But it is still a house what you're used to be because this is what we built. But if I look what will happen in 15, 20 years, I'm by myself curious what's going to happen. But let's see. Sorry I moved a bit away from your question, but I think it was important to understand that this automation and really production in a factory of homes is an important step into the future of homes and housing and we need to do it otherwise we are never moving there.

David Monson (00:40:42):

I love it. I love it. Yeah, we'll see if we can, Fred, we'll see if we can get a link to the book in the chat. So Michael talking a little bit about production capacity of this new factory. We've been talking about doing upwards of over 20 homes a day coming out of this new factory. Are we crazy?

Michael Schmitt (00:41:10):

Yes and no. We're crazy because we are doing it and no because we can do it. If I look into what I get out at the moment in this existing manual factory by only changing the way how we do it and go manually from constructing a home in producing a home or manufacturing a home, we are capable to do what I assess at the moment, a house a day with one shift, or we can do three houses a day in three shifts. So it's doable but it's limit because you need, as I mentioned before, you need to bring all this stuff to one house because if you don't automize, the house is not moving and then you get inefficiencies which actually limit you by what else you can do because you have this chaos and material flow and everything which is simply not possible on this space you have available. And then you need to actually go in a big huge area to do so with the new factory. The 20 is very, very reasonable with the standardization and with a clear defined material flow and a clear defined product flow and the value add flow. So I don't see a problem to do it. Yeah,

David Monson (00:42:33):

I love it. Something for those maybe not so familiar with our journey and our approach so far, our current factory, we're building these homes by hand. And one thing I will say, I've done a lot of work in software development over the years, but don't sleep on the impact of an incrementally improving product process. So those homes that I just showed, we're installing an Elgin, these homes that we're building, every single time we identify a flaw or an opportunity to improve, we can go back, insert that, change that in the process and every single home moving forward gets that benefit. In a traditional house building scenario, you don't really get that and then you leverage on top of that potential of robotics and things like that. You can eliminate entire phases, entire processes over time if we are just diligent and keep checking things off the list, man, it's transformational in the long run. Michael, I know another question people have been very curious about is talk about some of the role of robotics in this new factory.

Michael Schmitt (00:43:47):

Yeah, I mean there's actually things which are very difficult to do in a manual way and robotics plays a very important role. Simple. You can move things by a crane with people and you know how much it costs to be precision with a manual gear drain and then people doing it and how many people you need. And we are talking about huge weights. So the robots will help us simply to move precision and the robot will help us to move heavy loads, precision. This is why you do robots because you don't need robots. Plus because of robots, they help us to be better. There's another aspect, a robot doesn't go on sick leave, but I don't need to tell you this one. And a robot works as precise as an engineer has programmed the robot. So beside the robot software connected industries, digitization of the whole value stream and all these things will play a very, very major role.

(00:44:53):

I can tell you I have done this in the past. I'm not an expert. I cannot program on whatever these things, but I know what it needs to really get this whole story connected. And in Mexico, by the way, we have semi automized things. We brought a lot of robots in place. I had a complete digital twin of our value stream process and instead of people doing administrative work, they did then value add to the product. And this is going to happen in the new factory and robots are important part of it because you will never digitize if you have manual work from people inside. You need this robots, you need this automation, you need these machines doing these things that you can optimize on machine processes and not on individuals.

David Monson (00:45:42):

Yeah, I love that. And now maybe on the other side, maybe some people worry that like, oh, is this just going to be a completely faceless human list type of an operation? I think the answer is no. Can you talk a little bit about actually the types of jobs that will be created? One of the interesting things is our site, we were on the former Navajo generating station, there's over a thousand jobs lost when that facility went down. And an amazing part of this journey and this story is we've been able to bring so many people back to work at this site. So can you talk a little bit about the job creation that will happen with this factory?

Michael Schmitt (00:46:23):

On one hand we need more people because at the moment we do, we can do, we are not there, we are still working and you mentioned this incremental improvements we're doing, but also some major improvements in how we work differently and we can do a hours a day with X people. So there is a lot which you cannot automize. I mean you cannot automize, drywalls, mudding, taping, grinding and all these things. So for this, people are needed and if you produce 20 homes a day, we still need to do this work for 20 homes manually in a very standardized way, but manually. So it creates jobs. On the other hand, what I mentioned is we will have this digitization, we will have robots and it creates jobs not only in the labor area, it creates new engineer jobs and we are currently actually hiring a industrial engineer.

(00:47:28):

We are hiring an IT engineer to create our MRP system and to drive this digitization and the digital twin of the operation that we can really improve it and we get data to work with it and do it. We will need create new jobs in sourcing because we need to find, and we are doing it at the moment, very actively sourcing material at the right place because material is a cost driver and we want to be affordable homes. So we create this kind of job. So beside operational jobs, there's a lot of high tech jobs coming related with how can our program a robot, how can I create my digital twins, how can I drive my MRP system, how can I and these things are coming.

David Monson (00:48:14):

Yeah, I love it When it comes to those jobs, I think a lot about the skills that people will learn and that will grow out of that. It's going to create a whole new generation of incredibly skilled folks, which I'm very, very excited about. And when we're leaning into advanced manufacturing techniques, those people that will take these jobs and get this experience will be on the cutting edge of a lot of these procedures. So I'm really, really excited about that. There was another question that came in that I thought was really pertinent. It was how are we financing this factory? So it's no secret that an advanced factory like this will cost a decent amount of money. So I'll maybe answer this one. So if you've seen the news earlier on our grants with Navajo Nation, the first one, the 24 million grant is for factory expansions that is going towards this factory 2.0 that does not cover the entire cost of it, but we have financing partners that are lined up that 24 million will go towards it.

(00:49:25):

We will finance the remainder of that in what some folks in the industry call a separate propco and an opco model. So for those that are invested and thinking about investing, the plan is we are not going to dilute our shareholders in order to build this factory. So we're not trying to raise equity money in order to finance and build this factory. We will do that separately, lease the building and the factory back so that we're taking good care of our shareholders. And I hope that answers the question there Michael, I had one last question on sort of maybe providing value back to some of our listeners. So for decades many have approached manufacturing through this idea of offshoring and outsourcing for years. I think I was under the impression if you want to manufacture anything, you go to China or elsewhere and manufacturing in the United States maybe wasn't as in fashion. You obviously are evidence to the contrary of that, but I would say recently we're definitely seeing a resurgence of manufacturing in the United States, nearshoring or reshoring. What crucial advice would you give to those that are aspiring to manufacture in the United States?

Michael Schmitt (00:50:56):

I think what won't work is that we try to copy what happens in Vietnam, in Thailand, in China, maybe even in rural areas in Mexico to bring back manual value add. This doesn't work because I'm pretty much convinced people don't want to do this work, number one and number two, it's too expensive. People cannot make a living from it. The competition is too high. So I see actually related to automation, related to digital twins and to artificial intelligence, what we can use also really cool meanwhile in operation, a really good opportunity to bring operation back to the states because with this means we are very competitive against low cost worker in other countries. This is the same what actually I'm a German, you can hear it on my maybe decent or esent slang and dialect and whatever you call it.

David Monson (00:51:59):

But Michael, I never knew, I never knew,

Michael Schmitt (00:52:02):

But Germany actually went down this way and it's the success story of the German manufacturing industry that with automation was keeping this holy grail of doing operation inside the country and not outsourcing it but do it intelligent, do it smart with automation, with artificial intelligence. It was actually the recipe to keep it there. And what we want to do in semi home is actually the same. So we want to automize and to digitize and to do everything what we can to be competitive and we keep manual work wherever we need it, but I believe particular for this industry we are in producing it in China or producing it in Mexico won't work. It doesn't work because of logistics. It doesn't work because of customer proximity. It doesn't work because of many reasons.

David Monson (00:52:58):

And we started there back at the beginning with Bob, we thought that's what was going to happen and quickly we decided that's not going to happen. Michael, I'm going to jump into some of the customer question or attendee questions and I want to set the stage for everybody. We have so many questions submitted in the live chat as well as before this. We will not get to everybody's questions now, but we are committing to, we have all of these questions recorded. We are committing to make sure that we write these all down, get them all answered. We will send out an update with answers on every single one of these questions. So I do want to make sure that you understand, we see them, we hear them, we are going to get you some answers. So I will go through a series of them with our remaining time. I know we're hitting our hour here, but there's a handful of these key ones that I think we'll want to answer live for everybody. So Michael, can you talk a little bit about timelines for factory 2.0? When are you thinking this will come online and Yeah, yeah, we'll start there.

Michael Schmitt (00:54:10):

Yeah, I mean first what we mentioned and what I think is absolutely right thing to do is do this processes manual and then assign them digital and automized and so on. This will take us a bit of time and I believe we need another 2, 3, 4 months to really understand how to build a automized factory. This does not mean that we don't start. So we start now on the design of the product and design, we call it design for manufacturability. Actually in my language, in parallel we try out which processes are working and then we most probably start somewhere July, August area to put the plans in place. And then it's not a big rocket science. We know a building takes a year, getting equipment in takes you a year. So from then on we have roughly 12, 13, 14 months for sourcing everything we need and then another three, four months to get these things running. And then we are there, I think it's somewhat in total around an 80 months period starting in July.

David Monson (00:55:24):

So to be clear, there's many of those things that can be happening in parallel as we're shooting for that end goal. It's not, they're stacking up and it's not going to take three or four years.

Michael Schmitt (00:55:34):

And I can promise you also one thing because I saw a lot of this factories of competitors not being successful. We are not going this way. No, I cannot say it now because I have a disclosure agreement. But I saw good and I saw not so good examples. I say it this way in Bosch, if we launched something new, we did it very properly and we had good ideas how to do it in out of 90, no, in 98 of 100 cases it was successful. So some cases were not, but then the whole setup was from the beginning not successful. For example in design of the product or whatever. So we will take care of the money. I'm not burning money and I'm German so I save money and don't spend it and I was running commodity my whole life. So I know what commodity is and how you'll be successful in commodity.

David Monson (00:56:34):

Well for those listening, you would not believe the barrage of spreadsheets that Michael has rained down on us. So we are in good hands here. He's a true operator. The next question here, I might just answer it and then Michael you can comment as well. There's asking questions about further expansion across the United States that maybe is getting a little bit ahead of our skis, but we are thinking about it and we do have sites that we are looking at and selecting across the United States. Our dream is that Zenni home units will never have to be transported more than one day trucking distance to get to their final destination. So we don't want to be building in page and shipping to Florida. That's not very cost effective to do that. And so be patient with us. But we do have sites mapped out that get us roughly coverage across most of North America in terms of a one day trucking distance. So we're excited for that, but by all means we are keeping our eyes on the ball for let's get this first one nailed and then we'll go from there.

(00:57:51):

Let's see, next question. Oh, someone is asking about when will this any home units be rolling out on Navajo reservation and where can I get an application? This is a great question. We are trying to nail down our timelines on delivery there. It is coming up very, very immediately as far as managing your application, that will be done through your local chapter. So it'll be handled there. And then yeah, we will be delivering those as rapidly as we can. So please get in contact with your chapter. Another question, what investment options are available for veterans? I'll just say that it's the same investment options that are open to everybody and anybody. So we believe strongly in having an army, if you will, of investors. And the value add that brings, we're now over 2000 investors strong through our Wefunder. That's the most easy way to invest in our campaign with a minimum of $250. But we do have additional opportunities for accredited investors investing over 25,000. And so through our website and I'll drop a link, you can talk with one of our investment specialists. We have opportunities through an opportunity zone fund as well with some tax advantages there that are awesome. And so yeah, we'll drop the links in the chat for anybody that is curious.

(00:59:40):

Let's see. Oh, here's a great question for you Michael. So someone, this is Roger Barger said the units look very well made. How often or in what ways do you apply quality control during manufacturing?

Michael Schmitt (00:59:57):

Yeah, first there is of course a process given by states and federal government and whatever. So you need to fulfill with this units a certain standard and the standard is audited by an external company until we can prove that we fulfill the standards. So this means our own team and this external company is currently on the units and they verify every single unit which is going out, that it is fulfilled and we have standards, we have standards defined how we check this, units, checklists and so on. And every unit is checked, every unit and every single item in the unit.

David Monson (01:00:38):

Amazing. Okay, so the links that I mentioned earlier, I just dropped them in the chat. So both to Wefunder and to our invest page on our website. I know we're a little bit over our time and I want to be sensitive to folks time in case people do need to drop. So just to close out again, just want to recognize so many of our amazing investors that have joined the call, thank you so much. It has made a huge impact. Again, we are closing that Wefunder campaign, midnight eastern time on April 29th. So we invite you to join the family at this exciting time and please send that link out to any folks that you think could also make an impact with us and that are interested in solving the housing crisis with real scalable solutions. Something else that I can mention. So earlier today we did launch our Zenni home ambassador program.

(01:01:35):

For those that have invested, this is a fun way. We've actually had some investors that have gotten involved and brought their skills to the table to help us grow. And so this program will give investors a chance to actually play an active role in our progress. So you'll have access to exclusive tools and resources that empower you to contribute directly to our company's success, which is kind of a fun thing. You not only get to invest, but actively participate in our growth. So thank you again. It looks, I hope you guys enjoyed the update today. I hope you enjoyed meeting Michael Schmidt. This certainly will not be our last discussion with him. We hope to be bringing valuable to you guys regularly. So be on the lookout, sign up for our email list and we will host more of these in the future. So thank you everybody. Thank you.