Nanalysis Reports Fourth Quarter and Full Year 2022 Results

CALGARY, AB, April 27, 2023 /PRNewswire/ - Nanalysis Scientific Corp. ("the Company", TSXV: NSCI, OTCQX: NSCIF, FRA: 1N1), a leader in portable NMR machines and MRI technology for industrial and research applications, releases its fourth quarter and full year results ending December 31, 2022. Chief Executive Officer, Sean Krakiwsky and Chief Financial Officer, Randall McRae will host a conference call at 5 P.M. Eastern Time today to discuss the results. A second call will be held for European investors at 8:30am ET on Friday, April 28th. All interested parties are invited to join these calls. 

"This past year was pivotal for Nanalysis on our path to becoming a fully vertically integrated scientific instrumentation company," said Sean Krakiwsky, Founder and CEO of Nanalysis.  "Our core benchtop NMR business continues to grow as we continue to improve and innovate our products.  We have added to our product offerings with High Field NMR in collaboration with Quad Systems AG and with the acquisition of K'Prime Technologies we added a sales and service organization that led us to win the $160 million Canadian Air Transportation Security Authority ("CATSA") project.  The CATSA project itself enables us to leapfrog ahead with a revenue generating service organization as we roll into the five-year contract and potentially longer.  And finally, we continue to see the MRI portion of our business progress with two million dollar plus wins in 2022." 

Financial highlights for the twelve months ended December 31, 2022:

• The Company reported consolidated revenue of $24,821K, an increase of $8,778K or 55% from the comparative period in 2021. This includes $21,588K in product sales and $3,233K of service revenue related to our security services business.
• Gross profit margins on total sales was 45% for twelve months ended December 31, 2022. This was the result of increased training costs of personnel for the CATSA airport security project, increased personnel and training in Nanalysis' manufacturing group to increase manufacturing capacity, and an increase in costs due to worldwide supply chain constraints and inflation. Management expects gross profit margins to improve as investments in manufacturing improvements continue, sales levels increase, and the CATSA airport security project continues to phase-in to full capacity. There was also a specific warranty replacement issue that affected gross profits in the second half of 2022.
• (Loss) / Income before other items for the twelve months ended December 31, 2022, was ($3,935K) versus $1,905K compared to the same period last year.
• Net loss for the twelve months ended was $9,915K as compared to the loss for December 31, 2021, of $1,772K.
• The Company had cash on hand of $3.5 million, an undrawn available credit facility of $3.9 million, working capital of $8.4 million and undrawn government contribution funding of $3.5 million as of December 31, 2022.

Financial highlights for the three months ended December 31, 2022:

• For the three months ended December 31, 2022, the Company reported consolidated revenue of $7,203K, an increase of $2,126K or 42% from the comparative period in 2021.  This includes $5,893K in product sales and $1,310K of service revenue related to security services.
• Gross profit margins on product sales were 36% for the three months ended December 31, 2022.  This was the result of an increased manufacturing workforce whose associated wages and training costs began impacting gross profits in the second half of 2022. Current period gross profits were also affected by K'Prime's product distribution business whereas in the comparative period only Nanalysis manufactured equipment is in product sales. As this workforce gains experience and sales continues to grow, Management expects gross profit margins to improve.
• Service gross profit margins in the quarter were (42%) as the Company accelerated its training schedule for the CATSA project and began expensing wages related to airports that were in service.  Wages related to airports not yet in service continue to be deferred to prepaid expenses.  Management expects service gross profit margins to improve significantly as the CATSA airport security project is phased-in to full capacity.
• (Loss) / Income before other items for the three months ended December 31, 2022, was ($2,532K) versus $413K compared to the same period last year.
• Net loss for the three months ended was $3,292K as compared to the three-month loss for December 31, 2021, of $658K.

Recent strategic and operational highlights during and after the fourth quarter of 2022 include:

• Funding received from Prairies Economic Development Canada: The Company received its first $1.5 million in funding from the Business Scale-up Program. This program will provide Nanalysis up to $5.0 million of funding in the form of an unsecured interest free loan. The program is designed to help fast growing tech firms scale-up and enter new markets.  At April 27, 2023, the Company has drawn $2.8 million on this facility.
• Security Service: In November 2022, the Company began providing services under the CATSA airport security contract and continues to execute its phase-in plan for the entire project.  During the first quarter the Company has accelerated its phase in and now has a presence in 39 airports and is expanding.
• Manufacturing: Nanalysis has also invested in growing out the manufacturing team allowing the Company to meet expected growth in demand in 2023.  Some of the additions included Nanalysis investing in a state of the art five axis machining center and wire electrical discharge machine. This has allowed the Company to significantly reduce manufacturing time on certain products.
• Quad Systems: The Company recently launched the full 400MHz full high-field NMR product in collaboration with Quad Systems, of which the company owns 43%. Sales have continued to increase, and the Company expects Quad's sales to gain momentum in the second half of 2023.
• Announced $3.5 Million Private Placement: The Company announced April 21, 2023, the intention to close a $3.5 million private placement in order to bolster the Company's balance as it enters the final stages of the CATSA project roll out.

Outlook

"Since we went public in June of 2019, we have executed on the plan that we communicated to investors. This plan has entailed new products, four acquisitions, and a growing direct sales organization, as well as a burgeoning service business. While the road has not been easy, we believe we have created tremendous intrinsic value. We are very optimistic about the next five years of our business, and are committed to staying the course and overcoming any adversity we face. We continue to focus on improving our tactical execution, especially with regards to our sales organization, and we are prepared for any potential headwinds if recessionary fears in our industry manifest themselves. In 2023 we are committed to continuing to strengthen our direct sales pipeline for our products, as well as establishing some vertical market partnerships.  We are laser focused on completing the roll out of the CATSA airport service contract to full run rate at all 81 Airports.   With the launch of the full systems at ENC in Monterrey California last week, we look forward to and will continue to work towards the initial sales of the full multi-module high-field NMR product via Quad Systems," said Sean Krakiwsky.

"The value that has been created by our recent acquisitions and resulting business from those, like the CATSA project, have positioned us well for growth and well on the path to becoming the full service global scientific instrumentation company of our vision, as high field NMR, MRI, and benchtop NMR all require global service support" concluded Mr. Krakiwsky. 

Conference Call

Investors interested in participating in the live full year call can dial 1-888-664-6392 or 416-764-8659 from abroad. Investors can also access the call online through a listen-only webcast here:  https://app.webinar.net/6QdyAgwARmo or on the investor relations section of the Company's website HERE.

The webcast will be archived on the Company's investor relations webpage for at least 90 days and a telephonic playback will be available for seven days after the conference call by calling 1-888-390-0541 or 416-764-8677, conference ID #931980.

Additionally, the Company will be hosting a Q&A session for its European investors at 8:30am ET on Friday, April 28th which can be accessed by the following link: Click here to join the meeting or call in (audio only) +1 437-703-4522, Phone Conference ID: 372 224 118#.

About Nanalysis Scientific Corp. (TSXV: NSCI, OTCQX: NSCIF, FRA: 1N1)

Nanalysis' business is what we term "MRI and NMR for industry". The Company develops and manufactures portable Nuclear Magnetic Resonance (NMR) spectrometers or analyzers for laboratory and industrial markets. The NMReady-60™ was the first full-feature portable NMR spectrometer in a single compact enclosure requiring no liquid helium or any other cryogens. The company has followed-up that initial offering with new products and continues to have a strong innovation pipeline. In 2020 Nanalysis announced the launch of its100MHz device, the most powerful and most advanced compact NMR device ever brought to market.

Nanalysis' devices are used in many industries (oil and gas, chemical, mining, pharma, biotech, flavor and fragrances, agrochemicals, law enforcement, and more) as well as numerous government and university research labs around the world. The Company continues to exploit new global market opportunities independently and with partners.

In 2022 the Company acquired K'(Prime) Technologies Inc. (K'Prime), a North American sales and service company which provides sales services for scientific instrumentation for pharma, food, chemical and oil & gas customers, as well as imaging systems for security applications.  K'Prime's service organization provides airport and commercial security installation and maintenance solutions across North America.

Additionally in 2022, the Company acquired a 43% ownership in Quad Systems AG ("Quad Systems"), a Zurich-based Nuclear Magnetic Resonance (NMR) company focused on high-field NMR for pharmaceutical and other vertical markets.

Notice regarding Forward Looking Statements and Legal Disclaimer

This news release contains certain "forward-looking statements" within the meaning of such statements under applicable securities law. Forward-looking statements are frequently characterized by words such as "anticipates", "plan", "continue", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed", "positioned" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this news release. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The Company is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.

Neither TSX Venture Exchange nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release.

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SOURCE Nanalysis Scientific Corp.