CALGARY,
AB, May 25, 2023 /CNW/ - 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 first quarter results
ending March 31, 2023. 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. The second call for
European investors at 8:30am ET,
tomorrow, Friday, May 26 has been
cancelled since Mr. Krakiwsky will be conducting meetings in
person.
"Nanalysis reported consolidated revenue of $4,674K for the first quarter of 2023," said Sean
Krakiwsky Founder and CEO of Nanalysis. "We planned and expected
K'Prime's CATSA airport security contract and Quad's revenue to be
modest in the quarter as those business lines are in the early
stage of roll out, but we underperformed on the rest of our
business segment revenues, particularly in Benchtop NMR.
Management is not satisfied with this overall financial result and
has taken corrective action as identified below. That being
said, I remain confident about the Company's prospects and long
term vision."
Financial and Operational
Highlights1
Financial highlights for the three months ended March 31, 2023:
- For the three months ended March 31, 2022, the
Company reported consolidated revenue of $4,674K, a decrease
of $880K or 16% from the comparative period in
2022. This includes $3,034K in
product sales and $1,640K of service
revenue, predominantly related to security services.
- Gross profit margins on product sales were 40% for the three
months ended March 31, 2023.
This was due to lower manufacturing department utilization,
warranty costs of $135K related to
the same customer service issues discussed in the December 31, 2022, financial statements, and
higher weighted average costs due to post-COVID inflationary
increases and supply chain issues affecting raw materials
pricing. The Company is taking several steps to manage its
margins and mitigate further materials cost pressure going
forward.
- Service gross profit margins in the quarter were (53%) 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 as prepaid expenses. Management also
ramped up its training program for security service employees in
conjunction with taking on more airports, incurring $971K of one-time training and related costs for
new CATSA project employees that were expensed in the
quarter. Ongoing training costs will continue into Q3, but
are then anticipated to drop to considerably lower levels.
- (Loss) / Income before other items for the three months
ended March 31, 2023, was ($3,547K) versus $210K compared to the
same period last year.
- Net loss for the first three months of 2023 was $4,320k as
compared to the three-month loss for March 31,
2022, of $1,492K.
- The Company had cash on hand of $1.8
million, an undrawn available credit facility of
$2.2 million, working capital of
$4.1 million, and undrawn government
contribution funding of $2.2 million
as of March 31, 2023.
- The Company has signed a non-binding term sheet for two-year
committed $15 million senior secured
credit facilities with ATB Financial. The new credit facilities
contemplated by the term sheet will, upon and subject to the
execution of definitive credit documents and receipt of applicable
regulatory approvals, replace the Company's existing demand senior
secured credit facility with another lender. The new facility is
expected to provide improved financial flexibility to help the
Company manage its operations and current growth initiatives.
- Closed a $4.1 Million equity
private placement on May
3rd after upsizing it from the original
$3.5 M announced April 21, 2023, and included insiders and
directors.
Recent strategic and operational highlights during and after the
first quarter of 2023 include:
- Benchtop NMR: The Company is still within the
transition period of integrating the K'Prime and Nanalysis sales
organizations for benchtop NMR and has experienced some sales
slowdown due to this. Management continues to believe that the
sales team and systems changes will benefit overall long-term sales
performance. Additionally, the Company may be experiencing a
temporary slowdown caused by the reduction of capital equipment
spending due to concerns over economic slowdown in the USA and worldwide. Management continues to
monitor this situation closely. The Company is also continuing to
explore application and valued added distribution deals to augment
revenue from direct sales.
- 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, as of today, has a
presence in 44 airports and is expanding. Complete
countrywide rollout is expected to be completed by
September.
- Quad Systems: On April
18th the Company debuted and presented the full
400MHz full high-field NMR product in collaboration with Quad
Systems, of which the company owns 43%, at the prestigious ENC 2023
conference. The Company expects Quad's sales to gain momentum in
the second half of 2023.
- Medical: RS2D began work on a large pre-clinical
MRI project during the first quarter but has not yet reached the
project milestones required under IFRS to allow for revenue
recognition in Q1 2023. It is expected that revenue
recognition on this project will begin in later 2023.
- 3rd Party Equipment: 2023 has started
out slower than what was experienced in 2022, and the Company
believes that it is a result of customers' concerns regarding a
possible recession in the United
States and Canada.
Comments and Outlook
"The first quarter was busy with focus on training and rolling
out of the CATSA project," said Sean Krakiwsky, Founder and
CEO of Nanalysis. "We have hired and trained nearly 92% of
the workforce needed and we are servicing over 50% of contracted
airports now, with all locations coming online by September.
Additionally, we are already fielding requests for additional
service contracts."
"We continue to innovate and improve our core benchtop NMR
products with added features and functionality. Lastly, we are
excited to add High Field product offerings through our launch and
collaboration with Quad Systems AG," added Mr.
Krakiwsky.
"Despite Q1 revenues not meeting our expectations, I continue to
believe that 2023 will be a positive and important year for
Nanalysis as we digest our acquisitions and progress in creating
long-term value from our more resilient business," said
Sean Krakiwsky. "We continue
to be a leader in benchtop NMR and believe we will continue to hold
that position through innovation and improvements to our
technologies."
"We expect to provide solid growth with services and products
working synergistically together, as high field NMR, MRI, and
benchtop NMR all require global service support. We are
striving to reduce the lumpiness of our revenue quarter to quarter,
and we feel like we are much better positioned to withstand any
macroeconomic headwinds that may arise. Out of an abundance of
caution, and in light of possible global economic slowdown, the
Company has begun a cost reduction program, which will continue
until headwinds subside. I have full confidence that the medium and
long-term business prospects for our Company remain very
attractive, and therefore our cost reductions will have a
stay-the-course nature to them, and only be meant to conserve cash
in light of potential lower short-term growth numbers," 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/aJQmbEZXR2l 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 # 648443.
Additionally, the Company has cancelled the Q&A session for
its European investors that was scheduled for 8:30am ET tomorrow, Friday, May
26th. The Company intends to resume these sessions
for future calls.
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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1 Financial
Highlights should be read in conjunction with the Company's Q1 2023
Management Discussion and Analysis as well as the Q1 2023 Interim
Condensed Consolidated Financial Statements.
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SOURCE Nanalysis Scientific Corp.