Thank you everyone for joining us here today with Nanalysis. Just a few comments before we get going here. The company is presenting. I'll be asking lots of discu-- questions, and we'll be discussing things. There is a Q&A option for the audience. Probably at the bottom of your screen there's a little Q&A button. We highly encourage you to drop in any questions you have for the company. We see the text messages. They're essentially anonymous. We're not gonna call out your name or anything. These webinars and interviews always go way better if we get audience questions. Audience typically has great questions to ask and good insight on the company. I hope everyone participates. With that, I'll get my introductory remarks going here. Good day. I'm Martin Gagel with Market Radius Research. It's Wednesday, June the 21st. First day of summer, I guess. To celebrate that, we've got CEO Sean Krakiwsky and CFO Randall McRae of Nanalysis joining us. Nanalysis is a leading provider of nuclear magnetic resonance technologies with compact NMR spectrometers and MRI technologies and services for the scientific and industrial and medical markets. They're here to give us an update and a look into where the business is and where we're going. Please remember, this is neither a recommendation or investment advice. We're here to learn about the company. Sean, Randall, thank you very much for taking the time to talk with us and give us an update on Nanalysis. It's been over a year and a half since we've chatted on the platform, it's great to have you back. A lot has changed since then. Why don't you bring us up to speed? Well, thanks, Martin. It's absolutely fabulous to be here. Yeah. Thanks for having us, Martin. Looking forward to it. Yeah. You know, when I founded this company about 14 years ago, we had a vision to one day disrupt the MRI space and make it work the way it should work, right? You know, any one of us on this webinar should be able to make an appointment at their local pharmacy. Go sit down in a nice chair, have an MRI of their prostate or their ovaries. Should be connected to the cloud, driven by AI, accessed through a trusted service, and then you should get a pleasant message saying, you know, "Nothing wrong with your prostate. No need to consult your doctor at this time. Please consider doing this again a year from now." That was sort of the grand vision. Well, of course, we embarked on with a lot of excitement. We have succeeded at moving towards that vision. One of the things that I wanted to do as a veteran entrepreneur was, you know, before we actually got to where we have human medical imaging products that are FDA-approved and selling into the healthcare industry, I wanted to build a solid business foundation around that. You know, that's sort of the unique twist to our story, is that MRI machines are also used for industrial analysis. In fact, it's the gold standard of industrial analysis. That sort of brought me to an executable mission to start building a real business around that vision. We do seek safe harbor for forward-looking statements. Yeah, we feel that, you know, we're absolutely a very compelling investment story. We're a market leading category-creating global technology company, you know, the category being portable MRI machines for industrial analysis and the vision towards the medical imaging product. We've experienced high year-over-year growth. You know, Martin, when I first met you, let's call it 2.5, three years ago, to now, we've tripled our revenue and substantially grown our overall business, including our economic moat. As I sit here talking to you today, if you ask me, "Sean, what's your objective for the next 2.5, three years?" I'd say we're gonna do the same thing. We're gonna endeavor to triple our revenue from where we are now, which is about CAD 25 million in annual revenue. The difference between the next three years and the last three years is that there won't be dilutive acquisitions. We'll do so with intentions to be highly profitable. We're gonna talk more about how we're gonna get to profitability and triple our revenue over the next several years. We started out as a sort of sexy technology product company. We definitely are that. Our DNA is still the same as when I first met you. We've added on some very sticky recurring service revenue as a complementary part of our business as well. Just a little bit about the management team, you know, just absolutely fabulous, experienced CFO, whom you'll get a chance to talk to here towards the end of the presentation. Our CTO, Julien Mueller, came to us through one of our acquisitions about two years ago. And he's got a real unique vision for the future of magnetic resonance. I feel we're a compelling valuation story as well as a growth story, where we're trading at right now, 100 million outstanding shares and where our stock is trading. You know, it's approximately a CAD 50 million market cap. As I said before, our 2022 revenue is CAD 25 million. Sorry. Julien Mueller, your CTO, you got him through the RS2D acquisition? He sort of rose to a corporate-wide role? Yeah, that's absolutely right. About three or so years ago, we were exploring licensing technology from that company. We were gonna design their electronics and low-level software into our next generation technology platform and products. During that activity, we really hit it off with that founder, and also their CTO, and he gained the respect of our entire R&D organization. At some point when we started talking about, you know, coming together rather than just them being a supplier, he was a natural fit for our CTO. That's kind of been one aspect of philosophical aspect of our acquisitions, right? Is it's not a roll-up, it's strategic bolting on of businesses, including the key people that come with those businesses. Yeah, you know, great question on Julien. I think most of you know my background a little bit. By education, I have a master's degree in electrical engineering. Professionally, I'm a technology startup guy, this is my third tech startup. My first one was internet software, associated with wireless location services on phones. My second one was high-performance computing. Probably the first person in the world to develop a commercial, professional computing application using NVIDIA graphics cards. They weren't called GPUs in those days. I hacked into them using OpenGL, which is a graphical interface for gaming, but I used it for professional applications like seismic data processing and so on. I got a strategic investment from NVIDIA Corporation in approximately 2006. That was my second business. You can see that with this magnetic resonance company, it's consistent with my past of, you know, starting companies from scratch, building a great team, and then scaling them. Little bit about me there. We also have a senior independent, you know, very high-quality board of directors. This is a slide to get calibrated on, you know, what we mean exactly by magnetic resonance. I think a lot of people in your audience will understand that magnetic resonance exists in hospitals, and human beings go in them, and there's images created, and a radiologist looks at those images. The technology is also used to determine what molecules are in a substance of interest. For example, a pharmaceutical company developing a new drug, or a mining company wanting to analyze their lithium brine pools. With the scaffolding and the two gentlemen on top of them, what they're doing is they're putting their substance of interest in a 7 in glass test tube, a standard test tube, and they're putting it in this cylindrical module, which is a magnet. It's the same superconducting technology as in an MRI machine, and they're determining exactly what molecules are in that substance for R&D purposes, QA, QC purposes, and so on. So we're the only company in the world that's sort of leveraging the similarities between the technology in MRI machines and the technology in magnetic resonance for industrial analysis, building a real business today around the industrial analysis part because it's unregulated in the FDA sense. But then we have a strategic plan to one day launch a very exciting, smart next-generation MRI product for human medical imaging. What our company does is two things, is we've miniaturized magnetic resonance technology with real products that we're selling in the marketplace today. More broadly speaking, we're democratizing magnetic resonance so that it's not an exotic machine either in a specialized room in a hospital or in the basement of a pharmaceutical company, rather is proliferated all over the place. There's several aspects to not only miniaturizing, but also democratizing magnetic resonance technology. That's what our company does. This next slide here is a look at the real products that we sell today and have been for years. The products on the top left are the full-blown systems. In other words, magnet, electronics, low-level software, and end-user software. They're our flagship products, where most of our patents are associated with. We sell them to pharma companies, food companies, petrochemical companies, Homeland Security, the DEA, a lot of universities, and so on. That's sort of emblematic of the miniaturization initiatives that we've had. You know, they're the size of a toaster or a microwave oven as opposed to a gigantic expensive machine that requires liquid helium, and so on. Our products do not require liquid helium, so that's a big growth driver for us. The product on the top right is, in fact, a medical imaging product, but as you can probably determine from the picture, it's not the full system. It doesn't include the magnet. It includes the electronics and low-level software, the same electronics and low-level software that's in all of our products. We built a common technology platform around this notion that the math and physics is exactly the same for magnetic resonance for medical imaging versus magnetic resonance for industrial analysis. We sell that on an OEM basis to Tier 2 preclinical MRI companies. We sell it to a lot of organizations that are developing next-generation MRI technology, for example, to detect smaller tumors earlier. We have a really exciting European Union project in that regard, and we're incubating that MRI business unit. It's not a big part of our revenue. Let's call it, you know, CAD 2 million, CAD 2.5 million of trailing 12-month revenue. We're very active with it, and our scientists on that side of our business work very closely with our scientists on the industrial analysis side of our business. Sean? Yeah, sorry. Go ahead, Martin. The physics between an NMR and an MRI are essentially the same. They're responding and sending off some radiation, you figure out what it is. An MRI is imaging where you have multiple, I guess, spatial points, so you can kind of create an image, and the NMR is you've got one sample, and it's telling you kind of what's in that sample instead of giving like a 3D or a 2D picture. Am I kind of right on that? You, you're absolutely right. The one small point that you made, you used the word radiation. There is no radiation associated with magnetic resonance. The energy that's emitted from the atoms is just RF energy, right? It's the same energy as you'd have on a cell phone or on a garage door opener. That energy is emitted from the atoms, and then you process that energy, which comes to you in a very particular way with codes, and that tells you what molecules are in that substance, right? That application is also or that physical phenomenon is exploited to create an image. We do create images with our benchtop NMR spectrometers. It's a little bit strange to sort of think about, when we put a sample in there, we can create an image of that sample, or we can create a frequency spectrum, which is which you would think of as spectroscopy. You can do both. If you go to the most hardcore magnetic resonance conferences in the world, like one we were just at in Monterey, California, and you're sitting beside, you know, Nobel Prize winners from Princeton, they do not distinguish between magnetic resonance for spectroscopy and magnetic resonance for imaging. It's the same math and physics. In fact, this is a sort of a key kind of bridge into the vision. The reason why MRI is so important is not because it creates images. It's important because in the future, MRI machines will also analyze cells. Not the radiologist analyzing cells, but the actual hardware and software will analyze cells. That's the link, that's the future of MRI down the road, is you won't need a radiologist, or the radiologist will be, you know, an extra layer, but the actual technology will be able to interpret the nature of cells and so on. If you think about that a little bit, it's pretty exciting about what the future capabilities of MRI will be. Just if I put my head in an MRI to scan for a brain tumor, they see a blob there. In the future generations, they may actually be able to not just say, "Hey, there's a blob here," but that here are some characteristics that maybe makes it look tumorous or not cancerous or something like that. That's absolutely right. You'll be able to identify the nature of the abnormalities. You know, again, this is sort of our grand vision. You know, I'm not forecasting revenue on this idea in the next, you know, couple years, the idea is that you'd be able to analyze the tissue without doing a biopsy. That's the potential of magnetic resonance, that's the link between industrial analysis and our grand vision that I talk about right now. Interesting. All right. Thanks. I just wanted to sort of talk about our great products. You know, we have markets, products for the sort of chemical and food part of the opportunity, and then we have higher-end products that are more targeted at human blood and urine and proteomics, which is very common in virology research and so on. Really great technology and products that we manufacture ourselves with proprietary manufacturing. The new part of our company that is different than what I would have talked to you last, Martin, is that we've added on direct service capabilities with lucrative contracts, one in particular, that our CTO, that our CFO is gonna talk about and give more detail on towards the end of this presentation. I've highlighted by reference to that service contract here at the bottom of this slide. You know, when we started the company, we didn't wanna just be a technology company and then rely on other entities for our future. We built out proprietary manufacturing, not just final assembly, but proprietary processes such that if you took our product apart in China or India, you had 10 PhDs that were smart enough to understand our patents, you still wouldn't be able to reverse engineer the technology unless you knew exactly what we were doing in our manufacturing facility, which is right here in Calgary, Canada. Our R&D scientists and engineers develop a massive amount of intellectual property every day in the form of proprietary firmware, software, hardware, and other product characteristics. Really, you know, excited about the, you know, the technology DNA of our company. Sean, sorry. Yeah. Like, within the whole organization, I always used to enjoy it. Like, I forget the stat out of Calgary, but roughly how many PhDs and master's scientist types do you have on staff? Yeah, I've lost track of the exact number, but the number of PhDs is well over 30, you know, and, you know, 40 or 50 master's degree people, and then really, you know, a truckload of high-quality engineers and scientists with undergraduate degrees. You know, in our current incarnation of our services business, we have a lot of field techs and stuff too. You know, we used to be, you know, very heavily weighted towards the PhDs, we're now becoming a full-blown operating company. We also have, you know, the field workers and, you know, manufacturing techs and stuff to complement kind of the high-end talent and experience. All right. Yeah. This is just a slide that's emblematic of what I've been talking about the future of magnetic resonance. You know, I always say, you know, if you have a PhD in chemistry or if you're a radiologist, you can interpret the data on the left that is created by magnetic resonance machines, our machines in particular in the case of this slide. Our partners and our customers are telling us that in the future, they want the output of our machines to look more like the data on the right. In fact, we're doing those types of things today. I've mentioned, for example, real customers that use our products to analyze lithium brine pools, and their field techs just see one number, percent lithium in this sample, right? That's the way magnetic resonance is going, and we're really excited about. I call it the appification of magnetic resonance. Really exciting market opportunity. You know, a huge amount of money is spent every year on scientific instrumentation or test and measurement equipment, if you will. You know, everything in the modern world is tested and measured for whether it's innovation for health and safety, quality control, and efficient manufacturing. It's just going more and more in that direction. Really excited about the general market space that we're in. The addressable part of this opportunity for us, we think is in, you know, the CAD 2 billion-CAD 3 billion range. We think that with ongoing miniaturization and democratization that, you know, our TAM will grow in this very large market space. In terms of the exact customers that we sell to, we sell to the biggest companies in the world, like Pfizer and DuPont and BASF and Eli Lilly, but we also sell to two-person little biotech startups. We sell to the most important universities in the world like Oxford, in England and MIT and Harvard, but we also sell to little community colleges in rural Mississippi or rural India. By the way, in those places, there are no liquid helium trucks driving around to keep superconducting magnets cool. The cryogen-free part of our product family is a big growth driver for us. Sean. Sorry. Yes, go ahead, Martin. I just always thought looking at the miniaturization and the democratization of your products is similar to how like computers went from mainframes to minis to PCs. Well, initially they were like, "Who wants a PC on their desk? Who wants an NMR?" Then as the price goes lower, it's like, "Hey, I could do this cool thing or that cool thing with it." So it's kinda with the price elasticity of it's kinda hard to see what the market's gonna look like in 10 years when the software gets better, the technology, and it gets cheaper, I guess. No, I view things exactly the same way, and it's about the price elasticity aspect of it. Of course, I really do like the computing analogy because if people really want to get what we're doing and I'm not there to answer a question when they think about it, they can think about the computing analogy because the question and answers are very similar. A big part of the spread of PCs, right, is third-party software and applications. Well, it's the same thing in scientific instrumentation and the same thing with NMR and MRI machines. A big growth driver is going to be software partnerships and third-party applications. You know, if there's only a small number of mainframe computers in the world or there's only a small number of big NMR machines in the world, why would a software ecosystem evolve, right? Now if you can get hundreds of thousands and millions of these devices out there, now all of a sudden, software ecosystems evolve, and people have more utility and so on and so forth. That's the way, that's definitely the way I view our business as well. You know, several years ago, I had a partner that's a very large international industrial technology company come to us with a vision about a very tiny, magnetic resonance devices that, you know, for example, you could plug into your iPhone, and use iPhone for some control processing, but also access to the cloud, and it would be perfectly mobile in that regard. You know, that was something that came to me. That wasn't something that sort of I came up with, but that's just an example of where a lot of people think this stuff can go down the road. In the meantime, we're just building a quality business with real growth and, in the next couple of years, real profitability. Right. People have asked me about our sales organization. You know, we had an acquisition that we closed in January 2022 of a sales and services company, and that changed the way we thought about our sales organization and the sort of team sport nature of sales to take us from sort of a small tech startup kind of mentality to a larger scalable kind of mentality that would be deployed by companies like PerkinElmer or Thermo Scientific or Agilent. In the last year, we've been evolving the way we do sales. This is just a snapshot of how many people on the ground we have in the United States and Canada, how we sell internationally. We're for us sort of direct or tight partnerships between direct and external sales reps works well. Sort of uncoupled distributor relationships haven't worked that well for us, so we're going more and more towards the sort of direct route or the tightly coupled direct with partnerships route. Yeah, we've got some really exciting kind of value-added reseller opportunities to go deep in verticals. You know, one of the, one of the powerful aspects too, which I've kind of woven into this discussion, is that magnetic resonance is a general in nature technique. It can analyze a lot of different things. For the most part today, our customers use it as a general-purpose analyzer. The same customer will, for the most part, will analyze a drug or a food item. They don't use it as a single-purpose analyzer. As we move forward, we're working on vertical market partnerships with companies that, you know, are only in the food industry, are only in the beverage industry, are only in the petrochemical industry, and they're gonna take our products deep into their vertical market. That's an important part of our growth strategy as well. Sean. Yeah. Sorry, just that- Go ahead. ... that the sales organization, that's the K'(Prime) acquisition you're talking about that gave that rolled out on the services side. That's correct. I guess you kind of addressed it as well 'cause you're going more direct through the sales organization now. I guess at least in North America, K'(Prime) was North American-focused or exclusive, correct? That's correct. You kind of got rid of your distributors or your middlemen there and then went direct to customers, using the K'(Prime) distribution? Yeah. We sort of evolved them. I mean, to say we got rid of them is maybe that language is a little bit too strong. Yeah, we definitely evolved in a new direction with the K Prime acquisition. Okay. Where the distributors are more sort of traditional distributor model, but you guys are in charge of making the sales calls and much more taking the sales process in your own hands? Yeah. That's right. Then K'(Prime) introduced a model where they become more like lead generation type people, but that don't have to handle the product 'cause, you know, they're not specialists in that product. We are. They don't have to invoice the customer and that sort of thing. They get, you know, a 6% commission kind of a thing. That was one new dimension to it as well. You know, we changed our compensation structure with our existing salespeople, so larger quotas, smaller territories, which is a sort of normal evolution when you go from a small tech company to a, you know, a large company with... You know, today we have, you know, over 230 employees kind of thing where, you know, if I talked to you four or five years ago, we might have had 30 employees. Yeah. Okay. Just before I kind of turn it over to Randall here in a second, I just wanted to highlight, you know, how we built this company from scratch. The original team that I put together 14 years ago is still all with the company, executing on our mission and driving towards our vision. We've just, you know, we've raised quite a bit of money over the years. We've, you know, layered on fabulously talented people as we've gone from phase to phase in our business. We went public in June of 2019. We've done four acquisitions since then and integrated them into our business. Most recently, a company in Switzerland called Quad Systems that we've been working with as a OEM partner. Now they're taking us upmarket into human blood and urine. Also the K'(Prime) acquisition, which is the entity that won this CAD 160 million scientific instrumentation service contract. It's just been a fabulous 10 years, but we think our next 10 years are gonna be even better. We've got all kinds of exciting catalysts coming down the pike. Like I said before, you know, I intend to, you know, endeavor to triple our revenue in a profitable way over the next sort of two and a half years timeframe. You know, our company is, y es, it started out about technology and products, but now it's about products and services working synergistically together. Because this particular contract win that we signed about a year ago is such sort of a big part of our company, sort of disproportionately large, just because it was opportunistic and lucrative, and it's consistent with our vision of having direct service in every major market in the world, I wanted to talk about this in particular. I'm gonna let our CFO talk about that. He's heavily involved in the financial management and operational management of this very important contract. With that, Randall McRae, our CFO. Thanks, Sean. Looking at this contract, we're about a year past signing, a little more than that, and in our phase-in period. Currently, we've got an active presence in 81 locations for the customer, which is the entirety of the service. We're still ramping up our services available in those locations, that's gonna continue on through the next part of 2023. To step back a little bit, this is a CAD 160 million service contract to provide maintenance services and other ancillary services to the Canadian equivalent of the TSA. This is a sticky recurring revenue contract where we're in there every day servicing airports across Canada, 81 locations, as I mentioned, and lasts five years. The contract actually has two renewal options in it at the customer's discretion as well, it has a theoretical life of 15 years. We've, we've been generating revenue on the contract since late 2022, and we're expecting to have revenue reach, you know, around CAD 25+ million a year as we get into the full operation stage of the contract. Like a lot of service businesses, this is a business that relies on a technically skilled labor force. We've got some great people. We've hired 115 out of our project, which is over 90% of our projected hiring for the contract. We're gonna generate strong margins on this. We've got a good handle on what this type of business should do. Our modeling is tracking very well to what, to both, you know, industry standards as well as our goals in terms of what we want to generate. It's gonna allow us to have a highly skilled technical labor force that we can not only work on this contract, but redeploy those individuals to other types of service work, especially in the major centers across Canada, where, you know, a large portion of the workforce will be located. Is the service you're providing essentially servicing the X-ray machines and the body scanners and the test strips where they rub on your laptop and that kind of a thing? That's exactly right. Servicing, installing, commissioning and decommissioning, a whole range of services related to that. It really works well with our business model. You know, we're a scientific equipment company, and we're servicing some of the most complex scientific and detection equipment on the face of the Earth, and it only increases in its complexity. One of the things that I think makes us attractive to the customer is the fact that we do have, as Sean said earlier, a huge amount of intellectual resource. You know, we can solve problems that might come up that people haven't necessarily seen working with the original manufacturers, but also with our highly skilled tech workforce in the field and our highly skilled Nanalysis subsidiary as well that brings forth a lot of technical knowledge in detection and analysis. All right. The phase-in period is ending soon. The phase-in period is you couldn't start one Monday a year ago and say, "Okay, you're now covering all the airports." It was slowly rolling it out to the things. You're almost rolled out to all of them. Sort of cliches, the kind of the heavy lifting's been done. The investments have been made, and now it's once you're all in and a few other sort of learning hiccups, presumably along the way, you should be in full force and then probably go more to the optimization phase once you kind of figure out what's working and what's not working so well. That's exactly right. I'd say the majority of the heavy lifting is done at this point. You know, we've hired most of our staff. There's a ton of training that has to go into this, so that's the last phase here, is to get everybody trained up and get them all fully deployed to where we can cover every type of service the customer wants, which, you know, the service is quite broad. There's a preventative maintenance component, and there's what we call corrective maintenance. That's a break-fix model. 'Cause of course, as equipment ages, it tends to break, and it breaks regularly, and we need to be able to respond quickly. You can't have flights being delayed or airport travel going down because your body scanner's not working properly. We've got to be out there and fix it in a timely fashion. That's, that's the second component. The third component is actually working on additional projects and upgrades that the customer has ready to go. As we have everybody fully trained and certified by the equipment manufacturers, then we're ready to take all of that on. All right. It sounds like it’d be the type of business where you describe it here as CAD 25 million per year. It’s roughly flat, maybe every new X-ray machine they install, you get a little bit of additional service revenue, or if they take a unit offline, something like that, but it’s pretty stable over the term of the contract. Yeah, that's my expectation is that it'll be fairly stable. Like the preventative maintenance is scheduled. Yeah. Corrective things like that, well, that is, you know, when we talk about corrective, you know, we're talking about a huge volume of equipment. That's gonna average out to be, I think, fairly stable over the course of a year. You know, month to month, it may vary a little bit, but over the course of the year, I expect it to be stable. Projects, on the other hand, could go either way. You know, certainly if there's a larger or, you know, project that the customer has that we wanna take on, that might be something that happens over a period of months or, you know, the majority of one year, and that might be, you know, make that year stand out a little bit more than others. I would think you're probably on it there, Martin, that we're looking at a, you know, relatively flat year-over-year revenue once we're fully scaled in. Gotcha. You say you're targeting strong EBITDA margins. Are you able to give any sort of hint or range of what relatively strong EBITDA margins kind of means? Yeah. I mean, you know, we're expecting to see at least 15%-20% on that. You know, hopefully with some optimizations and strategic work on our part, do a little better. Yeah. Obviously with the last couple years, all the inflation news, I know there are some inflation adjusters in there. Given this last year of inflation, were there any surprises that kind of caught you off guard or the pricing mechanism seems to work here? No. As you can see, you know, we've got a billing rate with the customer that is, you know, I think it's a win-win for the customer and for us, that it's a fair price for the customer, but it also allows us to, you know, in the first couple of years of the contract, absorb a little bit of that inflation that we're seeing and also allow for the fact that we do have to have people on call for that break-fix model. As we go forward, as you hit the nail on the head, there's inflationary adjustments in the contract that are indexed. That should cover, you know, what we need to make sure we can continue servicing in the future. Gotcha. This services contract presumably gives you a bunch of scale, especially in Canada. Are you looking after other or looking at other sort of large contracts like this? Now that you've got this sort of foundation of business, then you're just really lucky, because I think you could clearly argue that this is, it's sort of, it's what you do, but it's not really core to your scientific or commercial industrial customers, but it gives you a scale. Is all your other sort of growth looking more at your kinda key target market, if that's fair to say? I think there is a good target market in the detection side of this industry as well. I think there are opportunities that we're looking at in the service side, particularly in detection equipment. You know, I'm hopeful that, you know, we can continue to grow that part of the business. I think you're right, Martin. Right now, it is a little bit, you know, outside of our kind of core NMR target market. What we have to remember is, you know, as we grow internationally, as we continue to get more instruments out into the field, and as we continue to expand with our, you know, investment in Quad into the high field segment, is particularly high field instruments require a ton of annual maintenance and a ton of ability to keep those running. In the long term, we're gonna need a service segment of our business to be able to deal with all of our scientific equipment that's in the field. I think that's really important. If you look at some of the major, you know, kind of players in all sorts of industrial equipment, there's an increasing move to have in-house service because of the attractive margins that you can make on this, but also because it provides a you know, an A to Z customer experience where everything that they need can be taken care of at one shop. Yeah. You don't have to worry about your customer experience failing because your service provider isn't doing their job, and it kind of rubs off on you then. Exactly. Especially with what we do, 'cause there's gonna be quite a bit of expertise that you're gonna need to handle equipment that is, you know, literally groundbreaking. You know, it's not like we can just call up a local supplier and, you know, have it repaired like, you know, a microwave that's been on the market for 40 or 50 years. This is new stuff. This requires proprietary knowledge. Having it internal makes a ton of sense from a strategic perspective, from an IP perspective, and a customer relationship perspective. Gotcha. Your K'(Prime) is North American-based. I guess in Europe, you're still relying on service companies and so forth. Is that a logical step to have your own services organization in the European market, sort of firstly comes to mind? Yeah. I think, Sean, why don't you take that question? Thanks, Randall. No, absolutely. Everything Randall just said, I'll extend that to Europe. United States has been our biggest and best market. We always sort of do things there first, but we're moving that model to Europe. With our acquisitions, we have a couple of physical offices there right now. In sort of the peripheral of Europe, we do use third-party dealers. In France and Switzerland and Germany, we're currently selling and servicing direct. We're going to continue to sort of grow that. Gotcha. Okay, you do have a foundation there. I would think Switzerland, Germany, and France are some of the better markets for, I'm guessing, for a lot of your clients are based in those three key markets. Yes. Gotcha. All right. Okay. great. I know, I think that's pretty in-depth here on the services one. Thank you. Absolutely. Maybe I'd just like to say, you know, to sort of, you know, cap off this thing, you know, my vision is to be able to service you know, a next-generation MRI machine in a hospital in Menlo Park, California, to provide service to benchtop NMR spectrometers that have been deployed in a corn manufacturing facility in rural Nebraska. You know, don't be surprised if there aren't benchtop NMR spectrometers analyzing illicit drugs in airports in the United States and Canada, right? Yeah, this service business has gotten big fast, but it's also a key part of our long-term growth strategy. All right. Is that the key presentation? We can go into more questions at this point. Yeah, that's, you know, other than to just emphasize how fabulous our people are, that's the end of the presentation. Happy to have any kind of discussion or Q&A you'd like, Martin. Sure. Your the 400 MHz quad system or I know. Are you launching it or is it launched at this point? It's launched. We launched it at a very important conference in Monterey, California, in April. Yeah. Is that a cryo-based system as well, or is it more permanent magnet? It is a cryo-based system, and it's using our electronics and software platform that's in our cryogen-free products. That particular product today does use liquid cryogens. We have a very exciting path, though, to stay at that higher field, but get rid of the cryogens in the future. A tangible plan to do that. Today it is using conventional superconducting magnets that require liquid helium, yes. There are significant players in that market with the high field NMR. Like, it's clear the benefit you have on the benchtop, that's basically a new product class. How do you differentiate yourself from the incumbents? If I was running a science lab, why would I go with Nanalysis as opposed to a big multinational billion-dollar scientific instrument company? Yeah, great question. The first thing is that everywhere except in Japan, which has some kind of unique characteristics in that market because the involvement of the Japanese government, but everywhere else in the world, there's essentially a monopoly in place. There's one company, a large NASDAQ-listed company, that really has, you know, customers by the throat all around the world. I've spoken to thousands of these customers over the last five years, and they tell me they're looking for an alternative supplier. We acquired a company that the founder and the 15 employees actually come from that very large company. One of them is arguably the most important R&D executive that existed at that company. They went off on their own, then they partnered with us, now we've come together as one company. We feel like we have a compelling offering that's at a reasonable price, that will give customers freedom that they want, that they're requiring. We have a really exciting plan to differentiate ourselves going forward in terms of unique selling points relative to that. I won't call them a monopoly, I'll call them an incumbent. A really exciting plan with some very knowledgeable, experienced people. By the way, just going back to the computing analogy, but now applying it to, you know, the bigger machines and the smaller machines, there's huge cross-selling opportunities. 95% of our current benchtop customers use the big machines, but sometimes they want machines that are portable. They wanna drive them around in their mobile labs or use them on their desk. Conversely, with this acquisition called Quad Systems in Switzerland, you know, selling, leading with the sale on the high field side opens up all kinds of opportunities for benchtop sales as well. It's not an either/or proposition. It's about giving the customer what they want, evolving the technology to make it smarter, and more easily accessible, and we're doing that with Quad Systems. You seem to have a lot of focus on the software side of things. Is that where you see you gaining some of the differentiation is on the software and I guess interpretation? Absolutely correct. You know, historically, magnetic resonance is used predominantly in a high-end academic research environment, but we're moving it more into the industrial environment where, you know, the customer doesn't want sort of an exotic research toy, but rather an efficient machine that can give them the answers that they want and only the answers that they want. Software is a big part of that. All right. Speaking of Quad Systems, that is sort of a, you own a part of the company, you have option to increase ownership. Can you talk about the state of Quad Systems, your ownership, your partnership, the path forward going there? Yeah, absolutely. The main part to emphasize is that we're working well together. We're both excited about the joint product that we just launched. Our sales pipeline is strengthening. We currently own 43% of the company. We are in some sort of sensitive negotiations right now with the company that I kinda don't wanna sort of get involved in publicly. I do wanna say that it is our full intention to be to eventually acquire 100% of that company. You know, the macro sort of stock market environment over the last year and a half has been a bit turbulent, but we sort of see that it's stabilized now and so we feel confident that we're gonna be able to, you know, fully consummate that acquisition, you know, in the near future. I do wanna point out that, you know, our module is sort of the control engine of the whole system. You know, really, it's our technology that enables them to execute the exciting business plan that they're executing. All right. You are key to their product. Absolutely. You're important to them, is what you're saying. Absolutely. Gotcha. You had a slide here earlier, I think where it said fentanyl yes/no in it. A couple of years ago, you announced, I don't know, I guess call it a partnership with a German police agency, call it, where I guess you'd have mobile labs to check to see what kind of drugs are in the samples they seize, call it. Is that still ongoing? What is the state of that partnership? Yeah, it's an active technology partnership with their scientists. The German organization was out of Hanover called LKA. There were several press releases on both sides that went out about that. We're excited about it. It involves using benchtop NMR spectrometers from us to analyze, for example, suspicious white powders that are confiscated in very, you know, whether it's at border crossings or just out on the street, and doing database matching with the database that we built with the LKA. We think there's a tremendous opportunity there. You know, for example, in crime labs in the U.S., you know, they're using all kinds of instruments for controlled substances like narcotics. We, we've all seen this publicly that, you know, this is a growing problem, especially in the developed world, and we think we can participate in dealing with that problem in some way. Initially, it won't be, you know, on the evidentiary side, but it will be on just, you know, helping law enforcement and other crime agencies sort of deal with the problem and kind of develop their technology platforms so that they can better deal with the problem. Then from a visionary perspective, ultimately, I see it as being a tool that's used for evidentiary reasons as well in the field with law enforcement. They're, you know, they use optical techniques and wet chemistry techniques right now. Optical techniques like Raman spectroscopy that just have a terrible, you know, a false negative and false positive rates. Wet chemistry techniques just aren't really effective at all. We think we can do some really great things in that regard. Thanks for bringing up the project with us, Martin. All right. Question here on artificial intelligence. With the increase in artificial intelligence technology over the last six months especially, are there opportunities for you to apply any artificial intelligence or powerful computing techniques to, you know, generate better images or create new? Does it give you any opportunities in the future? Yeah. Absolutely, you know, artificial intelligence and machine learning is a way to get smarter answers faster. You know, when you're trying to make machines that are smaller and cheaper so that they can be deployed more broadly, part of that is to not try to get all the information from the raw hardware, but to sort of get a minimum amount of information from the raw hardware, then use software and AI as the smart way to get to the final answers that you need. We've got several exciting projects associated with this. That topic is also related to the illicit drug or narcotics technology as well. Yeah, on the medical imaging side, it definitely applies to getting more information out of the images than rather than just what the raw hardware plus a radiologist can get out, for sure. Gotcha. All right. Another question here from the audience: Are you considering divesting parts of Nanalysis to stabilize things? That's not part of the current plan. You know, I've been talking about our vision and our business plan for several years now. If you go back and look at what we talked about when we went public in June of 2019, we've basically done all those things exactly how I said they would roll out. Then the next phase of that, which eventually will be medical imaging, that's our plan. You know, when the audience member says stabilizing things, yeah, we've had a need for capital. I mean, anytime you sign a CAD 160 million rock solid contract with the government of Canada, yeah, that's going to require capital. We're executing successfully on that, on contract. You know, we anticipate that particular contract being profitable in the very near future. I view it as a cash cow that's gonna fund a lot of the initiatives for the rest of our business. You know, that's how we've executed on our plan, and we're gonna continue to execute on our plan. We feel like all these different pieces in our company are coming together very nicely. Since going public, I believe you've done two equity raises. As well in one of your slides, or you have a line of credit or a credit facility queued up here. Are you gonna need to raise additional equity, or would that maybe be only limited if you have a big acquisition or just? Are you sort of structured here to be self-sufficient with upcoming profitability? Yeah. We publicly disclosed that we did a small raise about a month ago. Existing investors, really supportive investors, angel investors as well as institutions participated in that. Then, I'll maybe let Randall talk about this, but we are currently restructuring our debt facility that's been provided to us by commercial banks. You know, not private debt or anything, but just regular old commercial banks. You know, we expect to have some really exciting news about that. W e've already publicly disclosed what's going on, so it's not new in that sense. The culmination of it will be new, and I'll let Randall talk about that. Thanks, Sean. For today, you know, there's nothing new to announce there. We're continuing to work on restructuring that debt facility. As we said in our press release at Q1 that we've, we entered a non-binding term sheet on a CAD 15 million set of credit facilities. My expectation is, you know, when we, when we close that, we will significantly strengthen our balance sheet and it'll help provide the necessary capital to, you know, to allow for growth and some of the goals that Sean's been speaking of here today. All right. Right. Are you able to provide any revenue projections for this year, next year, or thereafter? Yeah. What we've decided to do going forward, especially as we get this large service contract profitable here in the next few months, is just to sort of talk about what we endeavor to do. At the outset of this webinar, Martin, I mentioned that you've seen us triple our revenue in the last two and a half, three years, and we have a specific plan to endeavor to triple our revenue in the next two and a half, three years. Again, with the only difference being there won't be the dilutive activity that you've seen. We'll do it in a way that's profitable. Not just sort of tripling our revenue, but getting to very solid EBITDA margins. Randall, any other comments on that? No, I think that's the way I view it as well. You know, there's We've spent the, you know, the last year really focused on rolling out this 160 million CAD contract and, you know, that requires a lot of work, a lot of focus, and I'm, you know, I'm really happy with where we're at on that. I think it's gonna provide us with a really good base for us to grow our revenue going forward. Let's say having similar growth in the next two, three years as you had the last two, three years, would that require like significant acquisitions, or is that essentially organic in nature, just growing the businesses that you currently have? The latter. Again, not with any acquisitions, just with, you know, digesting our past acquisitions, hunkering down and focusing in on our current operations. It would be 100% organic. All right. When can we expect profitability? I'll let our CFO comment on that. That's a good question. I'm not gonna put a date on it, but what I will say is this, you know, further to what I talked about with regards to rolling out CATSA, you know, and what Sean said about organic growth and looking inwards. You know, we've done a few acquisitions over the years, and that means there's a lot of synergy available for us to make use of with our acquisitions. We need to take some time to, as Sean says, digest it, look internally here, realize some of that efficiency. You know, we've done a lot of work on our sales group over the last year. We've done a lot of work on CATSA. I would say sooner rather than later will be the answer I'll provide here, 'cause it is a key focus for us for the remainder of 2023 to do that work, to realize those synergies and realize those efficiencies. Would it be fair to say, given the size of the CATSA project and the opportunities that gives, you maybe haven't been able to put as much effort on optimizing the other parts of the business and pushing that as there's a lot of making sure that CATSA worked well? I don't know if taking the eye off the ball is quite the right analogy, but there's only so much you can do in a day. Yeah, definitely. You know, we bit off quite a bit with that contract. It came through one of our acquisitions. When we closed that acquisition, I didn't have full visibility on the probability of winning that contract. It wasn't until three months into closing that K'(Prime) acquisition that it hit me like, "Holy smokes, we're actually gonna win this bloody thing." Yeah, you know, candidly, if I could rewind the clock back 12 months, there's a couple things that I'd do differently in how we scaled it and how we financed the CATSA project, for sure. You know, a lot of smart, hardworking, sincere, committed people have been getting this thing going, so I'm very proud of the work that everybody's done. Yeah, there definitely are some things that we could've done differently if I had a time machine and could go back 12 months. I'm very excited about where we are today and how I view the next 12 months. All right. I think you've a question from the audience here. I think you've largely addressed it, but maybe they're looking for additional specifics. What measures are you taking to control and improve cash flow and adapt as the company matures? You know, I'll speak to one thing that we're doing. It's one of many, many items but, you know, one thing we're looking at is improving internal automation. You know, as you grow, you know, we all know organizations get more complex, and they get more challenging to manage. Invariably, you can end up working off spreadsheets and different things like that. One of the projects we're working on right now is to unify our background software so that we can improve and increase the efficiency and scalability of our operations team, of our finance teams, of our human resources team. You know, we're trying to leverage software and tools to do things faster, better and smarter as we go forward. This is gonna lead us to better scalability and more efficiency. Yeah. Then I'll comment on that. You know, Martin, when I founded this company and for the first five years until we got a product to market, if you looked at our budget, it was 100% R&D, which, you know, normal for a quintessential tech startup. Then we launched a product, we started marketing and selling and so on, and our R&D budget, you know, as a percentage of revenue and as a percentage of our overall budget has been falling. In absolute terms, it, you know, it's gone up. So, you know, we're in the next phase of our business now, where we're still gonna spend a lot of money on R&D, we're still gonna be an innovator, we're still gonna be a technology company. In terms of the percentage of R&D that we spend of our overall budget, you're gonna see us go down to sort of what I would call orthodox percentages. We've had some very successful R&D projects that we're now manufacturing and generating revenue from. So yeah, we're moving our business, whether it's on the SG&A side, sorry, on the G&A side, which Randall just alluded to, or whether it's on some of the other cost centers in our business. We're also doing some, I would call it high quality right sizing that, you know, not gonna impact any of our innovative activity and of our revenue, but it is gonna bring us in line with, you know, conventional percentages in terms of where we spend our money going forward. That transition is happening right now as well. The last several years have been very transformative for you with the various acquisitions, the huge contract win, and now you've got sort of the digesting to do. Next couple of years isn't gonna be, call it, let's say, maybe as transformative, but it's more streamlining and sort of executing. Is that where kind of the focus will be? Yeah, 100%, right? You know, we feel like we've created a tremendous amount of value in the last couple of years years. Obviously, if you look at our stock chart, that value hasn't manifested itself yet in our stock price. Over the next couple of years, it's all about building up a very strong, like, impressive balance sheet and making sure that the value we've created, the intrinsic value manifests itself in the stock price for shareholders. Then once we do that, let's call that two years, then we're gonna embark on the next phase of very aggressive growth associated with the medical imaging side of our business and an FDA-approved product. That's not gonna happen in the next 18 months for sure, and it's probably not gonna happen in the next 24 months. We will be successful, and then we will embark on that next phase after a couple of years. You were profitable prior to going public and sort of hitting the growth accelerator and so forth. In a way, you've kind of proven that NMR machines can be profitable. Yeah. You do a bunch of transformation, and then you focus on getting back to that cash flow and, sort of just growing and running a good business, and then you can sort of stir things up again, I guess. That's exactly right. You know, we've had periods of profitability in the past, you know, I, based on our access to capital and the reality of the equity markets, there has been periods of time where we've run our business for three or four quarters profitably, you know, EBITDA positive and cash flow positive. And then there's been other parts of our evolution where we've publicly stated that we're not going to run our business profitably for three or four quarters. We're gonna do this acquisition and this project ramp up and so on. What I really like about our business and the way I founded it was we would have levers to operate for profitability when we, you know, wanted to / had to, we would have other times when it would just be about, you know, about growth. You know, that's the way we've run our business, and that's the way we're going to continue to run our business. My experience over 27 years as a tech entrepreneur is that reality does not happen in terms of linear curves or exponential curves. Reality happens in S curves. That's the way we're managing our business with S curves. All right. We're at an hour here. A couple of quick questions, then we should wrap things up here. Can you comment on what the startup costs were for the CATSA Airport contract? Be more specific, be more specific with your question for Randall, please. The startup cost. I guess this is from an audience member. I guess the investment required to now sort of, the burn that was required to get to the point until you expect to be profitable. You know, to the audience member, I would encourage you to go look at our Q1 MD&A because it's detailed out in there. I think we're sitting around a little bit north of CAD 3 million to date at Q1 and expected another CAD 2 million in the end. I expect CAD 5 million-CAD 6 million would be the net investment by the time we're cash positive on it. Gotcha. All right. Then one final question here. Is there a company barbecue this year? If so, when is the date? There definitely will be a company barbecue. The weather in Calgary hasn't been that great recently, but we usually have one in the August timeframe. Everybody's always invited. We're all welcome? Yeah, of course. Martin, we'll make you a special guest if you, if you come here from Vancouver. We have a couple employees that really take pride in their grilling capabilities, so we'll definitely have one, and we'll definitely invite everybody. We get occasionally some visitors from Europe and the United States that come to these things as well. Looking forward to inviting you to that, Martin. All right. Just, I'd like to end with, what kind of news flow should investors expect over the next three to six months? I guess more confirmation on your bank facility, I don't know, contract wins, obviously, you can't say specific things, but the type of news flow you hope to be announcing over the next couple quarters. It'll be a smattering of different things. You know, you mentioned some of them and, you know, we expect some really high-quality partnering announcements, in the next six months as well. From my perspective, the biggest thing is as we get into the fall, you know, we expect to be able to demonstrate that from a financial perspective, our business plan is working. All right. Well, gentlemen, thank you very much for that. That was a really good update and great to see, get an update from you guys. It has been too long. Sean, Randall, thank you very much. Thanks, Martin. Appreciate it. Thanks, Martin. Martin. Appreciate it. Cheers.