Nanalysis Announces First Quarter 2024 Results

Company Achieves Record Revenue Quarter

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 announces first quarter results for the period ending on March 31, 2024 achieving 139% year-over-year revenue growth to $11.2 million in Q1. 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 Eastern Time tomorrow, May 30 . All interested parties are invited to join these calls.

"The momentum from the end of 2023 has carried into first quarter of 2024 and continues today," said Sean Krakiwsky, Founder and CEO of Nanalysis.  "In terms of revenue, we had a strong quarter.  We are also happy to report that our security service segment generated positive Adjusted EBITDA for the quarter, as previously announced, we foresee that continuing going forward. Our revenue growth, combined with ongoing cost reduction initiatives are moving us towards profitability.

"Benchtop NMR sales were up significantly year-over-year, and we are seeing continued strength in in our sales pipeline.

"While we are happy with our revenue results and improving margins, we are still laser focused on continuing revenue growth, improving gross margins, reducing costs further, and delivering profitability and value to shareholders."

Financial highlights for the three months ended March 31, 2024:

• For the three months ended March 31, 2024 , the Company reported consolidated revenue of $11,162 , an increase of $6,488 or 139% from the comparative period in 2023. A significant part of the revenue number for Q1 comes from flow-through inventory revenue associated with the Company's airport security maintenance revenue, in which the Company provides purchasing and resale to the customer at cost, with the Company billing a fixed charge for the service.  This revenue can vary widely quarter over quarter and may be significantly lower in future quarters.
• Gross margin percentage on product sales was 47% for the three months ended March 31, 2024.  Improvement in gross margin percentage for Benchtop NMR is materializing as sales have improved in the second half of last year.  In addition, reductions in manufacturing labour in late Q2 2023 have begun to positively affect margins.
• Security service gross margin percentage in the quarter was 8% versus (76)% in prior year comparative period as the Company completed the full transition of 100% of airports serviced to its control from the incumbent provider, and now expects to increase revenue and drive efficiency on the project through 2024.
• Adjusted EBITDA loss for the three months ended March 31, 2024, was $362 versus an Adjusted EBITDA loss of $3,547 in the same period last year.  This improvement was driven by increased product sales, full transition of airports to the Company's control, and cost reduction initiatives.
• Net loss, which includes non-cash items, for the three months ended, was $2,522 as compared to the three-month loss for March 31, 2023, of $4,320.

Quarterly Trend:

• The Company has demonstrated continuous growth in Security service revenue quarter over quarter, driven by the expansion of the Company's airport security maintenance project as the Company took over more airports from the incumbent service provider.
• Product sales showed continuous recovery through the latter half of 2023 culminating in $5.5 million in sales during the fourth quarter, which is seasonally the Company's strongest quarter of the year. This momentum was carried into the first quarter of 2024 which remained strong.
• Adjusted EBITDA losses have reduced with each subsequent quarter, driven primarily by the successful roll out of the airport security maintenance project.
• Net loss reached a low in Q3 2023, as the Company recognized a non-cash $2.8 million loss related to the deconsolidation of Quad Systems. In Q4 2023, product sales continued to recover and security service revenue continued to grow, improving the Company's net loss. In Q1, net loss increased primarily due to the absence of some non-cash gains that were present in the fourth quarter of 2023, as well as increased interest expense.

Recent strategic and operational highlights during and after the first quarter of 2024 include:

• New Quarterly Revenue Record: Q1 2024 revenue of $11.2 million was driven by continued expansion of security services related to the airport security maintenance project, as well as continued strength in Benchtop NMR sales.  Excluding $2.2 million of revenue attributed to flow-through inventory revenue, the remaining $8.9 million of revenue was a quarterly record in itself.
• Completed Phase-In of the Airport Security Maintenance Project: On January 11, 2024, the Company completed the phase-in period related to its airport security maintenance project, resulting in the Company's Security Services business now performing maintenance of passenger screening imaging and detection equipment across all of Canada, and beginning a scale up phase to increase revenue to its expected run rate. The Company is confident that the highly capable team built during this project will provide significant growth opportunities for this business with new customers and partners.
• Continued Benchtop NMR Strength: In Q1, the Company generated $3 million in Benchtop NMR sales.  This represents a $1.3 million increase over Q1 2023 Benchtop NMR sales.  The Company expects strength to continue in this product line through 2024.
• Closed Exempt offering and concurrent Private Placement: Gross proceeds of offering were $5 million .
• Granted Funding Supporting AI Software Development for Detection of Illicit Substances: The Company is receiving advisory services and up to $1.45 million in non-repayable, non-dilutive funding from the National Research Council of Canada Industrial Research Assistance Program (NRC IRAP), to develop Artificial Intelligence based software tools to detect illicit substances on top of the Company's portable Nuclear Magnetic Resonance (NMR) spectrometers.

Outlook

"We feel that our Benchtop sales are in a good position," said Sean Krakiwsky, Founder and CEO of Nanalysis.  "We believe that our prospects will only improve as we continue to develop capability across our Benchtop NMR platforms.  Additionally, we continue to engage in discussions and work toward larger goals to penetrate certain verticals.  Our Security Services segment will continue to grow throughout the year as we work to layer on new projects and contracts.  Margins will continue to improve as we have greatly reduced the upfront training that was required and are working towards increased operational efficiency with our highly skilled team.  Lastly, we are seeing some medical imaging projects on the horizon and could see some of these close in the coming quarters."

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/MxmDjJq1gXA 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 #  242821.

Additionally, the Company will be hosting a Q&A session for its European investors at 8:30am ET tomorrow, Thursday , May 30 ^th , which can be accessed by the following link: Join the meeting now

Non-IFRS and Supplementary Financial Measures

The Company prepares and reports its consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, ‎as adopted ‎by the Canadian Accounting Standards Board (" IFRS "). However, this press release may make reference to certain non-IFRS measures including key ‎performance indicators used by management. These measures are not recognized measures under IFRS ‎and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable ‎to similar measures presented by other companies. Rather, these measures are provided as additional ‎information to complement those IFRS measures by providing further understanding of the Company's results of ‎operations from management's perspective. Accordingly, these measures should not be considered in ‎isolation nor as a substitute for analysis of the Company's financial information reported under IFRS.

The ‎Company uses Flow-through parts revenue, Security service revenue, and Adjusted Earnings Before Interest, Tax, Depreciation and Amortization ("Adjusted EBITDA") as non-IFRS measures, which may be calculated ‎differently by other companies. These non-IFRS measure are used to provide investors with a‎ supplemental measure of the Company's operating performance and liquidity and thus highlight trends in the Company's ‎business that may not otherwise be apparent when relying solely on IFRS measures. The Company also ‎believes that securities analysts, investors and other interested parties frequently use non-IFRS measures ‎in the evaluation of companies in similar industries.

Supplementary Financial Measures

The Company may also use supplementary financial measures which are intended to be disclosed on a periodic basis to depict the historical or expected future financial performance, cash position, or cash flow of the Company, are not a non-IFRS measure, and are not presented in the financial statements.  The measures as discussed in this press release include:

• Gross margin percentage, which is defined as either (Product sales less Cost of product sold) divided by Product sales or (Security service revenue less Cost of security services) divided by Security service revenue

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

Nanalysis Scientific Corp. in operates two primary business segments: Scientific Equipment and Security Services. Within its Scientific Equipment business is what the Company terms "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, the Company announced the launch of its 100MHz device, the most powerful and most advanced compact NMR device ever brought to market.

The Company's 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.  With its partners, the Company provides scientific equipment sales and maintenance services globally.

In 2022 the Company was awarded a five-year, $160 million contract to provide maintenance services for passenger screening equipment in Canadian airports.  This has resulted in expansion of the Company's Security Services business.  The Company is providing airport security equipment maintenance services in each province and territory of Canada.  In addition, the Company provides commercial security equipment installation and maintenance services to a variety of customers in North America.

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.

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