Nanalysis Reports Second Quarter 2022 Results

Nanalysis Scientific Corp. ("the Company", TSXV: NSCI OTCQX: NSCIF FRA: 1N1 ), a leader in portable NMR machines and MRI technology for healthcare and industrial applications, releases its second quarter results ending June 30, 2022. Chief Executive Officer, Sean Krakiwsky and Interim 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 August 26 th . All interested parties are invited to join these calls.

"We continue to record substantial year over year revenue growth," said Sean Krakiwsky, Founder and CEO of Nanalysis.  "With that being said, we are not satisfied with our Q2 revenue results, and a lot of focus is being given to regain our previous trajectory.  In the second quarter a lot of time, focus, and resources were given to closing the $160 million CATSA contract, which we did on May 25 ^th . Additionally, we underestimated certain operational challenges associated with scaling our benchtop NMR sales organization which impacted our Q2 revenue. We have redoubled our efforts in this area, which is going well, as are other important areas of our business, and are seeing improvments in the current quarter."

Financial highlights for the three months ended June 30, 2022:

• For the three months ended June 30, 2022 , the Company reported consolidated revenue of $5,187K , an increase of $844K or 19% from the comparative period in 2021.
• Gross margin was 62% for the three months ended June 30, 2022 compared to 67% for the three months ended June 30, 2021 .
• (Loss) Income before other items for the three months ended June 30, 2022 was $(947K) versus $1,234K compared to the same period last year.
• Net loss for the three months ended was $(2,532K), as compared to the three month net income for June 30, 2021 of $222K.
• The Company had cash on hand of $12,278K, an undrawn credit facility of $6,465K, working capital of $13,476K and an undrawn government contribution funding of $4,985K as of June 30, 2022.

Recent strategic and operational highlights during and subsequent to the second quarter of 2022 include:

• Awarded $160 Million Multi Year Service and Maintenance Contract: The Company's wholly owned subsidiary K'(Prime) Technologies (KPrime) has won a six year $160 million service and maintenance contract with Canadian Air Transportation Security Authority ("CATSA"), which includes a gradual phase in period of approximately one year. Furthermore, it is common for these types of contracts to be renewed for an additional five years, making it a potential 11 year recuring revenue opportunity, with inflation-adjusted contractual price increases. The effective date of the executed contract is May 25, 2022 and it expires on May 31, 2028. Nanalysis expects to begin billing the customer in Q4 of 2022, and ramping up billing amounts in expectation of completion of the phase-in period in mid-2023.
• Integrated K'Prime into Nanalysis and restructured sales model: The Company has restructured their internal sales force with a focus on higher quotas and smaller, more targeted territories combined internal technical support that used to be a cost center and are now being mobilized to revenue generating activities.  Additionally, the Company will also be leveraging external manufacture representatives. All in all, the changes we have made will result in roughly 25 people on the ground in the United States to scale up benchtop NMR revenue.
• Manufacturing : Nanalysis continues to invest in incrementally increasing production capabilities for all our product lines, in anticipation of strong demand going forward. Recently, the company purchased a state of the art five axis machining center and a wire electrical discharge machine, both from Makino, a global leader in CNC machining center design and digital innovation. These machines will contribute to Nanalysis' continued innovation as well as cost reduction initiatives.
• Quad Systems : The company continues to move towards full high-field NMR product launch with Quad System. There have been delays in the completion of the complete suite of modules, but revenue generation has begun. The company is expecting that material revenue from this acquisition will start in 2023.
• MRI / Medical Imaging :  Nanalysis continues to be active in medical imaging which is consistent with its publicly disclosed strategy. In Q2 the Company won a C$1 million purchase order (P.O.) to deliver a full pre-clinical medical imaging system to a customer in France and was recently notified of an additional contract win of C$1.1 million for a custom MRI system from another France based customer (pending P.O.). Additionally, the previously announced European Union gamma MRI project is proceeding well.

For the six months ended June 30, 2022 , the Company reported consolidated revenue of $10,741K , an increase of $3,129K or 41% from the comparative period in 2021. The increase from Q2 prior year can be attributed to the shipment of more units of the 100MHz, coupled with revenue from the recent acquisition, K'Prime.

Gross profit for the six months ended June 30, 2022 , was $6,577K (a margin of 61%) compared to gross profit of $5,037K (a margin of 66%) for the six months ended June 30, 2021 .

The Company's net loss for the six months ended was $(4,024K) , as compared to the six-month loss June 30, 2021 , of $(253K) . The increased loss was due to higher costs, specifically sales and marketing expenses, increased general and administration expenses and increased research and development expenses, both in the Nanalysis segment and from the new acquisitions. In addition, there were business acquisition costs from the two transactions completed, increased depreciation and amortization expense, increased finance expense partially offset by no RS2D earnout in the quarter and increased revenues.

"Our main objective through next year is to capitalize on our recent acquisitions and CATSA service contract. This means we are restructuring and refocusing our benchtop NMR salesforce; we expect to launch the full multi-module high-field NMR product at Quad Systems, and are successfully executing on a methodical rollout of coverage across Canada's airports for the CATSA project," said Sean Krakiwsky .

"We do believe that by the end of 2022, it will become clear that Nanalysis is well positioned for solid growth for years to come, with a strong economic moat, and a motivated team energized for the future. Operational excellence still remains our most important mantra, as we will continue to leverage existing customer relationships, along with our technologies, to fuel growth. So, the rest of 2022 is about consolidation, execution and capitalizing on synergies. We are confident that we will deliver the value we've created by our recent acquisitions to our shareholders," concluded Mr. Krakiwsky.

Investors interested in participating on the live 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/32l7RdQB0Zw , 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 # 484317.

Additionally, the Company will be hosting a Q&A session for it's European investors tomorrow, Friday, August 26 ^th at 8:30am ET 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: 636 080 139#.

Nanalysis trades on the TSX Venture Exchange (TSXV) in Canada with ticker symbol 'NSCI', OTC and the Frankfurt exchange under the ticker symbol '1N1'. The company's 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. Nanalysis recently announced that it has begun selling a 100MHz device in 2020. The Company's new device will be 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.

With the recent acquisition of K'Prime, the company maintains a North American sales and service company of over 40 individuals who cover scientific instrumentation for pharma, food, chemical and oil & gas customers, as well as imaging systems for security applications.

Additionally, the Company has a 43% ownership in Quad Systems AG ("Quad Systems"), with an option to purchase the remaining shares.  Quad Systems is a Zurich-based Nuclear Magnetic Resonance (NMR) company focused on high-field NMR for pharmaceutical and other vertical markets.

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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