Mr. Sean Krakiwsky reports

NANALYSIS ANNOUNCES FOURTH QUARTER AND FULL YEAR 2023 RESULTS

Nanalysis Scientific Corp. has released fourth quarter and full-year results for the period ended Dec. 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. A second call will be held for European investors at 8:30am ET tomorrow, Tuesday, April 30th. All interested parties are invited to join these calls.

"As noted in our previous release dated February 6, 2024, we are very pleased with how our businesses ramped up in second half of 2023 and we closed out the year with good momentum which has carried into the current year," said Sean Krakiwsky, Founder and CEO of Nanalysis. "Our benchtop sales have regained stride and the personnel changes that we made earlier in the year are producing good results that we expect to continue going forward. Our security services segment completed taking over all basic services on the Company's Airport Security Project early in 2024, and this project will continue its expansion and roll-out, building towards full revenue run rate through the year. Additionally, in 2023 we had significant up-front training costs which contracted our margins. In 2024, we expect that to be significantly reduced and look for security services margins to improve throughout the year."

Financial highlights for the three months ended December 31, 2023:
  
  
   Three months ended  December 31   
($000's)                        2023      2022      ($)  Change  
Product sales                   5,450     5,893     (443)        
Service revenue                 4,350     1,310     3,040        
Total sales and revenue         9,800     7,203     2,597        
                                                                 
Gross margin - product sales    48 %      32 %      16 %         
Gross margin - service revenue  -21 %     -50 %     29 %         
                                                                 
EBITDA                          (774)     (2,532)   1,758        
                                                                 
Net loss                        (2,123)   (3,292)   1,169        


  
  

For the three months ended December 31, 2023, the Company reported consolidated revenue of $9,800, an increase of $2,597K or 36% from the comparative period in 2022. This includes $5,450K in product sales and $4,350K of service revenue related to security services.

Gross margin percentage on product sales was 48% for the three months ended December 31, 2023. Improvement in gross margin percentage for Benchtop NMR is materializing as sales have improved in the second half of the year and reductions in the manufacturing labour force in late Q2 have begun to positively affect margins.

Service gross margin percentage in the quarter was (21%) as the Company accelerated its training schedule for the Airport Security Project and began expensing wages related to airports that were in service. Management expects service gross margin percentage to improve significantly as the Airport Security Project is phased-in to full capacity and revenue scale up continues in 2024.

EBITDA loss for the three months ended December 31, 2023, was $774K versus a $2,532K EBITDA loss in the same period last year.

Net loss for the three months ended was $2,123K as compared to the three-month loss for December 31, 2022, of $3,292K.

Financial highlights for the twelve months ended December 31, 2023:
  
  
   Twelve months ended  December 31   
($000's)                                   2023        2022      ($) Change  
Product sales                              16,342      21,588    (5,246)     
Service revenue                            12,124      3,233     8,891       
Total sales and revenue                    28,466      24,821    3,645       
                                                                             
Gross margin percentage - product sales    41 %        49 %      -8 %        
Gross margin percentage - service revenue  -23 %       -1 %      -22 %       
                                                                             
EBITDA                                     (8,074)     (3,935)   (4,139)     
                                                                             
Net loss                                   (16,784)    (9,915)   (6,869)     


  
  

The Company reported consolidated revenue of $28,466K, an increase of $3,645K or 15% from the comparative period in 2022. This includes $16,342K in product sales and $12,124 of service revenue.

Gross margin percentage on product sales was 41% for the twelve months ended December 31, 2023, down from 49% in the prior year. Benchtop NMR margins were depressed in the year due to a slow scientific instrumentation market in the first half of the year as well as higher costs related to post-COVID supply chain issues and ongoing inflation. Starting in the second, and into the third quarter, the Company began cost-cutting measures including the reduction of its manufacturing labour force to better align with its current manufacturing requirements. Because of these cost-cutting measures, as well as improved sales markets, gross margin percentage on product sales rose to 48% in the fourth quarter. The Company continues to analyze its supply chain to manage its material costs.

Services gross margin percentage was (23%) for the twelve months ended December 31, 2023. This was the result of high up-front training costs related to the roll-out of the Airport Security Project as the Company's labour force was hired and trained through 2023.

EBITDA loss for the twelve months ended December 31, 2023, was $8,074K versus an EBITDA loss of $3,935K in the same period last year.

Net loss for the twelve months ended was $16,784K as compared to the loss for December 31, 2022, of $9,915K. This increase was driven by losses generated from up-front training related to the Airport Security Contract of $2,901 and a loss on derecognition of Quad of $2,810, offset by a $1,071 increase in gains on contingent consideration.

The Company had cash on hand of $759K, an undrawn available credit facility of $1.9 million and working capital of $3.3 million as of December 31, 2023.

Quarterly Trend:

The Company has showed continuous growth in revenue, quarter over quarter, driven both by expansion of the Airport Security Project as the Company took over more airports from the incumbent service provider, as well as recovery of product sales revenue in the second half of the year.

Net loss improved from Q1 to Q2 as security services revenue expanded but reached a low in Q3 2023 as the Company recognized a non-cash $2.8 million loss related to the deconsolidation of Quad. In Q4, as product sales continued to recover and service revenue continued to grow, the Company continued to improve its net loss.

Recent strategic and operational highlights during and after the fourth quarter of 2023 include:

New Quarterly Revenue Record: Q4 2023 revenue of $9.8 million was driven by continued expansion of security services related to the Company's airport security maintenance project, as well as continued recovery in Benchtop NMR sales.

Completed Phase-In of the Company's 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.

100 MHz Benchtop NMR Product: In Q4, the Company sold and shipped 14 100MHz Benchtop NMR units, the highest number of shipments for 100 MHz units in a quarter since the Company cleared its backlog in 2022. This drove continued recovery in Benchtop NMR revenue.

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 are very encouraged by the continued sequential growth of our benchtop sales quarterly last year and we believe we can maintain strength in our product sales into 2024," said Sean Krakiwsky, Founder and CEO of Nanalysis. "The operational changes and leadership changes that we put in place in both our sales organisation and Security Services are paying off and we believe we will continue to foster growth in the current year. We continue to demonstrate that we are a leader in Benchtop NMR and plan to retain that position through continued innovation and advancement of technologies used in our product line. Lastly, the changes implemented by right sizing our R&D and manufacturing capacity, particularly as it relates to Benchtop NMR, positions us to grow both our topline and margins in 2024, as we move towards profitability.

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/9xEage3Q0PB 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 # 093791.

Additionally, the Company will be hosting a Q&A session for it's European investors at 8:30am ET tomorrow, Tuesday, April 30th which can be accessed by the following link: Join the meeting now

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(TM) 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.

We seek Safe Harbor.