Nanalysis Scientific Corp. Reports First Quarter 2020 Results
Three months ended March 31
Cost of products sold
Sales and marketing
General and adminstration
Earnings (loss) before other items
Acquisition transaction costs
RTO transaction costs
Depreciation annd amortization expense
Finance expense (income)
Foreign exchange (gain) loss
Loss before tax
Deferred tax recovery
Other comprehensive loss
Total comprehensive loss
On March 3, 2020, the Company acquired all of the outstanding shares of RS2D S.A.S. ("RS2D"), a technology company based in Strasbourg, France that designs and builds cutting-edge NMR and MRI electronics components for precision analytical instruments. The base consideration paid for RS2D was $1.9 million in cash and the issuance of 2.9 million Nanalysis shares, which are subject to a three-year lock-up period restricting the sale of shares for specific periods. The former shareholders of RS2D may also receive an earnout over the three years to December 31, 2022, based on future revenue growth objectives. RS2D provides Nanalysis with a key module for its next generation electronics platform, which will ship with the future products including the new 100 MHz product. RS2D also expands the Company's product portfolio with its Pulse console for high-field NMR systems. Further, RS2D moves Nanalysis fully into the MRI space, expanding the company's total addressable market. Full integration of the companies has been completed, highlighted by two RS2D executives taking important leadership positions: Remy Schimpf as Senior VP of Sales, and Julien Muller as Chief Technology Officer.
For the three months ended March 31, 2020, the Company reported consolidated revenue of $1,523k, a decrease of $542k over the $2,065k for the comparable period ended March 31, 2019. Unearned revenue was $2,102k as at March 31, 2020, an increase of $1,486k from $616k as at December 31, 2019. The increase was due to customer deposits on pre-orders for the 100MHz product, an increase in extended warranty sales to customers and a backlog of work for RS2D that was delayed due to the novel coronavirus ("COVID-19") restrictions. The decrease in revenue was partially a result from COVID-19 as local, national, and international regulations have made conducting business difficult amid 'shut down and shelter in place' orders. Nanalysis was unable to deliver some international shipments due to closures at the border, while RS2D employees in Strasbourg, France were unable service customers as all nonessential services were ceased. Also contributing to the reduction in revenue is customers holding off on purchases and awaiting the release of the 100MHz device.
Gross profit for the three months ended March 31, 2020 was $982k (a margin of 64%) compared to gross profit of $1,335k (a margin of 65%) for 2019.
The Company's comprehensive loss for the three months ended was $935k as compared to comprehensive loss of $201k in 2019. The majority of the increased loss was due to decreased sales, increased depreciation and amortization, acquisition transaction costs, increase general and administration expense, partially offset by an increase on foreign exchange gain and finance income.
At March 31, 2020, Nanalysis had $5,423K (December 31, 2019 - $8,534k) in working capital, including $5,326k (December 31, 2019 - $6,619k) in cash. The Company has an undrawn line of credit of $2,000k and $1,312k of available borrowing on the Western Economic Diversification Canada interest free loan. Subsequent to March 31, 2020 the Company received $188k from the Canadian Emergency Wage Subsidy ("CEWS") for the payroll period of March 15th to April 11th, 2020. Nanalysis' business has been affected by COVID-19 and as such is eligible for the March 15th to April 11th, a subsidy of 75% of employees' wages. Nanalysis will continue to monitor revenues and seek government assistance where applicable.
The Company is addressing the recent outbreak of COVID-19 and the related economic and social disruption, disruption to global supply chains, and the ability to directly and indirectly staff the Company's day-to-day operations. Local, national, and international regulations have made conducting business difficult amid 'shut down and shelter in place' orders. Despite shut down orders, the Company was able to continue the development and manufacturing aspects of the business and have continued development on the 100MHz device. Government health regulations will have a negative impact on the Company's short-term performance, but the Company remains in a strong financial position with ample cash on hand.
Sean Krakiwksy, CEO of the Company states "Despite the recent disruption to our business stemming from the COVID-19 outbreak, we continue to manufacture product and to make significant progress on the 100Mhz device. We are pleased to announce that to date, we have received $1,924k pre-orders for our 100MHz, of which $303k was reflected in unearned revenue as at March 31, 2020. This speaks volumes to the accomplishments of our team and demonstrates that there is demand and excitement for this product. There are four main themes to shareholder value creation that we are committed to for the remainder of 2020: (1) release of our new 100 MHz product, (2) continued execution of our acquisition strategy, (3) continued vertical market partnering agreements, and (4) expanding investor relations activity, especially in the United States in keeping with our recent OTCQX listing."
The Company has utilized government programs offered to Company's impacted by COVD-19, specifically the CEWS and Canadian Emergency Business Account. Nanalysis will continue to monitor results and seek government assistance where applicable.
Despite short-term forces presenting new challenges, the Company continues to have confidence that the market for compact NMR spectrometers and related accessories and services will grow for the next two decades. The nascent nature of the opportunity coupled with the value proposition to customers will continue to drive increased demand for compact NMR.
The Company trades on the TSX Venture Exchange (TSXV) in Canada with ticker symbol 'NSCI' and over the counter in the United States under the ticker symbol 'NSCIF'.
Nanalysis business is what we term "MRI for industry": It develops and manufactures portable Nuclear Magnetic Resonance (NMR) spectrometers or analyzers for laboratory and industrial markets. The NMReady60™ was the first fully featured portable NMR spectrometer in a single compact enclosure requiring no liquid helium or any other cryogens, and the company continues to develop new products and has a strong innovation pipeline. Nanalysis began taking orders for the 100MHz device in early 2020. The Company's new device will be the most powerful non-cryogen, permanent magnet compact NMR device ever brought to market. Nanalysis devices are used by chemical professionals in many industries (oil and gas, chemical, mining, pharma, biotech, flavor and fragrances, agrochemicals, and more) as well as numerous government and university research labs around the world. The company continues to exploit new global market opportunities both independently and with partners.
March 2020, the Company acquired all outstanding shares of RS2D, a complementary technology company based in Strasbourg France that specializes in the development of cutting-edge MR electronics. Based on a single electronic board, RS2D has developed MR product lines in high-field ("HF") NMR and magnetic resonance imaging ("MRI") that can further advance Nanalysis' existing product line, while the new products to round out the Company's magnetic resonance technology portfolio.
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.
SOURCE Nanalysis Scientific Corp.
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