Good afternoon, everyone. Thanks very much for joining me for the last presentation of the day. As Chris mentioned, I am the Founder and CEO of Nanalysis Scientific. We make portable MRI machines for industrial applications, and I will layer on what that means as we go through the presentation. We do seek safe harbor for forward-looking statements. One of the reasons why I think we are really compelling as a stock and as a company is because we created this category of portable MRI machines for industrial applications, the first company to go to market with such a device. On a trailing 12-month basis, we do about CAD 40 million in revenue, and we are working very hard to achieve some top-line growth. We have achieved positive EBITDA on a trailing 12-month basis, and also we will be putting out our Q3 financials here towards the end of November.
So keep a lookout for that and see how we have done in terms of expanding our profit margins. Then to complement our product sales, our beautiful portable MRI machines that are about this big, and I will show you the price points and so on. We have also added a recurring services revenue dimension to our business model, which is really exciting. We trade on the Venture Exchange in Canada and also on the [OTC Pink] in the United States with those symbols. Whenever anybody hears me say MRI, one of the first things that may come to their mind is, okay, well, they must be a medical device company, or they must be a life sciences company. It is important to delineate that. We are not a medical devices company per se. We are an instrumentation company.
If you want some large cap comparables, you can look at companies like Thermo Fisher Scientific, which is a $100 billion market cap company on the NASDAQ. You can look at companies like Agilent, Bruker Corporation, and yeah, they sell their instruments of various kinds into the pharmaceutical industry, into the life sciences industry, but they also sell to the food industry, and the chemical industry, and to law enforcement and so on, as do we. Again, not a life sciences company or medical device company, but rather an instrumentation company. These types of companies tend to have really strong economic moats because of their IP. But also a thematic point here is that it is not just capital equipment sales, it is services as well. So products and services working together. This is sort of an aspirational slide for us.
The market for scientific instrumentation is a massive and global growing market. Over $75 billion per year is spent on scientific instrumentation for various verticals. We believe that our addressable market, our subset of that opportunity, is about $4 billion and growing. We sell direct in the United States, which is our most important market, and also Canada, Germany, France, Switzerland, Austria, where we have physical offices. Then, in international markets like Japan and Indonesia and Brazil, which is a great market for our product, we sell through a network of local dealers that sell complementary products and services. In case you are wondering what types of customers we sell to, here is a sample of real customers. So we sell to the biggest chemical companies in the world, like BASF and DuPont, pharmaceutical companies like Eli Lilly and Pfizer, as well as small little biotech startups.
We sell to government labs all over the world, including U.S. Customs and Border Protection, the FDA, and so on and so forth. A lot of universities as well. Here's a look at our amazing direct sales organization that we've really built organically and are very proud of. Management team, I'm the Founder and CEO of the company. As I mentioned, by education, I'm an Electrical Engineer, but really, I'm a tech startup guy, so this is my third tech startup, creating technologies and products from scratch. I've been doing this a long time. Never had a real job in my life, just having a blast doing these entrepreneurial initiatives. Our CTO, Julien Muller, has a really unique vision for the future of magnetic resonance going forward, which is a little bit different, by the way, than what most people think MRI is and other aspects of magnetic resonance.
Here's a look at our cap table, 135 million outstanding shares. You can see that pretty good value opportunity, at least I would submit right now, and again, some restatement of some of these positive financial numbers that we've started to post quite recently.
Sean, what is your current market cap?
It's about $11 million .
Thank you.
Yeah, senior independent board of directors continues to evolve and improve. Most notably, Werner Maas is the former President of Bruker BioSpin, which is the biggest incumbent player in our industry. If you want to check that out, they're a large NASDAQ-listed company. He was with them for over 25 years, just got off his non-compete with them, and he joined our board, and it's a real testament to the potential of our company. Little bit of a science-y slide here.
This is to sort of get why I founded the company, and what we're doing in the future. Most people are aware of these large MRI machines that are in hospitals. What most people aren't aware of is that those machines are also used in every industry in the world, like pharmaceutical, food, petrochemicals. They're configured a little bit differently, but what's going on at the top here is these two guys are putting a 7 in glass test tube in the MRI magnet, and they're doing a scan on that to determine exactly what molecules are in that substance of interest, whether it's a new drug being developed at a pharmaceutical company or a foodstuff looking for purities, like looking to see if olive oil has been adulterated with aniline, which is a harmful substance.
And people do that, by the way, to try to dilute it and make more money all over the world. This is the gold standard of testing any substance of interest. The problem is these machines are very large. They're very expensive. They require liquid helium fills to keep the superconducting magnets cool, and they're not portable by anybody's definition of the word portable. What we've done is we've miniaturized that gold standard of testing into beautiful little benchtop products like this that are about this big. They don't need any liquid helium. They cost about CAD 100,000 average selling price. And we've sold well over 1,200 of these instruments all around the world into pretty much every vertical, and some of those I've mentioned, but for example, we sell them into law enforcement as well.
The math and the physics associated with an MRI machine used on human beings in a hospital and to do molecular analysis in an industrial setting is exactly the same. There are some linkages there in that we are also working with partners to launch healthcare products as well. Only about CAD 2 million of our CAD 40 million of trailing 12-month revenue is associated with actual human being-oriented MRI technology, but we are leveraging our tech platform for those applications and working with partners. A recent press release we did with an American MRI company called IMRIS gives you a glimpse into the future of what we are planning to do there to take advantage of the synergies between those two worlds. Here is a look at our full product portfolio. These are our flagship products.
When I said we have sold well over 1,200 of these instruments, these are the ones that I am referring to, mostly in the U.S., but all over the world. We also have an extensive suite of accessories that complement these flagship products, software modules, and so on. Look out for, in not too distant future, us announcing an FDA software compliance module that allows our instruments to go from R&D environments into quality control environments. Then also making a reference to our burgeoning services business that I will touch on a little bit later. It was an opportunistic thing that happened to us associated with one of our acquisitions. It is part of our vision going forward, even though it occurred at a time that we were not really expecting, and I will touch on that in a future slide.
Just in terms of our technology and our manufacturing, we do fully vertically integrated manufacturing in our facility in Calgary to protect intellectual property and control costs and quality. All of our products and the associated technologies were developed in-house and are patent protected. This is what I refer to the appification of magnetic resonance. Right now, if you have a PhD in chemical engineering or if you are a radiologist, you can interpret the data of a magnetic resonance machine. But in the future, the data of a machine is going to look more like this. The power of MRI is that it has the potential to analyze cells. It does not just create a quality image.
X-rays and ultrasound can do that, but magnetic resonance, because of the way it communicates with particles in the nucleus of atoms, can do molecular analysis and has the potential to analyze human cells in a non-invasive way. You will be able to determine exactly what is wrong with tissue without a biopsy going forward. That is why MRI and magnetic resonance is so important. A little bit of a history on our company. We are a quintessential technology startup. We did everything in-house with our own marketing people, our own engineers. We have achieved a lot of great things over the years, raised a lot of money when valuations for micro cap companies were really good. We have got a lot of exciting catalysts going forward, including partnerships and expanded profit margins and so on.
Moving towards the end of the presentation, again, one of the main thematic points is as an instrumentation company, it's not just about cool technology and great products that customers love, but it's about products and services working together to entrench customer relationships. Going forward, the way to think of our company would be 50% product sales, 50% services sales. That's sort of in a visionary sense. Just to highlight, an example of a big, recent contract win, we signed a CAD 160 million contract with the government of Canada to service all equipment in airports. We have aspirations to expand into the United States. So when you walk through airports and you put your hands up or your luggage gets scanned or your laptop gets swabbed, we have the exclusive contract in all 90 airports in Canada to install new equipment, uninstall old equipment, and breaks.
When it breaks on Christmas Eve or Easter Sunday, it's our people that are going in there and fixing it at over CAD 300 an hour that we're billing to the customer. So really excited about this services opportunity, and strategically, the way to think about that is in some verticals, like the security industry, we'll lead with our service capability and then backfill our products. In other words, we're already in airports in Canada. We have really good opportunities to move into airports in the United States. and other venues, and the customer's already talking to us about, well, what about your portable MRI machines used in airports to analyze suspicious white powders? We're already selling our product to law enforcement. They drive them around in mobile labs, and they analyze suspicious white powders to see if there's deadly synthetic opioids in there and so on.
You can't hide a synthetic opioid from magnetic resonance like you can other techniques. So we'll lead with services, but then bring our product capability into it. In other verticals like pharmaceuticals, we'll lead with our proprietary products, which we're already selling into, and then we'll say, hey, by the way, pharma companies, as you want to take our products from just your R&D lab into quality control and production, we also have a massive services organization, and we'll be able to provide you with the required services. So that's sort of a strategic point about products and services, and a highlight of a big contract win, which is very profitable today.
In the early days of this contract, there was definitely some challenges, but we're really proud to say that we have our gross margins up at around 20%, and we think we can take them towards 30% on this. So this is a look at something that's emblematic of how hard we've worked over the last couple of years to reduce our costs and resume top-line growth with expanded profit margins. If you look down here, our annual revenue run rate when we're hitting negative EBITDA is about the same as our annual run rate today with our last quarterly release where we're achieving almost CAD 1 million in positive EBITDA. As we resume revenue growth, what you're going to see is this change in our fundamental cost structure is going to result in multiples increases of our profit margins.
If our revenue goes up by 20%, that doesn't mean our EBITDA is going to go up by 20%. It means it's going to go up by multiples. We positioned ourselves after a lot of hard work to get to this point. Again, our Q3 financials will come out at the end of November, and if you're interested in our company, please check those out. We have a really great analyst who covers, Doug Loe. He's a senior guy. He's got a PhD in chemistry. He understands our technology and our strategy. He's got a really great buy rating on us. I recommend you check him out if you have some time. That's the end of the presentation.
Thank you very much for spending a little time with me on a Wednesday afternoon, and happy to answer any questions or engage in any kind of discussion that anybody would like. Yes, sir.
It looks like you got a 65% gross margin on your products—
Yeah.
—on your physical machines.
Yeah.
How can you sell them quicker and how can you reduce manufacturing costs, and how many can you build without spending additional capital? Everybody's worried about that.
Yeah, for sure. I'll sort of answer them in reverse order there. We worked really hard to build scalable manufacturing. As I kind of alluded to on that IP and manufacturing slide, we spent a lot of money on fully vertically integrated manufacturing even before we had a product to market. Our manufacturing is really firing on all cylinders now. We can double our revenue, we can triple our revenue, with really just incremental investments in our manufacturing, right. Basically hundreds of thousands of dollars of extra spend every six months to completely scale and transform our manufacturing. We're really well-positioned for that. Then in terms of selling more, I showed that amazing slide of our direct sales organization. Two years ago, I couldn't have showed you that slide.
We had kind of used one of our acquisitions as sort of an outsource selling organization, which admittedly was a mistake, and we fixed that. We're really starting to see the fruit of that organic activity, in terms of our sales organization, and it goes beyond just direct. We've also fixed how we manage international dealers as well in terms of training and compensation and so on, and making sure they have all the support they need, regardless of what time zone they're in. Because of our proprietary products don't require liquid helium like the big machines do, it truly is a global market, right. There's no liquid helium trucks driving around in certain parts of Saudi Arabia and India and Brazil and all these places which are a big market for our products. That's one of the growth drivers.
It's not the only one, but it is one of the growth drivers. We're ramping up marketing spend too in terms of market pull, not just the sales aspect of it. Yeah.
Just a little quick clarification. With your current production facilities, how much growth can you take without having to spend money for manufacturing? Your current manufacturing, how much growth can you incur without spending any?
With our current manufacturing the way it is, we could double our sales. Think about that as getting over CAD 20 million a year in sales approximately, like CAD 20 million, CAD 23 million, CAD 24 million a year in sales. To get up to CAD 50 million a year in sales, we would have to spend a little bit more, but it would be incremental in nature as I was referring to, like hundreds of thousands of extra kind of thing. No big sort of quantum step up or something like that. Yes, Steven at the back.
Can you go back, or could you go over in more detail on your credit facility and your term facility, where they started, how high they got, how you are paying that down?
Okay.
Yeah. We signed this contract to begin the phase and period for this in middle of 2022, and that's just sort of right around the time the Fed cycle shifted and the microcap equity markets for tech companies kind of crashed. We actually funded the ramp-up of this with debt. We took out a CAD 10 million term loan. We had to hire 150 people, the customer told us to do it as fast as we could. 130 field techs plus about 20 sort of back office people and some managers. The revenue for the first 18 months of this contract was zero. We funded it all with debt, and then the revenue started to ramp up. That's what prompted us to take out the CAD 10 million term loan with our commercial bank.
Nothing exotic, just prime plus two standard commercial banking terms, and we had a CAD 5 million revolving line of credit. For years, we had spent the whole CAD 10 million, and every single month, we were maxing out the CAD 5 million revolver. Today, I'm happy to say we paid that CAD 10 million term loan all the way down to CAD 3.7 million, and we're not even in the line of credit at all, right. Basically, in terms of our commercial banking relationship, we've reduced our debt exposure from CAD 15 million essentially down to CAD 3.7 million. Quite an accomplishment, quite a bit of hard work over two and a half years, three years of a lot of kind of hardcore focus on operational excellence.
Can you tell the stock market that please?
I'll do my best and really focused in on fundamentals, but also love telling the story, and I hope that the market starts listening to a little bit more positive outlook for our company. Yeah.
Oh, yes, go ahead.
I just had a really quick question. I may have missed this at the beginning. You have proprietary software and you have some IP protection. How far ahead do you believe you are in terms of maybe years from someone who is going to be doing something quite similar?
We do have competitors. We were the first to market, but we do have two arch competitors, I would say. One is called Magritek. Sorry, I might be going in the wrong direction here. It is the end of the day. But just so everybody knows, so there are two competitors that we compete with every day all over the world, Magritek and Bruker. These other companies are not really competitors today. They are more foreshadowing as we get into the healthcare part of our opportunity a bit more. Then eventually, companies like Siemens and GE and Philips will enter our competitive landscape. But right now, it is these two companies. The hardest part in creating a portable MRI device is miniaturizing the magnet system.
The way I would describe us relative to our two competitors is that we spent more time and energy miniaturizing the magnet system, so our instruments are smaller and lighter, which means they are applicable to more applications. For example, driving around in mobile labs, or sometimes our customers use our products in a. If you have ever seen CSI: Miami, where they are working inside a glove box or a fume hood, our products can fit in the main port of a glove box, and they can do air-sensitive chemistry in there. Because of the emphasis on miniaturizing the magnet system, which is the most important, we have a competitive advantage relative to our two arch competitors. But in terms of somebody else entering the market, combined, we have spent a lot of money and a lot of time.
The barriers to entry today are massive. I do not see anybody being able to enter the market other than the people that are already there. Three companies for one class of instrument is relatively small. Other types of instruments, like high-performance liquid chromatography and so on, have dozens of competitors. The fact that we were able to be one of the three that is competing for the huge global market is a pretty good testament to our engineers and scientists that did what they did for us.
Thank you.
Yeah.
Sean, there is a big juggernaut [slide]. Can you go back to the first or second slide where you have all the names? I think it was the first slide. Yes, the first one. One more. Yes, this.
Yeah.
I would say that there are probably several companies there that are worth more than $20 billion.
Yeah, I think Thermo has like a $100 billion market cap kind of thing.
Would it make sense, or do you foresee an opportunity down the road to essentially partner with one of these guys, whether it is either vertical integration or something proprietary that you have? I mean, has that thought ever crossed your mind?
Oh, for sure.
Because as you know, on The Street, there is no greater press release than a small company partnering with a multi-billion dollar player. I am just trying to figure out, is there a strategic edge? Is it conceivable? How do you approach a partnership?
Yeah, it's certainly conceivable. Some of these companies have tried to buy us, and we've said no. Really, they all want our type of technology, and only one company on here has it, which I just mentioned on the previous slide. All of these other companies want to have this in their product portfolio, and those types of discussions are, in fact, ongoing. But right now, we're just having too much fun scaling our business as an independent.
What do you think the primary reason is that there is so little interest in this space right now, from the investor side?
Well, I think maybe it's a mix of some macro things, and you kind of alluded to those a little bit. We're not the only microcap tech company that has had some difficulty. So, there's that aspect of it. Then admittedly, if I go back to the second quarter of 2022 when things sort of started to shift, in the macro sense, that's right when we took some big risks, right. They were consistent with my vision, and they're still consistent with my vision, but I thought we were going to be able to keep the momentum on our stock, and I was always able to raise a lot of money very fast at really great valuations, right. That sort of changed, and since then, we've had to change our strategy quite a bit.
I think a lot of investors, when they looked at our company and our stock in mid-2022, were sort of like, these guys are going to have to really work hard to kind of get out of this situation for several years. I think it's just been a matter of, we haven't been focused in on the sexy. We've been focused in on the fundamentals. Until the market sees that that activity is going to bear fruit, I think that's why the stock price has suffered.
In terms of ancillary products and services, how is that going to ultimately evolve in the next three to five years?
Yeah. We will always be an innovation company, so you are going to see great new products coming out of our magnetic resonance group. Then, you are going to see us going after all kinds of new verticals on the services side of our business. So, when I go to bed at night, when I wake up in the morning, I am thinking about one thing, how can I double the size of our business, right, in sort of the three to four-year timeframe? So, ancillary products and services is part of that objective.
Who wants to ask the last question? Oh, see, they are done. Who wants to ask the last question of the 20th LD Micro 20th Annual Main Event? Okay, let us do it, Mr. Kenny. I think it is only right that you do it.
Thanks so much. What time is the party?
That's good. Good.
You've got CAD 450,000 in cash left, right? At your current burn, where does that leave you?
We're not burning cash right now.
[Okay. How do you think you can use that cash to get your market to double, right, as you're manufacturing now some more instruments?]
The plan is that our cash flow generation is increasing, and it is not just that relatively small amount, but there are bigger amounts that we will be able to invest. Again, check out our Q3 financials when they come out at the end of November and take a look at our trajectory, and you will get a better answer for that.
Sean, thank you so much.
Yeah.
That was incredible.