Scientific Industries Inc

Good day and welcome to the Scientific Industries Report 4-Year 2023 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Joe Dorme, Managing Partner. Please go ahead.

Thank you, Betsy. Good morning, and thank you for joining us today to review the 2023 full-year financial results for scientific industries, ended December 31, 2023. With us today on the call are Helena Santos, Chief Executive Officer, Daniel Grunes, CEO of Scientific Bioprocessing, and John Moore, Chairman. After the conclusion of today's prepared remarks, we'll open the call for questions. Before we begin with prepared remarks, I would like to remind everyone certain statements made by the management team of Scientific Industries during this conference call constitute forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1995. Except for the statements of historical fact, this conference call may contain forward-looking statements that involve risks and uncertainties, some of which are detailed under risk factors and documents filed by the company with the Securities and Exchange Commission, including the annual report on Form 10-K for the year ended December 31, 2023. Forward-looking statements speak only as of the date the statements were made, A company can give no assurance that such forward-looking statements will prove to be correct. Scientific Industries does not undertake and specifically disclaims any obligation to update any forward-looking statements except as required by law. Now I'd like to turn the call over to Helena Santos, CEO of Scientific Industries. Helena?

Thank you, Joe, and thank you, everyone, for joining us today. So we entered 2024 having successfully raised the financing to complete the development and the launch of our two major technology platforms. Those platforms are, first, the Torbell Zivit family of pill counters, and second, the SBI DOTS multi-parameter platform. The connection between these two platforms is our value proposition of digitally simplifying science and automating our customers' workflows. The greatest technology visionaries of our times all agree that artificial intelligence or AI is going to be the biggest productivity advancement of our lifetimes. Together with our growing shareholder base, we have raised and deployed over $30 million to make certain your company and our customers are major beneficiaries of this coming wave. In giving today's update on the specifics of our progress on these two platforms, I'll just give some hints of how our customers will benefit from AI. I'll start with the Torbell Vivid platform. We committed to building the most comprehensive, automated pill counting system, and we have a terrific sales and development partner in RxSystems and Healthmark in Canada. And they've helped us steer our product development. We introduced the VividLight S, which can count pills at three times the speed of the original VividLight. at a great price point, and we have been very happy with the market share gains this system has allowed us to gain from the large installed base of mechanical pill counters. So the big news this year will be the introduction of the $13,000 price point Vivid Workstation in early summer. That will fulfill our strategy to offer the most complete line of automated pill counters on the market, ranging from $3,000 to $13,000. We will have five working prototypes ready to show the market and begin taking orders during the busy May to October trade show season. Our major partner, RX Systems, makes most of their sales at trade shows and Q1 is seasonally our lowest sales period historically. The availability of the workstation will mean we will then be ready to start showing the system to the major chains and we expect to be the main market for more sophisticated systems, where we feel there is a big unmet need for our products at the price point that we're speaking about. We have the only cloud-based system and have designed the workstation to be the first AI-enabled pill counter which will be able to sort pills by color and, as importantly, by shape. This is going to be a fundamental change in the way pharmacists do their work and it addresses a big headache associated with new pharmaceutical products introductions and to the supply chain. We expect that the AI enabled version of our Vivid Pill Counter will be trained and ready for the market in early 2025. We have an important technical mode and we'll be alone in this market with this capability to deliver value to our growing network of users. And with that, I will turn it over to Daniel so he can give us an update on our bioprocessing business. Daniel?

Thank you, Helena, and good morning, everyone. Before diving into our business, let's acknowledge the broader global context that has shaped our realities last year. 2023 was a challenging year, which saw us facing continued macroeconomic events in the aftermath of COVID. While slowly normalizing, high inflation rates and increasing energy prices have driven up costs and created headwinds across all sectors, including softer markets, slower economic growth, and higher cost of capital. Our industry was particularly affected. Coming from the heights of outsized growth and profits in the corona years, we experienced a sector-wide slump since 2022. In the chemistry and pharmaceutical industries, which represent a large section of our customer base, we have been observing that budgets are being scrutinized, constrained, and cut, and that expensive equipment becomes a luxury that many cannot and will not afford anymore going forward. SBI is not an exception to these challenging realities, but we can be one of the beneficiaries, too. In the efforts not to compromise on their ability to innovate, many Symbio companies are searching for more cost-effective solutions to decrease their high R&D spending, as well as to reduce their time to market. And our newly developed DOTS platform will help them achieve that over the next couple of years. Throughout the last quarter of 2023, we have made important steps towards rolling out the first version of the DOTS platform. Our software has been equipped with new features and capabilities towards a simplified user experience, usability improvements, and significant advancements regarding the device management framework, which enables easier and more flexible integration of additional devices. At the same time, we have worked on the next software version, DOTS 2.0, which will be released with the MPS in April and which will include features like email notifications about important events in the customer's life cultures, and subscription-based licensing for recurring software revenue. And lastly, we have initiated a partnership project with Kuna, one of the leading shaker manufacturers in the world, to integrate their devices into the DOT software to enable the control of parameters such as RPM or temperature. For the first time, customers will be able to adjust the process conditions of the environment in which ShakeFlask operates automatically and in real time, and based on the live data that we provide with our DOTS technology, similar to how they are used from bioreactors. On the hardware side, our DOTS multi-parameter sensors saw a design freeze while we continued the firmware optimization of the data acquisition algorithms, as well as data handling and communication features. Simultaneously, we have focused our R&D efforts regarding the sensor pills on the performance for the second round of pilot studies that take place as we speak, as well as the preparations for the upcoming market launch, including work on the dye chemistry and improved core design, the coating process, packaging, and sterilization. All hardware components are now being produced, calibrated, and quality controlled to be ready to service the first orders of the new platforms. As regards the commercial side, we focused our activities on the pilot studies, voice of customer activities, messages and content for flyers, web pages, and presentations, and delivered the DOTS marketing launch in the US with a co-hosted symposium with Kuna, a launch event at MIT, and a keynote at RAFT, the leading conference on recent advances in fermentation technology in Florida, which was a huge success and gave us a head start for the DOTS demand creation. I'm happy to see the initial traction from the hot launch and the wider audience of interested potential customers that DOTS attracts. A testament to that is the fact that we have already taken two orders for the new product prior to the actual availability on the market or the customer being able to demo the equipment. We expect to ship the devices within the next two weeks, which also marks the start of our market launch of the first generation of DOTS. At the same time, the restructuring of the commercial team that we commissioned in Q3 last year delivered an impressive pickup in productivity. Although we reduced the cost structure in the team drastically, revenue with the legacy portfolio grew by 30% and per rep performance increased by 3x. And although the seasonal year-end business was softer than usual, our pipelines going into 2024 developed nicely with MQLs being up 40%, SQLs being up 60%, and a rapidly growing and maturing total pipeline of over $3 million prior to SBI's major trade show season in the spring and fall. Lastly, we are very excited about the addition of John Nichols, former CEO of Synthetic Biology Pioneer Codexist, to be our new SBI Chairman. John will not only be a great mentor to our team and to me personally, but also represents the mind of the senior management of our customers. Being their peer, he will give us additional credibility in the SynBio space. John already visited our SBI facilities in Germany last week to get to know the team and technology, And we'll co-present the DOTS MPS system with Jens Beyer, our Chief Commercial Officer, on the main stage of SynBioVita in San Jose next month, one of the biggest conferences of the year and the annual gathering of CEOs in our target industry. We are very excited by the impact and validation John can deliver to our customers and the important message that we want to share with the community together. that DOTS can enable the humble shake flask to generate critical process data equivalent to much more expensive bioreactor systems, that it can fuel the application of artificial intelligence, and that it is fit to liberate major bottlenecks that constrain the enormous potential for synthetic biology to take over global manufacturing and supply chains. Thank you for your time, and we're now happy to answer your questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

At this time, we will pause momentarily to assemble our roster. Once again, if you would like to ask a question, please press star then 1 to be joined into the question queue.

There appear to be no questions at this time. I would like to turn the conference back over to John Moore for any closing remarks.

Thank you so much. Well, first of all, we'd like to thank our shareholders and our employees for helping us build the company. Helena started the presentation by talking about the impact of artificial intelligence and how we're positioning the company to benefit from that. Many leading thought leaders on artificial intelligence believe it's going to change the world more than anything in the history of humanity, even more than electricity. And in order for that change to happen, they need the artificial intelligence needs high volumes of digital structured data. And we're providing the edge devices that change these analog tasks like pill counting or like shake flask production of synthetic organisms to digitally enabled devices that can feed those artificial intelligence and machine learning systems. So we believe that this is going to be a huge wave of productivity for our society, and we're excited to be able to play a role in that. So thank you so much for all for listening, and we thank our shareholders very much. That concludes our remarks.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.