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spk00: Good afternoon, ladies and gentlemen. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Analysis Third Quarter 2022 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your request, please press star followed by the number two. I would now like to turn the call over to Mr. Matthew Selinger. Please go ahead, sir.
spk06: Thank you, operator, and welcome everyone to the Analysis Scientific's third quarter 2022 conference call. Before we begin, I would like to remind everyone that our remarks and responses to your questions today will contain forward-looking statements that are based on current expectations of management. These assumptions involve inherent risks and uncertainties that could cause actual results to differ materially from our responses. Certain material factors and assumptions were considered and applied in making the forward-looking statements. These risk factors are included in our filings for the year ended December 31st, 2021. Forward-looking statements on this call may include but are not limited to statements and comments with respect to future growth of the company's business, the ability to graduate to a senior exchange, the company's acquisition strategy, the ability to develop future products, and the possible associated results. The company's actual performance and financial results in the future could differ materially from any estimates or projections of future performance implied by the forward-looking statements. The forward-looking statements made on this call speak only as of today, and Analysis Scientific assumes no obligation to update any such forward-looking information as a result of new information, future events, or otherwise, except as expressly required by applicable law. For additional information, I do encourage everyone to review our public filings and press releases, which are posted on the CDAR filing system at www.cdar.com. On the call with me today are Analysis Founder and CEO, Mr. Sean Krakiewski, and Analysis Interim CFO, Mr. Randall McRae. So with that, I would like to turn the call over to Analysis Interim CFO, Randall McRae. Randall?
spk07: Thanks, Matthew. It's a pleasure to join and interact with everyone on the call today. I'm first going to dive into the financial results for the quarter ended September 30th, 2022, then move into a discussion of cash management during the rollout and scale up of our services business. With that said, I'll turn to the financial performance for the quarter. All amounts referenced are in Canadian dollars. I'm happy to report that for the three months ended September 30th, 2022, the company reported consolidated revenue of $6. $6.878 million, an increase of $3.542 million, or 106% from the comparative period in 2021. This includes $6.145 in product sales and $733,000 of service revenue related to airport security services. Gross margin on total sales was 43% for the three months ended September 30th, 2022. This was the result of increased training costs of personnel for the CASA airport security project, increased personnel and training in Analysis's manufacturing group to increase manufacturing capacity, an increase in costs due to worldwide supply chain constraints and inflation, as well as a specific project completed in the RS2D subsidiary that had lower than normal margins. Management expects that these lower gross margins are transitory and will improve as the CASA airport security project continues to phase into full capacity, investments in manufacturing result in increased efficiencies, and sales levels increase. The company incurred a net loss of $2.599 million for the third quarter, up from a net loss of $857,000 in Q3 2021. The increase in net loss was driven by higher costs in G&A expenses, depreciation and amortization, sales and marketing, and stock-based compensation expense. These were driven in large part by the acquisitions of K Prime and Quad. The company had cash on hand of $7.9 million, an undrawn credit facility of $6.7 million, working capital of $9.7 million, and undrawn government contribution funding of $5 million as of September 30, 2022. I'd like to take a moment here and discuss our working capital and cash management as we move into 2023. Our decrease in working capital is due to lower cash balances as the company is investing in new initiatives, primarily the airport security project. As we have previously discussed, we do expect to invest cash in the ramp-up period of this project, and begin to turn positive cash flow for the airport security project in early 2023. We're not concerned about cash, and while we're in a drawdown phase, we purposely decided to move more aggressively in the phase in to get to billing sooner. We've begun operations in Q4 on this project and we'll continue on our rollout plan, anticipating profitability on that project in the first half of 2023. Additional to our cash balances, we have a consolidated credit facility. Subsequent to the quarter, on November 18, 2022, the company closed a credit line with a major Canadian bank, consolidating its existing operating facilities into a $9 million operating line, allowing us to execute on our growth and expansion plans. Those of you who follow the company may also recall that back in March, we announced funding of $5 million to expand manufacturing operations and global markets for nuclear magnetic resonance products from the Government of Canada. We've recently received our first $1.5 million funding amounts from the Prairie's Economic Development Canada Business Scale-Up Program. With that being said, we're confident we have the necessary liquidity resources available to support all our research, development, and project initiatives, including the airport security project. This strong financial base will be the foundation for an analysis of future growth. So with that, I'd like to turn the call over to our founder and CEO, Sean Krakuski.
spk08: Thank you very much, Randall. On our last call, we spent a lot of time focusing on what I would call the Q2 speed bump in our sales organization, what led to it, and what we're doing to rectify the situation. On that call, we assured you that we had made remedies and that we were already seeing a return to our normal trajectory. We put out a business update press release last month to give you, our shareholders, assurance that we had returned to previous norms and that we are confident in our future growth across business segments. What I would like to do is go through the highlights of our five business segments, starting with our core benchtop NMR group. Then I'll touch on our recent acquisition of Quad Systems and our high-field NMR products. Then move to K-Prime third-party equipment sales, provide more detail on our services business, including the CATSA project, and then talk about our medical imaging group. I'm very happy to report that our benchtop NMR business, including both 100 MHz and 60 MHz products, have delivered strong results in terms of sales, shipped units, and average sales price. In this last quarter, we shipped a record number of 20 100 MHz units. Our revamped sales organization is executing well, and I expect an excellent fourth quarter in benchtop NMR sales. We are also working on several exciting benchtop NMR partnerships that I expect will drive broader adoption of our products, and I hope to be able to talk more about those partnerships in the coming months. Now that we have accomplished our primary R&D and manufacturing objectives associated with our new 100 MHz product, we have started to implement these newfound gains into our established 60 MHz product, which I expect will allow us to increase performance, and hence the list prices going forward. With regards to our recent acquisition of Quad Systems in Switzerland, I'm pleased to convey that we have started generating significant revenue in Q3, that we have a very bright outlook for the revenue that we're projecting for Q4, and we're starting to get excellent visibility on the material revenue that we'll generate for our company in 2023. With regards to K-Prime and the third-party equipment sales business, a third-party equipment sales business which is highly synergistic with our own benchtop NMR and future high-field NMR businesses, by the way, knocking on the same doors of customers that we would with those products, is steady and showing signs of slow but steady growth going forward. With regards to our security services business, K-Prime is also managing. We've seen some really good progress with regards to the CAATSA implementation, namely real coverage of real airports thus far. We have started to generate revenue from that particular customer and we expect to be, as Randall mentioned, cash flow positive on that project by the first quarter of 2023. All of you know that we are incubating a very exciting medical imaging group. And in fact, it's part of our vision to disrupt the MRI space in the not too distant future. And I'm happy to report that we're involved in several exciting projects there. We previously announced a couple of significant project wins. The more recent one turned out to be a $1.3 million project. which is a little bit higher than previously stated, a contract with a university in France, which we're very excited about. That includes our proprietary electronics and software, as well as some third-party modules that we're acquiring with partners. So in closing, again, I'm very happy to report our return to growth. Speed bumps do occur in growing businesses, and we did learn a lot from that experience, and I believe where they're wiser because of it. We continue to look forward, outward, and inward to see what we can do to improve and prepare for future growth. I'm very confident in the changes and improvements that we have made in our ability to adapt over time. We continue to stay the course as we progress towards our vision of building a fully vertically integrated global scientific instrumentation company, serving customers in the security, pharma, biotech, food, energy, advanced materials, petrochemicals, healthcare and education markets with imaging and detection products and services. We will continue to expand product line, direct sales groups, services and channel management capabilities globally, as well as strengthen technology partnerships. As we move forward, we will continue to advance our technology differentiation capabilities while keeping an eye on supply chain risk mitigation and ultimately creating value for our shareholders and stakeholders. Thank you very much.
spk09: Operator, I would now like to open up the call for questions.
spk00: Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If your question has been answered and you would like to withdraw from the queue, please press star followed by the number two. And if you are using a speakerphone, please lift the handset before entering any keys. Your first question will come from Stefan Quenville of Echelon Capital Markets. Please go ahead.
spk05: Hi, guys. Congrats on the quarter and thanks for taking my question. My first question, given, let's say, the lumpy revenue from the NMR business you had last quarter and this quarter, Can you, and I know you've sort of shied away from providing details on backlog and that sort of thing for competitive reasons, but would you be maybe for this one occasion or maybe this one last occasion, be willing to talk a bit about the backlog either precisely or at least directionally at the close of the quarter and how Q4 is shaping up?
spk08: Hi, Stephan. This is Sean, the CEO. Thanks very much for joining our call today. Yeah, so again, I have stated that it's an objective of ours to operate our benchtop NMR business, for example, without a backlog. In other words, when we get a purchase order, we're in a position to ship the product out right away. That's better for our cash flow and it's also a competitive advantage over our main competitor in particular. So that's kind of where we're going. I don't really want to give a breakdown on things, but I don't mind saying that today our current sales backlog is well over $3 million across our business. But in terms of how long we maintain backlogs, it's quite short and we also have a very strong sales pipeline. And so in terms of fourth quarter and beyond, I'm very confident that you're going to see continued growth
spk05: Great. Maybe I'll just sort of, I have a couple of questions, maybe I'll just rattle them off one at a time. Just in terms of your gross margin this quarter, if you backed out the CAATSA contract, could you give us a sense of where gross margin would have been in a kind of, you know, X the obvious investment you're making in that contract, just sort of from a kind of trend perspective?
spk08: I'll make some comments on that from the CEO's perspective and from an engineer's perspective, and then Rand will add some color. We have seen some gross margin erosion in our benchtop NMR business due to what I believe are temporary higher cost components due to the well-documented supply chain challenges. You know, on the benchtop NMR side, our gross margins across the board are roughly around 55%. And so the way I view our gross margins right now is, first of all, it's very complicated. And I kind of feel like we're in a period of flux where, and again, I'm just giving you the honest perspective of an engineer, right? I'm not an accountant. is I feel like things like accounting treatment and transitory phenomena are kind of heavily weighted right now in terms of describing our gross margins. And so, I mean, we have a fabulous team of accountants as our CFO and our audit committee and, of course, our auditors that work with us on the interim financial. So they're doing a great job and I have full trust in them. Um, but their perspective on where our gross margins are, are not an engineering perspective. And so when I look at our, our cost of goods sold and our gross margins, let's say on a per unit basis, um, and, and, and, you know, or, or associated with actual revenue, um, I really like what I see. Um, but right now our gross margins include things like, you know, training for the CASA project that, um, that aren't yet associated with a dollar of revenue. And so that's kind of what I mean by things like accounting treatments and transitory phenomena are heavily impacting our gross margins right now. From my perspective, I believe we're going to sort of be out of this period of flux and complexity with regards to our gross margins, probably in the middle of 2023. And then I'm very confident you're going to see a return to the really strong kind of gross margins that you've seen from us in the past. So, Randall, do you have anything to add to that?
spk07: No, I think that covers it well. Stefan, thanks for the question. You know, I'd like to highlight as well that... I would call your attention to the financials where we've broken out those services and product sales just to highlight for you the different components of our business that will have different margins and say that we would expect an increase in those margins once CAATSA rolls up. I don't want to get into specific numbers just from a competitive perspective here on some of these other projects, but we'll see it tick up as we get rolling.
spk05: Great. And I just have two more, guys, if you'll allow. You mentioned sort of very quickly in passing product improvements that were particularly beneficial for your 60 megahertz system and may allow you to position the product differently going forward. in talking to some of your engineers when I was there a couple months ago, I got a sense that these are pretty meaningful improvements. Can you, I mean, also, I guess for competitive reasons, maybe talk about them in qualitative terms and talk about what it might mean in terms of your ability to take price going forward. I know that you've, you know, for your backlog systems, you kept prices where they were. uh, despite, uh, inflation, but, uh, maybe even directionally, uh, what that might mean for pricing going forward.
spk08: Absolutely. Happy to talk about that, Stefan. And so, um, you know, part of my comment there was just, just real genuine enthusiasm for, for what we accomplished on the, on the a hundred megahertz side. Uh, just absolutely ecstatic about what we achieved there. And, and granted, yeah, it took longer than I, than I would have liked, but, um, sometimes, you know, um, you know, difficult challenges take a little bit more time. And so we are going to be retrofitting those gains back into our 60 megahertz product. Um, part of that, um, and I didn't really link the two in my formal statement, but I'll, I'll link them now. A part of that activity is linked with some of these partnerships that I'm talking about. So, um, you know, part of our business strategy is, is to, um, work with partners, uh, that have a long history of, of, um, being, um, deep in certain vertical markets, vertical markets like the food and beverage industries, for example. And so we're going to take the gains that we've made in the 100, we're going to put that back into our 60, sort of unify the tech platform. And that is going to be correlated with some of these exciting vertical market partnerships that we're working on. And so to drive up but also to allow us to increase prices with our own product that we sell direct. And so in the magnetic resonance world, you know, customers are always clamoring for more performance. So if you can deliver more performance, you can increase prices. So, you know, and then sort of, again, my statements about gross margins before, you know, we think that as our business grows, we can get back to the gross margins that we experienced in the past, both in terms of increasing prices, but also taking some aggressive actions on cost reduction side as well. Now that we feel we're on the other side of some of these supply chain challenges we've faced.
spk05: Great. And my last question also, I think it's sort of important given the sort of what occurred last quarter. In terms of your Salesforce realignment now, you know, last quarter, you know, this quarter showed that obviously, you know, the tweaks you made have been working. Can you provide a little bit more color on how it's going, whether you're touching sort of new clients or parts of the market where you weren't really before? Just anything from that perspective to maybe help people understand how that's going.
spk08: For sure, yeah. So, yeah. Really happy about the changes that we've made. I think they're the best thing for the long-term health of our sales organization. Essentially, it's implementing a large company model of how to run sales and distribution that K-Prime learned over 20 years working closely with Agilent. It's a hybrid model that includes... you know, more sales people that we, we had before. Uh, but it also includes, um, third-party partners that, that, um, you know, are turning over a lot of rocks. So basically we went from four people in the United States, um, um, you know, trying to, trying to, um, generate purchase orders to now the team is well over 30 people. Um, and, and, and the, the division of labor in terms of the different parts of the sales cycle, uh have been modified as well so very happy with it and confident that it's going to generate growth here in the in the next uh in the next uh well it already has contributed but i i really think it's going to take our growth to the next level um in 2023 and yeah because there's more boots on the ground and because we're leveraging um relationships of of partners that have been selling scientific instrumentation for over 30 years then yes, we are making contact with new customers, more customers, and increasing our deal flow.
spk05: Great. Thanks for all the color. Sorry for monopolizing the call. I'll get back in the queue. Thanks.
spk09: Thanks, Stephan. It was a pleasure.
spk00: Your next question comes from Bob McWherter of Selective Asset Management. Please go ahead. Thank you.
spk02: Could you talk about the Q3 sales of $6.9 million up 106% year over year? How much of that came from organic versus the acquisitions?
spk08: Hi, Bob. Great to hear from you. Yeah, so the sort of ballpark number is, and I'm not going to provide a lot of detail here, but ballpark number, which is kind of the thing that I've always said and will continue in the future, is 70% is associated with organic, and roughly 30% would be associated with the new acquisition. That's a ballpark number. And that trend is going to continue going forward.
spk02: Okay. You talked about getting the $5 million interest-free loan to be able to buy some new equipment. One of them is a five-axis machining center as well as the electrical discharge machine. Talk about, one, what they cost, and two, What kind of efficiencies you might get? In other words, you end up saying we no longer have to outsource some of our work. What do you hope to achieve with the investment in the machinery?
spk08: Thanks. I'll let Randall add some color, but I'll make some initial statements on that. So, yeah, so one of the machines, the wire EDM machine is associated with reducing our COGS. It allows us to insource some key components that we use to outsource and improve quality as well and turnaround time and our ability to schedule properly. And then the other one, it has a little bit of an R&D component as well as an absolute manufacturing component, and that's the 5-axis machining center. It actually delivered some significant performance gains on our 100 megahertz product, which, again, we are going to put back into our 60 megahertz product, you know, some of these precision components that are in our instrument have tolerances of microns, you know, so that's not very many layers of atoms if you're able to do the math. And so that's very important to us, and the ability to machine these parts is part of that, and that's what the 5-axis machining center is all about. I'll let Randall talk about...
spk07: costs associated with those machines uh hey bob uh randy here so um you know i'll call your attention to uh to our actually our second quarter uh discussion in the mdna we invested about 1.3 million in various property plant and equipment um and that includes those two machines as well as some other uh items in our manufacturing process so What I will say to that that I'm quite optimistic about is seeing, as Sean referred to those gains up in our 100 megahertz product and then, you know, putting them into our 60 as well, I think the payback period on this investment is going to be quite short.
spk02: Okay. And a ballpark description as to the improvement that you expect in the 60 megahertz device is meaningful of 15% or better. Any kind of guesses as to how much more oomph you might get?
spk08: Yeah, I think I don't mind going out on a limb and say that we're targeting sort of 30, 40% improvement and on the key sort of flagship performance metrics. And it will also allow us to offer some capabilities that we don't currently have at all right now. And so I think, yeah, confident in giving those numbers
spk02: Okay, so assuming that you would end up snaking at least a third of that, it implies that you might end up being able to increase your price by 10% to 15% to end up saying, okay, to the client, it's going to be more expensive, but you're going to get a pretty good deal on the kind of increased cost. Turning to the one-time training cost for both the manufacturing staff as well as the CATSA crew, any guess or, sorry, can you give a number that says okay, that was quarter of any bucks in the quarter, whatever the number was.
spk03: Rattle, would you like to? Yeah.
spk07: You know, it's not a number that I think I can pull out directly, Bob. It's part of In terms of manufacturing, when we're training our team, I would view it more as increasing efficiency with new members of our team. So training and investments made there will increase their efficiency as we go forward. On the CASA piece, it would be in the order of kind of low six figures that we've invested so far on training. And I would expect that to continue to go forward as we roll out. There's a significant amount of of complex equipment that we deal with. And so there's a lot of work that goes into getting all of our team fully up to speed.
spk02: You talked about the $9 million consolidated line of credit. Can you talk about how much has been drawn down of that line of credit?
spk07: As of today, I don't have the numbers in front of me, but We've drawn down – well, I have to say we have the $2 million that we had at Q3. We paid those lines out as part of the consolidation process. And then as I referred to in the financials, we did draw down a little bit more to complete the acquisition of K-prime and pay out that working capital amount. So it's drawn down – The net cash position I would have to pull for you, Bob. I don't have that off the top of my fingers right now in terms of drawdown plus net cash rate or net it off against it.
spk02: Okay, and then turning to Sean's description of the four-person sales crew blossomed to become 30 people. If you end up saying we've added net 26 people even at a modest $25,000 draw, which I'm sure is a very conservative estimate, That would add approximately 650 grand to your expenses. Can you give some insights related to the staff cost increase of going from four to 30?
spk08: Yeah, so. Roughly 20 of those are commissioned only partners. So they don't they don't get paid until until we ship a product, so they're not adding to our fixed costs. So and then and then also I'd like to say that. part of the revamped sales organization is a total change of compensation structure. And so our new VP of sales has managed to increase the headcount on our team, but not dramatically increased costs because of the change in comp structure relative to the team that we had before. So it's not quite that, the math isn't 30 people times average salary, it's different than that.
spk02: Okay. So I think what I'm hearing is the four base staff salespeople have gone to 10 and you've moved to a larger success-based compensation model similar to what the 20 contractors are as well to all kind of balance out. Okay.
spk08: That's correct. And a couple of people have moved into the Benchtop NMR portfolio from the K-Prime team that were already there.
spk02: Okay, and can you remind me as to the size and term of the CASA contract?
spk08: Six-year contract, $160 million, but the first six to nine months are phase-in. So I think of it, practically speaking, as 5.5 years and $160 million. So if you divide $160 million by 5.5, that's $29 million per year. And then it's also extremely likely that the contract will be renewed for an additional five years, which would make it a 10.5-year contract. But the signed contract that exists now is 5.5 years for $160 million.
spk02: And can you use some color as to the actual number of airports that you're involved with?
spk08: Right now, it's a handful. So we've got coverage in Calgary and satellite airports such as Medicine Hat, Lethbridge, Cranbrook, for those of you who know the West. But we're also in Edmonton and the Vancouver airport as well right now. And we're rapidly moving towards other airports in BC. And then we're going to take a little bit of a break in terms of actually being able to physically get into the airports for the for for the the holiday season um and then and then after after um commencing again on january 2nd we'll be going full bore again on on getting uh we believe full coverage in all 81 airports by by the end of march that does it for me for the moment thank you very much thanks bob it was a pleasure
spk00: Your next question comes from Brandon Austin of Venator Capital Management. Please go ahead.
spk04: Hey, guys. Just a couple of follow-ups here from largely from Bob's questions. You said that you expect to have all the airports rolled out by March?
spk05: Yes.
spk04: Okay. So would that mean that by Q2, Q3, that contract should be running about $7 million a quarter, just 30 divided by 4 or whatever?
spk03: Go ahead, Sean.
spk08: Yeah, so we won't be at those kind of billing levels by Q2 of 2023, and the reason for that is... there's different categories of revenue from the contract. And so some of those categories we have like really deterministic visibility on, but then there's some other categories of revenue that we don't have full visibility on. And so I expect to be billing at sort of the maximum rate more towards the end of the year than the middle of the year. So I think by the middle of the year, I think a reasonable expectation for monthly billing rate is like $2 million a month. So maybe like $5 to $6 million per quarter. But in terms of getting to that $29 million per year rate, I think that's going to take more towards the end of the year to get to.
spk04: Okay, and that's additive to K-Prime's current revenue run rate of like 1.5 mil?
spk08: That's correct, yes. Yes, it is. Yes, it is. If you meant 1.5 mil per quarter, yes, it is.
spk04: Okay, so if I'm using like 1.5, then sort of Q2, Q3, K-Prime as a division should be doing about 6.5 million and finishing in sort of the 9 to 10 range by the end of the year? Is that fair, ballpark?
spk08: Ballpark, yes.
spk04: Okay, okay. And just remind me, I remember when you guys first signed this contract, you guys seemed to suggest this was a fairly decent EBITDA margin contribution for you guys.
spk08: Yeah, absolutely. We're basing our planning around the idea to do 15% to 20% EBITDA margins on the project, including overhead. As we've gotten further and further into the contract, we now have reasons to believe that it's more profitable than that, but I'm not prepared to quantify it for you at this time. But as we get a better understanding of how profitable it's going to be, we will start to quantify it in later quarters.
spk04: Okay. But it sounds like... You guys should, if we're assuming this is going to be a profitable contract, you guys should be profitable by mid-next year, or do you have more spending plans?
spk08: So I think I understand the granularity of your question, and the answer is we expect to be profitable on the CAATSA contract by March, or cash flow positive, I guess I prefer to say. And then, yeah, it is a target of mine. to be profitable as a business, certainly on an EBITDA basis by middle of 2023. Yes, absolutely. Randall, do you have any more color on that?
spk07: Yeah, I would just like to call everybody's attention to our income and loss before other items. You can see for the three months ended, September 30th, we're not far off of that number already. And there's a great deal of our cost below that line that's non-cash. So I think from an EBITDA perspective, we're already getting close, and I only see that going up in the future with the addition of CAATS at its full run rate.
spk04: Okay. And if I'm looking at, I guess Bob was asking what your growth rate was, X acquisition. Your analysis revenue segmentation, though, that's pure, right? Like there's no acquisitions in there, right?
spk08: Sorry, go ahead.
spk07: No, no, no, please go ahead, Sean.
spk08: No, actually, Randall, if he's referring to a specific section of the document, I prefer if you answer it.
spk07: Sounds good. So it's almost all pure, Brandon, to answer that. We've got in the quarter ended about a little over $300,000 of quad revenue in that analysis segment right now in our NMR segment. So I would back that out if you're doing the calculation. But, you know, to Sean's earlier comment about 70-30, that's about right on the numbers.
spk04: Sorry, so there's 300,000 of the 4.1 million?
spk07: Correct.
spk04: Okay. And so... Okay, fair enough. And so that would still be pretty healthy over the 2.2 million you guys reported last year. And then... I guess on a year-to-date basis, an analysis old is running about $10 million for the nine months versus $7 million last year. Does that sound about right?
spk07: That's about right, yep.
spk04: Okay, okay. Okay, so that's good. And I mean, you guys are a little cagey there on the quad systems, you know, in terms of the progress they're making towards commercial growth. you know, revenue. I know these are big ticket items, so it's tough to really give any kind of definitive forecast. But is the product at this point ready for prime time, or are we still, you know, a couple quarters away from that?
spk08: The product is ready for prime time now, but it's only four out of the five modules which are ready for prime time. But you can sell those four out of five modules independent of the fifth. And the fifth is the magnet. And so we did $300,000 in revenue in Q3. I believe we have a great shot at doing a million in revenue in Q4. And then we should be off to the races in 2023 with the full five modules. So there, we, we did have an expectation that by now we would sell, be selling all five modules. So it's been, um, a classic R and D delay with one of our partners that is, um, that has, has caused the magnet part of this system, um, to not be generating revenue yet, but the other parts are, are, uh, do, will be doing that in, in, um, in Q4 and that's associated with our target of a million in revenue.
spk04: Okay. And your inventories on your balance sheet, there's a lot of raw material inventory there. Is that just a function of shipments coming in late? Because it does seem that there's a decent source of cash there in converting those inventories into sales. Yeah, absolutely.
spk08: I mean, before the pandemic, we were – We were striving for just-in-time manufacturing, and we had all kinds of KPIs associated with inventory turn that we wanted to reduce and so on. But then when we got into the middle of supply chain challenges, right from the top of our board of directors, to be honest, there was a mandate given to management to go the other way with that and start increasing inventory just so we didn't get caught off-guard and with an inability to ship instruments. We're sort of tempering that a little bit now as we see easing on the supply chain challenges, but that's what that is. It's all current and good inventory. I don't anticipate any write-down. I know there's not going to be any material write-downs associated with that or anything, and you're right. It is going to be converted into cash, and it's being converted into cash right now And, you know, I anticipate having just absolutely fabulous fourth quarter.
spk04: Okay. And you guys said you guys shipped 2,100 megahertz units in the quarter. How were 60 megahertz sales directionally?
spk07: So we had 22 in the quarter. Okay. And, you know, we continue to see strong average selling prices across the product lines. So we see strong numbers across the board in Benchtop NMR and continuing into the fourth quarter.
spk04: Okay, so are we expecting, can we expect Benchtop, and I can't remember seasonality, but is that number, is that an analysis revenue number going to continue to increase or is there seasonality I should be accounting for?
spk07: Our seasonality is positive in Q4. Typically, historically, that's one of our better quarters. So that's certainly where we're aiming with regards to benchtop revenue.
spk03: Okay, great. Thanks, guys.
spk09: Thanks very much, Brennan.
spk00: At this time, there are no further questions, so I will turn the conference back to Sean Krakuski for any closing remarks.
spk08: Thanks very much, Operator, and thanks very much to everyone who participated on the call today. I look forward to talking with many of you in the not-too-distant future.
spk03: Have a wonderful afternoon and evening.
spk00: Ladies and gentlemen, this does conclude your conference call for this evening. We would like to thank everybody for participating and ask you to kindly disconnect your
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