Nanalysis Scientific Corp.

This meeting is being recorded.

Financial results and company highlights are the company's president, CEO and founder, Sean Krakiwsky, and CFO, Heather Kury. Following their remarks, we'll open up the call for an analyst Q&A session. Before handing over the call to Sean and Heather, please note that information we present today could contain forward-looking information that is based on management's expectations, estimates, and projections. Please consider the risk factors, including those in the filings made by analysis on CDAR when reviewing this information. Also, all amounts discussed will be in Canadian dollars unless otherwise noted. With that, I'd like to turn the call over to Analysis CFO, Heather Kury.

Thank you, Jake, and thank you to everyone joining us on the call today for taking the time out of your day to allow us to share with you the progress we are making here in analysis. I will begin by walking through the financial results for the second quarter, which ended June 30th, 2026. All amounts referenced are in Canadian dollars. For the three months ended June 30, 2026, the company reported consolidated revenue of $9,722,000, an increase of $146,000, or 1.5%, over the corresponding period in 2025. Product revenue declined year-over-year due to the termination of third-party equipment sales, while security services revenue increased year-over-year primarily due to increased levels of project-related work associated with the airport security maintenance business. Gross margin percentage for product sales for the three months ended June 30th, 2026 was 65% compared to 61% in the corresponding period from 2025. The improvement in the second quarter was primarily attributable to operational improvements. Gross margin percentage for security services for the three months ended June 30th, 2026 was 12% compared to 10% in the corresponding period from 2025. The improvement was driven by operational efficiencies, including enhanced logistics processes, more effective management of overtime and on-call hours, as well as higher levels of project-related service activity. The company recorded adjusted EBITDA of $881,000 for the three months ended June 30, 2026, an improvement of $1,343,000 compared to the corresponding period in 2025. The improvement was primarily attributable to improved operational performance, which included increased security services customer service, Lower sales, marketing, general and administrative expenses, and included ensuring that all eligible investment tax credits had been filed. Net loss was $666,000 for the three months ended June 30th, 2026, an improvement of $1,456,000 compared to the corresponding period in 2025. The reduction in net loss reflects improved business performance. With that, I'll turn the call over to our founder and CEO, Sean Krakiwsky. Sean?

Thanks very much, Heather and Jake. We're quite proud of our accomplishments in the second quarter. As you can see, our adjusted EBITDA number, which is kind of a proxy for cash generation that we use, which is important to our bank and also our internal management team and our board. has gone up substantially. And we're working very hard to keep our company going in the direction of improving that number over time. With regards to the business operations of our company, we have seen some modest improvement in services business gross margins year over year. But really, you know, we haven't seen what I consider the sort of important part of the improvements associated with the great work that Marc Tomlinson has done. And I expect to see several emblematic criteria of how that business is going in a great direction going forward. So keep a look out for those types of things. With regards to our core technology products, our benchtop NMR spectrometers, We've worked very hard to improve the management of our international dealer network in territories like Japan and UK and India and China and Indonesia. And we see a lot of good things there. Substantial reorganization of how that international dealer network is managed and the focus we put on it. We're already seeing the fruits of that. Thank you so much for joining us. are in fact looking very promising and we expect to see the fruit of that, you know, basically over the next coming months. I've already seen it in the numbers thus far and we expect to see strength of that going forward, which of course is coupled with ongoing innovation of our products and our products have had, have better performance than they ever have before. And we're really excited about the, The ongoing performance of our products and new products that we'll be launching that expand the market for us. And just as a side note with regards to our financial statements, how you view innovation there, don't just look at the income statement and the number for R&D there. You have to look at the notes and you'll see that we continue to spend Thank you for joining us. that nets off against the gross R&D spend so don't be fooled by that small number you see on the income statement if you want contact me or look in the notes and you'll see we still spend a healthy amount on innovation and we always will we're just very fortunate to be able to get subsidies for that R&D activity so as I've mentioned many times in the past There's a tight correlation between our core technology products, namely benchtop NMR spectrometers, and some of the other things we do in our technology business, namely MRI and high-field NMR activity, which we do through partnerships as Quad Systems in Switzerland, and also companies like IMRS, which is a private equity backed MRI, clinical MRI company in the United States which we work very closely with and very proud of the activity that's going on in those areas and we're working very hard on some really cool licensing opportunities and recurring revenue opportunities with those customers going forward. Just to touch on some macro issues so as an example one of our new directors on our board. Dr. Werner Moss is a very well-known figure in the NMR industry. In fact, was the president of Bruker Biospin for many, many years and was an employee of Bruker for roughly 20 years. And he saw that company go from a relatively small revenue to a billion dollars in revenue overall. So quite a knowledgeable person when it comes to NMR and and Scientific Instrumentation and Analytical Instrumentation and so on. And one of the things that he's been emphasizing recently, which we are seeing in the numbers is that pretty much all instrumentation companies had a kind of a weak sort of first half of the year, but everybody's expecting quite a bit of improvement in the second half of the year. So we're seeing that as well in addition to We're seeing that in our sales pipeline. in months like July and August where in previous years we'd essentially just tell our sales people, hey, get your vacations in in July and August. We're not saying that this year and we're seeing a lot of exciting opportunities. So we expect to see continued progress overall with our business and with the new cost structure that we put in place in our company that our CFO has ensured that we were positioned for really good profitability going forward as our revenue increases so really excited about all the hard work we've done and how we're positioned for significant improvement in our financial performance going forward so with that I'd like to turn the meeting back over to Jake and see if there's any questions from anybody in the audience today and thanks very much for joining us by the way

Thanks, Sean. If anybody in the audience has a question, please feel free to use the raise hand button or just unmute yourself and feel free to ask a question.

I see a lot of familiar faces on the call. I see Walter in Belgium and I see all kinds of people that I know are familiar with the company. I see Doug probably in Muskoka. So I'll try to maybe get the juices flowing a little bit. Yeah, maybe I'll just touch on the last part of my talk and talk about how, you know, probably several of you were expecting some maybe some more explosive growth in Q2. And, you know, we almost sort of saw some of that, but ultimately kind of didn't get things rolling before the revenue recognition cut off of June 30th. But again, it's related to this theme that Second half of the year is looking totally different than the first half of the year. And again, this is substantially because of macro issues. So we do expect to see significantly better numbers in the second half of the year, starting off in Q3 and so on. So if you remember, I don't know if any of you remember this, but if you remember what our Our Q4 numbers were in 2024. I know that's going back a little ways but essentially it's before we started to terminate Some of our third party businesses, which were related to acquisitions and we kind of went organic. And they were also before a lot of the uncertainty that was created by the new US administration sort of in Q1 of 2025, right? So if you can all harken back to the Q4 2024 timeframe, which of course preceded our current CFO, but If you remember the adjusted EBITDA numbers and the operating cash flow numbers that we did then with the revenue that we were able to do in that quarter, that kind of foreshadows what our potential is, right? Now, the reason why we weren't able to keep that potential is because we had to shed some businesses because of our legacy issues associated with acquisitions. And then the macro uncertainty came in with the and so on and so forth. But I think it really is emblematic of anybody who wants to sort of see in the form of financial numbers what our potential is. You can look at that quarter and not only do I expect to get back to those kind of revenue numbers but we have a way better cost structure in place and then most importantly everything we're doing now is organic and so we have full control of our destiny and how we resume growth so That's just sort of an interesting thing to look at if you have some time on your hands and you want to say like, what could this company do going forward if it achieved X number of revenue in a quarter and so on, now that they have even a better cost structure in place. So not sure if that is going to get anybody to put up their hand, but those are the types of things that I think about every day and we're working on every day in our business. Okay, I see Walter with sort of a half smile on his face, so a little bit of a laugh. So, Walter, you're on mute if you're trying to say something.

Is this, do you hear me?

Yes, we do now, Walter.

Okay, well, I'm happy that you are optimistic about the future of the company. I am too. I'm patient, so I'm waiting for the results to happen in the next couple of quarters. I'm waiting.

Terrific, and I appreciate that, Walter, and thanks very much for your support over the years. And we're working very hard to make it worthwhile, so thanks for your comments.

Okay.

Okay, well, it appears as though we're going to have to wait for the next earnings call to get some more interaction with everybody, but I really appreciate the time you've spent on this Monday morning. Oh, I do know I need to address one other item. Those of you in Canada, especially, may have seen some of the news with regards to the US-Canada trade turbulence going on between the administrations. I just want to confirm to everybody that we're exempt from any of these tariffs that are being discussed in the popular media, so you don't need to worry about that over the weekend. I was working very hard to get U.S. Legal on the phone and also some of our partners in the United States who are part of advocacy for the import of Canadian products because it's in their best interest. So again, not affecting us, so nobody needs to worry that an analysis is affected by the tariffs mentioned recently in the popular media. Okay. Sorry, Walter, were you...

No, no, no. I was listening.

Okay. Okay, well, Jake, I guess with that, I'll turn it over back to you to thank the audience for participating.

Yeah, thank you, everybody. If there's any questions that do come up, feel free to reach out to us anytime directly. And again, I'd like to thank everyone for joining us today. We look forward to talking to you again on our third quarter 2026 call in November. You may disconnect.

Thanks everybody. Have a great rest of your summer. Thank you.