Nanalysis Scientific Corp. (NSCI) Earnings Call Transcript & Summary

Dear patrons, as we head for home plate, I wanted to thank the thousands of listeners we've had this year for our Zooming with LD Series. It is a labor of love from me and the team, and I hope that the world has a fast and full recovery in the months to come, so that all of us can see each other again in their physical form. You can never replace the human element. And I look forward to the day that we can all share laughs and stories together in person. At LD, our goal is to always save the best for last, and I've been following our next company even before they were public. The cool thing about Nanalysis, ticker NSCI on the venture and NSCIF on the OTC, is that they only make a couple of products, and they are both game changers. Based out of Calgary, Alberta, the company is a global manufacturer and seller of compact, nuclear, magnetic resonance spectrometers. The instruments are notable for their ease of use, low maintenance, accessibility and affordability. The NMReady-60 was the first portable, high-resolution 60-megahertz benchtop NMR spectrometer released back in 2013. Recently, Nanalysis introduced 100 megahertz spectrometer, representing the highest resolution instrument available on the market today. The company has sold instruments in over 45 countries and is expanding in a big way here in North America. For full disclosure purposes, I personally own shares in the company. Joining us on the call today, it is my pleasure to welcome the Founder, President and CEO; Mr. Sean Krakiwsky; and CFO, Mr. Luke Caplette. Gents, thank you again for your time and energy today. I've been waiting a long time for this. The floor is now yours.

Thanks very much, Chris. It's a pleasure to be here. Thanks to everybody for joining the call today. And so yes, so we're poised to be the global leader in portable NMR and MRI machines for industrial and health care applications. We do seek safe harbor for forward-looking statements. So I'm going to start off the presentation by sort of telling a little bit of a story that began 11 years ago, when I got a call from a friend of mine, who's also a professor of electrical engineering. And he called me up and he said, Sean, I want to meet you tomorrow at the Foothills Hospital in one of the research centers. I've got something to show you. I said, "Okay, Michael. I haven't spoken to you for a while, but yes, I'd love to get together." So I show up the day in one of these buildings with all kinds of world-class, sophisticated equipment and so on, and Michael introduces me to all of these senior researchers. And he shows me a machine that I've got here up on the screen right now on the left, called the Nuclear Magnetic Resonance spectrometer. Hadn't heard of one of those machines at that time, and Michael starts telling me about them. He says it's the most important analytical machine for analyzing all different types of substances. It's used in all different types of industries like pharmaceutical, food, mining, energy, as long as you can get your sample in like a 7-inch high, 5-millimeter diameter sample and you put it in the magnet, which I've depicted here on the screen annotated in red there, you can determine what molecules are in any substance and what percentage of molecules are in there. And it's a nondestructive technique, so you can analyze the same sample over and over again. It's very reliable. You can put precious things in it, even things like human embryos with -- or a very fine wine or something like that and measure it 100x without altering it in any way. So extremely powerful. Now this was fascinating for me, but I still didn't really understand why I was there and why Michael wanted to talk to me about this. And he says, well, Sean, there's some problems with these machines. They're very complicated to use, they're like mainframe computers with a gatekeeper. So the user actually can't use them. They have to give their samples to somebody else and they might return them in 3 days. They're relatively unsafe to use, very expensive. And of course, you can't move them around. Once you install them in their specialized room, it's there forever. It requires liquid helium, liquid nitrogen to keep the superconducting magnets cool, and it weighs more than your car. And so okay, fine. Yes, I can see that this is an impressive-looking machine, and I guess it has some limitations and so on. But if you're telling me it has all these capabilities, well, that's interesting, but I still don't know why you want to talk to me today. And he said, Sean, I want to build a business around this. I want to miniaturize these things. Miniaturizing them will drive growth, and eventually, they'll become industry standards. And I said, oh, you want to start a business around that. And he says, yes, absolutely, we can do this. I've got some grad students who have some good core competences. And I said, okay, well, I'm not doing anything at the time. He kind of had me convinced. This was about -- after about 3 hours of talking to him and his colleagues. So we went for lunch and talked a little bit more about our plan, the IP plan, how we build the technology platform, the products on top of it, how we put the initial team together and all that sort of stuff. So really, by this time, I'm excited, and we're going to do it in the next day. I'm going to the lawyers and getting all this thing rolling. And he said, great. He said, one more thing, before you go, and he shows me a picture of this, which I've now depicted on the right-hand side of the screen. And I said, well, I know what that is, that's an MRI machine. Everybody knows what that is. And he says, yes, MRI machines and NMR machines are the same thing from the perspective of the fundamental math and physics and even a lot of the hardware that goes into it, they're the same thing. So if we can miniaturize an NMR spectrometer, get some early traction in the market, prove out the growth model, we're also going to be able to miniaturize MRI machines and participate in the revolution of modern health care. And MRI machines will be all over the place in football stadiums of certain sizes to determine concussions. And they'll be inexpensive. You'll have them at volleyball facilities. If you think you've broken your finger, you'll be able to go to the pharmacy and sit in a chair and get a prostate cancer test. There'll be -- these machines will be connected to the cloud, driven by AI and the regulatory environment will change, and we'll participate in next-generation health care system. And I was like, wow, that's incredible. So we're going to start off with something that we're going to be able to generate early revenue from. And then eventually, we're going to be a major health care provider. He totally had me convinced, never been more enthusiastic about anything in my life. So basically, the next day, we embarked on this incredible journey that we've been on for 11 years now to build a scientific instrumentation company focusing on magnetic resonance from scratch. So we developed all the IP ourselves, hired a couple of key people from MIT and Caltech and moved them to where we're starting our business here in Calgary, Canada. And then we just started to build the technology platform. Eventually, we had products. We decided we're going to manufacture them ourselves. So we did all the sort of quintessential things that you do to build a tech start-up over many years. And at that time, I have to admit, our strategy was to prove out the technology platform, sell a few products and then maybe sell to a large, probably American or German company. But after having an opportunity to sell our company in sort of end of 2018, we decided that we wanted to stay independent. So we got together with our shareholders, our Board and management and we said, you know what, we don't want to sell our business. We're having too much fun. Our shareholders were saying they want to put more money into this company, not take money out. Let's stay independent and let's build a real business. I said, okay, that's fine. I'm excited about this, too, but if we're going to do that, I want to execute an M&A strategy, and I want to go public. So in full unity, with all the key stakeholders, we decided to go public on the Venture Exchange, raised a little bit of money. It wasn't really the money that made us want to go public, but we wanted to have a public currency to be able to buy companies with so that more shares, like a paper swap rather than cash. It makes a little bit easier. There's more transparency when you're a public company and so on than if you're private. So with the full blessing of everybody, we did that. And we closed our first acquisition in March of 2020 just before the pandemic. And it's really starting to bear fruit right now, that first acquisition, and we're in the process of just scaling our business. So a little bit of a snapshot of where we are right now. As Chris mentioned at the outset, we sell in over 45 countries around the world. In the United States, which is our best market, and also Germany, Switzerland, Austria and France, we sell direct. And then in international markets, we sell through a network of dealers. We're very excited about our huge market opportunity that we're facing, sort of -- we're a category creator in terms of like portable MRI and NMR machines. We're positioned very well financially with a strong balance sheet. We have a solid sales backlog and an even better sales pipeline, and we're really excited to grow our business. Here's a look at our market opportunity as we see it. So we're in -- in general, we're in the test and measurement space. So in the modern world, everything you see, just look around you, is tested and measured. And for several reasons, either for innovation, you can't innovate new products or new materials without test and measurement equipment; for health and safety; for quality; and also for economic efficiency, when you start manufacturing something that you've innovated. So going forward into the future, test and measurement will become even more critical to how our modern world works. So over $75 billion per year is spent on test and measurement equipment of different kinds. That includes about $8 billion per year for MRI machines that are in hospitals. In terms of NMR equipment for analyzing substances, it's about $1 billion per year. We think that miniaturizing these instruments is going to drive growth by establishing them as standards in every lab around the world. We think that it's going to enable new applications that hadn't been conceived of before for magnetic resonance. And then also connecting to the cloud and having them driven by AI and machine learning is also going to drive huge growth into the future. Here's a look at some of the customers we sell to. So we're way past the pre-revenue stage. We've sold over 800 units of the products that we make. We sell to the biggest companies in the world like Bosch and DuPont and Pfizer and Eli Lilly, as well as 2-person little biotech start-ups. We sell to the most famous universities in the world like MIT and Harvard, as well as tiny little community colleges in Mississippi and rural India and so on, where there are no liquid helium trucks driving around, by the way. And we also sell to government labs of all different kinds for food analysis and so on and so forth. Here's a look at what we sell. So the products on the left-hand side are the ones that Chris referred to at the outset. They're the products that we developed completely on our own from A to Z. And they're nuclear magnetic resonance spectrometers for the analysis of foods, drugs, cannabis and so on and so forth. The ones on the right are the ones that we acquired by our first acquisition in Strasbourg about a year ago. It was a little bit of a technology tuck-in acquisition, but also gave us access to new markets. And then there's a common technology platform in both lines of products. The one on the right is a little bit more MRI focused. So it's sold as a module to companies that make preclinical MRI systems. And we're going to be more active on that, over time. We're also very active on the software side. So in the future, a significant part of our revenue will start to be derived from software-as-a-service, where the simple investigation is done on the instrument with the basic software. And then if you want more sophisticated analysis, you go off onto the cloud and pay for that. All of our products are completely proprietary. So we have 3 patents granted in the United States, and we also file in 9 other jurisdictions. We have 5 more patents pending. And then we have an impressive suite of trade secrets on the hardware side, the firmware and the software side. And just as importantly is our proprietary manufacturing processes. So if you got a hold of one of our products in China, you took them apart, you had 5 PhDs that were smart enough to understand our patents, you still wouldn't be able to reverse engineer our products unless you knew exactly what we were doing in our manufacturing facility. That was sort of a strategic point of mine when I started the business. I didn't want to do all this innovation and then have it easily reverse engineered. So one of the tactics we took is we never pushed out any complexity to our component vendors. We only wanted to use off-the-shelf parts, whether it was the magnets or whatever the case may be. And then we keep all the complexity in-house to enhance these raw components, develop the printed circuit boards and so on and so forth, and then, of course, do the final assembly. So full-blown manufacturing in our facility right here in Calgary. So just to talk about our growth strategy a little bit. So it's to combine innovation with our new products, with OEM partnerships of big companies that can go deep in a particular vertical better than we can do on our own. And then as I alluded to before, M&A. So we're proud to say that we've closed our first acquisition a year ago. It's fully integrated. We had cross pollinization with their management team. So we operate as one company. And then over time, what you're going to see is you're going to see us talk a little bit more about MRI. So from a technology platform perspective, NMR and MRI are the same. But of course, from a product perspective and an application perspective, they're different. In the financial world and in the consumer world, people are more familiar with MRI. We're very active at MRI technology today. Recently, we publicly announced a project with some European Union consortium partners, where we're working on ways to make early detection of smaller tumors more effective. So we're going to be very active on the technology side. And as we go forward from year-to-year, eventually, you'll see us become more active, not just in terms of providing modules to OEM customers in the MRI space, but actually having MRI products ourselves, end user products. One key aspect of our growth strategy is what I call the amplification of magnetic resonance. So on the left-hand side of the screen, you see very complicated output, whether it's looked at by somebody with a PhD in chemistry or a radiologist or whatever. And we're in the process of making that simple to evaluate. So any person can -- like a technician or a regular human being can look at it and say, oh, okay, there's fentanyl in this suspicious powder. I need to hold this person or maybe one number like of 13.1% THC. So amplification, which in both software, including AI and machine learning, is an important part of our business going forward. Here's a look at our management team that's executing the strategy. So as Chris mentioned, I'm the CEO and Founder. This is my third technology start-up. By education, I have a Master's degree in Electrical Engineering, but really professionally, I've been on the business and finance side my whole career. I had a little bit of luck playing hockey with the Los Angeles Kings a long time ago, so I kind of bring my kind of competitive spirit from sports into my business career. Luke Caplette is our CFO, tremendous experience on the M&A side and finance side, and he's on the call here in case anybody has any questions for him. And it's just a fabulous management team that we've assembled over the years as we've gone from phase to phase in our business. One of the things that I'm most proud of is that the core technical team that I assembled 11 years ago is still all together and with the company. So quite an accomplishment in terms of maintaining the continuity with people and the intellectual property and so on. We also have a senior independent Board of Directors, led by our Chairman, Martin Burian, who's got extensive experience in M&A and Finance. He sort of rides shotgun with me a little bit as VP Corporate Development on the M&A side. Werner Gartner is the Chairman of our Audit Committee. He's a former CFO of a large NASDAQ-listed company. Guido Cloetens is basically the representative of our large European contingent of shareholders that we brought on when we went public. He's also the CEO of Elysee Development Corp. And then Michal Okoniewski is a world-renowned scientist in this area of technology. And that sort of brings my story full circle. He's the gentleman that called me up one day, 11 years ago and said, hey, I want to show you one of these machines that we're going to miniaturize in our new business. So he's still with the company, obviously as well. So just to sort of close out here, here's a little bit of a look at our cap table. So where the stock price is today, about a $31 million market cap. These are in Canadian dollars here. We've got an exciting revenue target of $16 million for 2021, which would constitute basically a doubling of our annual revenue before COVID hit. Take a look at our stock price, it was doing pretty good. And then when the pandemic hit, it started to sort of wane a little bit. So we're pretty confident that once investors start to believe that we're going to hit our targets and that we're going to be poised for awesome growth for years to come, that our stock price will start to look pretty good as well. And that's the end of the presentation. And just to state that we have a fabulously talented team of people who are all shareholders in the company, by the way, extremely well educated and extremely well motivated to make us a tremendous success. So that's the end of my presentation.

Sean, thank you, again. I mean, I've had the blessing of seeing you guys even before you went public. I think you have all the ingredients necessary to succeed. And I think that you will definitely be one of the dark horses of LD this year. There are a ton of questions for both you and Luke. Let me know when you're ready, and I'll go through them.

Shoot.

So how big is the NMR's mass spectrometer market today in terms of overall revenue size?

$1 billion per year is the NMR market today.

$1 billion per year, correct?

Yes, USD 1 billion.

Okay. Which industry uses more spectrometers than any other segment? And what is the primary application for them?

Pharmaceutical industry is the biggest user of NMR, and it's for reaction monitoring when they're doing R&D.

Got it. Can you tell us the biggest difference between the 60-megahertz device and the 100-megahertz device? Why is there such a discrepancy in pricing?

Accuracy and sensitivity. So it's a product that we built based on 5 years of market feedback, mostly from large pharmaceutical companies who say, we love the bench top product. We want to put these machines in all different kinds of places, which we can't do with the large ones. But we need a little bit more sensitivity because when we've developed a new drug or when we're developing a new drug, we spend $100 million on it to get it to a certain stage. We might only have micrograms of compounds, so a tiny amount of compound, and we want the instrument to be able to see and evaluate smaller amounts of compound. So we developed the 100-megahertz product for that need.

I see. And then this is a question for Luke. Are the gross margins essentially the same for the products? Or is there a difference?

Surprisingly, exactly the same kind of trends around the 65%, could be impacted a little bit with inflation. But we strive to always continue to keep the margins at 65% and going up as we kind of find efficiencies and develop other processes around our manufacturing process.

Understood. And then back to Sean, how much does each machine weigh? And is it plug and play?

It's absolutely plug and player. Our customers love it. They have a great out-of-box experience. It's basically just like setting up software that you download and click-through Wizards. And the 60-megahertz product is approximately 60 pounds, and the 100-megahertz product is approximately 200 pounds.

Can you talk about the price points that both of these products have been? Have they been relatively the same since introduction? Have they gone up in price? Have they gone down?

Yes. So the highest-end model of the 60 megahertz is USD 75,000 and the highest-end model of the 100 megahertz is USD 155,000. And they've been relatively stable in terms of list prices over the years.

In terms of the spectrometer market, are you guys priced on the lower end or the higher end?

We're premium-branded, higher-end product, and it's because of the value we deliver to customers. Remember, a customer is used to paying millions of dollars for a high field NMR spectrometer and then doing weekly helium fills and so on. So we deliver a lot of value to customers, and we priced our products accordingly.

Who else out there makes a small spectrometer? And what makes you guys truly superior to the competition?

Yes. So we have one arch-competitor. It's a company called Magritek. It's based out of New Zealand, believe it or not. And we compete against them every day all over the world. They are similar size to us. Their highest-end product is 80 megahertz. And so we're significantly above them. Sensitivity scales exponentially, not linearly. So if you're 20% higher in field, you can be double their sensitivity. So that's the main differentiator with them. And we're really the only entity in the world that has created 100 megahertz, which is 2.35 Tesla magnet of spectroscopic quality. And so it's sort of a world's first, and we're very proud of that accomplishment.

I just wanted to go back to a previous question. I think you forgot to answer it, or maybe I just didn't hear it. How much does each product weigh?

Oh, sorry, yes. The 60 megahertz is approximately 60 pounds, and the 100 megahertz is approximately 200 pounds.

Yes, that's very -- I'm glad somebody asked that question because I think it would be a little bit lighter. But of course, there's a lot of technology inside of them. You guys have sold over 800 units already. What is the given time line of reaching 1,000?

We should be able to reach 1,000 by the end of the year, approximately.

Wow. Excellent. In terms of generating sales, do you make any money after selling the spectrometer?

Currently, it's mostly a capital equipment sale, but we do have extended warranty, which about 20% of our customers take advantage of. And that's about like 10% of the capital cost per year approximately. And then we do have plans to add on software-as-a-service, which will be a yearly recurring revenue. And also, we do have a consumables model that we're cooking up behind the scenes as well, but it's not deployed today. Right now, we see it as a greenfield's capital equipment opportunity.

Have you guys ever had one of your spectrometers fail in the field? And what was the reason for it?

We've had very few. Over the years, spectrometers fail in the field. But occasionally, there are software bugs, for example, just like any product, and we can fix those over the internet. And then we also -- occasionally one of our electronic boards will have some difficulties, but very rare, and most of those can be fixed by our people in the field.

Where are your machines assembled?

Full-blown manufacturing and assembly, right here in our facility in Calgary, Canada.

Excellent. Do you guys have any plans? I think this is a no, but this was still a question. Do you guys have any plans of assembling overseas?

No. With this type of a market, it's relatively low volume, say, compared to a consumer market where you're selling 100 million things, right? And very high margins. We don't have any immediate plans to move overseas. And part of it is the intellectual property issue that I pointed out previously, is we have proprietary manufacturing processes that we don't want to disclose. And we don't want to sort of port those into a different environment. And as long as our gross margins keep going higher, we're happy to stay right here.

Straight up. I think it's a great idea for you guys to keep everything internal, and you should never change it. It's just my opinion. In regards to your customer base, how many repeat orders do you typically have? And where are they mostly coming from?

Yes. We're actually experiencing an inflection point on that, where we've got hundreds and hundreds of happy customers who are placing repeat orders right now. And we see that continuing, and it's mostly in the pharmaceutical space. And also, we get a lot of repeat orders from universities.

And then -- this was my favorite one submitted, thus far. How big is the market opportunity for replacing all those water heaters currently in circulation? So I think it's in reference to that first slide that you showed where it looked just like a water heater. Oh, oh, yes, let's go back to it. So this gentleman was asking, how many of those are out there in circulation right now? And are these machines...

There's about 15,000 of these machines deployed worldwide, and the vast majority of those are in the United States and Europe.

Okay. So let's talk about kind of the sales process. I'm assuming that you guys have an internal sales team, how do they -- where do they spend most of their time and energy? And then the big question is, how do you guys ultimately prove ROI?

Yes. So we do have an awesome direct sales organization, and we sell direct in the United States, Germany, Switzerland and France. And so it's -- before COVID, the classic sales cycle involved a lot of conferences, so we used to attend about 30 conferences per year. And now those conferences have gone virtual, which we have found that they're not quite as effective as the physical conferences. So we've kind of upped our marketing spend on digital marketing. So we get a lot of traffic from our website and the digital conferences that we attend. And our direct sales organization, along with our marketing department, sort of extends their capabilities via our network of about 45 dealers that we have in places like Japan, China, India and provides them with the training that they need and the expertise they need to sell our products.

So this is my question. I -- because, of course, I'm a shareholder in the company. COVID made a pretty significant impact to you guys last year. What was kind of the biggest damage done? And are you essentially at 100% right now moving forward?

Yes. So the way I would describe the impact of COVID on us is that it just sort of slowed things down a little bit. Everything remains intact, like all of our opportunities remain intact. We didn't lay anybody off or furlough anybody. In fact, we hired people during COVID. All of our partnerships are -- remain in place, but our partnerships slowed down. And that sort of flattened out our revenue a little bit. It did also delay the full production of our 100-megahertz product, for which we have a significant sales backlog, but we've overcome that. So it just slowed us down a little bit. I personally never thought it was going to last this long. I mean, I'd look back at presentations that I made last March, and I thought it was going to be 3 or 4 months tops. So I think we've just done an incredible job. Dr. Heather Phillips, who's our Head of Operations, is also our Health, Safety and Environment Officer, and she's just done a fabulous job in both of our locations in Europe and Canada to keep us open and to make -- and to keep us all safe. So I think I'm really proud of our team, how we've persevered through COVID.

My famous last words that were oh, yes, this will easily be done by June. But unfortunately, it was June of last year. So it's totally shocked me. And then the last question that was submitted by e-mail, historically speaking -- I'm so glad that someone touched up on this. Historically speaking, companies that reject offers from larger corporations tend to perform really well. Which company offered to take you guys out? And did they disclose at what price per share?

I can't mention the name, for sure, some pretty strict confidentiality around that. Anybody who knows our space, though, and took 3 guesses would be right on their first guess, a very large American-based NASDAQ-listed company. And they actually offered to buy us at the same price that we went public at, which is $0.60 per share. We're trading below what that offer was at. And basically, we're double the size of business in terms of our revenue run rate and so on at this point in time. So...

the last company that did this, Sean, in our arsenal was GAN, G-A-N. And I believe that Scientific Gaming wanted to buy them out. And sure enough, the stock has quintupled since the buyout offer. So there's always a positive harbinger. Okidoki. Let's go to the Q&A side of the Zoom app. Don. Don asks, how would you describe your competitors, if any, at this time? I believe you mentioned one competitor out of New Zealand.

Yes, we have mentioned our arch-competitor, who's -- it's an awesome company. I mean, we think our products and our people are way better, of course. But it's good to have competition. And the most interesting thing about the competitive landscape is some very large companies, one of them was the company that tried to buy us, have tried to build a competitive product and just failed miserably. It's extremely difficult to do what we've done. And unless you've got 50 brilliant people who are devoting their lives to it, you're not going to succeed. And so we're proud to say that there's sort of a small number of competitors out there, but not from lack of trying, they just failed to do it.

Understood. Mike is asking to give a little bit of color on capital budget items for the buyer. So I'm assuming it's kind of like what will they purchase? I'm assuming it's just the device itself. And then you mentioned that 20% of your customers also buy the warranty. Can you -- maybe this might be not a bad time to talk about what you guys may plan to sell in the future to generate more revenues and maybe some reoccurring revenue?

Absolutely. So like I said before, it's a greenfield opportunity for us. One of your viewers asked how many of those water heaters are replaceable, and I said, there's 15,000 of them. But that's not our market opportunity. Our market opportunity is hundreds of thousands. And even once we get into the MRI side of it, millions of devices that we can sell because we're growing the market. We're not just displacing a current part of the market. But -- so it's a capital equipment play with high margins that we think we're going to drive higher. And then we do have accessories. I've shown some accessories here that people buy, extended warranty. And then the bottom of the screen is sort of an illusion to software-as-a-service that's going to come into play with our company, where we just have classic SaaS recurring revenue. I probably hear a bit of an acquisition about that in the not-too-distant future, I suspect. And so we're going to be very aggressive on the software side, going forward. Like a lot of successful hardware companies, whether it's classic tech companies like Cisco or newer companies, once they successfully established their hardware platform in the marketplace, then it becomes all about applications, applications, applications, which is all about software, and it will be no different for us.

Respect. And then, can you give us a little bit of color on the company that you guys acquired last March? Do you have any regrets on that? How much did you guys pay? And where do you think that they're really going to help you guys moving forward?

Yes. No, it was an absolutely home run acquisition. It was founded by a guy who built the most successful high field NMR sales organization for Bruker back in the golden age of that company. And so he developed this little company to get -- to build next-generation NMR technology, and he's now our senior VP of Sales. So it's been absolutely fabulous. We paid about onetime sales for them. So this guy was a -- is a great salesperson and also a great NMR technologist. But he maybe doesn't have the most experience on sort of finance and raising money and that kind of thing. So we are able to get him at a good price. But he's in it for the same reason I'm in it. We did a paper swap. So instead of him holding his private company shares, he now owns our pubco shares. They're all locked up, so he can't sell them now. But he's going to work side-by-side with Luke and I for the next 5 years to 10x the value of our paper.

So Sean, I'm -- as a former hockey player, what do they call it when you're like in the 2-minute zone, that little box when you have a penalty?

Penalty box?

Well, ,penalty box, yes. So I'm going to kind of put you, not in the penalty box, but I'm going to give Luke 2 minutes because I do have some questions for him. Luke, let me know when you're ready.

Yes. Yes, go ahead, Chris.

And this is just me as an investor, okay? Because people are like, I want to see more of you just asking questions of investors. So why was sales -- why did sales and marketing jump from about 6 -- because you guys reported earnings last week. Why did sales and marketing jump from $681 million back in '20 to over $1 million this last quarter?

Yes. So as Sean kind of alluded to, if you're looking last year, we hadn't completed our STD yet. So part of our STD was bringing on a bunch of talented sales personnel. So you're seeing the impact of 2 companies together, opposed to just an analysis on a stand-alone basis.

I see. And then other items, can you give us some color on that? Because that number kind of jumped fairly largely as well.

Yes. I guess the biggest thing in other items would probably be finance income. You'll see about $0.25 million. And that is -- that's just accountants making the world complicated. So all of our debt is interest free. And so when you have interest-free debt, you have to present value it at today's rate. And so you get a win, immediately present-valuing that, and then you kind of amortize it over the life of the loan. So that's a big piece in there. You'll see amortization is a little bit higher from where it was last year. And that is, again, now that we're producing and selling our 100-megahertz product, everything that we've capitalized on the R&D front for that, is getting depreciated now because we're starting to sell. So that wasn't getting affected in 2020 because we hadn't brought the device to market yet. Now it's to market. So we're taking that over a 10-year life. So that's going to increase amortization a bit. The other piece you'll see in there is the RS2D earn-out. So they did fantastic last year, just to kind of echo Sean's comment. They've been just paying dividends. They had some pretty tough targets to hit. And they blew them out of the water, which is fantastic. So that's another big piece in the other items there.

Historically speaking, what percent of your overall revenue is spent on R&D? And how will that number evolve moving forward?

Good question. Historically, I guess, we're around about a $4 million spend per year. Obviously, we're going to continue to do R&D. There's no major plans to increase that spending like crazy at this point. It's just kind of status quo as we have a few other product lines we're going to start putting personnel on. Our revenue is going to be the biggest piece, I think, that you'll see skyrocketing relative to our R&D spend. So as a percentage of revenue, you're going to see it probably decrease quite significantly. In terms of just gross spend, it should be fairly consistent for the time being anyway.

And then one of the things that I've always respected you for is that you guys are incredibly financially disciplined. In terms of cash on hand, I'm assuming you're probably good for the rest of the year. And then I'm assuming that the company will be profitable as time moves on? And how important is profitability to you guys as an overall metric?

Yes. It's the most important. I mean, we're always striving. We want to be cash flow positive. Obviously, R&D spend for companies like ours are impactful on your cash balance and can hinder you a bit. But no, absolutely, we are going to be profitable. It's not a matter of when, it's just -- it's going to happen probably this year. I wouldn't be surprised, based on the new product coming out. So yes, absolutely, we manage everything to the bottom line. Every day, Sean and I beat ourselves up every day trying to make sure that we're at a place we want to be.

It's always wonderful being cut from the same fabric as you guys do. Because I'm -- I don't want to say I'm a penny picture, but I think that the number one reason why microcap companies fail is they spend more money than they bring in. So for you guys, you know what the opportunity is because historically speaking, and this is an interesting fact for everyone tuning in, med device companies, historically, have had the best buyout premiums out of any segment of the microcap market, which are usually 8 to 10x sales. So that's just something to remember. And the reason why I keep kind of stressing this reoccurring revenue, you guys, is that, that premium is also correlated with how much of your model is razor-razorblade. So with that, I'm going to bring Sean out of the box again. Okay. And then, Sean, I have to ask this, and you're probably going to kill me for this. Does Calgary still have a hockey team?

Oh no.

We do.

Oh, you do? Those are the Flames, right? Okay. Cool.

Called the Calgary Flames.

Oh, yes. Thank, God. Okay. I probably lost about $100,000 in business from Canada, if anyone is listening to this, okay? So I apologize. So the Calgary Flames. The second thing I want to ask you is that you -- I don't know if you saw this or not, but Gretzky, $3.75 million for his rookie card, Gem Mint 10, 1979 O-Pee-Chee. Do you have anything valuable that you collected growing up that has turned out to be a good investment?

I have one item, but I'm not sure. Like I know everybody knows who Wayne Gretzky is, but I have this incredible autographed picture of Guy Lafleur from 1978 who -- much all Canadians are kind of like the New York Yankees of the National Hockey League. And yes, I got a signature after a game against the Boston Bruins in 1978. He had -- it was a cold winter night and he had this amazing fur coat on, which you're not allowed to have. And I'm also going to say, he had a woman on both of his arms, and he was walking out with a cigarette in his mouth.

That's awesome.

[Foreign Language]. And he gave it to me. And I've got that picture. I don't know how much it's worth, but I got it.

So it's probably worth a lot. And I just want to give a literal translation to all the Americans. Sean is talking about Guy Lafleur. And just while we're at it, okay, just while we're at it because you know these intros are all customed. Let me see if I have this right, because I'm big when it comes to proper pronunciation. It's Krakiwsky. Is that correct, or I'm still...

No, you're perfect.

Okay, cool. Yes. No, and that's why we brought Luke on because his last name was just easier. Okay. So let's talk about this. You're at a $31 million market cap, fully diluted.

Canadian.

Canadian, okay. So the discount to the U.S. guys is what, about $25 million to $27 million market cap?

Yes.

And I don't know if this has been disclosed, if it's not, I apologize. But do you think that you guys can do -- what's kind of the estimate, about $16 million in overall revenues this year, correct?

Yes, that's what our publicly disclosed market is, and we think we have the backlog and the pipeline in place to -- we think that's a pretty feasible target for us.

Yes. And just to add to that, Chris, just our Q1 numbers, we were up 115% on revenue, which was...

No, no. Look -- and I told you guys, look, for me, at least, it's not a matter of if, just when. And you know the greatest investor in North America is Canadian. Okay, and he taught me a very valuable lesson. He said, I'm here all day. So you look at the real good deep value guys, their ability is patience, okay? But in a world today where people are just buying garbage on press releases, no one is thinking longer term. I love the scenario that you guys are in, obviously, because it gives me time to kind of see how things evolve in the company. But my stance is it's 2 part. Do you have -- and I'm pretty sure I know the answer to this, but do you have any coverage here in the states right now, in the U.S.?

No. We don't have it. We were on the cusp of getting some coverage from some really nice little boutique firms down in the U.S. and also in Canada before COVID hit. And then kind of -- the pandemic kind of put our investor relations activities in sort of a state of flux, and so we do not. And -- but we're about to ramp up our IR activity again here in the next couple of months.

Okay. Is there any coverage in Canada?

No, there is not.

So let's be real. I mean, why do you think that's the case? Is it -- I mean, is it -- what's the number one excuse? Is that you're too small? It's that there's not a lot of banking opportunity? Because I look at you guys from the outside in, and it's like, this is their discipline. They know where the puck is going. They have a distinctive product, and there's a huge opportunity. But maybe bankers see a different thing. I mean, what's kind of your stance on why you guys haven't had coverage yet?

I'm just going to say, we -- I guess, we're just being slow in sort of consummating some of the coverage opportunities. And when COVID hit, we really started to, I guess, neglect maybe the IR-related activity, and we kind of hunkered down. We didn't know what was going to happen. So we hunkered down, we focused in on our foundation. And now we're ready to sort of get back into the IR world. And there are several people of several groups who have explicitly stated they're interested in initiating coverage. So I guess that's really -- it's no real magic reason or profound reason, just that it's just a matter of the pandemic and timing.

You guys -- what is the total employee count of the company right now?

Approximately 85.

85.

Europe and Calgary.

Would you guys ever consider doing a partnership with one of the bigger players if you feel that you're going to be able to sell a lot more devices moving forward?

Oh, sure, especially in the MRI space, which is highly regulated. There's a bit of a cartel there with Siemens and Philips and GE. And I mean, over time, we'll -- I'm confident, us and others can disrupt that. But in the meantime, we're happy to partner with anybody who would like to. We have a publicly disclosed partnership with Bosch. That was sort of an OEM-type of a deal and which is still moving forward. And so yes, partnerships are a critical part of our future. We didn't want to just be a licensing company and -- because we wanted to have our fate in our own hands and develop an end user product that's branded by us with our own sales organization. But now that we've established that, yes, there's all kinds of exciting licensing opportunities and white-labeled OEM opportunities that we're pursuing.

And then going back to your press release on January about that strategic OEM partnership. How has that -- how has that relationship taken place since then?

Yes, it's evolving very well. They are still in stealth mode. It's a really exciting opportunity. When it is publicly announced who that entity is, I think it's going to shake up quite a few people in our industry. But it leverages our existing technology platform, so we're not doing anything new for them. And this is a group of people who has 25 years experience and a key part of our industry.

And of course, since I've been asking you guys questions, there are several more questions. Mike asked how much was invested over the years in the 100-megahertz product and development?

Yes, I'm just going to give sort of a quick kind of holistic answer. Probably about $20 million. And then if you -- of course, it's built on top of the same platform as our 60, right. So common technology platform and then multiple products built on top of that common technology platform. So that's the number that I would say would be -- I'd carve out an associate with just 100. But a lot more money than that if you include the whole technology platform development.

Okay. So our dear friend from San Diego asks what needs for capital will you guys need to ultimately grow and acquire? And then, of course, there's this question about cash on hand and raising money. It would be really helpful if you can give everyone your philosophy on that.

Yes. So we've got a strong balance sheet right now. And just in terms of like our organic growth, we would never need to raise money ever again. But we do have a fairly aggressive M&A strategy that we're executing. And so we feel like we're severely undervalued right now, so we won't raise any money at the current stock prices or anywhere close to this. But if in 4, 5, 6 months, our stock was trading at $1.50, yes, then we do significant raise and the use of proceeds would be M&A.

Of course, as just a piddly shareholder, my advice, don't give out equity because I don't -- my personal opinion is, I don't think the company is worth $25 million. Now where it's going to be worth? We'll see. And then 2 more questions from me. Say, I put myself in a box for 3 years, where I don't talk to you guys. What will you tell us that the company accomplished operationally?

Yes. So 3 years from now, we're going to be 3x the size. Our revenue will be higher than what it is now by a multiple of much greater than 3. We will have started to make inroads in the end user MRI space collect -- connected to the cloud and AI. And you'll see us starting to disrupt that environment to a significant extent with partners. And yes, you're going to see us as a burgeoning little Siemens or GE. Not the conglomerate side of it, I just mean the scientific instrumentation side of it.

And then finally, a very difficult business question, who is the most horrifying person you had to play against in the rink?

A guy by the name of Kenny Baumgartner, who actually -- I got to experience both sides of that. So when I was -- in Canada, we say junior hockey in the United States, it would be akin to playing like AAA baseball. I had to play against him in this place call -- and way up North called Prince Albert, Saskatchewan. And he used to always steal the other team's water bottles before they came out on the bench, and he was a scary dude. And actually, I got to play with them in Los Angeles Kings organization, and he had a successful career in the NHL as a fighter. And really just a wonderful person, but a scary dude to play against. Holy smokes.

Yes, I would be mortified. What's like the most conservative position to play where you're not going to get checked. Is there one? Is it defense? Or anything goes?

I think it's equipment manager. There you should be safe, right?

Exactly, Luke. That would be my role. But that's awesome. Now I have to ask you, this is -- I mean because there was one guy. I won't tell people what his name is, but he's the CEO of a biotech, and he played professional basketball for Buffalo where they had a team. And the stories that he would share were just amazing. But for years, I've been trying to find his basketball card. And supposedly, his CFO told me that he bought them all so that no one would have access. Do you have a card in circulation? And is it easy to find?

I think if you Google me on the Internet, you'll see a hockey card of mine when I played for -- I actually had a short stint of college hockey in the United States. I played for Minnesota-Duluth. And I think there's a hockey card of me there. And it's -- and I played -- some of you might know the guy named Brett Hull, Hall of Fame hockey player with a lot of teams. And I played with Brett Hull for Minnesota-Duluth, and I think there's a hockey card me there. But I think that's it, that's out there. I'm not sure.

Sean's being bashful. He actually hands out his old hockey cards every time someone comes to the office. In the front, we've got -- he's framed it all through the office and his hockey gear and his duffle.

I'm pretty sure, Luke, that somewhere in this drawer, there's a Gem Mint 10 of his card, that took him a while to find out. But, look, I mean as -- it's -- as a former athlete myself. Of course, I don't want to mention the sport tennis because it's not as masculine or as cool. You learn a lot, I mean, in terms of just playing sports and being a good executive. So with that, where can people find out more information on the company?

www.nanalysis.com. So N-A-N-A-L-Y-S-I-S.com. It's the word analysis, but with an n in the front, and you'll get everything you want there from our investor page.

Gentlemen, thank you again for today. I had a great time, and I will be joining you on some of your private meetings as well because I have further questions as an investor. And then what I will do is -- I apologize for anyone who submitted a question by e-mail, if I didn't get to it, I will make sure that Matt answers it off camera. But listen gentlemen, have a great weekend. I appreciate your time, and I will be in touch.

Thanks, Chris.

Thanks, Chris. It was a pleasure. Appreciate the opportunity.

Be well.