PART I
Item 1. Business
The Company Overview
Nexscient, Inc. (the “Company”) is early-stage company engaged in the business of developing a Software as a Service (SaaS) platform for commercialization that intends to exploit Industrial Internet-of-Things (IIoT), Artificial Intelligence (AI), and Cloud-computing technologies to deliver an innovative solution for manufacturers and continuous production facilities in the industrial automation sector that helps reduce equipment failures, avoid unscheduled downtimes, decrease equipment maintenance costs, and improve overall equipment efficiencies. The platform is currently under development.
Corporate History and General Information about the Company
Nexscient, Inc. was incorporated in the State of Delaware on March 14, 2023. Our fiscal year end is June 30. We are a development stage enterprise. Our principal office is located at 2029 Century Park East, Suite 400, Los Angeles, CA 90067. Our telephone number is (310) 494-6620 and our e-mail contact is info@nexscient.com. Our website can be viewed at nexscient.ai.
Addressing the shortcomings of most existing condition-based monitoring products on the market today, Nexscient is taking a unique approach by developing a remote, continuous monitoring solution as a subscription-based service -- one that not only will offer all of the benefits of condition-based monitoring diagnostic system through vibration and acoustic analysis, but also will offer those benefits with (i) no upfront capital expense of equipment and software purchases; (ii) no need to update and maintain and update purchased diagnostic equipment and software, (iii) no requirement for specialized training of maintenance personnel; and (iv) no need for licensing, maintaining, and updating software. From a financial perspective, our solution is more affordable because it does not require upfront investment and shifts what would be a capital expenditure to an operating expense for the customer. For the Company, our business model provides a pathway to profitability through recurring stream of revenues that can be realized through a growing base of subscribers and subscriptions.
Business and Market Summary
Nexscient represents the next-generation, wireless condition monitoring solution that is robust, secure, and scalable, offering manufacturers and continuous-process facilities a powerful new tool for not only reducing maintenance costs and protecting against potentially adverse conditions due to unexpected machine failures, but also improving production schedules, product quality and yield, and overall equipment efficiencies. Having instant access to accurate and timely information provides plant managers with a notable advantage in making front-end decisions that can improve return on investment. Through its subscription-based service, Nexscient expects to offer increased visibility, analytics, and continuous connectivity that not only provides an immediate solution to avert sudden machine failures, but also enables actionable insights into machine health and recommends adjustments for optimal performance. We intend to generate revenues initially from subscription fees and may generate additional revenues from premium service offerings as well as consulting services that may be offered directly to customers.
The Industry/Marketplace
The maintenance of manufacturing equipment such as motors, pumps, compressors, and other industrial machinery is experiencing a major shift as new maintenance methods are increasingly being adopted across the industrial sector. The emergence of ‘Industry 4.0’ and Industrial Automation is pushing companies to adopt IIoT and AI into their maintenance practices to achieve better outcomes from their operations.
Properly managing machine health plays an increasingly important role for continuous process, asset-intensive manufacturers in reducing operational expenditure, achieving superior cost efficiencies and resource utilization, and is becoming the top driver for many companies to remain competitive. Efficient machine maintenance practices go a long way in improving factory floor operations and reducing unforeseen expenditures.
Typically, manufacturers allocate 40% of their operating budgets toward running critical equipment, with an additional 5-8% earmarked for maintenance of the same equipment. Any unexpected equipment failure, not only increases the cost of operations, but also adversely affects asset utilization levels and ultimately impacts productivity.
Furthermore, the amount of money that is locked up in spare parts and inventory for repairs is in the tens of millions of dollars, because these parts often have such unexpected failures. For example, an auto assembly factory can experience the ill effects of downtime misfortunes adding up to $22,000 per minute or approximately $1.3 million every hour1. Likewise, an average manufacturing plant can have downtime costs extending in the vicinity of 5-20%.
The global predictive maintenance market is expected to grow from $5.66 billion in 2021 to $64.25 billion by 2030, witnessing a Compound Annual Growth Rate (CAGR) of 27.4% from 2022 to 2030, according to a market research report published by Next Move Strategy Consulting2. The major factors fueling the market growth include the increasing use of emerging technologies to gain valuable insights, and growing need to reduce maintenance cost and downtime.
The global predictive maintenance market is driven by rising demand for smart factories and is expected to register significant growth due to technological advancement such as wireless technology and remote monitoring. Remote monitoring is the most preferred monitoring process in continuous-process facilities that work continuously and are highly prone to flaws because it enables the operator to accurately collect data, which can be communicated immediately to all the concerned personnel.
Trends
The increasing advancements in efficiency and accuracy of machine condition monitoring equipment is resulting in growing demand for this equipment in several industries, as it maximizes machine productivity. Through effective condition monitoring, it is possible to virtually eliminate plant downtime resulting from unexpected machine failure. Condition monitoring facilitates planning of repairs during non-peak production hours. As an outcome of machine maintenance planning, the actual repair/maintenance work is more cost effective than the traditional way. Often, the overall effect of improved maintenance improves product quality.
Target Industries
Manufacturers and continuous process facilities using condition-based monitoring can be found in industries such as (i) automotive manufacturing, (ii) chemicals, (iii) metals and mining, (iv) oil & gas, (v) power & utilities and others, including (vi) food & beverage, (vii) cement, (viii) paper & pulp, (ix) pharmaceuticals, and (x) semiconductor & electronics. Many of these industries are under continuous pressure to improve performance in a competitive and cost-sensitive environment. Preventing machine downtime in production lines is a top priority. Ends users in these industries are increasingly adopting condition-based monitoring to help improve their competitive standing.
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1 According to a research study conducted by Nielsen Research in 2006 following survey of 101 manufacturing executives in the automotive industry. https://news.thomasnet.com/companystory/downtime-costs-auto-industry-22k-minute-survey-481017
2 Globe Newswire https://www.globenewswire.com/en/news-release/2022/08/24/2503654/0/en/Global-Predictive-Maintenance-Market-to-Generate-USD-64-25-Billion-by-2030-States-a-New-Report-by-Next-Move-Strategy-Consulting.html
Geographic Locations
North America dominated the market in 2022, accounting for over 36% share of the global revenue3. The U.S. and Canada are slated to provide promising growth opportunities against bullish demand from power generation, aerospace, oil & gas, marine, and food & beverages industries.
The trend for vibration monitoring has become pronounced for oil condition monitoring in the oil and gas platform machinery lubricants. The rapid growth in the energy sector as well as technological advancements in manufacturing sector spurred the demand for condition-based monitoring in other countries. Also, the rising need for effective scheduling of machine maintenance as well as prediction of equipment failure across major industries, namely manufacturing, oil and gas and construction, are the major factors behind North America’s largest market share. Manufacturers and continuous process facilities using condition-based monitoring can also be found in (i) Asia Pacific, (ii) Europe, (iii) Latin America, and (iv) Middle East/North Africa.
Operational & Financial Benefits
By leveraging the power of low-power sensor, edge processing, secure wireless connectivity, and Cloud computing technologies, we intend to develop an easy-to-use and affordable solution that helps continuous process, industrial facilities improve uptime and reliability, and optimize total cost of operations and maintenance. Continuous condition monitoring can help manufacturers automate the entire orchestration of events–from sensing performance data, updating critical systems and predicting breakdowns to alerting appropriate personnel and triggering schedule repairs–with regard to equipment maintenance. This makes continuous condition monitoring a compelling proposition for modern industrial facilities seeking to improve equipment productivity and cost competitiveness.
Our Products and Services
We are developing a Software as a Service (SaaS) platform that intends to exploit Industrial Internet-of-Things (IIoT), Artificial Intelligence (AI), and Cloud-computing technologies to deliver an innovative solution for manufacturers and continuous production facilities in the industrial automation sector that helps reduce equipment failures, avoid unscheduled downtimes, decrease equipment maintenance costs, and improve overall equipment efficiencies.
We are in the process of preparing the software development and functional requirements documentation that will be delivered to an outsourced third-party software development firm upon executing a software development agreement. While we have not yet engaged any software development firm, we are in the process of evaluating qualified potential candidates.
When complete, the Nexscient predictive maintenance platform intends to offer a simple, cost-effective solution for continuous monitoring of rotating machinery. Nexscient strives to become the next-generation, wireless condition monitoring solution that is robust, secure and scalable, offering manufacturers and continuous-process facilities a powerful new tool for, not only reducing maintenance costs and protecting against potentially adverse conditions due to unexpected machine failures, but also improving production schedules, product yield and overall quality. Having instant access to accurate real-time data provides plant managers with a notable advantage in making front-end decisions that can improve return on investment.
AI Analytics
Our platform incorporates a combination of rule-based logic and machine learning/AI to achieve a short- and long-term view of the machine’s health. We use machine learning/AI analytics to carefully monitor, diagnose and relay changes to a machine’s health status to designate personnel at the first sign of developing issues along with actionable insights. Our continuous machine monitoring service, will not only send notification alerts with detailed malfunction analysis, but will also recommend corrective actions.
3 “Machine Condition Monitoring Market Size, Share & Trends Analysis Report, 2023 - 2030”, Grand View Research, 2022, https://www.grandviewresearch.com/industry-analysis/machine-condition-monitoring-market-report
The AegisOne Prescriptive Maintenance System
Nexscient’s AegisOne Prescriptive Maintenance System leverages the latest IIoT technology with edge processing, machine-learning/AI algorithms, and Cloud computing infrastructure to collect, diagnose and transmit critical information about machine health and performance. Designed as a scalable, stand-alone service, Nexscient does not depend on integration with any control or IT system (i.e., SCADA, CMMS, MES, ERP, etc.)* for its data source.
Figure: Fundamental processes in Nexscient’s AegisOne Prescriptive Maintenance System
Collect: Sensors externally attach to the outer casing of the equipment being monitored and data is collected via three on-board sensors: vibration and temperature. Collected data is processed and wirelessly transmitted to a secure gateway, which makes the information available in the Cloud for analysis and viewing via a Web browser or mobile device.
Analyze: Our Cloud-based software uses rule-based logic, which incorporates domain-level expertise to effect immediate actionable insights and corrective recommendations without the reliance upon a large historical data set. Raw signal and temperature data collected from the sensors is stored in the Cloud and made available on demand for deeper analysis and engineering assessments, if desired.
Diagnose: In conjunction, our advanced machine learning/AI algorithms and analytics combine streaming data with historical information to learn, diagnose, and deliver long-term assessments, such as root cause analysis and estimate remaining useful life.
Execute: Resulting actionable outcomes are pushed to personnel as smart notifications and made available for viewing in an intuitive user interface accessible through any secure Web browser from anywhere in the world.
Competition
We compete with an array of established and emerging vendors of condition-based monitoring products and services and IIOT-equipped devices. As organizations increasingly embrace predictive maintenance, IIoT and other new industrial automation technologies, an increasing number of companies offering machine monitoring products and services could result to fill the growing demand. The introduction of new technologies and market entrants will continue to fuel an intense competitive environment as companies seek solutions to predicting equipment failures and maintaining equipment performance. Our competitors include condition-based monitoring equipment vendors, diversified diagnostic equipment and services vendors, and providers of machine monitoring products that compete with some of the features present in our solution such as Fluke, Emerson Electric Co. (NYSE: EMR), and Augury, Inc. We compete based on several factors, including product functionality; scope of offerings; performance; brand, reputation, and customer satisfaction; ease of implementation, use and service; price, scalability, reliability, and security. We believe that we will compete favorably with respect to these factors and will become well positioned as an emerging provider of predictive maintenance solution, data analysis, and professional services.
*SCADA: Supervisory Control and Data Acquisition; CMMS: Computerized Maintenance Management System; MES: Manufacturing Execution Systems; and ERP: Enterprise Resource Planning.
Contract Manufacturers, Strategic Partners and Suppliers
We expect to outsource the manufacturing of the sensors to third-party contract manufacturers, which we may heavily rely upon. We are also exploring other potential joint venturing options with suppliers of sensors, in addition to a contract manufacturer. The Company believes that strategic partnerships with contract manufacturers and suppliers will be a major component of the Company’s operating strategy and path to success. Currently, the Company has no existing agreements in place with such contract manufacturers, suppliers, or joint venture partners.
We intend to continue development of our AegisOne Prescriptive Maintenance System. We expect continued growth in the number of cloud and SaaS operations experts, to further our goal of delivering the best experience for our AegisOne customers. Accordingly, personnel related costs within our SaaS development, predictive maintenance platform, sales, and operations teams, will increase in line with our projected ARR and service revenue model.
Sales and Marketing
We will sell our services through a direct inside sales team, a direct field sales team and indirect channel partner relationships. Teams will be designed to efficiently sell to organizations of all sizes and will initially focus on new customer acquisitions. As we expand, they will pursue, up-selling and cross-selling opportunities of new offerings to existing customers. We leverage the uniqueness of our solution to create brand preference and build a strong sales pipeline while cultivating customer relationships to help drive revenue growth efficiently and effectively. Our most important marketing goal as a start-up is to establish product and brand awareness with customers in each target market. The way we go about this task will vary from one target market segment to another.
Direct Sales
Teams will be organized by geography as well as by target organization size. The inside and field sales teams will focus on small and middle-market transactions, while larger or more complex transactions will be handled by highly trained sales consulting engineers to help define customer use cases, manage solution evaluations, and train channel partners. Our sales force will work directly with, and be involved in sales to, substantially all of the end customers of our channel partners and we may sometimes engage a channel partner solely to assist with finalizing a purchase if for example the customer is working on broader software initiative with that channel partner. As growth allows, we intend to invest in a dedicated sales team focused on U.S. federal, state, and local government entities.
Channel Partners
We will focus efforts to partner with condition-based monitoring test equipment and analysis software suppliers. We will emphasize our products' potential as an additional source of revenue for them with recurring monthly revenues; this should make our product very desirable as part of their product lines. By solidifying these partnership agreements, we will also enable cross-marketing back into the consumer market through their sales forces' efforts and their advertising, increasing our sales efforts nationwide without the expense of additional personnel to cover the entire U.S. We believe that once partnered with these companies, our channel market partners (resellers) will advertise the Nexscient system as new features in their traditional outlets, primarily print advertising and in-house POS material, in order to increase mutual sales and brand awareness, benefiting both organizations.
We will focus our marketing efforts on increasing the strength of the ‘AegisOne’ brand, communicating product advantages and business benefits, generating leads for our sales teams and channel partners while driving product adoption. We will deliver targeted content to demonstrate our prescriptive maintenance platform and use digital advertising methods to deliver opportunities to our sales teams. We will engage with existing customers to provide education and awareness to promote expanded use of our software. We will work with our own researchers, as well as the broader reliability engineering community, to share important information through the online community, social media, and traditional public relations.
We also intend to market to businesses through traditional sales efforts, such as advertising in trade journals and publications and establishing a presence at select trade shows geared towards businesses in our market segment. For the larger companies we target, we will offer the free use of our service for a limited time, to prove their efficacy in controlling maintenance costs and averting potential equipment failures, in order to penetrate and gain market share in this segment. We believe once reliability engineers and senior management of these businesses experience the rapid installation of the system, which is virtually plug-n-play and requires no integration with existing IT systems; experience the easy-to-understand tools and user interface without specialized training; and feel more in control of the health and performance of their equipment while realizing notable savings in equipment maintenance costs; all with no upfront costs, they will understand the value of Nexscient.
Service and Support
We believe, as a value-add, we must be able to sell a support option in order to accommodate certain customers. The AegisOne system, while very easy to install and facilitate, will be better received if we offer (fee-based) consulting services for our larger clients, such as our channel sales partners and large corporate accounts. Simplifying the understanding and implementation of our system will help encourage the daily use and sales efforts of our product, while generating additional revenues for Nexscient, our channel market resellers while increasing the ROI for our investor/partner(s).
Intellectual Property
To protect our unpatented proprietary technologies and processes, we rely on trade secret laws and confidentiality agreements with our employee(s), consultants, channel partners and vendors. At present our only intellectual property is the AegisOne Prescriptive Maintenance System which is currently still in development. The company will rely on provisional patents in the near term, filing for full patent protection, as necessary.
Subsidiaries
The Company has no subsidiaries.
Employees
We currently employ three full-time employees and contracted consultants on an as-needed basis.
We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our directors, officers or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
Jumpstart Our Business Startups Act
In April 2012, the Jumpstart Our Business Startups Act ("JOBS Act") was enacted into law. The JOBS Act provides, among other things: