Applied DNA Sciences, Inc.

Good day, and welcome to ApplyDNA Science Fiscal First Quarter 2020 Financials Results Conference Call and Webcast. Our participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there'll be an opportunity to ask questions. To ask a question, you may press star, then one. on the touchtone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Clay Shorrock, General Counsel for Applied DNA. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for our fiscal first quarter 2020 financial results conference call. A copy of the company's earnings press release and accompanying PowerPoint presentation to this call are available for download under the events and presentation section to the investor page of the Applied DNA website. With me on the call today are Dr. James Hayward, Chairman and CEO, and Beth Jantzen, Chief Financial Officer. As a reminder, please note that some of the information you will hear today during our discussion may consist of forward-looking statements including, without limitation, those regarding gross margins, Operating Expenses, Other Income Expenses, Stock-Based Compensation Expenses, Taxes, Earnings Per Share, and Future Products. Actual results or trends may differ materially. For more information, please refer to the Risk Factors Discussed in Applied DNA Sciences Form 10-K, filed on December 12, 2019, and Form 10-Q, filed a short while ago. Applied DNA Sciences seems no obligation to update any further statements or information. Now, it is my pleasure to introduce the first speaker on today's call, Beth Jantzen.

Thank you, Clay. Good afternoon, everyone, and thank you for joining us. Today, I will review our consolidated financial results for our 2020 fiscal first quarter. Then, Dr. James Hayward, our president and CEO, will summarize the company's achievements in the quarter and update you on certain key initiatives for the company in fiscal 2020. Jim will then open the call to your questions. Starting with the statement of operations, total revenues for the period decreased 28% to approximately $634,000 from approximately $884,000 in the first quarter of fiscal 2019 and decreased 62% compared to $1.7 million for the fourth quarter of fiscal 2019. Product revenues were $238,000 as compared to $322,000 in the prior period and $1.3 million in the fourth quarter of fiscal 19. The sequential decrease in product revenues is attributable to a $1 million shipment of DNA concentrate to protect the cotton supply chain that was recorded in the fourth quarter of fiscal 2019. First quarter service revenues were $396,000 as compared to $562,000 in the prior period and $423,000 in the fourth quarter of 2019. The year-over-year decrease in service revenues is primarily attributable to revenues in the prior period related to a government contract award that was completed in May of 2019. Cost of revenue as a percentage of product revenue in our fiscal first quarter of 2020 increased to 98% as compared to 48% for the year-ago period and 26% on a sequential basis. The year-over-year and quarter-over-quarter increase was due to product sales mix as sales during Q1 and Q4 of fiscal 19 were primarily comprised of sales in our textiles market which are at a higher margin as compared to sales during the current quarter. This increase was also the result of certain costs of revenue being fixed costs such as payroll and rent which were not fully absorbed with the level of product revenue during the first quarter of fiscal 2020. Total operating expenses decreased 23% or approximately $915,000 to 3 million in the first fiscal quarter of 2020, compared with approximately 4 million for the same period in the prior fiscal year, and declined approximately 200,000 on a sequential basis. The decrease on a year-over-year basis is primarily due to reduced payroll expenses as a result of a realignment of the sales force and reduction in overall headcount, as well as a reduction in stock compensation expenses and lower consulting fees. First quarter R&D expenses declined by $146,000 to $564,000 from $710,000 over the prior period. This decrease is related to decreased development costs for the DoD contract award mentioned earlier that expired during the second half of fiscal 2019. Net loss for the first quarter of fiscal 20 narrowed by 18% on a year-over-year basis to 2.7 million from 3.2 million and increased from 1.2 million for the fiscal fourth quarter of 2019. As a reminder, We implemented a 1 for 40 reverse stock split on November 1, 2019. As a result, reported earnings per share for the first quarters of fiscal 20 and 19 have been calculated using the post-reverse stock split share count. Weighted average shares outstanding for the first quarter for the first quarter of fiscal 2020 and 2019 are $2,380,564,761,769 respectively. Net loss per share for the first quarter of 2020 improved to 1.12 compared to a net loss per share of $4.25 for the same period in fiscal 2019, and a net loss per share of $1.44 for the fourth quarter of fiscal 19. Excluding non-cash expenses, adjusted EBITDA was a negative $2.4 million for the first quarter of fiscal 20 as compared to a negative $2.6 million in the prior period and a negative $1.6 million for the fourth quarter of fiscal 19. Turning to our balance sheet, cash and cash equivalents totaled approximately $8.7 million at December 31, 2019. This figure includes net proceeds of $10.5 million we received through an underwritten public offering of stock and warrants during the quarter. Total debt comprised of our secured convertible note payable was $1.5 million at quarter end. Our average monthly cash burn rate for the first quarter of fiscal 2020 was $867,000 compared to $528,000 for the year-ago period, an increase of 64%. Our cash position at January 31, 2020 was $7.7 million. Cash burn was higher in the first quarter of fiscal 2020 as we paid down payables as a result of the proceeds from the public offering. Going forward, we would expect this level to normalize more in line with the prior fiscal year. This concludes my prepared remarks. Thank you for joining us today, and I would now like to turn it over to Jim for his comments.