Applied DNA Sciences, Inc.

Good day, and welcome to the Applied DNA Sciences fiscal second quarter 2020 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Judith Murrah. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us for our fiscal 2020 second quarter 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 Presentations section to the Investors page of the Applied DNA website. With me on the call today are Dr. James Hayward, Chairman, President, and CEO, and Beth Jantzen, Chief Financial Officer. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements. Please see slide two of the accompanying PowerPoint presentation and the company's SEC filings for important risk factors that could cause the company's actual performance and results to differ materially from those expressed or implied in any forward-looking statements. Applied DNA undertakes no obligation to update or revise any forward-looking statements or other information provided on this call as a result of new information or future results or developments. Now it's my pleasure to introduce our first speaker to today's call, Beth Jantzen.

Thank you, Judy. Good afternoon, everyone, and thank you for joining us. Today I will review our consolidated financial results for our 2020 fiscal second quarter. Then Dr. James Hayward, our president and CEO, will update you on developments in our linear DNA business and especially on our COVID-19 vaccine and diagnostic development programs that have focused the company's time and attention since the outbreak of the pandemic. Jim will then open the call to your questions. As a result of the COVID-19 pandemic and the mandate by the state of New York to close all non-essential businesses until at least May 15th, The company reduced the scope of its operations, and where possible, certain workers have been telecommuting from home. Portions of the company's business are deemed to be an essential business and have continued operations, such as our government and pharmaceutical contracts, as well as the vaccine and diagnostic candidate developments. However, we have experienced and may continue to experience in the future facility closures related to our non-essential businesses. The impact of COVID-19 to revenue for the second quarter of fiscal 2020 was minimal. However, subsequent to March 31st, we have been experiencing a decline in revenues from our non-biological tagging and related services that comprise our supply chain security business segment. This segment services certain global supply chains such as textiles that transit through geographies and countries in Asia and North America. We are actively engaged with our partners and customers to monitor business activity levels during these unprecedented times. Regarding our biopharma activities that now take up the majority of our business development activities, We do not anticipate any barriers to continuing to manufacture linear DNA at scale for therapeutic applications and in support of our COVID-19 vaccine candidates. Nor do we see any barrier to continued development and manufacturing relating to our diagnostic kit programs. Starting with the Statement of Operations, total revenues for the period decreased 29%, to approximately 552,000 from approximately 778,000 in the second quarter of fiscal 2019. Product revenues were 198,000 as compared to 119,000 in the prior year period. The increase in product revenues is attributable to increased biopharmaceutical revenues and to a lesser extent initial revenue from the marking of a nutraceutical supplement offset by lower asset marking revenue. Second quarter service revenues were $355,000 as compared to $659,000 in the prior year period. 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, as well as a decrease in the number of textile and cannabis feasibility projects, the latter due to our canceled contract with Theracance, although we are actively developing leads in cannabis tagging. Cost of revenue as a percentage of product revenue in our fiscal second quarter of 2020 decreased to 91% as compared to 112% for the year-ago period. The year-over-year improvement was due to the change in product sales mix as well as an inventory adjustment during the second quarter of fiscal 19. Total operating expenses decreased 7%, or $223,000, to $3.1 million in the second fiscal quarter of 2020, compared with approximately 3.3 million for the same period in the prior fiscal year, reflecting lower selling general and administrative costs due principally to lower professional fees and to a lesser extent from a decrease in travel as a result of COVID-19 travel restrictions. Second quarter R&D expenses increased by 52,000 to 703,000 from 651,000 over the prior period. This increase reflects higher development costs for our biotherapeutic customers as well as an increase in payroll offset by lower development costs for the government contract that was completed in May of 19. Net loss for the second quarter of fiscal 2020 widened by 10% on a year-over-year basis to 3 million from 2.7 million. 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 second quarters of fiscal 2020 and 2019 have been calculated using the post-reverse stock split share count. Weighted average shares outstanding for second quarter fiscal 2020 and 2019 are are 3,758,512 and 834,990, respectively. Net loss per share for the second quarter of 2020 improved to 79 cents compared to a net loss per share of $3.22 for the same period in fiscal 2019. Excluding non-cash expenses, adjusted EBITDA was negative 2.6 million for the second quarter of fiscal 2020 as compared to negative 2.3 million in the prior period. Turning to our balance sheet, cash and cash equivalents totaled approximately 8.7 million at March 31st. This figure includes approximately $2.8 million in net proceeds from the exercise of warrants issued as part of our November 15, 2019 underwritten public offering. Total debt comprised of our secured convertible notes was $1.5 million at quarter end. Our average monthly cash burn rate, net of financing and warrant proceeds for the second quarter of fiscal 2020 was $880,000 compared to 399,000 for the year-ago period, an increase of 121%. The increase is due to catch-up payments made after the November 2019 financing was complete, as well as the timing of cash receipts. Subsequent to March 31st, we received additional warrant exercises totaling $2.9 million in net proceeds. As of yesterday, May 13th, approximately 1.5 million warrants issued as part of our November 2019 offering remain outstanding. Our current cash position is approximately $11.5 million. Finally, subsequent to March 31st, as a biopharma company with active, though as yet unsponsored, COVID-19 programs across both vaccines and diagnostic kits We applied and received Paycheck Protection Program funds totaling $874,000 as part of the second tranche of the program. As we intend to retain our staff, we expect full loan forgiveness. Full terms of the loan are found in our 10Q filed a short while ago. This concludes my prepared remarks. Thank you for joining us today. I would now like to turn it over to Jim for his comments.