Applied DNA Sciences, Inc.

Good day, and welcome to the Applied DNA Sciences second fiscal quarter 2021 financial results call. All 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 will be an opportunity to ask questions. Please note, this event is being recorded, and I'd like to turn the conference over to Sanjay Hari. Please go ahead.

Thank you, Jason. Good afternoon, everyone. and welcome to ApplyDNA's conference call to discuss our second fiscal quarter 2021 financial results and business updates. You can access the press release that was issued after market closed today, as well as the accompanying slide presentation to this call by going to the IR calendar page of our website. Speaking on the call today are Dr. James Hayward, our CEO, and Beth Jansen, our CFO. Judy Murrah, COO, and newly appointed Chief Legal Officer, Clay Chirac, will also be available to take your questions on the Q&A portion of the call. Before we begin, please note that some of the information you will hear today during our discussion may consist of forward-looking statements. I refer you to slide two of the presentation and to the company's Form 10-Q file today and Form 10-K filed on December 17, 2020, for important risk factors that could cause the company's actual performance and results that differ materially from those expressed or implied in any forward-looking statements. We undertake 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 on today's call, Beth Jansen. Please go ahead, Beth.

Thank you, Sanjay. Good afternoon, everyone, and thank you for joining us. I will begin this afternoon with a review of our consolidated financial results for the second fiscal quarter of 2021. Dr. James Hayward, our president and CEO, will then update you on developments across our COVID-19 diagnostics and surveillance testing businesses, as well as progress being made in our biotherapeutic and supply chain security markets. We will then open the call to questions from analysts and investors. To begin, we are pleased to report significant revenue in the fiscal second quarter, both on a year-over-year and quarter-over-quarter basis that was driven by demand for our linear COVID-19 assay kits and SafeCircle pooled COVID-19 surveillance testing service. despite the ongoing impact of the pandemic on our supply chain security business. Starting with the consolidated statement of operations, total revenues for the second fiscal quarter of 2021 increased to $2.7 million from $552,000 in the prior period. This year-over-year increase of 384% is primarily attributable to an increase in service revenue of $1.4 million, which was associated with Safe Circle that reflects a full quarter of testing for clients secured in the prior quarter. Second fiscal quarter revenues were up 65% as compared to first fiscal quarter revenues of $1.6 million. Product revenues increased to $965,000 for the second quarter of fiscal 2021 compared to $198,000 in the same period in the prior fiscal year. This increase is primarily due to sales of our COVID-19 Diagnostic Assay Kit. Cost of revenue as a percentage of product revenue in the second quarter fell to 37% compared to 91% for the prior period. The year-over-year improvement is due in part to a shift in product revenue mix, as our assay kit sales are at a higher gross margin. The decrease is also the result of certain fixed costs that were not fully absorbed with the level of product revenues in the prior period as compared to the period we are reporting today. Total operating expenses increased 52% or by 1.6 million to 4.6 million in the second quarter as compared to 3.1 million in the prior period. This increase was driven principally by greater SG&A and depreciation and amortization expenses. The increase in D&A relates primarily to equipment purchase to support our Safe Circle service and to produce our assay kits. SG&A expenses for the second quarter increased by $1.3 million to $3.6 million from $2.3 million in the prior period. The increase reflects higher stock-based compensation of approximately $422,000 and a higher headcount at our ADCL subsidiary, from which our Safe Circle service is based, of about $315,000. The balance of the increase in SG&A is attributable to supply purchases to support ADCL as well as to increase legal fees. R&D expenses increased by $171,000 to $874,000 from $703,000 over the prior period. This increase is mainly due to increased purchases relating to our clinical lab build-out as well as for the development of our recently announced COVID variant mutation panels that Jim will speak more about. Net loss for the second quarter narrowed to 1.5 million compared to 3 million in the year-ago period. Net loss for the second quarter includes a non-cash gain of $840,000 related to the extinguishment of notes payable associated with the full forgiveness of our PPP loan. Net loss per share for the second quarter improved to 21 cents compared to a net loss per share of 79 cents for the same period in fiscal 2020 on a higher number of weighted average shares outstanding. Excluding non-cash expenses, consolidated adjusted EBITDA improved to a negative 1.5 million for the second quarter compared to a negative 2.6 million in the prior period. Now turning to our balance sheet, given our enduring commitment to financial strength and liquidity and a purposeful approach to reducing debt, our balance sheet is at its strongest in several years. This affords us substantial strategic flexibility and the capacity to make investments in R&D and commercial initiatives to further enhance our growth profile. Cash and cash equivalents totaled $13.9 million on March 31st. This figure includes net proceeds of approximately $13.8 million from a registered direct offering conducted in January. Our working capital increased by $11.7 million in the second fiscal quarter of 2021 to $15.3 million, up from $3.6 million at the end of the first fiscal quarter of 2021. Accounts receivable stood at $2.2 million at March 31 compared to $1 million at December 31, 2020. And following the extinguishment of our PPP loan, we are now debt-free. Our average monthly cash burn rate net of financing and warrant exercise proceeds for the three months ended March 31, 2021, was $1.4 million compared to $893,000 for the year-ago period, an increase of 58%. The increase is primarily due to capital expenditures for our clinical lab subsidiary. and purchases of the equipment that underpins the production of our diagnostic assay. Now that our clinical lab is fully operational, we expect our capital expenditures to normalize, which coupled with the increased revenue levels compared to the prior fiscal year, should result in a trend of lower cash burn in the second half of fiscal 2021. Our cash position on April 30th was approximately $13.4 million. We believe we have adequate cash to fund operations for at least the next 12 months from today. Our warrants balance remains unchanged. Approximately 460,000 November 2019 warrants remain outstanding as of May 12th, 2021. that carry an exercise price of $5.25. This concludes my prepared remarks. Thank you for joining us today. I will now turn the call over to Jim for his comments.