Applied DNA Sciences, Inc.

Good day and welcome to the Applied DNA Sciences Fiscal Third Quarter 2021 Financial Results Conference Call. All participants will be in a 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. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Sanjay Hari. Please go ahead.

Thank you, Betsy. Good afternoon, everyone, and welcome to Applied DNA's conference call to discuss our fiscal 2021 third quarter financial results. You can access the press release that was issued after market closed today, as well as the accompanying PowerPoint 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, our COO, and Clay Chirac, our Chief Legal Officer, 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 the company's Form 10-Q file today and Form 10-K file on December 17, 2020, 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. 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. And before we begin, please know that management will attend and present virtually at HC Wainwright & Company's 23rd Annual Global Investment Conference next month. Please contact your HC Wainwright representative to schedule a one-on-one with management. Now, it's my pleasure to introduce our first speaker for today, CFO 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 fiscal 2021 third quarter. On the heels of our COVID-19 Testing Services Award from CUNY, Jim Hayward, our President and CEO, will then take you through our assumptions and modeling for testing based on certain aspects represented in the University Systems RFP. He will also provide operational updates across our industrial DNA and linear Rx businesses before opening the call to questions from analysts and investors. Starting with the consolidated statement of operation, total revenues for the third fiscal quarter of 2021 increased to 1.7 million from 432,000 in the third fiscal quarter of fiscal 2020. This represents a 294% increase year-over-year that is primarily attributable to an increase in service revenue of $686,000 associated with Safe Circle, our COVID-19 testing services program. On a sequential basis, third fiscal quarter revenues decreased 37% compared to second fiscal quarter revenues of $2.7 million. This is due primarily to lower Safe Circle revenues resulting from the non-renewal of our Suffolk County testing contract because of progressively higher vaccination rates within the county's employee base, as well as low positivity rates in our operating area, and the start of the summer recess for our academic clients during which no testing occurred. Product revenues increased to $640,000 for the third quarter of fiscal 2021. compared to $57,000 in the same period in the prior fiscal year. This increase is due to sales of our linear COVID-19 diagnostic assay kit. Cost of revenue as a percentage of product revenue in the third quarter decreased to 86% from 272% in 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 on today. Total operating expenses increased 30% or by $1.1 million to $4.5 million in the third quarter compared with $3.5 million in the prior period. This increase was driven principally by greater SG&A and R&D expenditures. SG&A expenses increased by $651,000 to $3.2 million from $2.6 million in the prior period. The increase is primarily attributable to an increase in payroll, consulting, and other administrative expenses related to staffing and the establishment of our ADCL subsidiary. R&D expenses increased by $215,000 to $1 million from $815,000 in the prior period. The increase relates primarily to increased purchases related to the clinical lab, as well as for projects projects related to our genetic sequencing, and a project associated with forensic traceability for our textile business. Net loss for the third quarter was relatively flat at $3.4 million, compared to $3.3 million in the year-ago period. Net loss for the third quarter improved to 46 cents compared to a net loss per share of zero of 72 cents for the same period in fiscal 2020 on a higher number of weighted average shares outstanding. Excluding non-cash expenses, consolidated adjusted EBITDA was unchanged as compared to the same prior period year at a negative 2.8 million. Turning to our balance sheet, Cash and cash equivalents totaled $12.2 million on June 30, 2021, as strong cash collections caught up with the large increase in accounts receivable that occurred in our fiscal first quarter. Accounts receivable stood at $737,000 at June 30 compared to $2.2 million at March 31. Our average monthly cash burn rate net of financing and warrant exercise proceeds for the three months ended June 30th, 2021 was 569,000 compared to 749,000 for the year-ago period, a decrease of 24%. The improvement in our burn rate was the result of increased cash receipts from the higher revenue levels during the first half of fiscal 2021, as well as decreased cash disbursements as the majority of our capital expenditures were paid for in prior quarters. Our total capital expenditures as of June 30th related to the establishment and scaling of our clinical lab subsidiary was approximately $1.6 million, including equipment to support our whole genomic sequencing capacity. Our cash position at July 31st was approximately $10.4 million. As for our fiscal fourth quarter, We expect to see an increase in spending in both capital expenditures and supplies and staffing to support our COVID-19 testing services contract with CUNY. Given the potential size of this contract, we believe these temporary increases in spending are warranted to support revenue growth in the fiscal fourth quarter and into fiscal year 2022. This concludes my prepared remarks. Thank you for joining us today. I will now turn the call over to Jim for his comments.