Applied DNA Sciences, Inc.

Today and welcome to Applied DNA Sciences' fourth quarter and full fiscal year 2021 financial results conference 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. To ask a question, you may press star, then one on your touchtone 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, Director of Investor Relations. Please go ahead.

Thank you, Oylee. Good afternoon, everyone, and welcome to ApplyDNA's conference call to discuss our fourth quarter and full fiscal year 2021 financial results. You can access the press release that was issued after market close today, as well as a slide presentation accompanying this call by going to the investor relations page of our website. Speaking on the call today are Dr. James Hayward, our chairman, president, and CEO, and Beth Jansen, our CFO. Judy Murrow, our COO, and Clay Chirock, 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 to the company's form 10-K filed today 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. Now, it's my pleasure to introduce our first speaker on today's call, Beth Jansen. Please go ahead, Beth.

Thank you. Thank you, Sanjay. Good afternoon, everyone. Thank you for joining us on our fiscal year-end call. I will start this afternoon with a review of our consolidated financial results for the fourth quarter of fiscal 2021, ended September 30th. I will then turn the call over to Dr. James Hayward, our President and CEO, who will outline our key initiatives for the 2022 fiscal year. We will then open the call to our analysts and institutional investors for questions. As detailed in our press release and 10-K that were filed moments ago, we are pleased to report continued quarterly revenue growth as well as announced record revenues for the fiscal year. both of which are the results of our decision to enter the COVID-19 testing and assay manufacturing market. COVID-19-related revenues in the fiscal year were driven by the establishment of Applied DNA Clinical Labs, or ADCL, our clinical laboratory subsidiary that provides population-scale COVID-19 testing as well as from sales of our Linea 1.0 COVID-19 assay kit and testing consumables. Momentum in COVID-19 testing, especially in the second half of the fiscal year, with the acquisition of new customers, supported our continued investment in ADCL that is now largely complete. In our fourth fiscal quarter, we were able to set up staff and supply COVID-19 testing sites and commence COVID-19 testing at over 23 sites spanning the five boroughs of New York City, Westchester, and Long Island, as well as prepare our testing lab for higher testing volumes. This is all done with an extremely tight timeframe from CUNY contract award until the first test was performed. Although we experienced revenue growth in our fourth fiscal quarter, We are continuously monitoring and right-sizing our valuable costs related to the CUNY testing program, as well as the testing levels have been less than originally projected by the client due to the combination of increased vaccination rates and vaccine mandates. In addition, we are also utilizing the infrastructure implemented for this testing program to service several other New York City testing clients that were acquired subsequent to 930. Starting with the statement of operations, I would like to note that due to the dollar value and it being a separate revenue stream, we are now presenting the COVID-19 testing revenue as well as the cost of providing the testing services performed by ADCL as separate line items in our statement of operations, beginning with the filing of our 10-K today. Cost of clinical laboratory service revenue is comprised of payroll and consumables to support our COVID-19 testing revenues. The cost for Q4 of fiscal 2021 reflects an increase in payroll as we staffed up ADCL in preparation for our new higher education testing contracts. Total revenues for Q4 were $3 million compared to $314,000 in the year-ago quarter and $1.7 million in Q3 of fiscal 21. This year-over-year increase in quarterly revenue is primarily attributable to an increase in COVID-19 revenues of $1.8 million. For the purpose of today's presentation, I am defining COVID-19 revenues as those related to the sales of our COVID-19 testing branded as Safe Circle, as well as the sale of our linear assay kits. I note that the year-ago period contained only one month of surveillance COVID-19 testing revenues, as we had established our clinical laboratory and a preceded CLEP-CLIA licensure, or ADCL, with which we can now conduct diagnostic testing. We also had not yet sold any of our linear assay kits. On a sequential basis, Q4 revenues increased 79%. The increase primarily due again to an increase in COVID-19 testing of approximately $813,000, as well as an increase in revenue of $824,000 in our textiles market. As a reminder, given Safe Circle's substantial concentration of academic clients, Q3 reflected the summer break in between terms. I would like to note that Q4 revenue includes only about six weeks of contributions from CUNY. Product revenues increased to 1.1 million in Q4 compared to 123,000 in the year-ago period. This increase is due to increased sales of 810,000 in textiles related to the shipment of DNA concentrate to protect a cotton supply chain, as well as an increase of 538,000 for the sale of our linear 1.0 assay kits and related consumables. Clinical laboratory service revenues derived from our COVID-19 testing increased to 1.6 million compared to 78,000 in the year-ago period. This is a testament to the dedication and hard work performed by our team to implement and grow a business over a 12-month period. Cost of revenue as a percentage of product revenue in the fourth quarter decreased to 30% from 49% in the year-ago period. The year-over-year improvement reflects a better product mix, as the fourth quarter of this fiscal year was primarily comprised of sales of industrial DNA to the textile industry, which are at a higher margin compared to the product sold during the same period in the prior fiscal year. Total operating expenses in Q4 increased 34%, or $1.4 million to $5.6 million, compared to $4.2 million in the year-ago period. The year-over-year increase is primarily attributable to an impairment charge of $822,000 for the write-off of goodwill and the remaining net book value of intangible assets associated with our 2015 acquisition of Vandalia, and to a lesser extent, an accrued bonus included in SG&A that was subsequently paid by the issuance of stock options. as well as an increase in depreciation and amortization totaling $218,000. Recall that we acquired Vandalia's core technology and IP portfolio that allows for the large-scale production of specific sequences of DNA using continuous flow PCR. We remain in this business, however, we have since migrated to a different PCR-based manufacturing process. Q4 net loss increased incrementally to 4.5 million from 4.1 million in the year-ago period. Net loss per share improved to 60 cents from 82 cents in the year-ago period on a higher number of weighted average shares outstanding. Excluding non-cash expenses, Consolidated adjusted EBITDA improved to negative 3.3 million in Q4 compared to a negative 3.8 million in the year-ago period. Turning to our balance sheet, cash and cash equivalents totaled 6.6 million on September 30th, 2021. We used 5.6 million of cash during the fourth quarter The increase in cash disbursements is primarily related to capital expenditures, the purchase of inventory and other supplies and consumables to support and service the CUNY award that I discussed earlier. These investments were essential since these supply chains were and remained under considerable pressure and we needed to ensure that future revenues would not be restricted by constrained supply chains. These investments are also being utilized to service other additional Safe Circle customers. Our cash position on November 30th was approximately 3.6 million. Accounts receivable stood at 2.8 million on September 30th compared to 737,000 on June 30th. Inventories stood at 1.4 million compared to 429,000 on June 30th. As I noted, The increase in inventory is related to our CUNY award, principally the purchasing of materials necessary for the production of our linear assay, as well as the sample collection kits. Our current warrants outstanding is $744,000, of which 459,000 warrants carry an exercise price of $5.25. We carry no debt on our balance sheet. We filed our fiscal 2021 10-K a short while ago in which we disclosed that based on historical financial results, there is substantial doubt about our ability to continue as a going concern for one year from the issuance date of the financial statement. Our ability to continue as a going concern is dependent on our ability to continue to increase our revenue or to raise additional working capital. This concludes my prepared remarks. Thank you for joining us today. I will now turn the call over to Jim for his comments.