Applied DNA Sciences, Inc.

Good afternoon and welcome to the Applied DNA Sciences Incorporated first quarter fiscal 2022 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 telephone keypad. 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, Investor Relations at Applied DNA. Please go ahead.

Thank you, Gary. Good afternoon, everyone, and welcome to Applied DNA's conference call to discuss our first quarter fiscal 2022 financial results. You can access the press release that was issued after market closed today, as well as the accompanying slide presentation to this call on the investor relations section of our corporate website. Speaking on the call today are Dr. James Hayward, our chairman, president, and CEO, and Beth Jansen, our CFO. Judy Murrah, our COO, and Clay Chirock, our chief legal officer and head of business development, will also be available to answer 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 2 of the presentation and our Form 10-Q filed a short while ago 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 statement. 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. I also want to inform you that management will participate virtually in next month's annual Roth conference. Please get in touch with your Roth representative to schedule a one-on-one with us. Additional conferences will be posted in the coming weeks. Now, it's my pleasure to introduce our first speaker in today's call, Beth Jansen.

Please go ahead, Beth. Thank you, Sanjay. Good afternoon, everyone. Thank you for joining us on our first quarter fiscal 2022 investor call. I will begin today with a review of our consolidated financial results for the first quarter of fiscal 2022, which ended on December 1st, 31st, 2021. I will then turn the call over to Dr. James Hayward, our President and CEO, who will summarize our operational performance for the quarter and outline key initiatives for the balance of fiscal 2022. We will then open a call to all of our analysts and institutional investors. Beginning with the statement of operations, as a reminder, We now present the revenue and the cost of providing testing services performed by our clinical laboratory, applied DNA clinical labs, or ADCL, as separate line items in the statement of operations. Following our record high revenue performance in fiscal 2021, we are pleased to start fiscal 2022 with a record revenue quarter. We are seeing continued momentum in COVID-19 testing, which provides population scale, integrated testing solutions and services to enterprises and institutions, such as the City University of New York School Systems, or CUNY, and other institutes of higher and lower education, as well as commercial businesses. Total revenues for Q1 were $4.2 million as compared to $1.6 million in the year-ago quarter and $3 million in Q4 of 2021. This year-over-year increase in quarterly revenue is primarily attributable to increased clinical laboratory service revenue comprising testing and related services. On a sequential basis, Q1 revenues increased 37% and was also due to an increase in clinical laboratory service revenue. To offer context on the strength we are seeing in testing, our record revenue performance was achieved despite school's winter recess during which testing demand softened. Product revenues were $826,000 in Q1 compared to $550,000 in the year-ago period. The year-over-year increase of $267,000 was due to increased sales of $308,000 for the final shipment of DNA molecular tagant for a textile application. This increase was offset by a decrease of $52,000 in sales of our linear 1.0 assay. Service revenues were $139,000 compared to $290,000 in the year-ago period. This decrease of $154,000 reflects the completion of R&D projects in our pharma nutraceutical vertical as well as at linear RX. Service revenues comprise research and development pilot projects and authentication services associated with our industrial DNA business. Clinical laboratory service revenues increased to $3.2 million compared to $773,000 in the year-ago period. On a sequential basis, clinical laboratory service revenues almost doubled from $1.6 million in Q4. The increase was driven by higher COVID-19 testing, within which our testing contract with CUNY was the primary contributor. As a reminder, our CUNY contract was entered into midway through our fourth quarter, making therefore Q1 was our first full quarter under this contract. Starting this quarter, we began allocating depreciation expense versus showing it as a separate line item on the P&L. As a result, we are presenting a gross profit line on the face of the statement of operations. This change will continue going forward. The gross profit percentage was 27% and 68% for Q1 and in the year-ago period, respectively. The decline in gross profit percentage resulted from a substantial portion of clinical laboratory service revenues coming from testing contracts where we also provide the staff and testing centers. These contracts have higher costs associated with them compared with our testing contracts where we do not staff testing centers. To a lesser extent, the decrease in gross profit percentage was due to product sales mix. As sales during the year-ago period included a higher volume of sales of our linear COVID-19 1.0 assay kit, which are at a higher gross margin. Total operating expenses in Q1 increased 41%, or $1.6 million, to $5.7 million, compared to $4.1 million in the year-ago period. The year-over-year increase is attributable to an increase in stock-based compensation of $1.1 million, primarily relating to officer stock option grants that vested immediately, as well as to the annual non-employee Board of Directors grant. To a lesser extent, the increase reflects higher research and development costs associated with outsourced service contracts and increased payroll associated with our ongoing animal vaccine study. and next generation sequencing projects. Our Q1 net loss declined to 4.7 million from 4.8 million in the year-ago period. Net loss per share improved to 63 cents from 88 cents in the year-ago period on a higher number of weighted average shares outstanding. Excluding non-cash expenses, Consolidated adjusted EBITDA for Q1 was negative 2.7 compared to negative 2.4 million in the year-ago period and narrowed compared to a negative 3.3 million in Q4. Turning to our balance sheet, cash and cash equivalents totaled 2.7 million on December 31st. We used 3.7 million of cash during Q1 consisting primarily of our net loss. Our accounts receivable balance stood at $3.9 million on December 31 compared to $2.8 million on September 30 and inventories were flat at $1.3 million for both periods. Our warrant balance remains unchanged and we carry no debt on our balance sheet. We disclosed in our fiscal 2021 10K and have also disclosed in our first quarter fiscal 2022 10Q that there is substantial doubt about the company's ability to continue as a going concern for one year from the issuance of the financial statements. Our ability to continue as a going concern is dependent on our ability to further implement our business plan, raise capital, and generate revenues. Our cash position on January 31 was approximately $2.3 million. This concludes my prepared remarks. Thank you for joining us today. I will now turn the call over to Jim for his comments.