Applied DNA Sciences, Inc.

Good evening, and welcome to the Applied DNA Sciences Fiscal Third Quarter 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. Please go ahead.

Thank you, Jordan. Good afternoon, everyone, and welcome to ApplyDNA's conference call to discuss our third quarter fiscal 2022 financial results and corporate updates. You can access the press release that was issued after market closed today, as well as the slide presentation accompanying 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 two of the presentation, NR Form 10Q 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 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. I also want to inform you that management will participate virtually at H.C. Wainwright's 24th Annual Global Investment Conference next month. Please get in touch with your H.C. Wainwright representative to schedule a one-on-one with us. 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. Thank you for joining us on our third quarter fiscal 2022 investor call. I will begin today with a review of our consolidated financial results for the third quarter of fiscal 2022, which ended on June 30th. I will then turn the call over to Dr. James Hayward, our President and CEO, who will offer context on the equity capital raise we conducted subsequent to the close of the quarter and outline the company's expectations and development milestones over the balance of the fiscal year and into fiscal 2023 for each of the end markets we serve. As a reminder for our newer investors, we are on a September 30th fiscal year. We will then open the call to our analysts and institutional investors. Prefacing my review of our financial results, as we discussed on our prior investor call in May, we implemented a cost management program in the fiscal third quarter designed to optimize our cost structure to align resources to our linear DNA platform for biotherapeutic applications to achieve maximum value for shareholders from current and future opportunities. Beginning with the statement of operations, total revenues for Q3 were 4.3 million compared to 1.7 million in the year-ago quarter. The 153% year-over-year increase in quarterly revenue is primarily attributable to increased clinical laboratory service revenue comprised of COVID-19 testing and related services. On a sequential basis, Q3 total revenues declined from 6.1 million in Q2. This is due to lower COVID-19 testing services due in part to the summer session seasonality inherent in our academia-heavy testing client base. Product revenues were 220,000 in Q3 compared to 640,000 in the year-ago period. The year-over-year decrease of $420,000 is primarily related to a decrease of approximately $459,000 in sales of our diagnostic test kits and supplies to Stony Brook University Hospital as their testing levels declined. Service revenues were $183,000 compared to $234,000 in the year-ago period. This decrease is attributable to a decrease in research and development projects. As a reminder, our service revenues comprise research and development pilot projects as well as authentication services associated with our industrial DNA business. Clinical laboratory service revenues increased to $3.9 million compared to $826,000 in the year-ago period. As a reminder, we had not yet secured the CUNY contract in the year-ago period. On a sequential basis, clinical lab service revenues decreased 29% from $5.5 million in Q2 due in large part to the aforementioned seasonality in testing demand. Beginning in Q1, we began allocating depreciation expense versus showing it as a separate line item on our statement of operations. As a result, we are presenting a gross profit line on the statement of operations. The gross profit percentage was 24% and 34% for Q3 and the year-ago period, respectively. The decline in gross profit percentage resulted from a substantial portion of our clinical laboratory service revenues coming from testing contracts where we also provide and staff the testing centers, which in our case is predominantly CUNY. This contract has higher associated costs compared with our other COVID-19 testing contracts where we only perform the testing services. As you know, we recently reported a 12-month contract extension with CUNY. In preparation for year two, we have worked to squeeze costs out of this contract and believe that we are currently at an appropriate baseline of fixed costs given the requirements of the contract. We in CUNY have learned a lot about how to efficiently implement very large-scale COVID-19 testing operations. and we will continue to closely monitor support levels going forward with an aim to minimize our costs and maximize our margins within the confines of the contract. Further, CUNY is now in its break prior to the start of the new academic year. As such, we expect a lull in testing rates between now and the start of the new school year in late August. with CUNY then ramping up testing thereafter. Total operating expenses in Q3 were flat at $3.9 million compared to $4 million in the year-ago period. Reflective of the implementation of our cost management initiatives during this Q3, total operating expenses on a sequential basis declined 15%. driven primarily by reduction in headcount from 95 to 75, or 27%. Q3 loss from operations decreased to $2.8 million from $3.4 million in the year-ago period. Given the transaction costs related to the warrant liabilities and the unrealized change in fair value of the warrant liabilities included in our net loss, Going forward, we will have loss from operations as being the best representative of the company's operations. Our Q3 net loss decreased to $1.1 million, or $0.13 per share, versus a net loss of $3.4 million, or $0.48 per share, in the year-ago period, on a higher number of weighted average shares outstanding. Excluding non-cash expenses, consolidated adjusted EBITDA for Q3 was negative 2.3 compared to negative 2.8 million in the year-ago period and negative 1.6 million in Q2. Turning to our balance sheet, at June 30th, cash and cash equivalents totaled 4.7 million and accounts receivables stood at 2.9 million. For fiscal 2022 to date, our average monthly cash burn stood at $620,000 on June 30th, representing a 46% reduction from fiscal 2021 average monthly burn of $1.2 million, and is reflective of increased cash receipts and the cost controls I highlighted earlier. Subsequent to the close of the quarter, we conducted a public offering of common stock and two series of warrants for gross proceeds of $12 million. We also received an exercise of warrants in connection with this offering for an additional net proceeds of $3.6 million. Inclusive of the public offering and exercise of warrants, cash and cash equivalents on August 9th stood at approximately $16.8 million. Based on our current average monthly cash burn, our cash runway is currently 25 to 27 months. Our warrant balance increased as a result of the recent public offering. We now have a total of 7.3 million warrants outstanding, with approximately 2.2 million of these warrants having exercise prices ranging from $2.80 to $2.84 per warrant share. and 5.1 million of these warrants having an exercise price of $4 per warrant share. We carry no debt on our balance sheet. As a result of recent funds raised, our just-filed 10-Q for the third quarter eliminates our substantial doubt of a going concern. This concludes my prepared remarks. Thank you for joining us today. I will now turn the call over to Jim for his comments.