Applied DNA Sciences, Inc.

Hello, and welcome to the Applied DNA Sciences Fiscal Second Quarter 2023 Financial Results. All parties will be in listen-only mode. Should you need assistance, please take note when conference specialists are 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 touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. And now I'd like to turn the conference over to Sanjay Hari, head of investor relations. Please go ahead.

Thank you, Keith. Good afternoon, everyone, and welcome to ApplyDNA's conference call to discuss our second quarter fiscal 2023 financial results. You can access the press release that was issued after market closed today, as well as a 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. Clay Chirac, our Chief Legal Officer and Head of Business Development, will also be available to answer questions on the Q&A portion of this 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 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 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. Please also note that we will be in attendance at the Maxim Group virtual healthcare conference later this month. I'm sorry, next month. To schedule some time with management, please contact your Maxim representative. 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 fiscal second quarter investor call. I will start this afternoon with an overview of our results for the quarter ended March 31st, 2023. I will then turn the call over to Dr. James Hayworth, our president and CEO who will discuss business initiatives and anticipated milestones in the second half of the fiscal year and as we enter fiscal 2024. We will then open the line for questions from our analysts and institutional investors. Before I begin my review, and as a reminder, we report segment data in our 10-Q filings that reflect the results of operations for our three reporting segments. The executive management team uses these data to manage the company's performance on a segment basis, assess expected future cash flows, and make more informed decisions about our three business segments going forward. We provide these data to investors as a measure of transparency into our management of these segments. Our three reporting segments are therapeutic DNA production, identified as LineaRx, our majority-owned biotherapeutic subsidiary, MDX, or molecular diagnostic testing services, which is our ADCL clinical laboratory, and DNA tagging and security products, which is our supply chain traceability segment. Our second quarter results were driven cheaply by ADCL and its COVID-19 testing service. We also recorded contributions from our therapeutic DNA production segment for the accelerated delivery of linear DNA under a large recurring order. Turning to our consolidated results for the quarter, total revenue was $4.4 million compared to $6.2 million in the prior fiscal period. The approximate $1.7 million decrease in total revenues reflects a decline in our COVID-19 testing revenue, reflective of an overall weaker environment for COVID-19 testing demand. Last Friday, we reported that CUNY, our largest COVID-19 testing customer, terminated its COVID-19 testing contract, effective no later than June 30th of this year. Our use of vendors and certain staff that support on-campus collection centers will be reduced commensurate with our wind down plan. In the near term, our COVID-19 testing service will remain in scaled-down operation to support our remaining testing contracts. Direct costs will be fully absorbed by these ongoing contracts. As Jim will discuss in his remarks, ADCL staff will transition to pharmacogenomics testing upon approval of our assay by the New York State Department of Health and once we secure contracts for pharmacogenomic testing. Gross profit for the quarter was $1.8 million, or 41%, compared to $2.5 million, or 40%, in the prior fiscal period. Total operating expenses were consistent at approximately $4.5 million and $4.6 million across the second quarter and the prior fiscal period respectively. Operating loss for Q2 was $2.7 million compared to an operating loss of $2.2 million in the prior fiscal period. Given the unrealized gain on the change in fair value of the warrants that are classified as a liability included in our net income line, we highlight operating income as best representing the company's operations. Excluding non-cash expenses, consolidated adjusted EBITDA for Q2 was negative 2.1 million compared to negative 1.6 million in the fiscal year-ago period. Now turning to our balance sheet, cash and cash equivalents excluding restricted cash totaled $12.3 million on March 31 compared to $12.9 million on December 31. As of March 31, accounts receivable stood at $2 million, which we expect to collect the majority of this amount in the current quarter. Year-to-date, our average monthly cash burn is $488,000 compared to $786,000 in the prior comparable period. Average monthly cash burn year to date does not include our restricted cash of $750,000 that was required by our new three-year lease agreement for our corporate headquarters. Based on our current cash flow forecast, we expect the impact of the CUNY termination to be reflected in our use of cash starting in our fiscal fourth quarter ending September 30th. We are projecting our quarterly cash burn for Q4 to range between $650,000 and $1 million per month. This range is contingent on several factors that Jim's remarks will discuss in greater detail, including the timing of PGx testing start and service uptake, certainty authentication platform sales for DNA tagging, order flow for linear DNA for IVT templates, TAP-X necessary to establish a linear DNA production capacity suitable for clinical use and to support ongoing platform development, and the cash consideration needed for a biotherapeutic acquisition that is being contemplated. We believe that with our current cash balance reserves and a continued focus on cost management, we can absorb a short-term increase in cash burn as we maturate contract opportunities. However, if any of the above revenue streams do not ramp up on our current forecasted timeline, it will have a negative impact on our cash position and financial resources. Our cash position on April 30th was approximately 11.1 million. This concludes my prepared remarks. Thank you for joining us today. I will now turn the call over to Jim for his comments.