Applied DNA Sciences, Inc.

Good day, and welcome to the Applied DNA Sciences Fiscal First Quarter 2024 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. Please note, this event is being recorded. I would now like to turn the conference over to Sanjay Hari, Head of Investor Relations. Please go ahead.

Thank you, Scott. Good afternoon, everyone, and welcome to ApplyDNA's conference call to discuss our first quarter fiscal 2024 financial results. 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 chief financial officer. Clay Chirac, our chief legal officer and head of business development, and Judy Murrah, our Chief Operating Officer, will also be available to answer questions on the Q&A portion of this call. Before we get started, I would like to take this opportunity to remind you that our remarks today may include 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 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. 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 first quarter fiscal 2024 investor call. I will start this afternoon with an overview of our results for the quarter ended December 31, 2023. I will then turn the call over to Dr. James Hayward, our President and CEO, who will update you on our ongoing business initiative. We will then open the line for questions from our analysts and institutional investors. Beginning with our Statement of Operations, total revenues for the first quarter of fiscal 2024 ended December 31, 2023, were approximately $891,000, or a decline of $4.4 million compared to $5.3 million for the same period in the prior fiscal year. Approximately $4.2 million of this decrease in total revenue is attributable to lower clinical laboratory service revenues. This revenue line item reflects an ongoing and unfavorable year-over-year comparison in our COVID-19 testing as the prior year period included testing revenues under our contract with CUNY that expired in June of 2023. Approximately $210,000 of the decrease in total revenue was attributable to lower product revenues and specifically lower cotton DNA tagging revenue within our DNA tagging and security products and services segment. Service revenues increased approximately $15,000 year over year and approximately $78,000 sequentially. that were driven primarily by demand for isotopic testing within our DNA tagging and security products and services segment. Growth profit was $231,000, or 26%, compared to $2.4 million, or 45%, in the prior fiscal year period. The decline in gross margin was primarily due to a higher percentage of COVID-19 testing service revenue in the three months ended December 31st, 22, which generated a higher gross profit compared to the three months ended December 31st, 2023. To a lesser extent, the decline in gross profit percentage was due to lower product revenues during the three-month period ending December 31, 23, as compared to the same period in the prior fiscal year. The lower volume of product revenues in the current period was not able to fully absorb the fixed costs that are included in cost of product revenues. Total operating expenses increased by $424,000 to $4 million compared to $3.6 million in the prior fiscal year period. This increase in total operating expenses reflects higher SG&A costs as the prior three-month period has a credit in bad debt expense of approximately $290,000 from a customer balance that was written off and was subsequently collected during the three-month period ended December 31, 2022. The remainder of the increase is related to an increase in stock-based compensation expense of $247,000 that relates to the timing of the annual non-employee Board of Director grant that vests one year from the date of grant. These increases were offset by a decrease in payroll of approximately $107,000. Operating loss for the first quarter was $3.8 million compared to $1.2 million in the prior fiscal period. Turning to slide five, excluding non-cash expenses, adjusted EBITDA deteriorated by $2.1 million to a negative $3.2 million compared to a negative $1.1 million in the prior fiscal year period. Now turning to our balance sheet on slide six, accounts receivable stood at 451,000 at December 31st, with payment terms ranging from 30 to 60 days. Cash and cash equivalents totaled 3.4 million on December 31st, compared to 7.2 million on September 30th, 2023. Fiscal year to date, our average monthly cash burn was $1.3 million compared to $780,000 in the prior fiscal year. Staying with the balance sheet a moment longer, we closed on a registered direct public offering on February 2, 2024 for gross proceeds of approximately $3.4 million. Full details of the offering are provided in the Subsequent Events section of our Form 10-Q filing. We issued approximately 3.2 million shares and pre-funded warrants to purchase up to 2.4 million shares of common stock. In a concurrent private placement, unregistered common warrants to purchase up to 11.3 million shares of common stock were issued with an exercise price of 0.609 per warrant share. These common warrants are subject to shareholder approval at a stockholder meeting that must be held by April 15th of this year in accordance with the terms of the private placement. Subject to approval by stockholders at a stockholder meeting, the exercise price of these warrants could result in additional gross proceeds of $6.9 million to the company. We also agreed to reduce the exercise price of warrants previously issued to the purchasers with exercise prices ranging from $1.29 to $4 per warrant to $0.609 per warrant. We also agreed to extend the expiration date of these warrants to August 2028. These warrant reductions are also subject to stockholder approval. Subject to approval, the exercise of the warrants issued discussed above, as well as the now reduced warrants, could result in total gross proceeds of up to $8.6 million to the company. Turning to our at-the-market facility. The ATM was terminated in accordance with the terms of and to facilitate this Registered Direct offering. Inclusive of the proceeds from the Registered Direct, cash and crash equivalents was approximately $5.1 million on February 2nd. Before turning the call over to Jim, the commercialization of our Linea IVT and Linea DNA platforms remains our primary objective To that end, we are committed to capital allocation that support our biotherapeutic goals while identifying and undertaking operating efficiencies throughout the company. Initial steps are being taken to manage a leaner organization aligned behind our highest ROI opportunities. This concludes my prepared remarks. Thank you for joining us today. I will now turn the call over to Jim for his comments.