Predictive Oncology Inc.

Good day, and thank you for standing by. Welcome to the Predictive Oncology Q4 2022 Earnings Conference Call. At this time, all participants on the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you'll need to press star 1-1 on your phone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded, and I would now like to hand the conference over to your speaker today, Ms. Theresa Ferguson, Senior Director of Marketing for Predictive Oncology. Ms. Ferguson, please go ahead.

Thank you. Welcome, and thank you, everyone, for dialing in. Today we'll share about our latest updates. First, you're going to hear from our Chief Executive Officer and Chairman of the Board, Raymond Benary, then our Chief Financial Officer, Bob Myers will give you an overview about our financials. Finally, Dr. Pamela Bush, our Chief Business Officer, will join Raymond and Bob during the Q&A portion. Certain matters discussed in this call contain forward-looking statements. These forward-looking statements reflect our current expectations and projections about future events and are subject to substantial risks, uncertainties, and assumptions about our operations and the investments we make. All statements other than statements of historical facts included in the call regarding our strategy, future operations, future financial position, future revenue and financial performance, projected costs, prospects, plans, and objectives of management are forward-looking statements. The words anticipate, believe, estimate, expect, intend, may, plan, would, target, and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Our actual future performance may material differ from that contemplated by the forward-looking statement as a result of a variety of factors, including, among other things, factors discussed under the heading risk factors in our filings with the FCC. Except as expressly required by law, the company disclaims any intent or obligation to update these forward-looking statements. Thank you for bearing with us with that and now we are going to welcome Raymond Benary and we'll get him on the line.

One moment please. Pardon me, Raymond Benary is now able to present.

Thank you very much. So good morning, everyone. Apologize for this slight little glitch here and for the delay. Thank you all for taking the time to participate in the call. I look forward to, we all look forward to answering any questions that you have at the end of our presentation. So I think it's important for me to reiterate a bit what I shared with everyone on March 7th in the letter to investors. And that is basically that since I joined the company in November, if not several months before that, there has been a concerted effort to completely rebrand and reposition the company, if not to consolidate the assets. as predictive oncology as a science-driven company, right, a science-driven company, applying our proprietary artificial intelligence and machine learning capabilities to accelerate drug discovery and able drug development. So that phrase is extremely important because that's who we are, what we do. It's the market in which we play, and it is the customer base to which we appeal. the entire continuum of drug discovery and drug development. So that platform, our platform, the PETL platform, includes, of course, as you all know, access to our own biorepository of more than 150,000 tumor samples and more than 250,000, I'm sorry, 200,000 pathology slides, both of which are not only core assets of the company, But they are key differentiators for us in the marketplace. As I also mentioned in that letter, although briefly, we are also completely reevaluating and expanding our intellectual property portfolio. And you will be hearing more about that in the coming weeks or possibly the next quarter. I should also point out, I think I've had an opportunity to speak with literally, literally hundreds of our shareholders, literally, either by phone, through email, conference calls, town halls, any venue that we could. And one thing is clear to me is that it's unclear to some of the investors how distinctive we are and how innovative this platform is. So not to be obvious, but not all artificial intelligence platforms are the same. They're simply not created equal. Our platform is quite unique, not only because of the platform itself and machine learning and access to the biobank, but our ability to actually do scientific experiments to validate those in silico analyses in our own CLIA laboratory, in our own wet lab. So, the point is that the I in AI, the intelligence and artificial intelligence is that which makes us unique. It's not the algorithms themselves, it's the comprehensive approach to incorporating artificial intelligence and machine learning into the access to heterogeneous tumor samples utilizing the wet lab that we have at our disposal that is completely unique in the marketplace. And that's what sets us apart. So the value proposition for predictive oncology, again, this is for context, is that it's the intelligence, the intelligence that is derived by what we do and the actionable information that we provide that distinguishes us in the marketplace. It's important for me to emphasize that because I think artificial intelligence by many people are seen as a widget, really, and ubiquitous. And it's the application of our science base that allows our artificial intelligence engine to differentiate us. So in the last few months, as I said, we have moved from R&D and product development to the validation, commercialization, and launch of Predictive Oncology's Petal Drug Discovery Platform. And by commercialization and launch, what I mean is that we just signed, the company just announced that we have partnered with Cancer Research Horizons, we refer to it as Cancer Research UK, which is the largest private funder of cancer research in the world. The largest private funder of cancer research in the world. The purpose of this collaboration is to drive the development of oncology drugs by incorporating our platform, our pedal platform, Predictive Oncology's pedal platform, into the CRH drug discovery process. by which we not only gain visibility and credibility, we also gain access to many of the drug discovery and drug development companies in the world. So the significance of this contract is that we have entrée through CRH to every major or most major and even mid-cap biopharmaceutical companies in the world. They become a funnel for us through which we can access these companies. The fact that they are incorporating our platform into drug discovery is a significant accomplishment for the company that cannot be underestimated. We also announced that the company had entered into agreement with Civergenics, Inc. to develop the first-ever genomics-based approach to precision radiation therapy and drug discovery, also using our PETL platform. Cevergenics is a spin-out of the Moffitt Cancer Center, where the Cevergenics precision genomics platform is being used right now in a phase two prospective clinical trial for triple negative breast cancer. So there are three things in that statement that are significant. One is that the serogenics platform is being used in a clinical trial, which, as everyone knows, is necessary for drug development and FDA approval for anything in drug discovery. I'm sorry, in development of a drug. The second is that it's the first ever genomics approach to precision radiation therapy. So the work that we will be doing with Cibrogenics is going to leverage that novel platform to focus on radiation oncology, which has been grossly underutilized and underserved for the last 30 years, at least in terms of drug discovery, drug development, but also in terms of the ability to screen and monitor patients receiving radiation therapy. And anyone who wants to ask questions after this can certainly feel free to do that. And the third thing, again, is that it's our platform is going to drive that. And there are other utilities other than clinical application for this collaboration, which I'm also happy to discuss later. So, as importantly, at least we think internally and we believe, as importantly, at least in terms of identifying future drug discovery and drug development opportunities, Predictive Oncology has launched the, it's called the Accelerating Compound Exploration Program, ACE, A-C-E, by which we partner with academic and research institutions to do exactly what the name suggests, to proactively accelerate and participate in their own drug discovery initiatives. So as you all know, because Pamela has been introduced to you in the past, either directly or indirectly. Pamela is now our Chief Business Officer. And in that role, she will lead the company's business development, partnering and growth strategy, and all of those efforts. So at the end of the call, please feel free to ask her any specific questions about any of these initiatives, contracts, objectives that you'd like to ask. In support of all of this commercialization and launch strategy and to further inform if not accelerate our growth strategy, the company has begun to expand or at least supplement the board with two leading experts in biopharma. Again, they should be known to you because we've made it public. These are biopharma life science and intellectual property experts. They are David Smith, a life sciences and intellectual property attorney, and a leading authority, nationally recognized authority, on legal issues surrounding therapeutic use of human tissues and cells, which should be, the significance of that should be obvious to everyone that's interested in what predictive oncology does and the biobank that we have. And the other is Matthew Ariolak, Ph.D., MBA, who is currently the Executive Vice President and Chief Business Officer of Gristone Bio, which also has an artificial intelligence component to it. But he is also the former Vice President of Corporate and Business Development of Foundation Medicine, which is, I'm sure most of you know, was subsequently acquired by Roche. The significance of Matthew being on the board should be equally obvious, that Foundation Medicine, what Foundation Medicine does, does, why Roche acquired them, the fact that there's an artificial intelligence component to this should make everyone comfortable. In fact, we have someone on the board who really understands not just the artificial intelligence but the application of that in genomics and specifically for drug development and even more specifically for positioning the company in terms of valuation in the marketplace. In parallel with that, we're also rebuilding our scientific advisory board around these emerging market opportunities with respect, of course, to artificial intelligence, oncology, drug discovery, and drug repurposing. So, in addition to current members, Dr. Mark Malandro, Vice President of Operations and Sciences, the Chan Zuckerberg Foundation, and with machine learning in Italy's pioneer, Robert Murphy, actually the inventor of the core platform, CLRE platform that drives PEDAL. We've added just recently, actually, I think Bob can address this in a bit, just yesterday, signed the agreement with Christoph Reinhardt, I'm sorry, PhD MBA, who is the Senior Director of Translational Research, Oncology, Pharmaceuticals, and Therapeutics at Eli Lilly and Company. He also established the Next Generation Sequencing Program there, preclinical and clinical, and the preclinical and clinical space for them. So he, too, should be an obvious asset to the company. He's coming from industry like Pamela. Pamela also came from Eli Lilly. And like Pamela, he's a PhD MBA, so he understands the business of science, not just the science itself. And most recently, we have engaged the largest integrated investor relations firm in healthcare and life sciences in the world. They have global operations across North America, Europe, and Israel. The company's life science advisors, again, this was made available, this information was made available to our shareholders. They were engaged to raise awareness about predictive oncology among their Wall Street constituents, including life science analysts and institutional investors. To supplement that, we have also and lastly engaged DLA Piper, a global law firm with very deep experience in life sciences, artificial intelligence, and intellectual property. So collectively, this overview should make it clear that we have moved, we've moved from R&D, we've moved from validation into the marketplace through Cancer Research UK and in collaboration with Civergenics, Inc., a relationship by which we have significant control over. And through which we can control our own destiny with respect to differentiating ourselves in the radiation oncology market or radio sensitizers and radio protectors. And then building the team around us with the board, expanding the board, scientific advisory board of directors, that is, scientific advisory board, our law firm, and our investor relations firm. So since this is an earning call, I'm sure the person you really want to be talking to and hearing from is Bob. So I will pass this off to Bob now and welcome any questions at the end of the presentation. Thank you.

Thank you, Raymond. I will give you all a financial summary, and then we'll be able to go to our question and answer period. The 2022 financial summary, we concluded the full year of 2022 with $22.1 million in cash and cash equivalents. and that was compared to the prior year of $28.2 million. The stockholders' equity completed at $21.8 million in 2022 against $40.3 million in 2021. Predictive oncology recorded revenue of $1.5 million in 2022 compared to $1.4 million in 2021, and our gross profit margin was stable at 66 percent. Expenses increased in 2022 compared to 2021. The increase in 2022 is primarily due to higher payroll costs, higher costs related to laboratory expenses, as well as increased cost in sales and marketing expenses that are driven by business development initiatives as we transition from research and development into commercialization. Net cash used in operating activities was $12.3 million in 2022, which is a slight increase from 12.2 in 2021. We're very consistent in monitoring our cash flow. Cash used in investing activities was $475,000 in 2022 compared to 10.6 million in 2021. The cash flows used in investing activities were primarily related to purchasing fixed assets and maintaining other intangibles. And our cash flows used in investing activities were primarily related to the acquisition of ZPredictor, one of the initial subsidiaries. Our net cash provided by financing activities was $6.7 million in 2022. compared to $50.3 million provided in 2021. Cash flows provided by financing activities in 2022 were primarily due from proceeds from the issuance of common stock and warrants of $6.5 million during the first half of 2022. Cash flows provided by financing activities in 2021 were primarily due from proceeds from the issuance of common stock and warrants of $50.5 million and from the proceeds and exercise of warrants of $4.5 million, all of which was offset by a debt repayment of $5.2 million. The company is currently debt free. During the year ended December 31, 2022, we recorded an impairment of goodwill of $7.2 million for the full impairment of goodwill of Z Predicta, which was acquired in 2021. predominantly for GAAP and accounting-related issues. We recorded a full impairment of the ZPredictor intangible assets at $3.3 million during the year of 2022. And according to GAAP, we impaired some intangible fixed assets totaling $185,000. We incurred Litton lawsuits for the year in December 21, I'm sorry, December 31, 2022 and December 31, 2021. Predominantly, the losses were comprised of impairments. And that would be our financial summation, which you could see in our earnings report that was done with the press release in 8K yesterday, or in costs in our 10K on file with the SEC and reachable in our website. So with that, I'm going to turn the call over to Raymond, and I believe, Raymond, we can start question and answers.

Anyone, whomever would like to ask a question of whomever it is you want to speak with, please do.

Thank you. As a reminder, to ask a question, please press star 1 1 on your phone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Stand by as we compile the Q&A roster.

One moment, please, for our first question.

Our first question will come from Michael Broadbent, the analyst. Your line is open.

Hi, Ray, Bob. Can you all hear me okay?

Yes, I can. Thank you.

Okay, great. Appreciate the time. My question revolves around, it's kind of a two-parter. ZPredicta, the acquisition, the asset impairment, and revenue growth seems inflationary at most outside of the cost increases under the current economic climate. In the 8K filed, there was mention of additional investment and potential offerings required down the road for further investments. in the Helomix, and I hope I said that right, and ZPredicta business lines. I'm wondering, with that purchase, the payout to Julia as she left, and everything else that goes in those entities, why haven't we seen any revenue growth, especially in ZPredicta over the last year, other than inflationary, you know, a couple of percent at most? And then, as far as investment goes, with the impeding or looming reverse split is, is POI willing to make any, any, uh, how would you say it? Uh, concessions to investors to, uh, promise not to do an offering within the six months after the reverse split with 22 million in cash. It really doesn't seem like there's a necessary for an offering or additional debt or convertible notes, unless you're planning to do any acquisitions.

it would go a long way to help investors who are about to get diluted that don't want to be diluted further right so um i will uh i'm not dodging the question but since the entire z predict uh acquisition and and all of those other uh everything that you mentioned essentially up to the very last part of your question occurred before i came into the company I'll ask Bob to address that because he has the historical perspective on it. So, Bob, if you don't mind.

Of course. Thank you, Raymond. And thank you, Michael. So, first and foremost, as explained earlier, and the impairment of goodwill and intangibilism, as you predict, is predominantly from two things. One, as explained earlier in the year when we did this in Q2, It was because of the fact that the market dropped and where our cash value is against our price per share at that time. Under accounting rules, essentially, we had to impair the $7.2 million. The $3.3 million is relevant to the fact that we are Beginning to bring in revenue from ZPredictor, but our forecast is it's not substantiated. We only only company a year. And as a result, again, under GAAP rules, that means you have to, and I'm really simplifying this, Michael, write off the intangibles for the purposes of GAAP. In terms of the revenue, we are sitting with revenue from Zpredicta from 2022. It's not recognized. It's in our what's called contract liabilities line in the balance sheet, and I believe that comes out to about $600,000. The reason it's that way is because the way the contracts were developed is that there are various stages in revenue recognition under the accounting rules for the work we're doing as you predict that there's various levels of it and various acceptance levels from the customers and we have not reached that level so therefore the revenue is not yet recognized in terms of future revenues we are now consolidated under our Pittsburgh CLIA Lab, and we are now kind of gone through everything with Predictive as one company, and we'll look to the future and see how we can develop a large molecule revenue. The second part of your question was regarding the possible reverse split and cash raise. So let me address it this way for you, Michael, and for everybody else. First off, I want to repeat something that we have said continually. We at Predictive Oncology do not want to do a reverse split. We have done everything possible and anything possible within our control to avoid getting to the point of having to do a reverse split. We've met with investors. We've been at investment conferences. Raymond has just personally contacted companies left and right. We've now made a deal with Kruk. We have, as Raymond said, a deal with Zebragenics. Things that have, you know, fortunately brought the stock to an increase over the course of time during this past year. that was then brought down again in the market. This was not something we can help, but it was something we certainly tried to fight against, and we are still doing. So the fact that we have put in, according to rules and regulations, to begin the procedure for a reverse split, that is something we have to do. Based on the timing, we waited as long as we could, and we are doing everything protect the company and its shareholders and to keep the value of the stock. In terms of what happens between now and the time of the shareholder meeting, we have the ability to stop the reverse split procedure if, in fact, the price per share gets above a dollar and stays that way for 10 consecutive trading days. We then become compliant and we could drop the reverse split procedure. But if we don't do this reverse split procedure, then we leave ourselves in the position of not becoming compliant by May 8th and doing the shareholders and the company a very large disservice. As regards cash, Michael, and everybody else, you're quite right. We feel very comfortable where we are in our cash position. This is an unusual situation if you look at the companies that are deficient in the market, of which there are hundreds, and this has given us a strength that when we go through the reverse split, we have absolutely no intention, and that is a fact that we are not going to be doing any cash raise. I can't 100% promise nobody can do that six months following. We have no intention of doing it. I don't find any reason for us to do it. We have been validated by our accounting firm as a continuing and ongoing organization. We have support of a large warrant hold as the share prices increase, and they don't have to increase very much to bring an input of cash, and we will bring revenue in. The intention, the desire, and the promise to do everything to avoid bringing in cash and doing a raise of that nature, that I can do. Thank you, Randy.

If I can ask you one more question. If I can ask one more question for Bob. Bob, in the past, I think even on shareholder calls, you had mentioned that POAI has the know-how to get back to compliance. Do you have any more tricks up your sleeve to get us there? Wow.

Michael, I wish I did have tricks up my sleeve. Everything we've done is with being sleepless here, if you will, and we've done good things. I'm not sure what more we can do than make a deal for PEDDLE, make an incredibly promising deal with Cevergenics, and bring in the people that we have in. It's up to the shareholders to see that we are doing everything possible and altruistically to build our company and build our price per share and follow through. There's no tricks. There's just us fighting to make this company be what it can and is.

I appreciate it. Hopefully we can get out behind those NDAs and get some of those contract terms public soon and I appreciate the hard work. Thank you so much, guys.

May I? This is Raymond, if I may. Can I? Am I heard?

Yeah, you're good. Okay.

So I just want, on that last point, Michael, thank you for keeping the faith. Honestly, I know we've had some conversations, and you know how transparent I am with all of this. I can honestly say that we have done and will continue to do everything humanly possible. You know, we're not blind to the fact that what's going to make investors happy is closed contracts that can be disclosed with financial terms. But I also want to be equally honest in saying we are constrained by those very contracts about what we can and cannot say. We can say who we're talking to. We can't say what we're doing with them. It's a horrible situation to be in where an investor says, who are you working with? And we say, I can't tell you. What's it about? I can't tell you. How much is it worth? I can't tell you. I mean, those are honest answers. They sound flip and arrogant, but they're really not. All I can say is no one is more anxious to let the investors know about these contracts than we are. And there will be the definition of a nanosecond. is the time from which the ink is dry and the terms are disclosed and the investor is being notified. That's my definition of a nanosecond. But to Bob's point, what we've tried to demonstrate to investors, I mean, I can only speak, you know, my history with the company is very short, but I can tell you in the history with this company since November, it's a different company. It's a completely different company. The traction that we have, the respect that we have, the progress that we've made has truly been significant. It just isn't the evidence the investors need to see to convince them not to be squeamish about this. But also to your direct question, my direct answer is we can promise you to continue doing everything we possibly can to keep from doing a reverse split. And it is the last thing that we want to do for us or for the investors.

Period. That's the truth. Are there other questions?

Yes, thank you. Again, to ask a question, please press star 11 on your phone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment, please, for our next question.

Our next question will come from the analyst, Robert Antioni.

Your line is open.

Great. Thank you very much, and thank you, Raymond and Bob. Two questions. One is really a follow-on on the Zed Predicta, if I can kind of do that one first. You know, Zed Predicta was acquired in December 2021, and at the time it was announced it was, you know, complementary to Predicta Oncology's AI platform by leveraging its tumor-specific cell culture, et cetera. And then, you know, the other statement in that sort of release was it was an immediate add to new revenue streams. You know, 12 months later, Bob, you've described kind of the impairment charges, the revenue charges, et cetera, and then the departure of, I would say, a key individual at Predicta. I guess the question is, Did that sort of departure of that key individual, did that slow down the revenue adoption or the revenue realization? Because we're, as I said, 12 months in or 15 months in now, and that $10 million acquisition, it's pretty much written off and very little revenue to show for.

Raymond, do you want to respond or do you want me to?

No, yeah, you can start. I'm happy to join in. But again, you have the perspective on it. I can give my current assessment, but you can give the historical perspective. Sure.

Thank you, Robert, for your question. So, has the departure of a key individual at the predictor caused us harm? The answer is no. We were prepared for that departure. We used that departure as a way to advance predictive towards its becoming one predictive and consolidated the San Jose office into our Pittsburgh office where we've just signed new leases for the next five years and expanded our lab. Dr. Arlette Uline, who is the site leader and a medical doctor that handles the lab and the CLIA lab at Pittsburgh, you know, is very, very proficient at everything that she does. So our work is ongoing with the things that we took over from ZPredictor, which is simply now our Pittsburgh location. We don't refer to our subsidiaries anymore because we're one predictor. As I said earlier, there's revenue to be recognized. It is sitting there. There is future revenue, and that is now in a very capable hand, as Dr. Pamela Bush, who was the person responsible primarily for the closing of the truck deal that we just had. And when we said back in November, December of 21, that this is new revenue, And one of the areas that we were referring to was not just revenue that we could gain through 3D culturing and the customers that were there already pre-existing from the deal, but the fact that we can now cross-sell to those customers. It's perhaps different avenues within those customers, very large companies, but that's something that Dr. Bush is very familiar with and already utilizing. I think that a lot of that is yet to be seen as to where we're going to be and to the value of what we got from those customers. And Raymond, if you want to expand on that, or perhaps Pamela would like to.

Well, I can certainly, Robert, pleasure to talk to you in person. So did the departure of Dr. Julie Kirshner hurt us? No, it did not. As you know, in the acquisition and consolidation of any company asset personnel, decisions have to be made about what we need, what's essential and what's not essential. So the assumption has always been that Julia was essential. And Julia was essential to the transition. She was not essential to moving the technology forward. And as Bob said, we have some very smart people in our company, scientists. MDs, computational biologists. They do this for a living. And secondly, Julia's number one person who did the 3D modeling is in the company now. He and his family moved to Pittsburgh. They're here. So nothing was lost in that transition. The assets are here. The domain expertise is here. But more importantly and frankly, we actually know more about it now than we did a year ago or whenever it was, I think, at least a year ago. And we see ways to move this forward or integrate it that was not immediately recognized. This is my perspective now, looking at it in retrospect, that there's more to this than we thought. We're actually speaking with another company that does 3D modeling in a very different way with a different matrix and a different media. That is the culture in which these experiments are done. that may actually change the trajectory of 3D modeling and how we use it. Or it may not. But we're at least, that's what science is. You look at it and you evaluate it. So we've not lost anything by Julia's departure. But I should also say Julia chose to leave. It wasn't that, it wasn't entirely that because we did an acquisition that we shed expense and overhead. It was a personal decision on Julia's part, and it wasn't working. Professionally, it wasn't working, and personally, it wasn't working. We learned after the fact that that was a possibility, so we did everything in our power to protect that investment. So hopefully that supplements with the explanation that Bob gave.

Yes, thank you. And one sort of other thing for me, and I don't know if this – uh, you're going to answer this one, but, um, so, you know, Bob, you talked about kind of, you know, cross-sell upsell, et cetera, based on relationships and clients and Raymond, you, you, you, you started the conversation around, you know, not all AI is created equal, right. Um, it's unique machine learning access to biobank, uh, wet labs, et cetera. And it's a unique value proposition that, that, um, that is, is quite solid. and that you've had the sort of validation that it's 92% effective, et cetera, et cetera. I guess the question is, if it's that obvious, right, to POAI, predictive oncology, and, you know, as we're communicating to shareholders, do pharmas and biotechs see it as that obvious? And if they do, why aren't they flocking? I guess, again, that's maybe an unfair question, but that's one of the genesis of what I'm trying to get at.

Yeah, sure. Well, first of all, Robert, it's not an unfair question. So I'm going to, I will in a moment, in a moment, I promise Pamela, I'll hand this off to you because I know you're sweating over there right now. So Robert, here's the thing. There are three ways to look at this. One is that by definition, when you're ahead of the curve, when you're an innovator, when you have something no one else has, You have to make it apparent. We see the need in biopharma, and we see that we are a solution for biopharma. But biopharma has to understand where we fit in their workflow. So just, A, from a sales cycle point of view, as Pamela mentioned, I believe, again, I wasn't there for the conversation, but I believe she mentioned that it was probably a 12-month sales cycle to get in, talk to the scientists. You have to understand what the sales cycle is. You talk to scientists, you talk to PIs, you talk to business people, and it's a mix of those people that decide to move that conversation up or down the ladder. So, that cycle can be long. So, for perspective, from the time that Pamela started speaking with Cancer Research UK to the day, literally the day that that contract was signed was 12 months. It was a one-year cycle. So our projection on the sales cycle was absolutely correct, spot on. Secondly, you have to understand that, yes, AI is being used in biopharma, and there are other people using artificial intelligence in biopharma and for drug discovery. But it has to fit within the workflow of these organizations. It's not a widget. You just don't plug it in. This is science. It has to fit into their drug discovery, drug development protocol. So one of the reasons it takes a year is you have to show them how it fits. You have to show them. They're not going to make a $2 billion mistake because we couldn't demonstrate on the front end how the information that we deliver is going to make a meaningful difference. And the third, from my perspective, is that don't forget at the end of the line, at the end of the day, the FDA has to approve these things. So it's all about tracing data, right? Tracing how do you know that this fact is correct? And that will ultimately lead back to our platform that says we believe the probability of this molecule could move you through drug development. Then it's on them. Once they make that decision, it's on them. So there are a lot of external pressures on the sales cycle to get this done, but it does not mean at all that biopharma is not unwilling to do it. They are anxious to do it. In the letter that I sent to investors on the 7th, there was a market analysis, not analysis, really the market conditions around why AI is being adopted by biopharma, why it's so important, and where we actually fit in that risk mitigation, in that process of risk mitigation on the preclinical side on the front end. So, from my perspective, it's all of those things. But Pamela, if you would like to provide more insight, please do.

Hi, Ms. Bush. Pardon me, Pamela Bush, your line is open. Ms. Lewis, if you could please unmute your line.

She is unmuted. Whatever technical difficulty we're having, Raymond, I think we should continue on, and if Pamela is able to correct it and get in, that would be great.

Sure. So, Robert, if you want a more specific answer, I'm happy. You can call me directly or we'll get Pamela on the phone with you to answer that question.

Thank you very much.

Thank you.

And I'm seeing no further questions in the queue. I would now like to turn the conference back to Raymond Benieri, for closing remarks.

I'm going to interject here for a moment, Raymond, forgive me, and Chris. Can we be sure of that? Because I know that I have had shareholders contact me in the past saying that we've cut off after a few questions, and yet they were there looking to ask questions. If you could re-explain to everybody how to go ahead and get on to make a question and present a question, that would be helpful.

Yes, sir. If anyone would like to ask a question or make a comment, please press star 1-1 on your phone and wait for your name to be announced. If you wish to withdraw your question, please press star 1-1 again. One moment, please, to see if there will be any more questions.

Thank you, Chris.

You're welcome, sir.

Again, please press star 1-1 to ask your question. And we have a follow-up from... Oh, we do have two questions. One moment. We now have a follow-up from the analyst, Michael Broadbent. Again, your line is open.

Thank you. This question is for Bob. Bob, is there any way, I think one of the major milestones that I'm looking for in predictive trajectory is achieving a break-even status and a zero cash burn. Is there any way for y'all to be able to predict based on current workflow the horizon when that milestone will happen? Is it six months? Is it three months? Is it a year? Is it two years?

Michael, that silence is me thinking. There is not a way that I can currently predict that. And let me explain why. Raymond just indicated to everybody, actually not indicated, very, very succinctly stated that it takes a year or currently a year for our sales cycle with PEDDLE. And I can tell you that PEDDLE revenue is got various, various components to it that will show both when agreements occur and as agreements progress and as milestones are reached and, you know, we progress along the years.

So... Maybe I could rephrase the question to be a little bit smaller. Yeah. What is the time frame from signing the contract to the first contract milestone where Predictive receives payment on pedal contracts? Is that a three-month time frame? Is it a six-month time frame? Or is it a year? I think that should be able to be divulged without violating any type of contract because you're not knowing what type of work is being done.

Yes, absolutely. I can give you a generalized view. All right. Perfect. I'm sorry, Raymond, are you cutting in there?

No, no, that wasn't me.

Oh, okay. Sorry. All right. I can give you a generalized view. So first, first and foremost, uh, we, we come to agreement on a contract. Um, and, and then there's an initial price that has to be paid that we have as revenue, um, for us to begin the work. Um, you know, this is, uh, where we get the, that's going to vary based on the number of drugs that we're going to receive that want to go through the process, and the amount of tumors that we're going to use in the process to evaluate the drugs. Now, that process goes through iterations, and each iteration, and again, I'm being very general here, but based on the number of drugs, based on the number of tissues, It could be a week. It could be a little longer. It's a continual process, and we're continually learning as we go along from that process, both through our machine learning and, of course, through going back to the lab. So what happens is 10 to 12 weeks later, we hope to have the initial answers from whatever project we're doing. Again, this is dependent on the size of the project. Based on that answer and what we have in the contract is the next stage for what the drug pharma company is going to do. And there could be a milestone now for successes on what they proceed with. Depending on a contract, they could be valuing what they don't proceed with. So there's just a number of ways for that revenue to come in. The next thing is, you know, the drugs have to go through, you know, clinicals. I'm not sure if you're aware of it, but the FDA in this past December passed the FDA Modernization Act 2, which essentially, and again, I'm being liberal with my answer here in terms of paraphrasing, but it's essentially saying that the FDA is very accepting of artificial intelligence and wants to proceed in that direction, and it's hopeful that this is something that's going to reduce, if not even potentially eliminate, animal clinicals. So by saving this time and money, that's a revenue opportunity for us. That could take three years, it could take two years. Again, it depends on the process, so I'm not really capable of fine-tuning that. Then you go through unique vehicles, and once you get through that and the drug does go to market, Then there's opportunity for passive income for a deal that we might make for revenue off of any drug that succeeds, goes through discovery, and actually goes to market to ultimately the patients. I think you're looking at a longer term. I really do need more clarity on that. I'm sorry, is someone asking me a question? Yeah, I did. I said, based on my answer, do you have any additional clarity on that?

Yeah. So, Michael, let me address it from a contract, just from the structure of the contract. I think this will answer your question pretty straightforward. So, our contracts are tiered contracts. Basically, when a pharmaceutical company comes to us and says, I'm just making it up, but, you know, this is the way it works. Take a look at these molecules or this molecule. Take a look at this compound. I need to know what the probability of success will be for this compound to move through the preclinical phase into drug development, or at least into preclinical, meaning animal testing and possibly humans in phase one. So that's the first part of it. They come, they say, look at this stuff, right? Is it yes or no? Is it good? Is it bad? Is it high probability, low probability? That's the fee for service. They come in, the front end of it is, look at our stuff, Tell us what you think. We tell them and we send them a bill. So that's fairly immediate. And as Bob said, that could be from the time that they contact us. We actually, as I said initially in the sales cycle of the contracts, we actually have to do work on our side to show them and to figure out we have to develop our own protocols to answer the questions that they're asking us. It's not, as I said, it's not a widget. You just don't drop it in a toaster and it pops back up. So there's work on our part on the front end. Then we do the work for them. We give them the answer, and whether the answer is high probability or low probability, that's the contract, and they pay us for the work that we do. That's, you know, let's say it's three months to do that. I think that's a fair estimate, assuming everything moves so quickly.

The second part of it is... If I can jump in, Ray, because I think this is what shareholders... should be latching on to, because this is a positive takeaway from this question, is that ultimately we want to know when are we going to see an increase in revenue? And the quick takeaway from that is predictive will get some fees up front after signing each contract for federal services. And with that in mind, from Q1 revenue, we should see a small bump in revenue, assuming All these announcements were signed contracts with the UK research partnership and other companies. We should see a bump in gross revenue for Q1 2023, correct?

Not from the partnership. Go ahead.

It may be small, but we should see something.

Yeah, so I'll answer it directly as the contracts go. So the Civergenics, no, we're not going to see an immediate bump in revenue because the whole point of this is for us to figure out how to use their stuff to our benefit. How do we utilize that PGRT platform to develop something for ourselves, which we own, where we control our own destiny? So the analogy there is rather than waiting for a pharmaceutical company to come to us at some point with a molecule, We go to them with a molecule and say, hey, we think that this molecule works as a radio sensitizer, a radio protector, right? So that's different. We're actually building our own engine to do that. With respect to CRUK or any contract, once it's signed, it has everything to do with the time that, from the time that we actually see the work that they want us to do, figure out what that protocol is and the delivery of that work when the invoice is issued. then it's whatever, 30 days, 60 days, 90 days, whatever their pay cycle is. So the answer is yes. The front end work is fee for service. The back end work are milestones. And the milestones are tied to the value created by the work that we do. And value can be saying no, right? Kill it quick. Because if we identify a molecule that has low probability, that's a molecule they otherwise would have taken through development and then five years and $50 million later figured out it didn't work when they could have come to us and we could have told them that in a year or less than that, right? So that's the value proposition.

I'm happy to hear, though, by Q2, end of Q2 this year, we should see some bumps in revenue on the predictive, even if it is listed as contract liabilities. It's nice to hear that there's progress in the short term.

Thank you, Michael.

Thank you. One moment, please, for our next question. And our next question will also be a follow-up for the analyst, Robert Antonioni. Your line is open.

Hi. Thanks. And sorry, I don't want to monopolize the time, but just a question on really, as a shareholder, I've been here a long time and believe in the kind of promise and all those kind of good things. I guess the question I have is, as key executives in predictive oncology, one of the things that some of the shareholders are talking about is the amount of ownership that key executives have outside of incentive based compensation. Can you make a comment on that? Is there any plans for key individuals to put their confidence in by acquiring market-based stock?

Sure. I think, Robert, I think I addressed that slightly in the investor letter. There is interest, yes, of senior management, yes, and board members, yes, and the company itself, yes, to either buy stock in the open market or stock purchase. We are precluded. from doing that. We have been since December, and we will be through May. Bob, if you have the exact dates, that's great. But it's that we can't. We're in a blackout period. We're not permitted to do it. We actually tried. I asked Bob to figure out some way to contact the SEC, and there is this sort of safe harbor process, but it's so convoluted, the process takes longer than waiting out the May deadline for the end of the blackout. So there's nothing nefarious in senior management not purchasing stock, there's a desire to do it. We're just not permitted to do it at the moment. Because if there was any time we knew was a good time to buy stock, just like any other investor, it's when we can buy it up at a reasonable price. But the reality is we can't do it.

That's fair. So outside of the blackout period, that's totally fair. You got to do what you don't want to kind of violate anything. But outside of the blackout period, my guess is really the question and the intent. Again, it'll show confidence to the shareholders that you guys are in it with us.

Yeah. No, Robert, listen, you are so right. There's nothing about that question that's either improper or not obvious. But we're also constrained by the reality of being a public company and under the thumb of the SEC, or at least under the guidance, I should say, of the SEC. Thank you.

Thank you. And again, to ask a question, please press star 11 on your phone and wait for your name to be announced. Stand by as we compile the Q&A roster. Again, to ask a question, please press star 11 on your phone. I am not seeing any questions in the queue. I will turn the conference back to Raymond for closing remarks. One moment, it looks like we do have. We do have another question. One moment. We do have a question from Danny Garcia of KSU. Your line is open.

Hello, Ray and Bob. I'm showing up a little late, so I don't know if anybody has asked a question yet. Are you guys able to hear me right?

Yes. Danny, good to talk to you.

Good to talk to you as well. It's good to hear from you again. I was going to ask, on your guys' structured rate, everything that's currently going on with the reverse lift, some investors are worried that you're most likely going to... or split, you know, depending on what you guys do. You know, what are you guys shooting for post-split? Do you want the share price to be in a range of, you know, three, you know, three to five? Or, you know, what's basing your guys' decision off of, you know, what dilution number you guys would use?

So, Danny, I'll answer that for you. This is Bob. As you know, in the preliminary proxy that we put out, the board approved us to do a 1 to 2 to 125. The reason that we make such a broad range is because a lot of it is going to be dependent on where the price per share is at the time of the shareholder meeting and before we look to go effective. So the vote from the shareholders is based on the fact that we can do anything between 1 to 2 to 1 to 25. And then once that is approved, we as a management team who has already been discussing this, not only amongst ourselves, but with some very wise consultants, will make a determination as to where we want to be. You know, it involves a lot of things. Number one, generally when you do a reverse split there's usually a down ride from the initial split where reaction is to sell off and you come down a little bit. So that reverse split doesn't automatically gain you compliance. It's carrying that price for 10 consecutive business days so that by May 8th, we are compliant. So coming in at $1.10 or $1.15, wouldn't be a prudent move because it could go below a dollar, and we've just sacrificed everything we've done by coming in too low. On the other hand, we don't want to do a ratio that's going to be disruptive to anybody. Ideally, in the market, it's anywhere from 350 to 450, and that's not what I'm saying that we're doing. I'm using an indication of what various high net worth investors look at, what institutions look at, and the value of the stock that has been cited by analysts in the past, which is $5. So I'm not avoiding the question. I don't have the answer. But what goes into it is determination of the value of the stock, the return to the shareholders, and the assurance that we could go through 10 complete days consecutively and gain compliance with NASDAQ.

Yeah, okay. So this question is more directed towards you, Bob. So basically there was a question saying something about, you know, how many shares the board of directors have. You know, would you guys be willing to, with your guys' compensation pay increase, would you guys be willing to switch over from getting, instead of, you know, pay cash, would you guys be willing to accept more stock? Just because depending on the decisions you make and how the company grows, if you're getting paid more stock than anything else, you guys wouldn't want the share price to go down, right? Going based off of what you said, Bob, of being the real deal, Helomics back in the day was supposed to be receiving all these contracts. In the end, they didn't. We hopped over to you know, different subsidiaries, including Depredicta, which got a write-off, which was massive, you know, would you guys be willing to shift your guys' pay for more stock than, you know, cash?

So, Danny, that's a good question. Let me first, I'm going to, since it is kind of a personal question, I'm going to answer this personally. You know, we're all workers here. We're all people that are supporting families and trying to make a living. With that being said, I'm still in this company and have been with it for 11 years because I really believe in it. I still believe in our StreamWay machine and what it can do protectively for patients and people in the OR that are the practitioners. I believe very much and what we're doing with Petal and now with the opportunity with Civergenics. So, you know, my, you know, my desire to succeed and to bring the shareholders value is very, very altruistic and very, very much belief in what we do and in the hope that we can make a difference in cancer. And I would just love to see that now. In terms of getting a stock, yeah. And I've done that in the past. Even when I first joined the company, I was paid very, very little because it was not very, very much cash. And I received options as my pay. And like many shareholders through historical problems with the stock, I lost that. And that's okay because I took that chance and I'm willing to take that chance again. But there are certain restrictions. There's certain rules and regulations regarding stock as a salary. So we try to do the best we can to get the combination of both. And we are developing a new plan. I haven't presented it yet to anybody, but I'm looking at a new plan that might help in terms of options for people in the company that would give further inspiration to the people that are doing it. that are actually doing the work. So the answer is a general yes, and I hope that that from a personal side helps.

Yeah, and this is Raymond. I would also add that historically, I mean, this is veiled from the investors, but this company, and again, it predates me, but I see it retrospectively. There are people in this company who work without salaries to keep it going. As a commitment of these people that have been around for quite a while, have recognized the importance of what they do, but also the potential of this company. They have worked and continue to work, you know, seven days a week, 365 days a year if necessary, and have gone without salaries completely absent any stock to make sure that the company moves forward, to help this company move forward. So if the concern by investors is we're not committed to the company or that In some way, we're taking advantage of the opportunity to make money rather than taking stock. That's simply not true. The commitment is there, and the desire to make it successful is there. So I want you to feel comfortable, and I want everyone to feel comfortable, so we all take it very seriously. But to Bob's point, you know, we are constrained by certain things, and there are people in the company who can't do that, and so they won't do that.

Thank you. As a reminder, to ask a question, please press star 11 on your phone and please wait for your name to be announced. To withdraw your question, please press star 11 again. One moment, please, as we compile the Q&A roster.

And we do have another question.

Our question will come from Brenda Thompson. Your line is open.

Hi. I have a rhetorical question, and that is the higher the price, even if it doesn't get to one, you have to do a reverse split. Doesn't that benefit all of the shareholders because then they're diluted less? That's my question. Thank you.

So I'm sorry.

The question, I guess, Brenda, is the higher the price – I'm taking that as a question regarding the reverse or split. And let me basically say this. In terms of actual value, the value to the shareholder doesn't change. It's a proportional split to the price of the price per share to the amount of shares you own. essential value does not switch. In terms of the price and the higher the price being better for the shareholders, you make a very, very good point. It's not the way we want to get there. We want to get there because people are buying the stock and because they believe in what we're doing and we're bringing a good return to them. But you're absolutely right that by getting the price into a true value of the stock where the type of investors that are high net worth and are looking to really support a company are going to invest and cause that price to now naturally go up as we wish to, that is a big help. But when we're doing something like this reverse split, we have to be very cognizant of all areas of how that price is affected. Again, since I'm talking about reverse split, I'm going to be really annoying here to everybody. But we do not want to do this. We hope we do not have to do this. Let's bring that stock up just by natural means.

Thank you.

And again, to ask a question, please press star 11 on your phone.

One moment as we compile the Q&A roster. And speakers, I'm seeing no further questions in the queue.

If you like, I will hand the call back to Mr. Raymond Venary for closing remarks.

Thank you, Chris. And thank you, everyone. Hopefully, this has been helpful. and you have a deeper understanding and perspective of where we are and what our intentions are moving forward and the efforts that are being made. But as usual and as I promised from day one, if anyone has any question about anything, please contact us directly and we'll do our best to answer that question as honestly as possible. So unless there are any other questions today, I just want to thank you all for your time. We've run a little long, but I'm grateful for the fact that you've stayed on this long and been so interactive with us. Thank you.

So this will conclude today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.