Q1 2021 Applied DNA Sciences Inc Earnings Call

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Pardon me. This is the conference operator, thank you for joining us for the applied DNA conference call, we'll be starting to call and just a couple of minutes and we appreciate your patience and please continue to hold for the applied DNA conference call will be starting and just a couple of minutes. Thank you.

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Good afternoon, and welcome to the applied DNA Sciences fiscal first quarter 2021 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 todays 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.

Please note this event is being recorded.

I would now like to turn the conference over to Sanjay Hurry Investor Relations Officer. Please go ahead.

Thank you Gary Good afternoon, everyone and welcome to applied DNA Its conference call to discuss our fiscal first quarter 2021 financial results and business updates and access the press release that was issued after the market closed today as well as the slide presentation accompanying this call by going to the IR calendar page of our web.

Right.

Speaking on the call today are Dr. James Hayward, our CEO Beth Jantzen, our CFO and Judy Moura, who was recently promoted to CFO.

Before we begin please note that some of the information you will hear today during our discussion may contain forward looking statements I refer you to slide two of the presentation and to the company's form 10-Q filed today and <unk> form 10-K filed on December 17th 2024 important risks factors that could cause the company's actual performance and results.

To differ materially from those expressed or implied and 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.

Before introducing a force speaker for the afternoon via slides that management will be participating virtually next month at the H C. Wainwright Global Life Sciences conference on the ninth and 10th.

30, <unk> annual Roth Capital Conference almost 15 through 17 and management will be available for one on ones with institutional investors at both conferences and so.

My pleasure to introduce our first speaker on today's call Beth Janssen. Please go ahead.

Thank you Sanjay and good.

Good afternoon, everyone and thank you for joining us.

We'll begin this afternoon with a review of our consolidated financial results for the first quarter of fiscal 2021.

After James Hayward, our President and CEO will then update you on developments across our COVID-19, diagnostics and surveillance testing business.

As well as progress being made and our biotherapeutic and supply chain security segment.

Judy Murrah, our newly appointed Chief operating officer will join us to offer insight into initiatives being undertaken to support both our near term.

And long term growth plan.

We will then open the call to questions from analysts and investors.

To begin and for the benefit of our new investors.

<unk> and results and shut down of global supply chains serviced by our tagging and related supply chain business.

Having ongoing adverse impact on revenue.

Specifically the shutdown has negatively impacted the textile industry that historically has been our largest contributor to revenue.

Over the past several years. This industry has average revenue to us of approximately 1 million per quarter.

Yeah.

However.

Early in the pandemic, we shifted our focus to COVID-19 to bring our deep expertise and DNA manufacture and diagnostics to the fight.

As a result.

We have experienced increased revenue from our diagnostics and biotherapeutic contract research and manufacturing businesses.

The increase is specific to sales of our diagnostic assay kit.

And for safe circa our COVID-19, and surveillance testing platform.

They've circled testing is performed under our wholly owned subsidiary applied DNA clinical labs that we formed during our September and 2020 quarter.

Therefore, the statement of operation that I will review in a moment includes our first full quarter of safe circle revenue contribution.

It also includes sizable revenue from our largest customer for our diagnostic assay from.

And we continue to receive orders.

And in fact, our COVID-19 test products and services business has replaced most of the tagging revenue lost to the pandemic and about one quarter's time.

Further our largest largest safe circle contract to date with signed late in the first quarter of 2021.

The full benefit of which we will will be seen and our second fiscal quarter.

Starting with the consolidated statement of operations total revenues for the first quarter of fiscal 2021.

Increased to $1 6 million.

From 634000 and the prior period.

The year over year increase is primarily attributed to an increase and service revenue of $1 1 million associated with the same circle.

Product revenues increased to 550000 for the first quarter of fiscal 'twenty one.

<unk> 238000, and the same period and the prior fiscal year.

This increase is primarily due to sales of our diagnostic assay kit.

Cost of revenue as a percentage of product revenue and the first quarter fell to 44%.

Per to 98 per cent for the prior year period.

This year over year improvement is due in part to a shift in product revenue mess mix as our diagnostic assay kit sales alright, a higher gross margin.

The decrease is also the result of certain fixed costs that were not fully absorbed with the low level of product revenues and the prior period.

Compared to the period, we are reporting today.

Total operating expenses increased 44 per cent.

Or by $1 3 million to.

Two $4 3 million and the first quarter.

Compared with 3 million and the prior period.

This increase was driven principally by greater SG&A and R&D expenditures.

SG&A expenses for the first quarter increased by $1 1 million to $3 5 million.

From $2 4 million and the prior period.

This increase reflects higher payroll expenses of approximately 748000.

Of which 341000 related to bonus compensation.

And the remaining increase was due to increased head count.

The increase in SG&A was also the result, and an increase and stock based compensation expense of 366000.

R&D expenses increased by 184000.

Two 748000 from.

And from 564000 over the prior period.

This result is this resulted primarily from an increase and laboratory supply purchases to support our continued research and development effort.

Net loss for the first quarter fight into $4 8 million compared to $2 7 million and the year ago period.

Net loss for the first quarter includes a noncash charge of $1 8 million for the loss on extinguishment of debt associated with the repayment of the entirety of our secured convertible notes.

Net loss per share for the first quarter improved to 88 cents compared to a net loss per share of $1 12 for.

For the same period, and the fiscal and fiscal 'twenty and 'twenty.

Excluding non cash expenses consolidated adjusted EBITDA was flat at negative 2.4 million and both periods.

Turning to our balance sheet cash and cash equivalents totaled $4 2 million on December 31st 2000 and.

Our average monthly cash burn rate net of financing and wire and exercised protein.

For the three months ended December 31, 2020 was $1 5 million.

Compared to 867000, a year ago period.

And increase of 77%.

The increase is primarily due to capital expenditures for our clinical labs subsidiary.

As well as the purchase the purchase of equipment that underpins, our safe Circle service and the production of our diagnostic assay.

And May 2020, we see we received a paycheck protection program loan and the amount of 847000 under the cares Act.

Submitted our loan forgiveness application and October 2020, and it is currently under review by the SBA.

Except for our cares Act loan we're currently debt free.

Okay.

Subsequent to December 31st we raised gross proceeds of approximately 15 million and be a registered direct offering.

As a result, our cash position on January 31, 2021 was approximately $16 5 million.

We believe we have adequate adequate cash to fund operations for at least the next 12 months from today.

Approximately 460000 November 2019 warrants remained outstand remain outstanding as of February 8th 'twenty, 'twenty, one that carry and exercise price of $5.25.

Which could result in potential proceeds if exercise of $2 4 million.

We have an additional 259000 warrants.

And 50000 of which carry an exercise price of $6.57.

50000 of which carry an exercise price of $6.46.

With the balance at an exercise price of $7.54.

Possible potential proceeds upon exercise of these 259000 and virus would be approximately $1 $9 million.

This concludes my prepared remarks, thank you for joining us today I'll now turn the call over to Jim for his comments.

Thank you Beth and good afternoon, everyone.

Thank you for joining us on our quarterly Investor call.

I Hope you and your families are keeping well and safe.

And we'll begin my remarks today.

We have a brief progress report against certain inflection points outlined in our fiscal 'twenty and 'twenty year and call that can drive our top line in 'twenty and 'twenty one.

I will also provide and update on our strategy to advance the establishment of our linear DNA manufacturing platform.

As a disruptive alternative to the use of plasmid DNA.

But first let me welcome Judy Mauro to the call.

Judy has been and integral part of the management team for the better part of a decade now and her contributions to applied DNA spend both our supply chain security and diagnostics and biotherapeutics businesses.

She is the driving force behind and the implementation of the digital track and trace infrastructure that underpins, our certainty platform and that ensures authentication and the supply chains, we serve.

More recently she has spearheaded the build out of our applied DNA clinical lab subsidiary and specifically its safe circle testing and capacity.

She has also recently undertaking are.

Undertaken our effort to build out a cgmp capacity at our linear Rx subsidiary.

She commands tremendous respect across all levels of the company and I am pleased to welcome her as a participant on her first investor call.

No and Sars Covid, two burst onto the world stage and January 'twenty 'twenty.

Scientists knew would be bad.

With almost all of the supply chains, we serve is running through China.

We saw an almost immediate impact on our tagging business.

As Beth noted.

With the onset of the pandemic, we made the decision to pivot much of our resources to the fight against the virus.

We saw COVID-19, as an opportunity.

And to bring to bear over 15 years of PCR expertise to build a new revenue stream to help us weather. The pandemic, while also advancing our long term strategy to position our linear DNA manufacturing platform as an alternative to plasmid DNA based therapeutics Spanish.

Fracture.

With the receipt of the EUA authorization last may.

And the establishment of a unique testing service and save circle in August.

We've moved with agility and speed to form a COVID-19 diagnostics and testing business that.

With the publication of our first quarter 'twenty 'twenty. One results today is already compensating the suspended revenue from mortality business.

Our aim however is for this business to be a significant contributor to our long term revenue.

Let me review the fruits of our labor to date and what is to come next.

Okay.

As both the manufacturer and user of linear COVID-19 assays.

And we enabled two COVID-19 revenue streams.

First is the sale of our assay kits to certified laboratories, and as Beth mentioned first quarter revenues included assay sales to our largest customer.

Excuse me and medical center, and teaching hospital and local to us.

We expect recurring orders from this customer.

We are also planning additional amendments to our EU way that we believe can attract further interest and RSA, especially given the assays relevant today two variant detection.

And more on this and a moment.

The second is the use of our S. A volume are safe circles surveillance testing service, the economics of which are much more favorable to us than kit sales.

Having established reference customers such as the Suffolk County, and New York Government several private education institutions.

Collegiate level sports teams and numerous businesses and private clients.

We are essentially focused on further expanding the sales pipeline.

Our recent partnership with cleared for is aligned with this sales strategy earlier. This week, we closed our fourth customer with cleared for a private college based and Manhattan.

Okay.

Yeah.

Yeah.

Due in part to the Fda's alert last month that listed are linear.

Assay is one of the very few EUA authorized multi target assay is able to discriminate COVID-19 positive samples for certain variance.

And confirmation of the ability both in silicone and and the field.

We have opened a third application for us.

Genomic surveillance.

Now to our knowledge, we are the only UA authorized test that looks for two targets within the Sars Covid two S gene that codes for spike.

We believe this gives us a substantial advantage and the ability to detect variance even if the wild type virus continues to mutate as we would expect it to do.

Warehouse Safe circle test within population for Sars Covid two positivity.

Genomics surveillance seeks to monitor positivity for variant spread to inform public health decisions.

The current means a variant presence confirmation uses expensive and time consuming gene sequencing.

Available only at specialty equipped laboratories nationally.

Given this limited gene sequencing capacity with which to confirm the presence of a variant.

Gary and spread can and.

And likely is going undetected, especially here in the U S.

The UK and countries in Continental Europe have successfully used genomics survey and wants to surveil variant spread.

They did so by using a similar multi target assay to the linear and say that experiences S gene dropout and the presence of certain mutations as the enabling test.

Now we aim for our assay to be the enabling test for genomics surveillance and the U S.

The U S. Currently lacks a national testing program with which to track variance spread.

Based on our very recent conversations with.

Departments of health from multiple states.

We believe there is a growing appreciation for genomic surveillance at the state level.

To monitor varian spread at a time when variants are not yet prevalent and the national population.

And action can still be taken against them.

Our linear I say it would be used to confirm the presence of certain variance on virus positive samples.

And they have confirmed.

Those samples would then undergo gene sequencing and its state labs.

Thereby making more rational use of their gene sequencing capacity.

This has been proved out and was detailed in our announcement this morning.

And which your lab and Kansas using our linear assay kit and genomics surveillance mode was the first to detect what ultimately proved to be the U K variant and the state.

And I'm pleased to report that we have already received initial orders from certain states that I hope to speak about it and the future.

Now we are also developing new multiplex PCR assays that will target the cell and mutations that characterize the variance of concern.

While these assets will not eliminate the need for sequencing the variant and viral genomes.

Can help ensure that sequencing is applied judiciously.

Only to those samples likely to contain variants of concern.

But genomics surveillance is also relevant to save circle. We believe we can grow the surveillance market given our capacity to discriminate certain variants.

They circle can help protect population against the propagation of variants, while we race toward herd immunity.

Should parents become more prevalent before we achieve herd immunity this would likely require higher levels of vaccinations at a time.

When populations are already under vaccinated.

Pooled genomic surveillance can help to isolate their assets before they can spread.

Which we believe makes this modality more relevant to states beyond our own.

As is the case with our largest customer safe circle could serve as a blueprint for pool surveillance testing a variance and other geographies.

Interest and genomics surveillance of variance is found at the regional level as well.

Begun very early discussions with a major regional and health care provider to run a certain number of their virus positive samples through safe circle to test for the presence of variance here as well the economics of safe circle are much more favorable to us and stand alone kit sales.

Okay.

Okay.

Now, while our COVID-19 test products and services offer and near term revenue.

We remain dedicated to the advancement of our linear DNA manufacturing platform as an alternative to nucleic acid therapeutics.

The pandemic has shown that regulatory bodies worldwide, which were once quite goddard.

Are now willing to accept nucleic acid based vaccines.

Yeah.

We achieved an important milestone and the development of our linear DNA veterinary COVID-19 vaccine just last week that I believe bears highlighting and preparation for phase one of our veterinary and trial.

And we proved that a freeze dried linear DNA vaccine could be shipped internationally unrefrigerated and subsequently re hydrated with no loss and potency.

We have manufactured a complete supply of the freeze dried form of our vaccine candidate.

For our partner and these acts to oversee our second and final round of preclinical testing.

If concluded successfully we expect to initiate phase one.

And the veterinary clinical trial and very short order.

The linear DNA can be shipped without the need of a cold chain.

And demonstrates no loss of potency upon rehydration.

And it adds to the compelling value proposition of our proprietary linear DNA and manufacturing platform.

Production of linear DNA via our platform and straightforward, we utilize only primers the template.

And Polymerous that makes the result and product fewer than the purest form of plasmid based DNA.

Our platform is easily and quickly modified if we learned tomorrow that a variant required a modification of our vaccine technically.

We could be manufacturing that change within 24 hours, but compliance issues of course would be the actual determinant and implementing any change.

Yes.

Currently we believe the gating factor for the therapeutic use of linear DNA is that no linear DNA therapy has ever been brought through the clinical trials process.

Our customers at our linear Rx subsidiary, however are the kinds of sponsors we seek the kind that have regulatory and compliance wherewithal to be able to help us get our first ever linear DNA based therapeutic to be approved by F. D. A.

This of course will take substantial funding and partner engagement.

Both of which we are currently working toward.

Now our recent capital raise serves to advance our long term strategy.

Our linear Rx subsidiary accounts, a who's who of biotech companies as customers.

We function as a C. R O contract research organization to them, whereby they present us with an initial construct they want to evaluate in vitro and.

They will ask us to produce it and linear format quantity sufficient for evaluation.

We have intellectual property and capabilities that can help them increase the circulating lifetime, so their cost structure and increase the expression levels to make their con strokes more effective.

And this value and forms the basis of a royalty to us should there therapeutic obtain regulatory approval and in fact, we get two bites of the therapeutic Apple.

Initially the pandemic slowed down customer and valuations that were typically performed on cell models and our lab, but in recent months, we have seen an uptick and C. R O activity.

That we take is reflective of the growing value being placed on linear DNA by drug developers seeking nucleic acid based vaccines that come to market.

And the C. R O mode, we might evaluate several of our clients construct around their central theme until they identify the construct that they would like to take to preclinical animal models.

Now several clients have made it clear their expectation for us to support them as a contract manufacturing organization.

And undersea GMP conditions.

And to that and we are enhancing our production capacity and capabilities.

And our CMO mode, we would be the manufacturer of record.

Should the therapeutic and the market.

And now Judy will provide an overview of our cgmp initiative and her remarks, but let me offer insight into what is driving interest and linear DNA as well as some of the applications. We are currently working on.

But to protect client relationships I cannot divulge customer names at this time.

And the journey and Pfizer's mrna vaccines have put the spotlight on messenger RNA as a therapeutic platform.

Messenger RNA vaccines aren't made by copying or transcribing DNA templates.

And that are well suited for production via the linear DNA platform.

To this and we are seeing a growing interest from biotech customers that believe linear DNA, maybe a better alternative template for use and mrna production, which currently uses plasmid DNA.

We are also seeing growing interest and virus based delivery of genes.

Such as vaccines using for example.

And no associated viruses or a vs.

We believe that linear DNA has a real chance of improving the outcome of AAV based therapies by improving their manufacturer.

Our current applications for the linear DNA platform include one of the top five pharmaceutical manufacturers globally that is seeking a non viral non plasma and car T application using an in market electric operations solution.

They found that our linear DNA outperformed plasmid DNA in terms of having better expression in cells, one electro poor rated.

A top 10 global pharmaceutical manufacturer, we've previously referenced.

We are seeking a non viral non plasma and car T or application, but with their own lipid nanoparticle based transfection system and not electroporation.

Another leading pharmaceutical companies contemplating using our linear DNA, rather than plasmid DNA as the template for RNA vaccines and.

And finally, an existing diagnostics customer has approached us to generate new amplicons for use and a new in vitro diagnostic under development.

So my comments today are intended to convey that we are positioned to benefit from the need for test and testing for however, long this pandemic because with us.

And we are positioning to benefit from growing awareness and adoption of our linear DNA platform more centrally.

Key enabling technology to make nucleic acid therapeutics safer and more accessible to manufacture them faster and to give drug developers as a platform with which to respond to future pandemics faster to the benefit of us all.

Before I pass the microphone to Judy.

Let me conclude with a few words on our tagging business.

Part of our pivot to COVID-19, we undertook a rationalization of our business pursuits to focus on those end markets. We believe offer a sure path to revenue, namely <unk>.

Textiles pharmaceuticals.

Dietary supplements and cannabis.

COVID-19 has made companies more focused on the need to secure their supply chains.

And made consumers and brand builders more aware of their exposure to counterfeiting and diversion.

As we await the return of increased demand patterns. We note the emergence of potential catalysts.

Such as the federal government's ban on the import of cotton from Xinjiang from Bush Xinjiang region of China that is currently used in one fifth.

The cotton goods manufactured globally every year.

Another potentially close catalyst is a more favorable environment for cannabis under the new administration here in the U S.

As the economy gradually reopens.

We expect a positive benefit to our tagging business now. This concludes my remarks, I'll turn over the call to Judy to offer some insight into the initiatives being undertaken to support both our near and long term growth plans and Judy.

Thank you Jim and good afternoon, everyone I'm pleased to be speaking with you today.

By way of introduction and as Jim noted previously I joined applied DNA and 2013 with the range of cross functional and experiences, which certainly have come in handy and operationalize and our practices products and services here.

Prior to applied DNA and held senior leadership positions.

And at simple technologies prior to its acquisition by Motorola.

They spend a functions of sales and marketing information technology and operations.

Today, my responsibilities and working with all of our teams here to drive readiness and responsiveness for our customers requirements.

Priorities balancing supply demand and inventory anticipating.

Anticipating where the business is coming from to scale appropriately and to ensure we have the skilled resources ready.

Today, well, there's much that I can address I will focus on two of the top trajectory for the company as discussed by Jim and death.

Number one COVID-19 diagnostic.

Well sure building capacity of our assay kit product sales and and use and adcs internal operations.

And and optimizing our services sales the deficiency and certification for Adcs.

Second.

Is scaling the biotherapeutics manufacturing based on our linear DNA platform.

Today, we are operating in a cgmp environment suitable for pharmaceutical excipient dietary supplements and cannabis industrial tagging.

We have institutionalized a G L P environment.

And for our linear Rx Biotherapeutic CRM business.

And now we are working to add a third regulatory compliance level suitable for CMO contract manufacturing for bi.

The therapeutic customers.

Let me offer some operational color and explanation of the industry activity acronym for each.

Diagnostics first.

The core of our product portfolio is the linear assay kit and sizes of 100 501000 reactions or test.

And we use those interchangeably.

It's volume based pricing model beginning at $40 per reaction list price.

Planning and producing these kits and managing the supply chain.

Meet demand for both our end users certified laboratory customers and.

And internally by our own applied DNA clinical labs subsidiary to support surveillance testing.

For our larger largest customer of our kids, we did earn our business by offering superb customer care and the differentiator from other of our competitors.

We provided vendor managed inventory services from reagent kit sample collection kits consumables and more in their facilities.

We offer process workflow design consultation for their lab, followed by software and automation implementation with the continuing eye on supply chain health to support their surveillance testing program.

Now anticipating an uptick and kit sales due to demand generation programs, we've recently launched and competitive differentiation and variant detection as Jim mentioned.

And the continued ramp up in our surveillance business and.

We're now implementing and around robotics and automation to again, Inc.

Kris our capacity to be production ready to service potential demand.

Next turning to our services business and Covid surveillance testing and.

And they circle is the engine that is opening doors for our customers to get back to work and back to school.

For our regional customers.

And we operationally manage supplies and sample collection logistics.

<unk> customers and setting up their surveillance program.

And a growing number of instances with our partner cleared for.

Monetarily for us and a pooling ratio of five individuals samples per test reaction.

And the price of between 60 and $100 per individual samples submitted depending on volume and portfolio of services requested.

And therefore that makes it 300 to $400 per test reaction.

And this program does generate more per reaction and the linear assay kit.

However, the assay kit also does have a lower complexity and overhead and delivering.

So the combination of these.

Balance our portfolio.

For customers outside of our region, we easily support sales and implementation remotely.

After one or two phone calls and consultative nature, and helping them set up their surveillance programs and the online platform. They can manage has self service.

And we shipped our kit to way via Korea.

Consequently, we have focused much of our capacity expansion unsafe circle services.

Since its launch we've outfitted a complete laboratory under our line.

Applied DNA clinical lab subsidiary with the equipment for licensed licensing RNA extraction and PCR.

We've completed facilities upgrades for cleanliness and safety and we've hired a team with the certifications and experience needed to grow over 10 times.

Since we began.

We're building capacity and anticipation of clip CLIA certification for which our application to the New York State Department of Health is currently pending.

And that will allow multiple avenues of growth from there.

And these metrics are staffing is complete.

Equipment and facilities expansion is ongoing to open some bottlenecks we have.

And our lab information systems, all new are being rolled out as we grow.

Near term clipped CLIA certification, we complete our service offering with patient specific diagnostic testing diagnostic testing on a sample of presumed to be positive as tested undersea circle pooled surveillance.

And our low relatively low positivity positivity region well. This action represents a small cost savings to bring in house from and outsourced third party certified lab.

It does represent a big time savings to our customers.

We are on track to request RV inspection as announced and are pursuing every avenue available under the New York State clip program to ensure ADC <unk> ability to offer and integrated testing service.

Longer term a clip CLIA certified laboratory would have benefit beyond the pandemic through commercialization of other services as in for example, our invasive circulating tumor cell based platform.

And that of our up to $1 million two year award with time technologies.

Our cancer assay transitioned to an approved laboratory developed test that is applicable to a host of cancer types, which serve as a diagnostic for oncologists to both diagnose and all of the course of therapy for their cancer patients.

In parallel with diagnostics.

Our second initiatives and I had mentioned is to drive adoption of our PCR based linear DNA platform.

Our toggling from CRO to CMO services as we now complete small quantity proofs of concept means investment and capability and capacity.

Something we must derived from sponsors.

And just a few acronyms.

The industry follows FDA guidance for good laboratory practices.

And I called T L P.

And current good manufacturing practices.

Cgmp.

It's a living processors speak.

Levels of product required different levels of stringency.

Well the stringency required at the level of Therapeutics and vaccines is quite high for example, we have been living the cgmp process and our cannabis dietary supplement and pharmaceutical excipient tagging.

And for two years.

We adopted cgmp appropriate for the Gram level manufacturing, we have performed to produce components of a third party's diagnostic.

We have lived G. L P within the linear Rx CRO business.

Now we have a step function upgrade required as we crossed the threshold toward the manufacture of clinical stage therapeutics, beginning with standard veterinary trials and moving on from there.

And the wheels are already in motion.

Last may we contracted a highly respected regulatory consulting firm to help us set our roadmap and we have been executing on it since.

We have divided our manufacturing groups and three diagnostics.

Diagnostics therapeutics and industrial.

Line appropriate overhead burden and regulatory compliance schemes for each.

We've completed some facilities upgrades and have purchased new cgmp compliant equipment and production and and quality and.

And we'll use the opportunity of the diagnostics facilities build out to begin to prepare for clinical stage therapeutic manufacture as well.

As noted and communications related to our recent capital raise this area is one of the primary use of funds as we in parallel seek sponsorship for work.

We have a lot happening here and today I'd like to conclude my remarks and on those points.

And turn it back over to Jim.

Actually I will notify the operator that we're ready for <unk>.

Questions.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

If you were using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Yeah.

Our first question comes from <unk> Chen with H C. Wainwright. Please go ahead.

Alright. Thank you for taking my questions. Congratulations on a solid quarter. My first question is based on the.

The current trend that you've observed.

On the shipping of the COVID-19 diagnostic kit.

Do you think the company is able to deliver a.

Solids are robust sequential growth in the current quarter over the calendar fourth quarter of last year.

We certainly have the capability.

Manufacturing wherewithal, and the equipment and people necessary to do it.

We also have a remarkable array for someone at our stage of development.

Of Blue chip customers.

So E. I think we do have the capability and the opportunity to ship significant linear DNA.

Construct.

That represent long term opportunities with these blue chip.

Players and.

And and all.

Spec that they will be successful since our.

Most house and their early cellular and animal.

Myles and I expect that they will continue to evolve toward requiring larger.

CMO like quantities under cgmp.

Yeah, so before.

Starting and B clinical trial for the better whenever a COVID-19 vaccine cats, what additional work needs to be done.

And two to prepare the company for the Ashish and for clinical trial.

Sure well, we have already menu fractured and.

All of the material necessary for a phase one trial.

So we are and a strong enough position for.

From a regulatory position and.

And from a manufacturing position.

And we have already manufactured all the material necessary.

Of course, we're planning to cat trials.

The Cat trial second Cat trial will require an additional quantity and we may have mild changes and formulation by the time, we reach the second trial, but we're actually in pretty good shape already to be able to manufacture those products.

Got it and my last question is as turkeys biotech SKU committed to advancing the human COVID-19 vaccine and do you believe.

And when this.

When your linear DNA based human Vas and COVID-19, investing reached a market there could be a skew.

Oh and meaningful market left and considering that our multiple new.

And that things could enter.

And the market this year, besides the Pfizer comtech and motto divestitures.

Yes, you know at this stage, it's difficult to see into the future out six months a year from now certainly hope that much of the world and are in 12 months, we'll have achieved herd immunity.

But it's unclear.

What kinds of boosters and may be required.

For the variance that become well established.

Across the world and that time, and so I could see a global need.

Or.

And third booster.

And many of those therapies.

And I can see and opportunity growing by that time, because we will have the cat trial behind us and hopefully its commercialization.

And we will begin to gather data and those animal models.

That will help us eventually with F D a.

So I think we are far from.

You know missing the opportunity and.

COVID-19, but more than that I think we are paving the path for a variety of vaccine like approaches and for the use of linear DNA and the other therapeutic platforms. We're investigating right. Now that include for example car T.

Cancer vaccine.

And.

The production of AAV using linear DNA.

And a far simpler way to manufacture a vs to achieve and.

And effective.

Gene therapy.

And.

Got it thank you.

Welcome and thank you.

The next question is from Jonathan Aschoff with Roth Capital Partners. Please go ahead.

Thanks, a lot and congrats on net revenue.

One last.

Peter.

When could more substantial cannabis tagging revenue come online and perhaps what the helpless to trace and how do you evaluate the specific and market potential of tagging itself for candidates.

Right.

Well our association with.

Our partner has.

Brought us already global opportunities that we're in the midst of.

And dialogue with.

So I think those opportunities will begin.

To require materials in the course of our car and fiscal year.

I think the market is large and I think that the new administration and the U S may open those opportunities wider and faster and deeper.

And.

It's an industry that will move so quickly it will need help.

Tracking the origins and our certainty platform is poised and really ready for our work and cannabis.

Sure.

Okay. Thank you and <unk>.

Assuming that the.

And the market will tolerate electroporation feline vaccines and for car T for sure, but it will you definitely only proceed with a human COVID-19 vaccine if it can be given without electroporation.

Well our colleagues at Tac as I've truly are using and electroporation device that is already well distributed and hospitals human hospitals throughout Europe.

And they are advancing ahead with a plasmid based version of our vaccine using electroporation.

So I don't rule out electroporation and others.

Uh huh.

A potential well delivery path, however that said.

I think there had been a great advances made in the science of lipid nano particles.

Relevant to all forms of nucleic acid.

Relevant to multiple delivery vehicles, whether it's intramuscular, whether its inhalation intranasal or.

Net utilized into belong.

So.

We are studying both paths, both electric operation and the use of lipid nano particles.

Okay. So im assuming the decision comes down to how far it goes.

And the lipid nanoparticle chemistry and up to speed, how far does that set you back time wise and that would be sort of the decision the gating factor right between deciding which way to get it yes, but remember the regulatory agencies have already encountered head on the Ela and P issue.

And and approved those drugs.

So I think the lid is off.

And for RNA based therapies and for a lipid nanoparticle based formulations and delivery systems.

You're right it requires a certain refinement of payloads change.

But we have at this company a deep history and.

Lipid nano particles like liposomes and the transition to the more solid based Ella and PS is not all that difficult.

Okay. I was wondering I come and you guys made during this call what what makes and mrna more easy to generate off of those and to your template.

It's not just that it is easier you know what it typically does.

And with plasmids they have to be linearized before they're used for IV <unk> in vitro transcription of course, our PCR produce DNA and it's already linear.

But.

PCR produced DNA has no.

History of.

Of exposure to bacteria.

No risk.

All of other sources of DNA, the bacterial chromosomal DNA.

Or worse.

Plasmid based.

Genes for anti microbial resistance.

Or more opportunities for homologous based insertion.

Because you got more than you bargained for from the plasma.

So I.

I think it will make it enormously safer and.

And we can provide those DNA and extraordinarily pure linear format.

And eliminate what I think is a partial risk that comes from a plasmid based templates.

Of the allergic and anaphylactic a response that can come from the endotoxin associated with bacteria small amounts of lipid membranes from bacteria that people can be allergic to I think it just makes eminent sense.

Okay. Thank you very much James.

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Again, if you have a question. Please press Star then one.

The next question is from John Samson with Hubble Wealth management. Please go ahead.

Yes.

Gratulation is on the quarter and congratulations to Judy I might ask this question using the wrong terminology and I apologize ahead of time, but.

And I guess this is directed at Jim we are approved and are.

You got to rise test, what's it going to take for assay to become the standard basically and the U S for genomic surveillance.

Part one and then part two is there a time line or when can we expect a linear DNA contract at the contract manufacturing or and CMO level.

Okay sure. So the first question is the.

The promulgation of a R.

Linear COVID-19 diagnostic kit.

Ah is a dominant means for genomics surveillance, John and I think we stand a very good chance at that.

And we are already seeing.

The distribution of our kits and genomics surveillance efforts.

And California, and Texas and Arkansas.

And.

And Kansas and Av.

Of course here in New York.

As we achieve success as we did and our announcement today.

And I must say that happened in the very first use.

Of our diagnostic kit by a certified laboratory after they develop their own lab developed tests. The very first use revealed three variance of concern and there positives that they have.

Identified from our large throughput diagnostic.

Operation as that kind of news spreads and.

Crossed and U S.

We'll have a great opportunity to recruit more and more.

Hum.

Diagnostic labs that have genuine concerns about the epidemiology of the variance.

Now as our clients, who typically enter into our workflow through a C O R O based relationship.

Meet success and their in vitro testing.

And they move of course, two very simple animal models typically zeno graphic mice.

Well, that's really at the cusp of requiring G. L P product force.

For CGM team product.

And so that transition to CMO really begins.

Even when a customer moves at the C. R O stage.

From selves and of dish.

Ooh and animal model and early animal model is that animal model matures.

The need for cgmp does as well.

And of course.

Once you reach early.

Clinical trials in humans.

And all those requirements are for a strict cgmp at the highest level.

And I can see that happening even now the signs of it beginning are crystal clear. It's why the raise we just did is so important to us and.

And it's.

Why we are investing and our cgmp wherewithal and retaining the best compliance and regulatory advice, we can find.

Thank you.

Youre welcome.

This concludes our call I would like to turn the conference back over to Dr. Hayward for any closing remarks.

Okay. Thank you Gary and thank you and.

Conclusion fiscal 'twenty 'twenty, one it was about business execution.

And to that and we have started the year really in tremendous form.

Fiscal 'twenty 'twenty. One is also about laying the foundation for opportunity and growth beyond our COVID-19, diagnostics and testing business.

The value of linear DNA has never been more evident in this COVID-19 and post Covid World and I believe we are uniquely positioned to benefit from its adoption across both biologic and non biologic world.

Well. Thank you all for your participation. This afternoon, and we'll speak to you again and three month's time stay well.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

And.

And.

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And the dividend.

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