Q4 2020 Co-Diagnostics Inc Earnings Call
[music].
Good afternoon, and welcome to the code diagnostics fourth quarter and full year 2020 earnings conference call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll 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'd now like to turn the conference over to Andrew Benson head of Investor Relations. Please go ahead.
Thank you I'm, Andrew Benson and joining me. This afternoon are members of the co diagnostics management team, including Dwight Egan, Chief Executive Officer, Brian Brown, our newly appointed Chief Financial Officer, and revenge and General Counsel.
We will begin the call with management's prepared remarks, and then open up the call to questions to our analysts before we begin we would like to inform the listeners that certain statements made by co diagnostics. During the course of this call may constitute forward looking statements any statement about company expectations beliefs plans objectives assumptions of future events or performance are forward looking.
Statements for example statements concerning 2021 financial and operational guidance the development regulatory clearance commercialization and features of new products plans and objectives of management and market trends are all forward looking statements. The company believes these statements are based on reasonable assumptions. However, these statements are not guarantees of performance and involve known.
And unknown risks and uncertainties that may cause the actual results to be materially different from any future results expressed or implied by such statements.
Important factors, which could cause actual results to differ materially from those in these forward looking statements are detailed in Kodak gnostics filings with the SEC.
Diagnostics assumes no obligation and expressly disclaims any duty to update any forward looking statements to reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events. In addition, the company will discuss certain non-GAAP financial measures during today's call. These.
These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results.
We refer you to the company's earnings release out shortly before this call which contains reconciliations of the non-GAAP financial measures presented to their most comparable GAAP results.
At this time I would like to turn the call over to co diagnostics, Chief Executive Officer, Dwight Ian right.
Thank you Andrew and thank you all for joining us on this call. We will provide an overview of our results for the quarter and year.
Updates on key financial performance metrics, and a discussion of progress and future strategy.
Then we will take questions from our analysts.
Before we turn to the results this quarter I would like to welcome Brian Brown to the call. This afternoon is our recently appointed Chief Financial Officer.
Following the significant growth we experienced this past year and the growth we anticipate in the future. It was critical we expanded our resources and our financial Department.
Brian has previously played integral accounting and financial roles for a variety of other public and private companies. We are pleased to have him joined Kodak gnostics at such a crucial juncture in our growth trajectory.
We are grateful to read Benson for his leadership and dedicated service as our CFO and look forward to continuing to leverage his expertise and experience as our general counsel.
Turning to our results. This year 2020 represented a solid year of development and strong execution for <unk> diagnostics.
We are very pleased with our record results in the fourth quarter and for the full year.
Our core strategy to position the co primary technology platform as an important player in the molecular diagnostics space has yielded exceptional results.
Man for our logic Smart COVID-19 test drove sales and profit to record levels This year and.
And although COVID-19 test sales may not be as robust in 2020 as in 2020, we anticipate demand for our portfolio of products to continue in 2021.
Full year revenue achieved a record level of $74 $6 million, while pre tax net income finished the year at $42 $6 million.
These solid results were driven by sales of our logic Smart COVID-19 tests to our global network of laboratories hospitals and distributors.
The three COVID-19 tests, we launched during the year enabled the company to address the needs of different countries around the world in the battle against Corona virus, our achievement of 10 million COVID-19 tests sold globally. This year is a testament to the ability of our co primary technology platform.
Quickly develop a high quality versatile infectious disease PCR test, while also scaling it to meet our global demand.
The co primary technology platform was developed by the company to dramatically enhance the output of molecular diagnostic tests conducted via real time, PCR, while also improving cost efficiencies and throughput.
We believe these advantages prove substantial in a variety of situations, including manufacturing or agricultural environment. In addition to clinical laboratory settings.
Saving the additional patent earlier this year and enhancing the U S patent protection for our co primary technology was critical to our long term success.
Not only does this emphasizes the uniqueness of our technology, but it also facilitates our growth into other verticals such as liquid biopsy and Nextgen sequencing applications as the company further develops the diverse and successful business model the reputation of our products has grown.
The company has already begun to benefit from its expanded distributor network. For example, dengue virus will often manifests in similar ways to COVID-19, and the company's logic Smart Z D. C. Zika dengue chikungunya test is seeing wider distribution to help combat a current outbreak of dengue in per.
Through and differentiate dengue from COVID-19, following our successful distribution throughout that country.
Diagnostics continues to participate in successful joint government private collaborations in several states and countries and the reach of our Corona virus Test has also expanded two high throughput laboratory, who serve a nationwide customer base.
We are very pleased by the sales generated from those collaborations and important laboratory relationships.
We remain committed to achieving our long term goals of improving the lives of others around the world by providing safe high quality and cost effective diagnostics.
Let me now turn things over to Brian Brown for a review of the key metrics and numbers after which I will conclude with a discussion of future plans, including our at home and point of care platform Bryan.
Thanks Duane.
For the quarter revenue increased to $27 $1 million, primarily due to worldwide sales of the logic Smart COVID-19 test, which was developed in response to the current COVID-19 pandemic.
Gross profit increased to $22 $8 million.
Representing 84, 1% of consolidated revenue due to improved product mix as compared to the prior year period.
For the year revenue increased to $74 $6 million again due to sales of the logic Smart COVID-19 tests gross profit increased to a record $58.0 million, representing 77, 7% of consolidated revenue day.
Increase in gross margin was due to the mix of products. We sold as the majority of our 2020 revenue came from sales of our test reagents, which have a higher margin than sales of equipment during.
During 2019, a larger percentage of revenue generated came from sales of equipment and from sales of test kits.
Total operating expenses for the quarter inclusive of corporate general and administrative sales and marketing research and development and depreciation and amortization increased $5 $1 million to $6 $8 million compared to the fourth quarter of 2019 primary.
Driven by increased activity to support the growth of our business.
This includes higher personnel and incentive compensation to our employees, our sales team and our distributors.
Additionally, we added employees to our research and development team to increase our research and product development activities.
For the full year total operating expenses of $16 $3 million increased by $10.3 million from 2019.
Primarily due to the increase in business activities required to support our revenue growth.
We anticipate higher operating expenses as a percentage of sales throughout 2021 as compared to 2020 as we invest in our people and expand our technology through additional research and development.
We had a great 2020, which has afforded us the opportunity to invest back in the company and provide a longer runway of future growth.
Through these operational investments, we will be able to take on projects. We believe are valuable to society and to the continued success of the company.
Yeah.
Due to record revenue and gross profit income from operations for the fourth quarter improved to $16.0 million for.
For the full year income from operations improved to $41 $7 million for.
For the fourth quarter of 2020, we achieved income before taxes of $15 $8 million compared to a loss of $1 7 million in the prior year comparative quarter.
For the full year 2020 income before taxes was $42 6 million compared to a loss of $6 $2 million in 2019.
Now moving to taxes as you may recall, we reported a credit to our income tax provision in Q3 of 2020 due to the reversal of valuation allowances related to income taxes.
During the fourth quarter, we utilized all of our historical net operating losses and recorded income tax expense of $3.0 million due to our strong results.
As a result of our income tax expense for the fourth quarter offset by the credit reported in the third quarter. We recorded income tax expense of zero point $1 million. During the year ended December 31 2020.
As we know as we have now utilized all historical net operating losses in 2020. One we anticipate continued profitability and as such estimate an effective tax rate of approximately 26%.
We achieved net income for the fourth quarter of $12 8 million or <unk> 43 cents per fully diluted share compared to a net loss of $1 $7 million in the prior year quarter.
For the full year net income increased to $42 $5 million or $1.52 per fully diluted share from a net loss of $6 $2 million from the prior year.
Turning now to our balance sheet and liquidity.
Our balance sheet remains strong, allowing us to invest in additional growth opportunities at.
At year end cash cash equivalents and marketable securities totaled $47 3 million, an increase of $46 4 million from December 31 2019.
We remain well capitalized with no debt and a strong cash position.
In prior years, we finance our operations through the issuance of equity and debt in 2020, we financed our business primarily through profitable operations.
Our strong cash generating capabilities provides code diagnostics with ample financial flexibility as we execute our strategic growth plan.
We ended the year generating $28 $2 million in cash from operations, which represents an improvement of $33 $7 million over the prior year periods use of operating cash of $5 $5 million.
Now turning to some directional guidance, we would like to provide for the first quarter of 2021, we.
We anticipate revenue for the quarter totaling between $19.0 million and $25 million, while gross margins are expected to remain consistent with the prior year periods as we continue to grow our cash position.
First quarter 2021 effective tax rate is forecast to be approximately 26%.
And fully diluted shares outstanding are expected to be approximately 29 million at quarter end.
We do expect to remain profitable and we will continue to invest those dollars back into our growth.
Because of the structure of our business and the foundation. We have built we are in a great position to continue progressing on scaling the company.
We believe our capital allocation strategy focused on organic and acquisitive growth aligns well with our long term growth strategy as well as the underlying trends our business is uniquely positioned to leverage.
Let me now turn things back over to Dwight.
Thanks, Brian Twenty-twenty was truly an inflection point for co diagnostics for any number of reasons and I would like to thank our valued employees management vendors and distributors for their hard work and dedication in helping to deliver outstanding results in.
In a year that was that is full of challenges as it was successes.
While it is understandable that our recent accomplishments following that amazing year that we've had might overshadow, where we've come from to arrive at this point, it's important to remember that when core diagnostics was founded in 2013, our mission was to bring affordable high quality molecular diagnostics products that people and places who need them the most ever.
Step we've taken since our beginning helped prepare us for 2020.
But our mission has remained unchanged even during the COVID-19 pandemic when the need for our products extend it from our own neighborhood to the other side of the planet.
We leveraged our unique proprietary co primer technology platform to develop our first COVID-19 diagnostic early on in the pandemic followed by several more products in the months to follow.
Those who have been following <unk> diagnostics over the years know that this design platform has been utilized long before 2020 to successfully develop a number of diagnostic from molecular testing products.
With our healthy margins and low overheads. The company now has the resources to fully realize our vision and continue to expand our menu of state of the art molecular diagnostics. This menu includes several infectious diseases for both domestic and overseas markets as well as continuing development of products and our exciting liquid biopsy.
Vertical, which we believe has the potential to fundamentally change how patients are tested for cancer and their ongoing treatment monitoring.
But perhaps the most exciting advance to result from this past year is our new point of care and at home PCR platform currently in development.
We agree with epidemiologists that the rapid spread of the Corona virus and appearance of mutant strains mean that COVID-19 will remain with us for years or even decades, leaving the world population to coexist with COVID-19, similar to other endemic diseases like flu the common cold in HIV.
Experts have predicted a range of scenarios, including those where the disease returns in waves each year, where COVID-19 shifts from a pandemic disease to an endemic one in many parts of the world or where the disease is with us in one form or another forever and lasting modifications to societal and personal behavior will lie.
We would be required.
While we believe we are a long way off from achieving normalization. The good news is we believe we have been through the worst of it.
The zero tolerance approach to last year mitigated the effects of the pandemic can help the world to realize the importance of accurate reliable testing as a long term strategy to reopening schools public venues in travel.
As regular COVID-19 testing becomes a part of the long term protocol for many organizations, we plan to revolutionize the availability of accurate fast and economical PCR tests with our new initiative, which is designed to provide cheap fast and accurate COVID-19 Pcr tests.
The results using saliva or swab samples in under 30 minutes, essentially is easy and convenient as over the counter pregnancy test.
Ultimately, we expect that other tests will also become available on the device such as strep, a RSV influenza, a an influenza b and potentially any other pathogen that can be samples from a patient using saliva swab.
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The development for these tests is either already underway or expected to begin soon.
The company has already had great success in selling its COVID-19 products around the world and while we believe testing demand will continue in the future. We also believe the weight testing will be done well migrate strongly to point of care and at home locations. In this context at home does not refer solely to tests done at home.
Home, but rather any locations such as the business or school, where a caregiver is not involved in the process.
Unopposed vaccinated world seeking normalization. The question is not will there be testing there will be an enormous amount of testing. The question is how and where will the testing to be done.
Testing has to be conducted at around points of normal interaction at work at home at school and as we traveled.
We refer to these locations cumulatively as the workflow of alive.
Normalization requires routine organizational testing to create COVID-19 safe work play in travel environments in particular travel beginning this summer in the U S and globally is likely best enabled by gold standard PCR testing as vaccine programs continued their rollout throughout the world.
Governments and regulators are developing necessary protocols to enable travel and as that as those considerations are evaluated it is our belief that the clearest path to ensuring travelers our COVID-19 safe is via PCR testing.
Similar to how building on previous company achievements preparedness for the challenges of the pandemic. This new initiative is made possible as a result of several innovations accomplished by the company over the last year, beginning with our direct saliva testing technology P.
PCR tests, usually require a costly time consuming process intended to extract any generic genetic material present from the sales contained in the sample.
He is extracted samples are then analyzed for the presence of the target pathogen using PCR technology.
Diagnostics co primary technology has been shown to be able to consistently detect sars COVID-19 two the virus that causes COVID-19 directly from minimally processed saliva samples.
Elimination of the extraction process has the potential to simplify the testing process.
Increased throughput and lower cost of COVID-19 testing, all without compromising quality or accuracy.
This testing technology utilizing co primaries unique capabilities was developed specifically to address the efficiency demands of high throughput lab applications as well as the accessibility imperatives of the point of care and at home markets.
All while delivering lower processing costs and increased accessibility of gold standard PCR diagnostics worldwide.
Early on in the pandemic. We also began to process the process of engineering testing reagents for a lie authorization or freeze dry which will extend their shelf life and allow for products to be stored at ambient temperatures and commercial packaging a vie.
It'll step for facilitating the widespread adoption of test that can be administered outside of clinical laboratory settings.
After considering the needs of the market and that normalization will require regular testing with inexpensive fast and accurate PCR tests the.
The company entered into an agreement with world renowned experts in rapid PCR technology to engineer the at home point of care testing device designed to be combined with the company's proprietary chemistry.
The scientists engineering the hardware. It previously designed several PCR based platforms that are in use worldwide by leading health care companies.
We expect to be able to submit the platform to the U S European and Indian another regulatory authorities in the back half of 2021 following its validation.
As populations around the World go back to the office of students go back to school as people again travel and participate in entertainment venues. We believe this direct saliva technology and our new platform will help ensure COVID-19 safe environments through fast accurate affordable and accessible testing solutions, including <unk>.
Point of care and at home applications for businesses schools and home settings.
So diagnostics is always envision ultimately developing a point of care at home diagnostic device, making PCR accessible at affordable prices worldwide and we are pleased that the culmination of years of development has resulted in a realization of this vision.
With this product our mission to make affordable gold standard Pcr.
Festival around the world from.
Full circle, we are proud of our accomplishments over the past year and we believe the company has the technology resources experience and roadmap for an exciting future.
That concludes our prepared remarks, operator, we are ready to begin the question and answer portion of the call.
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.
<unk>.
Our first question comes from each N with H C. Wainwright. Please go ahead.
Thank you for taking my question and congratulations for a solid quarter.
My first question is as COVID-19 things.
Things gets wider distribution protesting demand will eventually turned down from peak levels, even though it cooked existed for a very long time, so apart from the.
New point of care and in home testing platform are there any other.
Sentiments that Kodak.
Kodak is planning to ensure continuous top line growth in 2021 and 2022.
Thank you for the question Neil.
The first thing I would like to emphasize that we believe that there will be a migration.
Two PCR testing in a post vaccination environment.
As opposed to antigen or antibody tests.
I think this is becoming widely known that because the PCR test is able to detect the genetic material of the virus.
Vaccination World It becomes the test of choice in terms of giving true accuracy.
So.
Our real view is that we're going to be transitioning heavily from the kind of stadium parking lot grocery store parking lot hospital parking lot testing lines that take three or four hours to get through and then a couple of days per week to get test results. We're gonna be transitioning from that into a world where people have to get be able to get tested it.
The points of interaction actually at their business in their homes at the schools at venues on cruise ships on planes et cetera, and it's with that in mind that we develop the ikon product to to meet that need.
And so first and foremost we think there'll be a major transition in terms of.
How and where testing is going to be done and we think there will still be a great deal of testing as as the disease traverses from the pandemic to an endemic phase and then probably continues year after year with infection and reinfection and vaccination and that's the nation as such in addition to that of course.
We have several other verticals that we're pursuing.
And the most probably the exciting one of those is in our liquid biopsy product for cancer detection.
In this environment, we are developing panels of test to address.
The biggest killing cancers in terms of the mutations associated with those cancers, which would include breast cancer colorectal cancer non small cell lung cancer.
Prostate cancer and stomach cancer.
And we believe that our.
Our co primary technology is uniquely positioned to be able to provide those types of detections through the PCR process, especially as it relates to the the cause of monitoring after somebody has been diagnosed and the screening before they've had a cancer diagnostic which would make it so they could maybe get a.
Jump on the fact that they could detect cancer, perhaps when they have only maybe 12 million cells in their body that have these mutations as opposed to the hundreds of billions of cells that requires to have even the smallest amount of a tumor that could be picked up on a scan. So we're very excited about that particular vertical as you know we're also doing important.
Work in the agricultural area with companies like.
Like Bayer and L. G C.
Bayer purchased Monsanto, some time ago, and we're doing important work with them as it relates to agriculture, which is a vertical in which we have to double the food supply in less than 30 years from now and so we think this is also a good place to apply our technology and we're excited about that vertical and keep in mind.
Covid is just one of the tests that we provide we also have a solid menu of tests for tuberculosis, a solid menu of tests, including things like our hepatitis B and C human papilloma virus malaria.
And.
Chikungunya dengue and Zika, so we're going to be selling now to a worldwide audience through more than 50 distributors in countries all over the world, where we have established a branding recognition and people who know our product and trust us and now we're going to be able to sell our broader array of products.
Into those markets are like I've mentioned, so we have a number of tests that have already been through regulatory approval either at the European Union or through the C. D. S T O and in India, and we're going to continue to pursue that aggressively as time goes on here.
Got it and so with respect to the new P. C. Our point of care and in homes testing platform do you expect it to enter the market in early 2022.
For at home use our consumers expected to pay for the device and test out of pocket what is the potential market size for this device.
Yeah. So we we certainly are hopeful that by early 2022 that we can introduce this product into the market, we're going to introduce it as soon as we can possibly do so E.
We expect to be able to present this for submission to regulatory authorities, both here and abroad.
In the.
In the second half of 2021.
We believe the addressable market is is really gigantic we're talking about in the neighborhood of 132000 schools just in the U S. $7 7 million businesses again, just in the U S well over a million people are in the skilled nursing facilities that are elderly that need to be addressed.
We have more than 56 million people to play basketball in the United States, We have $5 6 million buildings that they have their wastewater tested for the presence of COVID-19 or new strains and of course add to that 6100 hospitals and about 230000 physician offices in 186000 dental op.
Officers and a whopping.
128 million are residential are locations in the United States alone so the.
The margin for this is truly enormous the device that we're talking about is something that will be very affordable. We anticipate and this is of course subject to change, but we anticipate a pricing of the of the box that's associated with this P. C. Our unit to be in the neighborhood of about $300 with tests costing between 15 and.
$20.
And these tests again or lyophilize, they would be able to be purchased at a drugstore and and have shelf life in a person's medical medicine cabinet or in a business location for a long time.
And imagine what happens in India, where you have you know the.
Perhaps what will become one of the largest health care markets in the World, where you have thousands and thousands of labs that have no Pcr capability.
Test things like tuberculosis, where they lose a thousand people a day to tuberculosis deaths.
400 million people carry latent TB in that country at this type of product that allows the.
The availability of our testing to really go to town in terms of May.
Making labs out of places before that didn't have access to this type of technology.
I encourage you to remember that this is real time Pcr testing.
The thing that makes this product unique is not so much that it's a keeper.
Cheap and fast you can buy cheap and fast test now you just can't buy cheap and fast tests that are also accurate, but now that we have the whole tri sector of the value proposition intact and this device, we're going to be able to offer. This in a way that has not been offered before in the marketplace.
And we you know we didn't do this this isn't something we've just dreamed up recently this is something we've been working on with the chemistry and such for much of the last year.
And when we got to the point, where our chemistry was ready to go we engage some of the greatest scientific minds in the world and I really mean that these are the top scientists in the world that have that know what to do with PCR real time, PCR and even extreme PCR, but that's why we're able to develop a product that gets cheap.
Fast and accurate results all in a single package the ability to do saliva and swab samples without extraction combined with these other technologies that we've harvested are what give life to this new product. We think it is actually going to revolutionize what's going on around the world in terms of testing.
Thank you.
The next question is from Jason Mccarthy with Maxim Group. Please go ahead.
Hey, guys. This is Michael on the line for Jason Mccarthy.
Thanks for taking the question. So I wanted to just ask about what your thoughts are on Covid.
Testing for this current year at.
$75 million this past year that was kind of tracking with the overall testing could.
Could you provide a bit more granularity on 2021 and then I also wanted to clarify did you say that youre expecting 20 to 25 million for the first quarter.
We said that we were expecting $19 million to $25 million.
And sales for the first quarter.
And so let me say that with respect to our viewpoint on Covid.
Covid testing you know, it's it's a commonly held viewpoint and promulgated by mainstream media and others that you know with widespread vaccinations that.
The expectation is that the need for Covid testing will attenuate, we think that yes, we're not going to be in a pandemic phase forever, but we believe that.
Widespread and aggressive COVID-19 testing will be with us for a long time, it's just going to change and how it's done.
As we've mentioned before on this call it's going to reverse from the parking lot into an individual's bathroom counter or into a business or a school and such so we believe that there's going to be a lot of testing and that our technology is well suited to making it available.
In these other at home and point of care venues now.
With respect to you know our current experience and what's going on in our world because we're not the same as a lot of these other companies out there are our distribution.
<unk> distribution base is worldwide, we service more than 50 countries with this product and have.
Our customers in virtually all of the states in the U S.
We're not like a CLIA lab that has one or two different locations in the country, where we provide tests, where we're relying on some government contract to provide us with these these grocery store parking lot type testing environments. We are distributing through multiple distributors around the world and they don't just need COVID-19.
They need other things, but even with respect to COVID-19.
That is a market that still is widely moving ahead very aggressively.
As you May well know there is no vaccination yet available for any children and there are many places in the world where people will not have access to a vaccination until late next year, it's predicted so.
Because we.
Sell a large percentage of our products to an overseas market.
I think we have some insulation from the attenuation of Covid testing that other companies may experience and indeed, our current pipeline would demonstrate that we have.
A strong pipeline of forthcoming deliveries for Covid are.
Through the second quarter and I don't have a lot of optics, you know beyond mid year, because people just don't order out that far in advance, but certainly as far as we have optics.
The optics are good in terms of the demand for our products from and I would also add that because we are doing PCR testing. We're also not likely to have a.
Experienced the same kind of attenuation that accompany you might experience if their primary products revolved around either antibody or antigen tests, which have a severe limitations.
To begin with and when you put them on top of a vaccinated person, it's kind of adding confusion to the already existing confusion. Our tests are real time gold standard PCR tests, and we believe that's where this is going to migrate and I think you'll find other experts agree.
Right. Thank you could you actually could you break down a little bit how much of your sales are U S focused versus international at least free enough the.
The data we have so far do you want.
Yeah, absolutely. So we we just filed the case so it's going to be the data is also going to be in there.
For 2020, approximately 60% of our sales were in the U S and 40% was outside the U S.
Thank you.
And then so on.
Oh good.
I was just going to say if youre looking at a model you you might.
As this year goes by you could even see it.
Central that inverting a bit so that you know you go to US a 60 40 mix in the other direction foreign versus domestic go ahead.
Yeah, So I wanted to ask a bit more about the.
The properties of your rapid point of care.
Base.
How does that look in terms of.
Time to get a result in throughput because obviously you know if you have a box in your home will get only being able to do one test every let's say 15 minutes works fine for you, but if you're doing something like at an airport where people are waiting to get in you might need higher throughput so would they need multiple devices to run in parallel could you.
Kind of help me understand that a little bit more.
Yes, and certainly there'll be places like hotels, and airports and things where they may want to have a number of these devices, but indeed this device is a one off test device. So that you know it's a single person.
It does not involve a test cartridge per se it involves a collection.
Mechanism to get the saliva from the patient.
The patient basically expect day rates or spits into the device.
And that device is then inserted into the little box, which is about a four and a half by four and a half.
You know inch cube.
You closed the lid and then the the test begins at that point.
All of the results of the tests are manifest on a cell phone on a smartphone. So the person can't start to test go about their work at their office or in their home.
And about 30 minutes later when they will see the result of the test and it will show that the virus is either detected or not detected and then of course into the cloud they'll be able to notify any kind of regulatory.
Requirements in terms of state health departments, or others and it would also give them a.
<unk> passport, if it's recognized as such to board a plane or to get on a cruise ship where to go.
Go to a concert venue and so on because it will be a real time PCR test and it will be date stamped in such as to when it was achieved in and they can do it frequently because it doesn't cost a lot.
These are not test that costs 100, or more dollars to do that'll be tests that they can purchase per say 15 to $20.
Alright, Thank you very much.
The next question is from Theodore O'neill with Litchfield Hills Research. Please go ahead.
You've talked in the past about how when the business started ramping up you didn't have the resources to evaluate whether our customers would actually end up paying their bills or not.
So you went with you know customers.
Customer is it more or less paid upfront and I'm wondering in light of the large increase in selling and marketing expense in the quarter do you have those resources now and then more broadly could you talk about the increase in that category.
Thank you for the question, let me just say that.
Again, because we have such a heavy mix to begin with in foreign customers can remember co diagnostics was the very first U S. Based company to have a test approved by the European Union with a CE Mark so well the United States are still trying to figure out what they were doing with their borders and everything else we began.
Selling tests overseas, because we received a clearance there in late February of 2020, and it was an April 3rd.
Last year that we received our clearance for the EUA in the United States. So because we were dealing with a bunch of foreign entities and you know we didn't know them.
And it was very difficult to check credit or to know whether somebody was actually viable and because there was such a a fear.
Fury of people wanting tests and ordering tests I mean, literally our sales guys would go to lunch and they'd come back and there could be hundreds.
Of inquiries over email of places all over the world So sort of the other way we had to really verify who we were dealing with and whether they could actually pay us.
Was to have them pay in advance or substantial amounts of money down so that we knew that day or not impecunious in that we could rely on them paying their bills and I think if you look at our 10.
10 Qs.
K all true the periods, you'll see you'll notice that we've done a very good job of managing our receivables and the people in fact.
Pay offs and we are oftentimes dealing with very large purchase orders from overseas.
Customers, you may notice that our customer or our biggest.
Other countries. Besides the U S are places like Mexico, or or the middle East and so you know billing people upfront, making sure that we have their wire in our account before we ship them millions of dollars worth of test was one of the ways that we assured ourselves of.
Having.
No not having a big problem with receivables as time went on and I'm, just really pleased to say that that has been very well managed.
By our accounting Department and accounts receivable were very proud of that record.
So yeah, yeah, maybe we could have sold more tests of we're willing to take the risk on people that we didn't know or couldn't verify but we were very careful that way and it's just one of the ways. We build our business now and in the meantime, we could continue to accumulate cash on a monthly basis and continue to do so now.
And so you know we're in a much different position than we were earlier on in terms of our cash position, but I really think that our investing public ought to look at that not as a way to make it. So we could be more reckless with what kind of a client we accepted but rather that we will be able to execute on our plans for our <unk>.
Icahn initiative in terms of this device and getting it through regulatory and getting it out and into the market.
And I might add and in that connection that you know we expect to you know.
Expand some significant money and putting this product on the market.
As I mentioned, we have engaged the top mines in the world as it relates to real time PCR to make such a device that will do what we're trying to do here and.
And so we're also looking at other other ways to partner this in terms of branding and manufacturing.
And commercialization so it will be letting the public know as these types of developments mature.
But it is a and then some.
Credibly.
Heavy duty undertaking by the company it is consuming a great deal of our resource.
Internally, what we're doing from our scientific staff and everything else. So it is a very important and Maine.
Sort of long suit for the company at this point.
Yeah.
But can you talk more broadly about why sales and marketing went up so much quarter from third quarter to fourth quarter.
Do you want to take that Bryan I can yeah.
I mean really it's supporting the business.
Two to sell product it costs money to sell product in and there is a a bit of marketing and things that we have to do to be able to sell product. We've also taken the opportunity now to start to build our teams here and grow and develop and those operational teams to be able to support the growth that we have.
I think over the past year, because it moves so quickly we didn't have that opportunity. So now we have that opportunity. So we will see you know as you've seen in Q4, a little bit of growth in some of those operational areas. You'll continue to see some of that going forward in the next year. Okay. Thanks.
Thanks, Ed.
The question is I guess, you're thinking about as we think about COVID-19 COVID-19 variance being either more infectious or more deadly or both.
Does that does that change the way people think about testing do you think.
Well I think it's just going to mean that testing is going to continue to be part of what has to happen in order to normalize you know everybody is sort of assuming that normalization is well underway. When let me tell you something it's not at all underway and people are working out of their homes, they're not at school there in audit College.
<unk>, there's just a great deal of non normalization going on right here.
All around the world and there's a whole bunch of media and from from the White House the governors to the Mayor's trying to act like a party on dues Everything's fine.
And yet everybody still at home and not out into the workforce or at the schools are at the concert venues are watching their local sports teams.
So we think it's going to continue to be that way and keep in mind. We live in a world that has just in the United States 1 billion cases of the common cold every year and we have are in the neighborhood of 8% to 9% of the entire world population that's affected with the flu every year and the flu in the common cold.
Have very common presentation to COVID-19 at least in the initial phases.
So as we get back into school as we get back in to go into all of these places we're way beyond the place where people are going to be able to show up at work or school and have sneezing, and coughing and runny noses in red eyes and in order to not have that they're going to be having to test at home, they're going to have to be testing at the schools are going to have to be testing out the businesses.
And create a way to normalize and we think this is going to require a great deal of additional testing like I said earlier, its not that theres going to be no tests, you, just how and where is it going to be done hence the development of the icon initiatives to make it. So there is a device and a test that is cheap fast and accurate for the <unk>.
First time on something that's affordable and accessible.
And not just in the United States from all over the World. So we have a long ways to go before we get into a normalization environment and this is in an environment, where we're gonna have infection, and then reinfection and so on.
And the same with vaccinations, we believe we'll let the scientists do the talking on that but I think it's pretty commonly accepted at this point that.
This is not going to be a one shot deal or not in the U S and not anybody else and a lot of people around the world are not even going to have access for quite some time. So I think the public should should realize that our asset of having a worldwide distribution network where.
Where the significant amount of our business is coming from overseas is a great asset in our company going forward in terms of our durability.
Because you know we don't as a company we don't view this as a as a COVID-19 play we view this.
Covid put us in a position to leverage our technology and specifically our co primary technology. So that we can play a meaningful role going forward for all of these other important.
Infectious diseases. If you look at how many cases of Covid, we have around the world right now from the beginning it pales in comparison to what we have in diseases, like malaria, and dengue and sexually transmitted infections and the and the flu you know we have a million cases of sexually transmitted.
<unk> a day in the world 40, or $50 million in the U S and the European Union a year, we just have tremendous burden there and all of these these are the kinds of tests that we'll be able to be done on our new point of care and at home initiative, it's going to be it's going to really radicalized.
How and where people get tested not only you know where they are getting tested but how much they're going to pay to be tested and how often they can afford to be tested to keep themselves and a COVID-19 safe work play and.
And home environment.
This is the future of where this is going in terms of testing and we are we are in the vanguard of it. We are we are having this device developed by the best experts in the world. It is the best chemistry in the World. We're looking really forward to being able to exploit this on a worldwide basis and to really take the claim of you know our technology.
Where we are with that respect.
Thank you very much.
Okay. Thanks Neil.
This concludes our question and answer session I would like to turn the conference back over to Don Egan for any closing remarks.
Yeah.
Thank you all for joining us on the call today are we.
We are very excited about our future again express our gratitude to all of those who have helped make this happen for the company.
Employees are great vendors, great customers, and we look forward to making a very meaningful change as we go forward in this in this are not just the COVID-19 world, but the infectious disease and cancer and agricultural needs.
Heading forward. Thank you all for joining US we'll look forward to talking with you again next quarter and give you some update as to where we are.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Yeah.
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