Q3 2024 Applied DNA Sciences Inc Earnings Call

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Operator: Good day, and welcome to the Applied DNA Fiscal Third Quarter 2024 Investor Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Sanjay Hurry, Head of Investor Relations. Please go ahead.

Speaker Change: Good day and welcome to the Applied DNA Fiscal 3rd Quarter 2024 Investor Conference Call. All participants will be in listen-only mode.

Speaker Change: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

Speaker Change: To ask a question, you may press star, then 1 on a touch-tone phone.

Speaker Change: To withdraw your question, please press star then 2.

Speaker Change: Please note this event is being recorded. I would now like to turn the conference over to Sanjay Hurry, Head of Investor Relations. Please go ahead.

Sanjay Hurry: Thank you, Cindy. Good afternoon, everyone, and welcome to Applied DNA's conference call to discuss our third quarter fiscal 2024 financial results. You can access the press release that was issued after the market closed today, as well as the slide presentation accompanying this call, on the investor relations section of our corporate website or via the webcast. Speaking on the call are Dr. James Hayward, our Chairman, President, and CEO; Beth Jantzen, our Chief Financial Officer; and Clay Shorrock, our Chief Legal Officer and Head of Business Development.

Sanjay Hurry: Thank you, Cindy. Good afternoon, everyone, and welcome to Applied DNA's conference call to discuss our third quarter of fiscal 2024.

Sanjay Hurry: Financial Results. You can access the press release that was issued after market closed today, as well as the slide presentation accompanying this call on the investor relations section of our corporate website or via the webcast today.

Speaker Change: Speaking on the call are Dr. James Hayward, our Chairman, President, and CEO , Beth Jantzen, our Chief Financial Officer, and Clay Shorrock, our Chief Legal Officer and Head of Business Development. Judy Mara, our Chief Operating Officer, will also be available to answer questions on the Q&A portion of this call.

Sanjay Hurry: Judy Murrah, our Chief Operating Officer, will also be available to answer questions during the Q&A portion of this call. Before we get started, I would like to take this opportunity to remind you that our remarks today may include forward-looking statements. I refer you to slide 2 of the presentation and our Form 10-Q filed a short while ago for important risk factors that could cause the company's actual performance and results to differ materially from those expressed or implied in any forward-looking statement.

Speaker Change: Before we get started, I would like to take this opportunity to remind you that our remarks today may include forward-looking statements.

Clay Shorrock: I refer you to slide 2 of the presentation and our Form 10-Q filed a short while ago for important risk factors that could cause the company's actual performance and results to differ materially from those expressed or implied in any forward-looking statements.

Sanjay Hurry: 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 being developed. Now, it's my pleasure to introduce our first speaker on today's call, Beth Jantzen. Please go ahead, Beth. Thank you.

Speaker Change: 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.

Speaker Change: Now, it's my pleasure to introduce our first speaker on today's call, Beth Jantzen. Please go ahead, Beth.

Beth Jantzen: Thank you, Sanjay. Good afternoon, everyone, and thank you for joining us on our third quarter Fiscal 2024 Investor Call. I will start this afternoon with an overview of our results for the quarter ended June 30, 2024. I will then turn the call over to Dr. James Hayward and Clay Shorrock, who will update you on our ongoing business initiatives. We will then open the line for questions from our analysts and institutional investors.

Beth Jantzen: Thank you, Sanjay. Good afternoon, everyone, and thank you for joining us on our third quarter Fiscal 2024 Investor Call.

Beth Jantzen: I will start this afternoon with an overview of our results for the quarter ended June 30, 2024.

Speaker Change: I will then turn the call over to Dr. James Hayward and Clay Shorrock, who will update you on our ongoing business initiative.

Beth Jantzen: We will then open the line for questions from our analysts and institutional investors.

Beth Jantzen: Prefacing my review of our financial results for the quarter, are year-over-year comparisons that reflect the June 2023 quarter, which included revenues and costs associated with our COVID surveillance testing for CUNY, that contract concluded in June 2023. Beginning with our statement of operations.

Beth Jantzen: Prefacing my review of our financial results for the quarter, our year-over-year comparison

Beth Jantzen: reflect the June 2023 quarter, which included revenues and costs associated with our COVID-19 surveillance testing for CUNY.

Beth Jantzen: That contract concluded in June 2023.

Beth Jantzen: Total revenues for the third quarter of fiscal 24, which ended on June 30, were approximately $798,000, or a decline of 2.1 million, compared to $2.9 million for the same period in the prior fiscal year. The majority of the year-over-year decline in total revenues was from a decrease in our clinical laboratory service revenues of $1.85 million, which relates to the aforementioned COVID surveillance testing contract for CUNY, which is included in our June 2023 financial results. Approximately $70,000 of the decrease in total revenue is attributable to lower product revenues and specifically to decreases in shipments for consumer asset marketing. Nutraceutical customers, both within our DNA tagging and security products and services sectors.

Beth Jantzen: Beginning with our Statement of Operations.

Beth Jantzen: Total revenues for the third quarter of fiscal 24, which ended on June 30th, were approximately $798,000.

Beth Jantzen: or a decline of 2.1 million.

Beth Jantzen: compared to $2.9 million for the same period in the prior fiscal year.

Beth Jantzen: The majority of the year over year decline in total revenue.

Beth Jantzen: With from a decrease in our clinical laboratory service revenues of 1.85 million.

Beth Jantzen: which relates to the aforementioned COVID surveillance testing contract for CUNY.

Beth Jantzen: Which is included in our June 2023 Financial Results.

Beth Jantzen: Approximately $70,000 of the decrease in total revenue is attributable to lower product revenues, and specifically to decreases in shipments for consumer asset marking.

Beth Jantzen: and from a

Speaker Change: Nutraceutical customer

Beth Jantzen: Both within our DNA tagging and security products and services segment.

Beth Jantzen: Service revenues decreased by approximately $200,000 year over year. This decrease is attributable to a decrease in R&D projects and our Therapeutic DNA Production Services segment, as well as to isotopic testing within our DNA tagging and security products and services sector. Gross profit was $245,000 or 31%, as compared to 1.3 million or 44% in the prior fiscal year period. The decrease in growth profit is primarily due to a decline in growth revenue for our MDX testing services segment, specifically related to significantly decreased COVID-19 testing volumes year over year.

Beth Jantzen: Service revenues decreased by approximately $200,000 year-over-year.

Beth Jantzen: This decrease is attributable to a decrease in R&D project.

Beth Jantzen: and our Therapeutic DNA Production Services segment.

Beth Jantzen: as well as to isotopic testing within our DNA tagging and security products and services segment.

Beth Jantzen: Hey!

Beth Jantzen: Gross profit was $245,000, or 31%.

Beth Jantzen: as compared to 1.3 million or 44% in the prior fiscal year period.

Beth Jantzen: The decrease in growth profit was primarily due to decline in growth profit for our MDS testing services segment. Specifically related to significantly decreased COVID-19 testing volumes year over year.

Beth Jantzen: Total operating expenses decreased by approximately $500,000 to $3.6 million, compared to $4.1 million in the prior fiscal year period. The decrease in total operating expenses reflects lower SG&A, which is attributable to a reduction in stock-based compensation expense related to the annual option grant to non-employee members of our board and RSUs to officers, as well as the elimination of certain consultants, which together totaled approximately 500,000. The decrease in XGNA was offset by an increase in R&D of approximately 77,000 to 913,000 from 83 This increase relates to the development of a commercial quantity of our linear RNA polymerase, used by our Linea IVT platform, and for consultants to further optimize the RNA polymerase acquired from the spindle acquisition.

Beth Jantzen: Total operating expenses decreased by approximately $500,000 to $3.6 million.

Beth Jantzen: compared to 4.1 million in the prior fiscal year period.

Beth Jantzen: The decrease in total operating expenses reflects lower FGNA.

Beth Jantzen: which is a trivial to a reduction in stock-based compensation, except related to the annual option grant to non-employee members of our board.

Beth Jantzen: and RSUs to Officers.

Beth Jantzen: as well as the elimination of certain consultants, which together totaled approximately 500,000.

Beth Jantzen: The Decrease in FG&A

Beth Jantzen: was offset by an increase in R&D of approximately 77,000 to 913,000.

Beth Jantzen: from 836,000 in the year-ago period.

Beth Jantzen: This increase relates to the development of a commercial quantity of our linear RNA polymerase used by our Linear IVT platform.

Beth Jantzen: and for consultants to further optimize the RNA polymerase acquired from the spindle acquisitions.

Beth Jantzen: Our operating loss for the third quarter was $3.3 million, compared to $2.9 million in the prior fiscal period. Turning to slide 5, excluding non-cash expenses, adjusted EBITDA decreased by $1.1 million to negative 3, compared to a negative 2.1 million in the prior fiscal year period. Now turning to our balance sheet on slide six, cash and cash equivalents totaled $10.4 million on June 30, compared to $7.2 million on September 30, 2023. The June 30th Cash and Cash Equivalents figure includes the net proceeds of $10.5 million from a public offering that closed on May 28.

Beth Jantzen: Our operating loft for the third quarter was 3.3 million.

Beth Jantzen: compared to $2.9 million in the prior fiscal period.

Beth Jantzen: Turning to slide 5.

Beth Jantzen: excluding non-cash expenses, adjusted EBITDA decreased by $1.1 million.

Beth Jantzen: to negative 3.2 million compared to a negative 2.1 million in the prior fiscal year period.

Beth Jantzen: Now, turning to our balance sheet on slide 6.

Beth Jantzen: Cash and cash equivalent totaled $10.4 million on June 30th.

Beth Jantzen: compared to 7.2 million on September 30th, 2023.

Beth Jantzen: The June 30th cash and cash equivalents figure includes the net proceeds of $10.5 million from a public offering that closed on May 28th.

Beth Jantzen: As of June 30th, accounts receivable stood at 531,000, the majority of which was collected after the quarter ended. Our average monthly cash burn for the fiscal year to date was $1.2 million, compared to 500,000 in the prior year. Our average monthly cash burn for the third quarter of fiscal 2024 was $1.3 million.

Beth Jantzen: As of June 30th, accounts receivable stood at 531,000.

Beth Jantzen: The majority of which was collected after the quarter ended.

Beth Jantzen: Our average monthly cash burn is $1.2 million fiscal year to date, compared to $500,000 in the prior year.

Beth Jantzen: Our average monthly cash burn for the third quarter of fiscal 2024 was $1.3 million.

Beth Jantzen: The increase in our cash burn during the third quarter of fiscal 2024 reflects a catch-up on payments made after the financing and the payment of professional fees related to our two financings conducted during the fiscal year. I also note that our just filed Form 10-Q maintains a disclosure from our prior Form 10-Q of a substantial doubt as to whether we are a going concern. Our ability to continue as a going concern is dependent on our ability to further implement our business plan and generate revenues or raise capital. As of July 31, 2024, our cash and cash equivalents were approximately $8.9 million. Turning to the offering,

Beth Jantzen: The increase in our cash burn during the third quarter of fiscal 2024, we've let they catch up on payments made after the financing.

Beth Jantzen: and the payment of professional fees related to our two finances conducted during the fiscal year.

Beth Jantzen: yeah

Beth Jantzen: I also note that our just filed Form 10-Q maintains a disclosure from our prior Form 10-Q .

Beth Jantzen: of a substantial doubt of a going concern.

Beth Jantzen: Our ability to alleviate the going concern.

Beth Jantzen: is dependent on our ability to further implement our business plan and generate revenues or raise capital.

Beth Jantzen: On July 31st, 2024, our cash and cash equivalents were approximately 8.9 million.

Beth Jantzen: We issued 9.23 million common shares and pre-funded warrants to purchase 9.23 million common shares. Series A warrants to purchase 9.23 million common shares at an exercise price of $1.99, with a five-year term from the shareholder approval date. We also issued Series D warrants to purchase 9.23 million common shares, at an exercise price of $1.99 with a one-year term from the shareholder approval date. The Series B warrants also allow for an alternative cashless exercise option, in which the warrant owner receives three shares of common stock, at a $0 exercise price.

Beth Jantzen: The exercisability of both the Series A and B warrants are subject to shareholder approval. Subject to shareholder approval, the exercise of the Series A Warren, could result in additional gross proceeds of approximately $18.4 million to the company. Subject to the same approval by stockholders, the exercise of the Series B warrants could result in additional growth proceeds of approximately 18.4 million, were under the alternative cashless exercise provision, holders of the Series D warrants would receive three shares of common stock for every Series B wiring exercise with no gross proceeds to the If all of the Series A warrants are exercised, and if the Series B warrants are exercised pursuant to the cashless exercise option described above, we would have 47.2 million shares of common stock outstanding.

Beth Jantzen: Turning to the Offering

Beth Jantzen: We issued 9.23 million common shares and pre-funded warrants to purchase common shares.

Beth Jantzen: series A-Warrance to purchase 9.23 million commentaries.

Beth Jantzen: at an exercise price of $1.99.

Beth Jantzen: with a five-year term from the shareholder approval date.

Beth Jantzen: We also issued series D-Wine to purchase 9.23 million common chair and an exercise price of $1.99 with a 1 year term from the shareholder approval date.

Beth Jantzen: The Series B warrants also allow for an alternative cashless exercise option.

Beth Jantzen: in which the warrant owner receives three shares of common stock at a zero dollar exercise price.

Beth Jantzen: The exercisability of both the Series A and B warrants are subject to shareholder approval.

Beth Jantzen: Subject to shareholder approval, the exercise of the series A Warren, could result in additional gross proceeds of approximately $18.4 million to the company.

Beth Jantzen: Subject to the same approval by spot folder, the exercise of the series D-worms could result in additional growth proceeds of approximately 18.4 million.

Beth Jantzen: where, under the alternative cashless exercise provision, holders of the Series B warrants would receive three shares of common stock for every Series B warrant exercise with no gross proceeds to the company.

Beth Jantzen: If all of the Series A warrants are exercised, and if the Series B warrants are exercised pursuant to the cashless exercise option described above, we would have 47.2 million shares of common stock outstanding.

Beth Jantzen: On August 2nd, in accordance with the terms of the public offering, We conducted a special meeting of shareholders to seek to obtain stockholder approval for the series warrants just discussed. However, the special meeting was adjourned due to a lack of quorum, in accordance with the terms of the public offering.

Beth Jantzen: On August 2nd, in accordance with the terms of the public offering, we conducted a special meeting of shareholders.

Beth Jantzen: to seek to obtain stockholder approval for the series virus just discussed.

Beth Jantzen: The special meeting was adjourned due to a lack of quorum.

Beth Jantzen: We are obligated to call a subsequent stockholder meeting within 90 days from August 2nd to seek to obtain approval of the exercisability of the series model, as such. The Warrant Stockholder Approval Proposal is now included in the proxy for our annual meeting of stockholders, which is scheduled for September 30. A preliminary copy of our proxy was filed with the FCC on Monday and is viewable on the EDGAR website and our IR website

Beth Jantzen: In accordance with the terms of the public offering, we are obligated to call a subsequent stockholder meeting within 90 days from August 2nd.

Beth Jantzen: to seek to obtain approval of the exercisability of the series virus.

Beth Jantzen: As such, the warrant stockholder approval proposal is now included in the proxy for our annual meeting.

Beth Jantzen: of stockholders, which is scheduled for September 30th.

Beth Jantzen: A preliminary copy of our proxy was filed with the FCC on Monday and is viewable on the EDGAR website and our IR website.

Beth Jantzen: The Annual Meeting Proxi also includes a proposal to grant the Board the authority to implement a reverse stock split, to meet the minimum bid price requirement under the NASDAQ Capital Market Listing Rule on July 12th. We received notice from the Listing Qualification Department of NASDAQ, notifying us that we are not in compliance with the minimum bid price requirements set forth by NASDAQ for continued listing on the NASDAQ Capital Market. The notification letter does not impact our listing on the NASDAQ capital market at this time.

Beth Jantzen: The Annual Meeting Proxy also includes a proposal to grant the Board the authority to implement a reverse stock split to meet the minimum bid price requirement under the NASDAQ Capital Market Listing Rules.

Beth Jantzen: We have 180 calendar dates, or until January 8th of 2025, to regain compliance with the minimum bid price requirement. In order to regain compliance, our bid price must close at, or above $1 per share for a minimum of 10 consecutive business days. If we do not regain compliance with this NASDAQ listing rule by January 8th, we may be eligible for an additional 180 calendar day compliance period, assuming that we are in compliance with all of the other NASDAQ listing requirements.

Beth Jantzen: On July 12th, we receive notice from the listing qualification department of NASDAQ.

Beth Jantzen: We believe that the 180-day period in which we have to cure the deficiency overlaps multiple biotherapeutic commercialization points that, in our view, are value-creating. In a moment, you will hear Jim and Clay deliver commentary on anticipated commercial progress that we believe will drive total revenues to an inflection point starting in the first half of fiscal 25. We consider it prudent to seek the discretion to implement a reverse dot split to maintain Applied DNA's NASDAQ listing. Should the stock market not recognize the execution of our biotherapeutic-driven value creation story by the conclusion of the 180-day cure period?

Beth Jantzen: Noteifying us that we are not in compliance with the minimum bid price requirements set fourth by an ad deck for continued listing on the NASDAQ capital market.

Beth Jantzen: The notification letter does not impact our listing on the NASDAQ capital market at this time.

Beth Jantzen: We have 180 calendar days.

Beth Jantzen: or until January 8th of 2025 to regain compliance with the minimum bid price requirement.

Beth Jantzen: In order to regain compliance, our bid price must close at or above $1 per share for a minimum of 10 consecutive business days.

Beth Jantzen: If we do not regain compliance, but this NASDAQ listing rule by January 8th.

Beth Jantzen: We may be eligible for an additional 180 calendar day.

Beth Jantzen: compliance period, assuming that we are in compliance with all of the other NASDAQ listing requirements.

Beth Jantzen: We believe that the 180-day period in which we have to cure the deficiency

Beth Jantzen: overlaps multiple biotherapeutic commercialization points that, in our view, are value creating.

Speaker Change: In a moment, you will hear Jim and Clay deliver commentary on anticipated commercial progress that we believe will drive total revenues to an inflection point starting in the first half of fiscal 25th.

Beth Jantzen: We consider it prudent to seek the discretion to implement a reverse dot split to maintain Applied DNA's NASDAQ listing.

Speaker Change: Should the stock market not recognize the execution of our biotherapeutic-driven value creation story by the conclusion of the 180-day cure period?

Beth Jantzen: This concludes my prepared remarks. Thank you for joining us today. I will now turn the call over to Jim for his remarks. Jim.

Beth Jantzen: Thanks for joining us today. I will now turn the call over to Jim for his comments.

James Hayward: Thank you, Beth. Good afternoon, everyone.

Jim: Thank you, Beth. Good afternoon, everyone. Thank you for joining us on our third quarterly investor call of fiscal 2024.

James Hayward: Thank you for joining us on our third quarterly investor call of fiscal 2024. We have a great deal to update you on today across each of our three business sectors. I encourage you to follow along with our slide deck that supports my remarks this afternoon.

Jim: We have a great deal to update you on today across each of our three business segments. I encourage you to follow along with our slide deck that supports my remarks this afternoon.

James Hayward: Our efforts during the third quarter and fiscal 2024 have continued a value creation strategy that we put in place after the pandemic to leverage our expertise in the scaled manufacture and detection of DNA via PCR and to increase the role of linear DNA in the contemporary platforms that are driving the commercialization of new nucleic acid therapeutics and related initiatives. All these efforts focused on the return of the company to a growth trajectory.

Jim: Our efforts during the third quarter and fiscal 2024 have continued.

Jim: a value creation strategy that we put in place after the pandemic to leverage our expertise in the scaled manufacture and detection of DNA via PCR.

Jim: and to increase the role of linear DNA in the contemporary platforms that are driving the commercialization of new nuclear gas at therapeutics.

Jim: and the related initiatives. All these efforts focused on the return of the company to a growth trajectory.

James Hayward: We accomplished much during the third quarter, executing against our commercial roadmap in all business segments and supported by a strengthened balance sheet for Continued Operational Momentum. During the quarter, we achieved the following significant development. We continue to build our capacity for the enzymatic GMP production of DNA IVT templates and are on track for completion of our GMP facility by September 30th, our fiscal year end. Additionally, we have received full New York State Department of Health approval for a laboratory-developed test.

Jim: We accomplished much during the third quarter, executing against our commercial roadmap in all business segments and supported by a strengthened balance sheet for continued operational momentum.

Jim: During the quarter, we accomplished the following significant developments.

Jim: We continue to build our capacity for the enzymatic.

Jim: GMP Production of DNA IVT Templates

Jim: and are on track for completion of our GMP facility by September 30th, our fiscal year end.

Jim: We have received full New York State Department of Health Approval for a laboratory-developed test. We commercially launched TREAT PGX, our Pharmacogenomic Testing Service, and after the close of the quarter.

James Hayward: We commercially launched TRAIT-PGX, our pharmacogenomic testing service, and after the close of the quarter, we entered into a multi-year agreement within this group that potentially represents a substantial expansion of our cotton tagging addressable market. These developments, we believe, signal applied DNA's post-COVID return-to-growth strategy, as we approach commercial milestones to deliver year-over-year revenue growth starting in the first We believe that our return to growth will be primarily catalyzed by anticipated near-term developments at LinearRx, our biotherapeutic segment, and from our DNA tagging segment with initial contributions from ADCL and its pharmacogenomic testing service. Clay and I will discuss these developments in greater detail in a moment. But before that...

Jim: We entered into a multi-year agreement within this group that potentially represents a substantial expansion of our cotton tagging addressable market.

Jim: These developments, we believe, signal Applied DNA's post-COVID return-to-growth strategy.

Jim: as we approach commercial milestones to deliver year-over-year revenue growth starting in the first half of fiscal 2025.

Jim: We believe that our return to growth will be primarily catalyzed by anticipated near-term developments at LinearRx, our biotherapeutic segment.

Jim: and from our DNA tagging segment with initial contributions from ADCL and its pharmacogenomic testing service.

Operator: [inaudible] Good day, and welcome to the Applied DNA Fiscal Third Quarter 2024 Investor 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.

Jim: Clay and I will discuss these developments in greater detail in a moment.

James Hayward: I want to be clear. Our expectation of an imminent revenue inflection should not be construed as financial guidance. We have every confidence in achieving them, but they are wholly reliant on future commercial activities that have not yet formally begun. During the third quarter, we negotiated and then entered into a five-year certainty commercialization agreement within this group, a key global cotton apparel manufacturer. The agreement calls for us to supply spray systems, DNA tagging, testing services for DNA tagging and genotyping, devices and materials for on-site testing, and isotope testing services. When they are ready, Indus plans to take testing in-house, accelerating their Service Velocity.

Clay Shorrock: But before that, I want to be clear.

Jim: Our expectation of an imminent revenue inflection.

Jim: should not be construed as financial guidance.

Clay Shorrock: We have every confidence in achieving them, but they are wholly reliant on future commercial activities that have not yet formally begun.

Jim: During the third quarter, we negotiated and then entered into a five-year certainty commercialization agreement within this group.

Jim: A key global continental parallel and you factor, the agreement calls for us.

Jim: to supply spray systems DNA tagging, testing services for DNA tagging and genotyping, devices and materials for onsite testing and isotope.

Jim: Testing Services.

Speaker Change: When they are ready, Indus plans to take testing in-house.

Jim: Accelerating Their Service Velocity

James Hayward: We are awaiting receipt of an initial purchase order from Indus to support our deployment activities. In year one of the agreement, we at Indus intend to implement certainty at multiple cotton spinning mills. INDIS will provide regular forecasts for tagged cotton demand, and a planned subsequent broader deployment across INDIS's footprint will be based on their demand for tagged content. And, as you can see on this slide, in the SERS major apparel market. Each with regulations to ensure that our customers are not complicit in using forced or slave labor in the supply chains that end in those respective markets.

Speaker Change: We are awaiting receipt of an initial purchase order from Indus to support our deployment activities.

Indus: In year one of the agreement, we at Indus intend to implement certainty at multiple cotton spinning mills.

INDIS: INDIS will provide regular forecasts for tagged cotton demand and a planned subsequent broader deployment across INDIS's footprint.

Speaker Change: will be based on their demand for tagged cotton.

Speaker Change: And as you can see on this slide, in this serves major barrel markets.

Speaker Change: Each with regulations to ensure that our customers are not complicit in using forced or slave labor in the supply chains that end in those respective markets.

James Hayward: The historical commitment to innovation and sustainability by Indus and its strong foothold across the apparel value chain makes it an ideal certainty partner. And while the agreement has no minimum purchase commitment, we believe our new partnership within this will provide for sustainable growth in this business segment for the following reasons. Indus is a leading supplier to some of the world's most renowned brands. Ours is a volume-driven business, and Indus uses approximately 450 million pounds of cotton annually in an environment so influenced by the UFLPA, or the Uyghur Forced Labor Prevention Act.

Speaker Change: The historical commitment to innovation and sustainability by Indus and its strong foothold across the apparel value chain makes it an ideal certainty partner.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded.

Speaker Change: And while the agreement has no minimum in this purchase commitments, we believe our new partnership within this will provide for sustainable growth in this business segment for the following reasons.

Sanjay Hurry: I would now like to turn the conference over to Sanjay Hurry, Head of Investor Relations. Please go ahead. Thank you, Cindy.

Speaker Change: Indus is a leading supplier to some of the world's most renowned brands.

Sanjay Hurry: Good afternoon, everyone, and welcome to Applied DNA's conference call to discuss a third quarter of the school 2024 financial results. Can I access the press release I was issued after market closed today as well as the slide presentation accompanying this call on the Investor Relations section of our corporate website or via the webcast today.

Speaker Change: Ours is a volume driven business and Indus uses approximately 450 million pounds of cotton annually.

Speaker Change: in an environment so influenced.

Speaker Change: by the UFLPA, or the Uyghur Forced Labor Prevention Act.

Sanjay Hurry: Speaking on the call, our Dr. James Hayward, our chairman, president, and CEO, Beth Jensen, our chief financial officer, and Clay Shorrock, our chief legal officer and head of business development.

James Hayward: The ability to sell UF LPA-compliant apparel to customers becomes a key selling point for new customer acquisition and retention. The deployment of our CertainT platform in all aspects will enable Indus to ensure that the products they manufacture for their customers are end-market compliant. Indus maintains year-round ginning and spinning operations, allowing for a decoupling from the revenue seasonality that's been inherent to our historical focus on U.S. Pima Company and which drove lumpy revenues in our business segment.

Speaker Change: The ability to sell UF LPA compliant apparel to customers becomes a key selling point for new customer acquisition and retention.

Sanjay Hurry: To tomorrow, our chief operating officer will also be available to answer questions on the Q and A portion of this call.

Sanjay Hurry: Before we get started, I would like to take this opportunity to remind you that our remarks today may include forward-looking statements. I refer you to slide two of the presentation and our form 10Q filed a short while ago for important risk factors that cause the company's actual performance and results to defer materially from those expressed or implied in any forward-looking statements. We undertake no obligation to update or revise any forward-looking statements or other information provided on this call as a result of new information or future results or developments.

Speaker Change: The deployment of our CertainT platform in all aspects will enable Indus to ensure that the products they manufacture for their customers are end-market compliant.

Speaker Change: Indus maintains year-round ginning and spinning operations.

Speaker Change: Allowing for a decoupling from the revenue seasonality that's been inherent to our historical focus on U.S. Kima Cotton.

Speaker Change: and which drove lumpy revenues in our business segment.

Beth Jensen: Now, my pleasure to introduce our first speaker on today's call, Beth Jensen. Please go ahead, Beth. Thank you, Sanjay.

James Hayward: And finally... Indus can supply tagged cotton at volumes required by the large users of cotton in our supply and in our sales pipeline. In short, we believe INDA solves the issue of tagged cotton supply that has always hampered the growth of this segment. Our certainty platform enables customers to provide forensic evidence supporting U.S. PLA compliance. It is still an issue, as supported by evidence in a report we published earlier this year by us and our isotope testing partners. The report indicated traces of banned Chinese cotton were found in 19% of a sample of merchandise sold at U.S. and global retailers in the past year of the items that tested positive for Xinjiang cotton.

Speaker Change: And finally...

Speaker Change: Indus can supply tagged cotton at volumes required by the large users of cotton in our supply, in our sales pipeline.

Beth Jensen: Good afternoon, everyone, and thank you for joining us on our third quarter fiscal 2024 investor call. I will start this afternoon with an overview of our results for the quarter-ended June 30, 2024.

Speaker Change: In short, we believe INDA solves the issue of tagged cotton supply that has always gated the growth of this segment.

Beth Jensen: I will then turn the call over to Dr. James Hayward and Clay Sherrock, who will update you on our ongoing business initiative.

Speaker Change: Our certainty platform enables customers to provide forensic evidence supporting UFPLA compliance.

Beth Jensen: We will then open the line for questions from our analysts and institutional investors. Prophecyng my review of our financial results for the quarter, our year-over-year comparison, we've left the June 2023 quarter, which included revenues and costs associated with our COVID surveillance testing for CUNY. That contract concluded in June 2023. Beginning with our statement of operations, total revenues for the third quarter of fiscal 24, which ended on June 30, were approximately 798,000, or decline of 2.1 million compared to 2.9 million for the same period in the prior fiscal year.

Speaker Change: It is still an issue, as supported...

Speaker Change: by evidence in a report we published earlier this year by us and our isotope testing partner.

Speaker Change: The report indicated traces of ban Chinese cotton were founding 19% of a sample of merchandise sold at U.S. and global retailers in the past year.

Speaker Change: of the items that tested positive for Shinjang Cotton.

James Hayward: 57% featured labels that claimed the merchandise's origin was solely in the U.S. With this as context, we continue to serve repeat customers for isotopic testing, as an entree to direct contact with very large cotton users, manufacturers, brands, and retailers, some of whom can now be introduced to in this for a ready supply of cotton. Now turning to our pharmacogenomics testing service, which is branded TR-8 or TRAIT-PGF While awaiting the resolution of the New York State Department of Health's lengthy LDT review and approval process, we built this business for large-scale testing, reflecting our commercial aspirations for enterprise or other large population contracts.

Speaker Change: 57% featured labels that claim the merchandise origin was solely in the U.S.

Speaker Change: With this as context, we continue to serve repeat customers for isotopic testing.

Beth Jensen: The majority of the year-over-year decline in total revenue was from a decrease in our clinical laboratory service revenues of 1.85 million, which relates to the aforementioned COVID surveillance testing contract for CUNY, which is included in our June 2023 financial results. Approximately 70,000 of the decrease in total revenue is attributable to lower product revenues, and specifically to decreases in shipments for consumer asset marking, and from a nutraceutical customer, both within our DNA tagging and security products and services segment.

Speaker Change: as entree to direct...

Speaker Change: Contact with very large cotton users.

Speaker Change: manufacturers, brands, and retailers.

Speaker Change: Some of whom can now be introduced to in this for a ready supply of cotton.

Speaker Change: Thank you for watching, and don't forget to like, share, and subscribe to our channel.

Speaker Change: Now, turning to our pharmacogenomics testing service.

Speaker Change: which is branded TR-8 or TRAIT-PGX.

Speaker Change: While awaiting the resolution of the New York State Department of Health lengthy LDT review and approval process,

Speaker Change: We built this business for large-scale testing.

Speaker Change: reflecting our commercial aspirations for enterprise or other large population contracts.

Beth Jensen: Service revenues decreased by approximately 200,000 year-over-year. This decrease is attributable to a decrease in R&D projects in our therapeutic DNA production services segment, as well as to isotopic testing within our DNA tagging and security products and services segment. Growth profit was 245,000, or 31%, as compared to 1.3 million, or 44% in the prior fiscal year period. The decrease in growth profit was primarily due to a decline in growth profit for our MDX testing services segment, specifically related to significantly decreased COVID-19 testing volumes year-over-year.

James Hayward: ADCL's PGX testing capacity can support up to $25 million in annual revenue today. Our goal with PGX testing is to avoid pricing pressures common to commoditized diagnostics. To this end, our initial sales effort is to build a demand for concierge testing before turning to higher volume enterprise testing. In our concierge sales model, the clinician plays a crucial role in patient uptake, and will enable us to begin generating revenue while further optimizing the testing service necessary to manage the larger enterprise testing volume.

Speaker Change: ADCL's PGX testing capacity can support up to $25 million in annual revenue today.

Speaker Change: Our goal with PGX testing is to avoid pricing pressures common to commoditized diagnostics.

Speaker Change: To this end, our initial sales effort is to build a demand for concierge testing before turning to the higher volume enterprise testing.

Speaker Change: In our concierge sales model, the clinician plays a crucial role in patient uptake.

Speaker Change: and will enable us to begin generating revenue while further optimizing the testing service necessary to manage the larger enterprise testing volumes.

James Hayward: Given PGX's favorable margin profile, we expect this segment to approach profitability over the next two quarters, even at low testing volumes. From there, our testing can be scaled quickly, and we expect our first enterprise testing customer to come sometime in the first half of calendar year 2025.

Beth Jensen: Total operating expenses decreased by approximately 500,000 to 3.6 million, compared to 4.1 million in the prior fiscal year period. The decrease in total operating expenses reflects lower SGNA, which is attributable to a reduction in stock-based compensation expense, related to the annual option grant to non-employee members of our board, and RSUs to officers, as well as the elimination of certain consultants, which together totaled approximately 500,000. The decrease in FGNA was offset by an increase in R&D of approximately 77,000 to 913,000 from 836,000 in a year ago period.

Speaker Change: Given PGX's favorable margin profile, we expect this segment to approach profitability over the next two quarters, even at low testing volumes.

Speaker Change: From there, our testing can be scaled quickly, and we expect our first enterprise testing customer to come sometime in the first half of calendar year 2025.

James Hayward: Now, before I turn the call over to Clay, who will take you through some very exciting developments in the commercialization of Linear IVT templates and our Linear IVT platform, I want to provide some context that demonstrates the speed with which the field of genetic medicines is progressing. In fiscal 2022, with the biotherapeutics industry coalescing around messenger RNA technology that was driven by the success of the COVID vaccine, we initiated cells of linear DNA as an IVT template for mRNA production. We positioned linear IVT templates as a differentiated approach to plasmid-templated IVT mRNA.

Speaker Change: Now before I turn the call over to Clay, who will take you through some very exciting developments in the commercialization of linear IVT templates and our linear IVT platform.

Clay Shorrock: I want to provide some context that demonstrates the speed with which the field of genetic medicines is progressing.

Beth Jensen: This increase relates to the development of a commercial quantity of our linear RNA polymerase, used by our linear IVT platform, and for a consultant to further optimize the RNA polymerase acquired from the spindle acquisition. Our operating loss for the third quarter was 3.3 million compared to 2.9 million in the prior fiscal period. Turning to slide five, excluding non-cash expenses, adjusted EBITDA decreased by 1.1 million to negative 3.2 million compared to a negative 2.1 million in the prior fiscal year period.

James Hayward: Relative to plasmid templates, lineal IVD templates have many advantages to facilitate the broader commercialization of messenger RNA-based therapy. By fiscal 2023, we had accumulated an impressive roster of biofarmer and CDMO template evaluation customers. The industry's strong interest was very clear, but our lack of GMP production capacity gated commercial adoption beyond technology evaluation projects. It also became quickly evident that while our templates have an outsized impact on messenger RNA workflows, we were leaving considerable economics on the table.

Beth Jensen: Now turning to our balance sheet on slide six, cash and cash equivalent total 10.4 million on June 30, compared to 7.2 million on September 30, 2023. The June 30, cash and cash equivalent figure includes the net proceeds of 10.5 million from a public offering that closed on May 28. As of June 30, accounts receivable stood at 531,000, the majority of which was collected after the quarter ended. Our average monthly cash burn is 1.2 million fiscal year-to-date compared to 500,000 in the prior year.

Clay Shorrock: But our lack of GMP production capacity gated commercial adoption.

Clay Shorrock: Beyond technology evaluation projects. It also became quickly evident.

Clay Shorrock: Well, our 10 floods have an outsized impact on messenger RNA workflows.

Clay Shorrock: We were leaving considerable economics on the table.

James Hayward: In fiscal 2023, we began to solve both those issues, with the implementation of a GMP roadmap and with the acquisition of Spindle Biotech. Our Linear IVT platform was launched, enabling us to capture more of the messenger RNA value chain and associated greater economics. And as we approach the end of fiscal 2024, I am pleased to report that we are on schedule for a GMP startup by September 30th, our fiscal year end, and we have successfully completed scale-up of our linear RNA polymerase enzyme, a critical component of our linear IVT platform.

Clay Shorrock: In fiscal 'twenty to 'twenty, three we began to solve for both those issues with the implementation of a GMP road map and with the acquisition of spindle biotech.

Beth Jensen: Our average monthly cash burn, the third quarter of fiscal 2024 was 1.3 million. The increase in our cash burn during the third quarter of fiscal 2024 reflects a catch up on payments made after the financing and the payment of professional fees related to our two finances conducted during the fiscal year. I also note that our just filed form 10Q maintains a disclosure from our prior form 10Q of a substantial doubt of a going concern.

Clay Shorrock: Our linear I V. T platform was launched enabling us to capture more of the messenger RNA value chain.

Clay Shorrock: And associated greater economics.

Clay Shorrock: And as we approach the end of fiscal 'twenty 'twenty four I am pleased to report.

Clay Shorrock: That we are on schedule for a GMP startup by September 30th our fiscal yearend.

Clay Shorrock: And it has successfully completed scale up of our linear RNA polymerase enzyme <unk>.

Beth Jensen: Our ability to alleviate the going concern is dependent on our ability to further implement our business plan and generate revenues or raise capital. On July 31, 2024, our cash and cash equivalents were approximately 8.9 million. Turning to the offering, we issued 9.23 million common shares and pre-funded warrants to purchase common shares. Series A warrants to purchase 9.23 million common shares, at an exercise price of $1.99 with a five-year term from the shareholder approval date.

Clay Shorrock: A critical component of our lineal I V T platform.

James Hayward: I'm also happy to report that we have recently completed long-term validation studies with two Linear DNA Template customers, and we are now being onboarded as a validated GMP vendor into their workflows. We are targeting early calendar 2025 to support them with IVT templates to produce messenger RNA clinical trial materials. We are also in the late stages of evaluation with a third Linear DNA template customer and hope to be onboarded as a validated GMP vendor shortly.

Clay Shorrock: I'm also happy to report that we recently completed long term validation studies with two linear DNA template customers and we are now being on boarded as a validated G N P vendor into their workflows.

Clay Shorrock: We are targeting early calendar 'twenty to 'twenty five to support them with I V T templates to produce messenger RNA clinical trial materials.

Clay Shorrock: We were also in the late stages of evaluation with a third linear DNA template customer and hope to be on board. It also validated GMP vendor shortly.

Beth Jensen: We also issued series D-Warn to purchase $9.23 million common share at an exercise price of $1.99 with a one-year term from the shareholder approval date. The series B-Warn also allow for an alternative cashless exercise option in which the warrant owner receives three shares of common stock at a $0.00 exercise price. The exercise ability of both the series A and B-Warn are subject to shareholder approval. Subject to shareholder approval, the exercise of the series A-Warn could result in additional gross proceeds of approximately $18.4 million to the company.

James Hayward: So this is an exciting place to be as we approach our GNP startup. And on behalf of our board of directors, myself, and the entire management team, I'd like to personally thank the LinearRx sales and business development team for the tremendous progress to ensure the success of our biotherapeutics business. Let me now turn the call to Clay for a deeper dive into our biotherapeutics opportunity.

Clay Shorrock: So this is an exciting place to be as we approach our G N P startup.

Speaker Change: And on behalf of our board of directors myself, the entire management team I'd like to personally thank the linear Rx sales and business development team for the tremendous progress.

Clay Shorrock: To ensure the success of our bio therapeutics business.

Clay Shorrock: Let me now turn the call to clay for a deeper dive into our our bio therapeutics opportunity quite.

Clay Shorrock: Thank you, Jim, and good afternoon. In recent years, we've established a market footprint, demonstrated credibility, and, as Jim noted, generated an enviable roster of customers. Last week, I attended the 4th Annual mRNA Therapeutic Summit in Boston. This is our third consecutive year.

Clay Shorrock: Thank you Jim and good afternoon, everyone.

Clay Shorrock: He has many years, we've established a market footprint demonstrated credibility and as Jim noted have generated an enviable roster of customers.

Beth Jensen: Subject to the same approval by stockholder, the exercise of the series B-Warn could result in additional gross proceeds of approximately $18.4 million or under the alternative cashless exercise provision holders of the series B-Warns would receive three shares of common stock for every series B-Warn exercise with no gross proceeds to the company. If all of the series A-Warns are exercised and if the series B-Warns are exercised pursuant to the cashless exercise option described above, we would have 47.2 million shares of common stock outstanding.

Speaker Change: Last week I attended the fourth annual mrna Therapeutics summit in Boston.

Clay Shorrock: This is our third consecutive year.

Clay Shorrock: Yeah.

Clay Shorrock: I've been privileged to have a front row seat to our maturation from an upstart new player to an established six-year player in the MRN industry, and I echo James' thanks to the marketplaces, receptivity to our Linea IVT template and Linea IVT, Continue to be... Relative to conventional, Plasmid DNA Base Templates, we utilize enzymatic manufacturing to rapidly produce large quantities at high rates, solving a major pain point. With our Linea IVT platform, which combines Linea IVT templates with our proprietary Linea RNA, we saw yet another significant industry, a reduction of We're pleased to be involved with numerous customers pursuing cutting. Now, as Jim noted, we are being onboarded as a validated GMP vendor of IVT templates into the manufacturing workflow of the two companies. 1A USB.

Clay Shorrock: I've been privileged to have a front row seat to our maturation from an upstart new player. So to establish six here in the mrna manufacturing industry.

Clay Shorrock: James Thanks to the entirety.

Speaker Change: The marketplaces.

Speaker Change: Receptivity to our linear IV exactly and linear IV T platform continues to be strong.

Speaker Change: Relative to conventional.

Speaker Change: Plasma DNA based template, we utilize an enzymatic manufacturing process to rapidly produce large quantities of high purity solving.

Beth Jensen: On August 2nd, in accordance with the terms of the public offering, we conducted a special meeting of shareholder to seek to obtain stockholder approval for the series B-Warns just discussed. The special meeting was adjourned due to a lack of quorum. In accordance with the terms of the public offering, we are obligated to call a subsequent stockholder meeting within 90 days from August 2nd to seek to obtain approval of the exercise ability of the series B-Warns.

Speaker Change: Solving a major pain point for the MRI.

Speaker Change: With our linear IBD platform, which combines linear IV he definitely with our proprietary again yarn.

Speaker Change: We saw yet another significant industry quite a bit of reduction of Donaldson.

Speaker Change: Our combined technologies enable our customers to produce better tomorrow and a faster.

Speaker Change: Pleased to be involved with numerous customers pursuing cutting edge therapies.

Speaker Change: Now as Tim noted, we are being on boarded as a validated GMP vendor IV definitely instead of manufacturing workflows with two customers.

Beth Jensen: As such, the Warns stockholder approval proposal is now included in the proxy for our annual meeting of stockholders, which is scheduled for September 30th. A preliminary copy of our proxy was filed with the SEC on Monday and is viewable on the Edgar website and our IR website. The annual meeting proxy also includes a proposal to grant the board the authority to implement a reverse stock split to meet the minimum bid price requirement under the NASDAQ capital market listing rules.

Speaker Change: One a U S b.

Clay Shorrock: Phytoforma Company, and the other, a CDMO, a We expect to begin supplying linear IVT templates for use by these customers in their manufacture of mRNAs, and clinical trial materials in early calendar year. Go to our website at www.sciencemedia.org. We are also involved in an additional customer evaluation where we were recently told that our IVT templates meet or exceed all of their GM. We hope to be added as a qualified vendor with this customer in the near future with potential GMP runs in the first half of the calendar year.

Speaker Change: Biopharma company and the other a C D M L b.

Speaker Change: We expect to begin supplying linear IV exactly for use by the customer in their manufacture mrna.

Speaker Change: Clinical trial material in early calendar year, 'twenty or our fiscal second quarter.

Speaker Change: We're also involved in additional customer evaluation, where we were recently told that our I V system in place to meet or exceed all of their GMP that we hope to be added in her qualified vendor with this customer in the near future with potential GMP runs in first half of the calendar year 2025.

Beth Jensen: On July 12th, we received notice from the listing qualification department of NASDAQ, notifying us that we are not in compliance with the minimum bid price requirements set forth by NASDAQ for continued listing on the NASDAQ capital market. The notification letter does not impact our listing on the NASDAQ capital market at this time. We have 180 calendar days or until January 8th of 2025 to regain compliance with the minimum bid price requirement.

Clay Shorrock: In addition to these early success stories, we are currently engaged with numerous biotech, pharma, and large CDMOs who are in the process of evaluating our linea ibis. Slide 9 provides a sampling of Evaluation Customer 2, who, if converted, has the potential to fill our GMP capacity and system.

Speaker Change: In addition to these early success stories, we are currently engaged with numerous biotech pharma and large medium.

Speaker Change: In the process of evaluating.

Speaker Change: Linear I think he got it.

Speaker Change: But no I prepared slide.

Speaker Change: Slide nine provides a sampling evaluation customer too if converted.

Speaker Change: The potential is still our GMP capacity into fiscal 2025.

Clay Shorrock: It's also notable that each of these customers has multiple assets in their pipelines, and initial GMP success of any of these customers holds the potential for long-term manufacturing. It's also significant that we are gaining traction with evaluation customers for linear IBT. The combination of our proprietary linear RNAP and our IVT templates allows us to increase our relevance to the mRNA value chain for approximately 5% to approximately 30% of mRNA manufacturing, providing us with a much larger total addressable market than IVT templates alone.

Speaker Change: It's also notable that each of these customers have multiple.

Speaker Change: Assets in their place line initially BNP success with any of these customers hold the potential for long term manufacturing jobs.

Beth Jensen: In order to regain compliance, our bid price must close at or above $1 per share for a minimum of 10 consecutive businesses. If we do not regain compliance with this NASDAQ listing rule by January 8th, we may be eligible for an additional 180 calendar day compliance period, assuming that we are in compliance with all of the other NASDAQ listing requirements. We believe that the 180-day period in which we have to cure the deficiency overlaps multiple biotherapeutic commercialization points that, in our view, are value-creating.

Speaker Change: It's also significant that we are gaining traction with evaluation customers for our linear I V C platform.

Speaker Change: The combination of our proprietary linear aren't out in our IGT template allowed us to increase our relevance to the MRI value chain for approximately 5% to approximately 30% of mrna manufacturing tox.

Speaker Change: Regarding it with a much larger total addressable market than I V C.

Speaker Change: This alone.

Clay Shorrock: Launched just one year ago, our Linear IVT platform is now being evaluated by several customers, including a multinational biopharma company and a large APAC-based CDMA. Early customer data has been positive, and our goal is to convert these evaluation customers into GMT supply contracts for both IVT templates and also endocs in the coming fiscal quarter. Thanks to our recently completed manufacturing process development project on our LinearRNAP, we now have the ability to manufacture this enzyme at reduced unit costs and in quantities necessary to meet customer demand at virtually any phase of the clinical trial process.

Speaker Change: I was just one year ago, our linear I V. C platform is now being evaluated by several customers, including a multinational biopharma company and a large APAC B C D M.

Speaker Change: Early sell through data has been positive and our goal is to convert these evaluation customer TMT supply contracts for both <unk> and also in the coming fiscal quarters.

Beth Jensen: In a moment, you will hear Jim and Clay deliver commentary on anticipated commercial progress that we believe will drive total revenues to an inflection point starting in the first half of fiscal 25. We consider it prudent to seek the discretion to implement a reverse stock split to maintain applied DNA's NASDAQ listing should the stock market not recognize the execution of a biotherapeutic driven value creation story by the conclusion of the 180-day cure period.

Speaker Change: Thanks to our recently completed manufacturing process development projects on our linear R&R, we now have the ability to manufacture and reduced unit costs and quantities necessary to meet customer demand in virtually any feet on the clinical front across the.

Clay Shorrock: The value of Linear RNAP for your Ulster this quarter with the receipt of a first U.S. patent with claims covering the enzyme composition of. Now looking ahead, we believe our goal to sell 100% of our current GMP capacity in fiscal 2025 is very high. Our optimism is not only based on the groundwork and customer relationships we have laid over the past two years, but also on the promising state of mRNA-based therapeutics. mRNA empowers much more than just...

Speaker Change: The value of linear arent happens.

Speaker Change: Further.

Speaker Change: Bolstered this quarter with a receipt of our first U S patent with claims covering enzymes competition.

Speaker Change: Now looking ahead, we believe our goal to sell 100% of our current GMP capacity in fiscal 2020 five is very feasible.

Beth Jensen: This concludes my prepared remarks. Thank you for joining us today.

Speaker Change: Optimism is not only based on the groundwork and customer relationships. We have made over the past two years, but also in the promising data mrna mrna based therapeutics.

James Hayward: I will now turn the call over to Jim for his comments. Jim? Thank you. That's good afternoon, everyone. Thank you for joining us on our third quarterly investor call of fiscal 2024. We have a great deal to update you on today across each of our three business segments. I encourage you to follow along with our slide deck that supports my remarks this afternoon. Our efforts during the third quarter and fiscal 2024 have continued a value creation strategy that we put in place after the pandemic to leverage our expertise in the scaled manufacturer and detection of DNA by a PCR.

Speaker Change: I'm wondering any empowers much more than just.

Clay Shorrock: Vaccines Against Infectious Diseases, such as those against COVID-19. mRNA is a flexible technology that we believe will empower a diverse range of therapeutic modalities from personalized cancer vaccines to CAR T and G. Increasingly, we are seeing interest from customers that are using mRNA for the first-size cancer vaccines, a modality that has seen recent success in the clinic. Here, the speed of manufacture is And given that speed is one of our platform's main selling points, we believe we are very well-positioned to capture new customers in this growing market.

Speaker Change: Vaccines against infectious disease, such as those against COVID-19.

Speaker Change: Mrna is a flexible technology that.

Speaker Change: We believe on power a diverse range of therapeutic modalities from.

Speaker Change: Personalized cancer vaccine the car T and gene therapy.

Speaker Change: Increasingly we are seeing interest from customers that are using mrna for the personalized cancer vaccine and modality. The recent success in the clinic here the theater manufacturer is critical.

Speaker Change: And given that speed is one of our platforms, meaning selling point. We believe we are very well positioned to capture new customers in this growing area.

James Hayward: And to increase the role of linear DNA in the contemporary platforms that are driving the commercialization of new nucleic acid therapeutics and the related initiatives. All these efforts focused on the return of the company to a growth trajectory. We accomplish much during the third quarter executing against our commercial roadmap in all business segments and supported by a strength and balance sheet for continued operational momentum. During the quarter, we accomplished the following significant development.

Clay Shorrock: Likewise, mRNA-based CAR T therapies have recently been shown to be safe and effective against autoimmune diseases and also potentially, Please lead to that IE, yet another new market opportunity for us. So, in sum, we believe we are in the last stage of what has been two years of extraordinary effort to create a new growth opportunity for Applied DNA. The development and launching of new technology is never easy. But fortune favors the bold, and we are excited for what the future holds. Now, I'll give the floor back to Jim.

Speaker Change: Likewise mrna based car T therapy have recently been shown to be safe and effective in autoimmune and also potentially cancer.

Speaker Change: This leaves a yeah.

Speaker Change: Yet another new market opportunity for our platform.

Speaker Change: We believe we are in the last page of what had been two years extra ordinary efforts to create a new growth opportunity for applied.

Speaker Change: Yeah.

Speaker Change: The development and launching of a new technology, it's never easy.

Speaker Change: But for some favorable and we are excited for what the future holds.

Speaker Change: Now I'll give the call back to Jim.

Speaker Change: Yes.

James Hayward: Thank you very much, Clay. Our LinearRx platform is the opportunity for our team and our investors to participate in the compelling future of biotherapeutics, which is evolving at lightning speed. Combined with the benefits of precision prescribing empowered by pharmacogenomics, we really find ourselves at the center of the new revolution in biotechnology. Operator, you can now open the session to Q&A.

James Hayward: We continue to build our capacity for the enzymatic GMP production of DNA-IVT templates and our on track for completion of our GMP facility by September 30th, our fiscal year end. We have received full New York State Department of Health approval for a laboratory-developed test. We commercially launched TREC-PGX, our pharmacogenomic testing service, and after the close of the quarter, we entered into a multi-year agreement within this group that potentially represents a substantial expansion of our cotton-tagging addressable market.

Jim: Thank you much clay.

Jim: Our linear Rx platform is the opportunity for our team and our investors to participate in the compelling future of bio therapeutics, which is evolving at lightning speed.

Jim: Combined with the benefits of precision prescribing empowered by pharma co genomics, we really find ourselves at the center of the new Revolution in biotechnology.

Speaker Change: Operator, you can now open the session to Q&A.

Speaker Change: Yeah.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our assembly. A question comes from Yi Chen from Applied DNA.

Operator: Well now begin the question and answer session.

Speaker Change: Ask a question you May press Star then one on your Touchtone phone.

Speaker Change: If you are using a speaker phone please pick up your handset before pressing the keys.

James Hayward: These developments, we believe, signal-applied DNA's post-COVID return to growth strategy as we approach commercial milestones to deliver year-over-year revenue growth starting in the first half of fiscal 2025. We believe that our return to growth will be primarily catalyzed by anticipated near-term developments at Linear-RX, our BILF therapeutic segment, and from our DNA-tagging segment with initial contributions from ADCL and its pharmacogenomic testing service.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press star from too.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Okay.

Speaker Change: Yeah.

Operator: Go ahead, please.

Speaker Change: Our question comes from E. Chen from applied DNA go ahead. Please.

Dan Onfrey: Good afternoon. This is Dan Onfrey. Thanks for taking our questions. Also, H.C. Wainwright, we were wondering how many customers for GMP manufacturing products do you expect to have by the end of 2024, and are there any customers beyond the two approved and third pending in conversation, as well as what is the level of test volume for TRA pharmacogenomic testing services you expect to have in the coming quarters. Thank you

Speaker Change: Good afternoon. This is Dan on for <unk>. Thanks for taking our questions also H C Wainwright.

E. Chen: We were wondering how many customers for GMP manufacturing products do you expect to have by the end of 2024 and are there any customers beyond the two approved in third pending in conversations.

James Hayward: Clay and I will discuss these developments in greater detail in a moment.

James Hayward: But before that, I want to be clear, our expectation of an imminent revenue inflection should not be construed as financial guidance. We have every confidence in achieving them, but they are wholly reliant on future commercial activities that have not yet formally begun.

Speaker Change: Well as a what is the level of test volume for TRA, a pharmacodynamic testing services do you expect to have in the coming quarters. Thank you.

James Hayward: Clay, would you like to take the first half, and I'll take pharmacogenomics?

Clay Shorrock: Clay would you like to take the first half and I'll take pharmacogenomics.

Clay Shorrock: Absolutely, sure. Hey Dan, so to answer your first question about the number of GMP customers in fiscal 2024, I mean we are launching our GMP facility at the end of fiscal 2024, so you know we don't expect to have signed contracts the day that it launches, but that being said and as we talked about in the prepared remarks, we have been through this evaluation process with two large customers and Based on their manufacturing timelines, which is really outside of our control, you know, the indications are that those first GMP-like manufacturing runs will be early calendar year 2025.

Clay Shorrock: Absolutely sure Hey, Dan.

Clay Shorrock: So to answer your first question about the number of E&P customers in fiscal 2024, I mean, we are launching our GMP facility at the end of fiscal 2024.

James Hayward: During the third quarter, we negotiated and then entered into a five-year certainty commercialization agreement with Indus Group, a key global cotton apparel manufacturer. The agreement calls for us to supply spray systems, DNA-tagging, testing services for DNA-tagging and genotyping, devices and materials for onsite testing, and isotope testing services. When they are ready, Indus plans to take testing in-house, accelerating their service velocity. We are awaiting receipt of an initial purchase order from Indus to support our deployment activities.

Clay Shorrock: So we don't expect to have signed contracts a day out and watch it but that being said and as we talked about in the prepared remarks.

Speaker Change: We haven't figured that the validation process with two large customer and.

Speaker Change: Based on their manufacturing timelines, which is really outside of our control.

Speaker Change: The indications are that there is first GMP manufacturing process will be early calendar year 2025.

Clay Shorrock: That being said, you know, the GMB process is that. It's a process, right? It doesn't give us materials, and we will end up manufacturing them. There is a process development and scale-up aspect to it, so some of those activities that predate the GMP runs could happen in, you know, late fiscal 2024 or Q1 2024. Q1 of fiscal 2025, did I make that?

Speaker Change: That being said the GMP process is that it's a process right it's not material.

Speaker Change: Manufacturer there is a process development scale up aspect to it so some of those activities that create the GMP runs could could happen you know late fiscal 2020 for Q1 'twenty.

James Hayward: In year one of the agreement, we in Indus intend to implement certainty at multiple cotton spinning mills. Indus will provide regular forecasts for tag cotton demand, and a planned subsequent broader deployment across Indus' footprint, will be based on their demand for TAG cotton. And as you can see on this slide, in this serves major apparel markets, each with regulations to ensure that our customers are not complicit in using forced or slave labor in the supply chains that end in those respective markets.

Speaker Change: Q1 of fiscal 2025 and make that.

Speaker Change: Yeah, that's perfect. Thank you.

Clay Shorrock: And then in terms of, I think you lost that, in terms of the number of...

Speaker Change: And then it turns out that you at that time, a number of customers. After Christmas 'twenty 'twenty four or did that answer your question.

Clay Shorrock: and Earth after fiscal 2024 or at that answer.

Clay Shorrock: Um, you know, whatever uh beyond 2024 would be cool just to get like a general picture of how quickly you think this uptake is uh expected. Yeah, yeah.

Speaker Change: You know whatever.

Speaker Change: And the 2024 it would be just to get like a overall picture of how quickly you think this uptick is expected.

Clay Shorrock: Thank you; that's perfect.

Clay Shorrock: Yeah, yeah. So right now, I mean, we have the verbal commitments that we discussed on this call for about half of our GMP capacity in early calendar year 2025. As we showed in that slide, we think we have a robust sales funnel for the rest of that capacity, and we're going to work to, like, close that. So, you know, it's not really a number-of-customers game. It's the size and the therapeutic modality of their mRNA order that, like, matters.

Speaker Change: Yeah, Yeah. So right now I mean, we have the verbal commitments that we have discussed on this call.

Speaker Change: For about half of our G. M P capacity in early calendar year 2025.

Speaker Change: As we show it and that's why we think we have a group of sales funnel for.

Speaker Change: For the rest of that capacity and we're going to work to close that so you know, it's not really a number of customers game at the size and therapeutic modality out there mrna order at that that it really matters.

James Hayward: The historical commitment to innovation and sustainability by Indus and its strong foothold across the apparel value chain makes it an ideal certainty partner. And while the agreement has no minimum Indus purchase commitments, we believe our new partnership with Indus will provide for sustainable growth in this business segment for the following reasons. Indus is a leading supplier to some of the world's most renowned brands, ours is a volume driven in business and Indus uses approximately 450 million pounds of cotton annually.

Speaker Change: Thank you that's a pretty good.

James Hayward: And Dan, to answer your pharmacogenomics question, you know, we believe that we are the first commercial entity in New York State to be offering a broad-based panel. We explore as many as 130 alleles in pharmacogenomics and are initially targeting New York State.

Speaker Change: And then to answer your pharma cogent.

Speaker Change: Question.

Speaker Change: We believe that we are the first commercial entity in New York state to be offering a broad based panel we explore as many as 130 illegals.

Speaker Change: In pharma go genomics.

Speaker Change: To be.

Speaker Change: You're targeting initially in New York State.

James Hayward: In an environment so influenced by the UF LPA or the Weeger Force Labor Prevention Act, the ability to sell UF LPA compliant apparel to customers becomes a key selling point for new customer acquisition and retention. The deployment of our certainty platform in all aspects will enable Indus to ensure that the products they manufacture for their customers are end-market compliant. Indus maintains year-round ginning and spinning operations, allowing for a decoupling from the revenue seasonality that's been inherent to our historical focus on US Pima cotton and which claims required by the large users of cotton in our supply in our sales pipeline.

James Hayward: So other testers come from outside of the state, outside of the country. And as a consequence, we believe we'll have a turnaround time advantage in providing service. Now speaking of service, we're starting with a service-oriented market, and that is the concierge physician practices that we have been talking to, really, for the last year. And this is a means for these physicians to implement precision prescribing and to compete effectively in the concierge marketplace. So we've been very excited by the initial response.

Speaker Change: So other testers come from without the state.

Speaker Change: Outside of the state and as a consequence, we believe we'll have a turnaround time advantage in providing service.

Speaker Change: Speaking of service, where we're starting with a service oriented market and that is the concierge.

Speaker Change: Physician practices that.

Speaker Change: We have been talking to really for the last year.

Speaker Change: And this is a means for these physicians to implement precision prescribing.

Speaker Change: To compete effectively in the concierge marketplace.

Speaker Change: So we've been very excited by the initial response.

James Hayward: And we hope to build an adequate volume of that form of testing in due course, actually in smaller quanta. And the idea behind the smaller quanta, you know, a typical concierge physician has somewhere between 250 and 500 patients, is that it allows us to provide the white glove service consistent with the concierge physician and to habituate the workflow that we will need in order to service the much larger enterprise customers that we want to begin tackling, say, by the end of the first quarter of 2025.

Speaker Change: And we hope to build an adequate volume of that.

Speaker Change: That form of testing.

Speaker Change: In due course.

Speaker Change: Actually in smaller quantities and the idea behind the smaller quanta you know a typical concierge physician somewhere between 250 and 500 patients is it allows us to provide the white glove service consistent with our concierge.

James Hayward: In short, we believe Indus solves the issue of tag cotton supply that has always gated the growth of this segment. Our certainty platform enables customers to provide forensic evidence supporting US PLA compliance. It is still an issue as supported by evidence in a report we published earlier this year by us and our isotope testing partner. The report indicated traces of band Chinese cotton were found in 19% of a sample of merchandise sold at US and global retailers in the past year, of the items that tested positive for Xinjiang cotton, 57% featured labels that claimed the merchandise origin was solely in the U.S. With this as context, we continue to serve repeat customers for isotopic testing as on tray to direct contact with very large cotton users, manufacturers, brands, and retailers. Some of whom can now be introduced to in this for a ready supply of cotton.

Speaker Change: Physician.

Speaker Change: And to habituate, the workflow that we will need in order to service the much larger enterprise customer that we want to begin tackling say by the end of the first quarter of 'twenty five.

James Hayward: Those customers, which include things like large hospital networks, and here on Long Island, we're surrounded by them. We believe there is a large opportunity to provide services of pharmacogenomics to companies that are self-insured, to counties and governments that are self-insured, and we believe that we can create large demand that way. The capacity we've built for is adequate to service more than $25 million of revenue per year, but it's eminently scalable. Of course, we could add more shifts. We could add more testing lines as well. So we're excited about the opportunity, and we're anxious to get started.

Speaker Change: Those customers, which include things like large hospital networks and here on long island, we're surrounded by them.

Speaker Change: We believe there is a large opportunity to provide services of pharmacogenomics too.

Speaker Change: Companies that are self insured to counties and governments that are self insured.

Speaker Change: And we believe that we can create large demand that way.

Speaker Change: The capacity, we built for it.

Speaker Change: There is adequate to service and a single shift.

Speaker Change: More than $25 million of revenue per year.

Speaker Change: It's eminently scalable of course, we can add more shifts we can add more testing lines as well. So we're excited about the opportunity in <unk>.

Speaker Change: We're anxious to get started.

James Hayward: That sounds great. If I could ask a follow-up question, are there any other states that you're targeting, and do they require a similar approval process in those states?

Speaker Change: That sounds great if I could ask a follow up.

James Hayward: Now turning to our pharmacogenomics testing service, which is branded TR-8 or TRAIT-PGX. While awaiting the resolution of the New York State Department of Health, LengthyLVT review and approval process, we built this business for large-scale testing. Reflecting our commercial aspirations for enterprise or other large population contracts, ADCL's PGX testing capacity can support up to $25 million in annual revenue today.

Speaker Change: Are there any other states that you're targeting and do they require a similar approval process in those states.

James Hayward: It's funny you should ask because we're just completing our registration that would enable us to sell in, I believe, 47 additional states. There is no validation required, thanks to the fact that New York State validation is itself so difficult, and it took us over a year to obtain approval, in part because this was our first genomics LDT, and it was deemed during the validation process, as they always are, high risk, and so was given very careful consideration before it was approved. But now, to march onward to other states, all we have to do is fill out an application. That's awesome! Congratulations on the approval!

Speaker Change: It's funny you should ask because we're just completing our registration that would enable us to sell and I believe 47 additional states.

Speaker Change: There is no validation required.

Speaker Change: Thanks to the fact that the New York State validation is itself so difficult.

Speaker Change: And it took us over a year to obtain approval in part because this was our first genomics L. D E T.

James Hayward: Our goal with PGX testing is to avoid pricing pressures common to commoditize diagnostics. To this end, our initial sales effort is to build a demand for concierge testing before turning to the higher volume enterprise testing. In our concierge sales model, the clinician plays a crucial role in patient uptake, and will enable us to begin generating revenue while further optimizing the testing service necessary to manage the larger enterprise testing volumes. Given PGX's favorable margin profile, we expect this segment to approach profitability over the next two quarters, even at low testing volumes. From there, our testing can be scaled quickly, and we expect our first enterprise testing customer to come sometime in the first half of calendar year 2025.

Speaker Change: And it was deemed during the validation process as they always are high risk and so was given very careful consideration before it was approved but now two March onward to other states. All we have to do is fill out an application.

James Hayward: That's awesome. Congratulations on the approval, and we're looking forward to the ramp. Thank you.

Speaker Change: That's awesome congratulations on the approval and we're looking forward to the ramp thank you.

Speaker Change: Thank you.

Operator: Again, if you have a question, please press star, then 1. Again, if you have a question, please press star then 1.

Speaker Change: Thank you and if you have a question. Please press Star then one.

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

Speaker Change: Okay.

James Hayward: This concludes our question and answer session. I would like to turn the conference back over to Dr. James Hayward for any closing remarks. Thank you, Cindy, and thank you all for attending our call. We look forward to keeping in touch with you.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Dr. James Hayward for any closing remarks.

James Hayward: Now before I turn the call over to Clay, who will take you through some very exciting developments in the commercialization of linear IVT templates and our linear IVT platform, I want to provide some context that demonstrates the speed with which the field of genetic medicines is progressing. In fiscal 2022, with the bio-theraputics industry's coalescing around messenger RNA technology that was driven by the success of the COVID vaccine. We initiated sales of linear DNA as an IVT template for mRNA production.

James Hayward: Thank you, Cindy, and thank you all for attending our call. We look forward to keeping you updated on our progress as we move through this very exciting period.

James Hayward: Thank you Cindy.

Speaker Change: Thank you all for attending our call and we look forward to keeping you updated on our progress as we move through this very exciting period.

Speaker Change: Thank you.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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

James Hayward: We positioned linear IVT templates as a differentiated approach to Plasma-Templated IVT mRNA. Relative to Plasma and templates, linear IVT templates have many advantages to facilitate the broader commercialization of messenger RNA-based therapies. By fiscal 2023, we had accumulated an impressive roster of biopharmor and CDMO template evaluation customers. The industry's strong interest was very clear. But our lack of GMP production capacity gated commercial adoption beyond technology evaluation projects. It also became quickly evident that while our templates have an outsized impact on messenger RNA workflows, we were leaving considerable economics on the table.

James Hayward: In fiscal 2023, we began to solve for both those issues with the implementation of a GMP roadmap and with the acquisition of spindle biotech. Our linear IVT platform was launched, enabling us to capture more of the messenger RNA value chain and associated greater economics. And as we approach the end of fiscal 2024, I am pleased to report that we are on schedule for a GMP startup by September 30, our fiscal year end, and have successfully completed scale up of our linear RNA polymerase enzyme, a critical component of our linear IVT platform.

James Hayward: I am also happy to report that we have recently completed long-term validation studies with two linear DNA template customers. And we are now being onboarded as a validated GMP vendor into their workflows. We are targeting early calendar 2025 to support them with IVT templates to produce messenger RNA clinical trial materials. We are also in the late stages of evaluation with a third linear DNA template customer and hope to be onboarded as a validated GMP vendor shortly. So this is an exciting place to be as we approach our GMP startup.

James Hayward: And on behalf of our Board of Directors, myself, the entire management team, I'd like to personally thank the linear RX sales and business development team for the tremendous progress, to ensure the success of our bio-theraputics business.

Clay Shorrock: Let me now turn the call to Clay for a deeper dive into our bio-theraputics opportunity. Clay? Thank you, Jim, and good afternoon, everyone. In recent years, we have established a market footprint, demonstrated credibility and, as you've noted, have generated an end-of-all roster of evaluation customers. Last week, I attended the fourth annual mRNA therapeutic summit in Boston. This is our third consecutive year in attendance.

Clay Shorrock: I've been privileged to have a front-rowed seat to our maturation from an upstart new player to an established six-year in the mRNA manufacturing industry. I echo Jim's thanks to the entire team. The marketplace's receptivity to our linear IVT template and linear IVT platform continues to be strong. Relative to conventional plasma DNA-based template, we utilize an enzymatic manufacturing process to rapidly produce large quantities of high-purity DNA differences, solving a major pain point for the mRNA industry.

Clay Shorrock: With our linear IVT platform, which combines linear IVT templates with our proprietary linear RNA, we saw we had another significant industry pain point via the reduction of double-stranded RNA contamination. Our combined technologies enable our customers to produce better mRNA faster, or please to be involved with numerous customers pursuing cutting-edge therapies. Now, as Jim noted, we are being onboarded at the validated GMP-eventor IVT template into the manufacturing workflow of two customers. One, a US-based phytoforma company and the other, a CDMO based in ATAC.

Clay Shorrock: We expect to begin supplying linear IVT templates for youth-buddy customers in their manufacturer mRNA clinical trial materials in early calendar year 25, or our physical static quarter. We are also involved in an additional customer evaluation, where we were recently told that our IVT templates meet or exceed all of their GMP's specs. We hope to be added as a qualified vendor of this customer in the near future, with potential GMP rodents in first half of calendar year 2025. In addition to these early success stories, we are currently engaged with numerous biopets, phytoforma, and large CDMOs who are in the process of evaluating our linear IVT templates.

Clay Shorrock: So I'd now prefer to provide a sampling of the value issue customers, too, if converted, have the potential to fill our GMP capacity in April 2025. It's also notable that each of these customers has multiple assets in their price lines and an initial agency success of any of these customers holds the potential for long-term manufacturing contracts. It's also significant that we are gaining traction with evaluation customers for our linear IVT platform.

Clay Shorrock: The combination of our proprietary linear RNAP and our IVT templates allows us to increase our relevance to the mRNA value issue from approximately 5% to approximately 30% of mRNA manufacturing, with a much larger total international market than IVT templates alone. Long since one year ago, our linear IVT platform is now being evaluated by several customers, including a multi-national bi-informal company and a large APAC-based CDMM. Early customer data has been positive, and our goal is to convert these evaluation customers into GMT supply contracts for both IVT templates and also ANDA in the coming fiscal quarters.

Clay Shorrock: Thanks for a recently completed manufacturing process development project on our linear R&AP. We now have the ability to manufacture this enzyme at reduced unit cost, and in quantities necessary to meet customer demand in virtually any phase of the clinical trial process. The value of linear R&AP was further bolstered this quarter with a receipt of a first US patent with claims covering the enzyme composition of matter. Looking ahead, we believe our goal to sell 100% of our current GMT capacity in fiscal 2025 is very feasible.

Clay Shorrock: Our optimal system is not only based on the groundwork and customer relationships we have laid over the past two years, but also in the prompting state of mRNA-based therapeutic, mRNA empowers much more than just vaccines against infectious disease, such as those against COVID-19, mRNA is a flexible technology that we believe will empower a diverse range of therapeutic modalities from personalized cancer vaccines to CARP-T and GMT therapy. Increasingly, we are seeing interest from customers that are using mRNA for the personalized cancer vaccines and modality that have seen recent success in the clinic.

Clay Shorrock: Here, the feed of manufacture is critical. And given that feed is one of our platform's main selling points, we believe we are very well positioned to capture new customers in this growing area. Likewise, mRNA-based CARP-T therapies have recently been shown to be safe and effective against autoimmune and also potentially cancer. This leads to an A yet another new market opportunity for our platform.

Clay Shorrock: So, in some, we believe we are in the last stage of what has been two years of extraordinary efforts to create a new growth opportunity for applied DNA. The development and launching of a new psychology is never easy, but fortunately, it's a bold, and we are excited for what the future holds.

Clay Shorrock: Now, I'll give the call back to you. Thank you much, Clay.

James Hayward: Our linear Rx platform is the opportunity for our team and our investors to participate in the compelling future of bio-theraputics, which is evolving at lightning speed. Combined with the benefits of precision prescribing empowered by pharmacogenomics, we really find ourselves at the center of the new revolution in biotechnology.

Operator: Operator, you can now open the session to Q&A. We will now begin the question and answer session. To ask a question, you may press star then one on your touch to your phone. If you were using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.

Operator: At this time, we will apply momentarily to assemble our roster.

Yi Chen: Our question comes from Yi Chen, from Applied DNA. Go ahead, please. Good afternoon. This is Dan on for you. Thanks for taking our question. Also, HC win, right?

Yi Chen: We were wondering how many customers for GMP manufacturing products do you expect to have by the end of 2024? Are there any customers beyond the two approved and third-pending and conversation, as well as what is the level of test volume for QRA pharmacogenomic testing services you expect to have in the coming quarters? Thank you.

Clay Shorrock: Clay, would you like to take the first half and I'll take pharmacogenomics? Absolutely. Sure.

Clay Shorrock: Hey, Dan. So, to answer your first question about the number of GMP customers in fiscal 2024, I mean, we are launching our GMP facility at the end of fiscal 2024. So, you know, we don't expect to have sign contracts today that it launches, but that being said, and as we talked about in the prepared remarks, we have been through the validation process with two large customers and based on their manufacturing time line, which was really outside of our control, you know, the indications are that those first GMP manufacturers' products will be early calendar to your 2025.

Clay Shorrock: That being said, you know, the GMP process is that if they process, right? It's not given the material that we want to say manufacturer. There is a process development and scale-up aspects to it. So, some of those activities that predate the GMP runs could happen in, you know, late fiscal 2024 or Q1-25. That makes sense? Yeah, that's perfect. Thank you. And then in terms of, I think you have that in terms of number of customers after fiscal 2024 or that answer your questions.

Clay Shorrock: You know, whatever beyond 2024 would be just to get like an overall picture of how quickly you think this uptake is expected. Yeah, yeah. So, right now, I mean, we have the verbal commitments that we have discussed on this call for about half of our GMP capacity in early calendar year 2025. As we show in that slide, we think we have a box sales funnel for the rest of the capacity and we're going to work to like close that. So, you know, it's not really a number of customers' game. It's the size and the therapeutic modality of their mRNA order. That is.., really matters. Thank you, that's perfect.

James Hayward: And Dan, to answer your pharma co-genomic question, you know, we believe that we are the first commercial entity in New York State to be offering a broad-based panel. We explore as many as 130 alleles in pharma co-genomics and to be targeting initially New York State. So, other testers come from without the state outside of the state. And as a consequence, we believe we will have a turnaround time advantage in providing service.

James Hayward: Now, speaking of service, we're starting with a service-oriented market, and that is the concierge physician practices that we have been talking to really for the last year. And this is a means for these physicians to implement precision prescribing and to compete effectively in the concierge marketplace. So, we've been very excited by the initial response, and we hope to build an adequate volume of that form of testing in due course, actually in smaller quanta.

James Hayward: And the idea behind the smaller quanta, you know, a typical concierge physician has somewhere between 250 and 500 patients. Is it allows us to provide the white glove service consistent with a concierge physician and to habituate the workflow that we will need in order to service the much larger enterprise customer that we want to begin tackling, say by the end of the first quarter of 25. Those customers, which include things like large hospital networks and here on Long Island, we're surrounded by them.

James Hayward: We believe there is a large opportunity to provide services of pharmacogenomics to companies that are self-insured, to counties and governments that are self-insured, and we believe that we can create large demand that way. The capacity we've built for is adequate to service in a single shift more than 25 million dollars of revenue per year. But it's imminently scalable. Of course, we can add more shifts, we can add more testing lines as well. So we're excited about the opportunity and we're anxious to get started.

James Hayward: That sounds great. If I could ask a follow-up, are there any other states that you're targeting and do they require a similar approval process in those states? It's funny you should ask, because we're just completing our registration that would enable us to sell in I believe 47 additional states. There is no validation required thanks to the fact that the New York State validation is itself so difficult and it took us over a year to obtain approval.

James Hayward: In part because this was our first genomics LVT and it was deemed during the validation process as they always are high risk and so it was given very careful consideration before it was approved. But now to march onward to other states all we have to do is fill out an application. That's awesome. Congratulations on the approval and we're looking forward to the ramp. Thank you.

Operator: Again, if you have a question, please press star then one.

Operator: This concludes our question in the answer session.

James Hayward: I would like to turn the conference back over to Dr. James Hayward for any closing remarks. Thank you Cindy. And thank you all for attending our call. We look forward to keeping you updated on our progress as we move through this very exciting period.

James Hayward: Thank you.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.