Applied DNA Sciences(APDN) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q4 fiscal 2020 declined to $314,000 from $1.7 million in the prior period, primarily due to a decrease in product revenue from the textile industry [8][11] - Product revenues fell to $123,000 for Q4 fiscal 2020, down from $1.3 million in the prior period, while service revenue decreased to $191,000 from $423,000 [8][11] - Net loss widened to $4.1 million in Q4 fiscal 2020 compared to $1.2 million in the same period last year, with adjusted EBITDA at negative $3.8 million [11][12] - Cash and cash equivalents totaled $7.8 million as of September 30, 2020, with an average monthly cash burn rate of $980,000, an increase of 111% year-over-year [11][12] Business Line Data and Key Metrics Changes - The tagging and related supply chain services business experienced a decline in revenue due to the pandemic's impact on global supply chains, particularly in the textile industry [6][7] - Investments were made in COVID-19 testing products and services, which did not significantly contribute to Q4 revenues as contracts were signed late in the quarter [7][8] - Operating expenses increased by 31% to $4.2 million, driven by higher SG&A and R&D expenditures [9][10] Market Data and Key Metrics Changes - The company has established a diversified customer base for its safeCircle platform, including schools, businesses, and hospitals, with over 30 customers currently [46][47] - The Suffolk County government awarded a contract valued at up to $2 million for pooled surveillance testing, which could expand based on demand [16][30] Company Strategy and Development Direction - The company is pivoting towards COVID-19 diagnostics and therapeutics, with a focus on developing its LinearDNA platform for vaccines and diagnostics [19][32] - Plans to commercialize the LinearDNA platform for veterinary use are underway, with trials set to launch in March [21][22] - The safeCircle platform is designed for pooled surveillance testing, which can be adapted for various respiratory viruses beyond COVID-19 [40][41] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong commitments from employees, investors, and partners despite the challenges posed by the pandemic [71] - The company anticipates that the revenues from the safeCircle surveillance business will exceed the growth rate expected from its traditional tagging business [47] Other Important Information - The company has maintained ongoing contracts in its tagging business and has obtained several issued patents that strengthen its position in the market [42] - The company is now debt-free, having repaid its secured convertible notes, with the exception of a Paycheck Protection Program loan [12][13] Q&A Session Summary Question: What role does CLEARED4 play in the Suffolk County Government contract? - CLEARED4 provides a flexible platform for tracking information and communication, and the company pays a fee for their service [44][45] Question: How many customers are on the safeCircle platform and will current revenue compensate for lost textile revenue? - The customer base includes over 30 diversified clients, and the revenue from safeCircle is expected to exceed the growth rate of the tagging business [46][47] Question: Is the cat vaccine trial on track and what about the human vaccine? - The cat vaccine trial is expected to proceed as planned, and insights gained may inform the development of the human vaccine [48][49] Question: Can you elaborate on the write-off for development expenses related to the cannabis industry? - The company is shifting its tagging methods to be more relevant to the cannabis supply chain, focusing on tagging during the chemical processing stages [61][62] Question: What were the deficiencies in the CLIA certification and when will they be addressed? - Most concerns were related to data flow in electronic systems, which have been addressed, and documentation is being submitted to the New York State Department of Health [66][67] Question: Any additional insights on gross margin and SG&A expenses for fiscal '21? - SG&A levels are expected to decrease slightly, while gross margins are anticipated to improve with the growth of the surveillance testing business [68][69]