Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Predictive Oncology Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Theresa Ferguson. Ma'am, please begin.

Thank you, and welcome, everyone. Thank you for dialing in. We are pleased to be here today, especially to introduce you to our new Chief Executive Officer, Raymond Vennare. He is going to share about his background in building, launching and leading biotech companies and how those insights will shape his vision for Predictive Oncology. Then we will hear from Dr. Pamela Bush, who will give us an update on sales and marketing. And then Bob Myers, our Chief Financial Officer, will share about our financials. So we appreciate you being here. And real quickly, I will read about our forward-looking statement. Note that this call will be recorded and includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations, estimates and projections about our industry, our management's belief and certain assumptions made by our management. Words such as expects, plans, intends, anticipates, believes, estimates, seeks, variations of such words and similar expressions are intended to identify such forward-looking statements. The forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, including the risks described in public filings with the U.S. Securities and Exchange Commission. The Company's actual results may differ materially from the anticipated results reflected in these forward-looking statements. Thank you. I now welcome Raymond Vennare.

Good afternoon, everyone, ladies and gentlemen, everyone on the phone, those who subscribed and those who have asked to – or signed up to ask questions. It's really a pleasure to be here today. I think it's important for you to know how I came to the company and what I see and where I think we can go with the company. So initially, about a year-ago, I should say, that I was asked to advise the Board and advise the company, I was asked by one of the Board members to come in and take a look at what was happening in the company. And in that process, to identify opportunities in the marketplace that might otherwise be unrealized or to maximize the value of the assets that the company had and how we might aggregate all of that in a way that would move us forward. And in the process to those conversations, I was actually asked to join the Board. So I spent about a year digging deeply into all of the technology as a company and the markets for which they have application. And ultimately, in the end, after the [indiscernible] retirement or the announcement of Mel's retirement, I was asked to step in as the CEO. So the first thing that you should know is this was not a knee-jerk reaction to just fill a seat with a Board member. It wasn't at all. It was that I was brought in really to provide some strategic direction for the company. Before I became the Board member and then after I became a Board member, I was asked to step in as CEO. And I will tell you that I do it gladly. We all know that it's a difficult time and it's challenging, and I've…

Absolutely. Thank you, Raymond, and good morning, and good afternoon to everybody on the call. I very much appreciate the opportunity to share with you some of the insight and advances that we have made at the company since the last time that we shared an update last quarter. But before we move forward with those updates, I want take a couple of steps backwards and share with you a little bit more about – not a little bit more, a little bit about the value of the services and the products that we have at Predictive Oncology. In the last few months since the last time that we had the privilege of presenting to you, we've had the opportunity to speak with different shareholders and stakeholders of the company. And there were a lot of questions that were brought up regarding what is the value that we're truly bringing to the biopharmaceutical company – the biopharmaceutical industry, excuse me, who are working in oncology drug discovery. So I want to take a couple of minutes of your time to walk you through that, what that looks like for biopharma. So one of the issues with drug development is that biopharmaceutical companies are really good at developing compounds to be brought into the clinic. And there's a sort of statistics, but for ease of math, let's say that 1 out of 10 of those drugs that actually go into the clinic in oncology actually make it to be a commercial product, all right? So we have a lot of years that have been spent in drug discovery. This is pre-human. And a lot of money that is put forth in the investment and the commitment to move a compound into clinical development in clinical trials. With the hopes that 1…

Thank you, Pamela. First, I'd like to just make a quick announcement. I know that a number of shareholders have been trying to figure out how to get into the conference and be able to ask a question. If you go to a Tweet by Theresa Ferguson. Theresa, is that under our Predictive name or under yours personal? Theresa, you're on mute.

Yes. My apologies. Yes, it is under the Predictive Oncology link to register.

If you do that now, if you hadn't done it another way, it will enable you to be able to follow the procedure to dial in for questions that might be on your mind. So having said that, let me just go into – before we discuss the financials specifically, and then maybe Pamela, you might help here. And unless you said it in the course of my trying to repair this, I missed it. The financial aspect of the advantage both to a pharma and to our investors and to us, as a company, when the pharmaceutical companies look to take this paradigm and shift what they've been doing for years and go in with a much, much more successful way of identifying drugs that we'll process in and succeed, what does that mean to them in terms of time and revenue both on the backside before going into clinicals and then on the other side to patent life?

Bob, was that a question for me?

Yes, I'm sorry. I could do it, but I thought you might be doing it better.

Okay. All right. So regarding the financials or what those numbers might look like, is that what you?

Yes. In terms of how our science is going to affect the financial well-being of our company and the financial well-being of pharma, which ultimately means it will make more money and our investors will do well.

Okay. Absolutely. Happy to address that. And I did not touch on this. All right. So as I had shared with you, as I was trying to paint the picture of what is going to happen when we have – when a company partners with us and is able to increase the probability of success of a molecule that they move into clinical development, what that is going to look like is when a pharmaceutical company is looking to advance a compound into the clinic, they are committing funds to start a clinical – a Phase I/II clinical trial for oncology, and they're committing those funds for different indications. And then there's other funds that are being committed to then do the further studies. For every success that a company has in a clinical trial to move forward, that reduces the expenditure that a pharmaceutical company would have in trials that would have failed. So this is not going to be perfect. This is not the magic ball that is going to take cell pharma, which ones are going to work or not, but this is going to increase the likelihood that the compound is going to be successful. As I mentioned earlier, to make it easier for math, let's say that the number that go into the clinic is – I'm sorry, that going to the clinic and make it out into a commercial setting is 10%. That means that there are 90% of compounds, nine out of 10 compounds, that go into the clinic do not make it out on the other side. So at least there are nine Phase I/II trials that actually fail. So what happens if we are able to double that probability of success, right, one in five companies – sorry, one in five…

No, that was great. And that means essentially that drug companies are going to save money, drug companies are going to save time, drug companies are going to know going into clinicals that they have a 92% chance of succeeding with the compounds by going through our system. What that means to the drug companies on the other side of it is that there's a patent life where they have the right to sell those drugs solely without generic. And this will extend that patent life where they can have additional funds on the back end. So by doing this, this makes it very, very attractive to our customers, to our partners to do what we do through PeDAL, to accelerate their program and make it more accurate. And that's where we make revenue. And then there are a number of ways that we can generate revenue off of that through the success of those drugs. So I think that was really important to get across, and thank you, Pamela, for that great explanation. So we need to go into the financials, and then we can turn this over to questions. So we'll make this kind of a little bit of a brief earnings call financial discussion since you all have probably seen the Q already. Number one, we are still sitting in a great cash position. We have $25 million in our account. Our equity position is still solid at $29 million. We have absolutely no debt. We do have, of course, normal accruals and accounts payable, but there is no other debt whatsoever in this company. So we're very solid. As Raymond, I believe, mentioned, and I see there are questions that are coming through and some media about our value of our biobank. And this is essential…

Hey guys. Bob, I apologize, my voice is still hoarse from being sick. But real quick, in the last conference call, I asked about reverse split. And I wanted to ask that question again going into the new compliance six-month period. What is the company's plan to get the compliance? What is the company's plan to avoid the reverse split? And if worst case happens where the company does need money, is there any way to avoid an offering after a reverse split?

Raymond, you're okay with me answering that?

Yes, sorry, I was on mute. Absolutely, Bob. Absolutely. I'm sorry.

No problem. We do it all the time. So Michael, thanks for the question. And first and foremost, let me say that it is our desire, our intention to avoid a reverse split. We fully believe that we are going to demonstrate to the market that our stock is valid, our value was high and that the PeDAL platform and the other cross-selling items that we have are attractive to the populous, to the customers that we have. And then we feel that the stock will raise on its own. It's a tough market to do it. As you know, we received an extension of 180 days yesterday from NASDAQ. So we are clear through May 8 before we have to be concerned with the listing. And our feeling is that we will continue to progress month-by-month for the stock to rise and get to the $1 for 10 consecutive days that we need to be compliant again. But we're not stopping there. We're going to go further. And a bad market or not, people recognize a good stock and a good value. But you have to be aware that that's not necessarily going to come by showing revenue in the third quarter or the fourth quarter. This is a long sales cycle. It is something that builds. What we want to show you are deals. We want to make deals and be able to show you the validity of our product to the customer. And that in itself should indicate that we're making a mark in the pharmaceutical industry. As far as if we had to do a reverse split as we get closer in towards the middle of the year because it takes time, we would do that if the stock was drastically go and not responding. But no, we would not do a raise with that. We have a very strong cash position, and we are sitting with roughly $30 million in warrants that are already within our capital structure that can be exercised somewhere between the price of $0.80 and about $1.20, $1.25. So it cools us to be able to keep the stock growing on our own. And additionally, there's no need to try to do this, if you will raise and bring in additional cash or additional dilution. Michael, I hope that answers your question.

It does. I've got one follow-up. And I appreciate that. It is reassuring to know that the company has options, because an offering after reverse split is usually the killer, and knowing that POAI can avoid that completely is it's reassuring to me at least to know that we're in a good position. The follow-up question, in my industry in real estate, when I take a property to market, I usually have it appraised at a market value to either [indiscernible] or determine the value so it could be on my balance sheet as an asset even when I go to refinance or get leveraged. Can that not be done with the biobank to get an appraisal of that asset so they can be added to the books at a fair market value?

All right. So the answer is yes and no. Right now, what we are doing is taking the value of this. Now that we have a procedure, a revenue path and commercialization to value the data bank and say – the biobank and say, how can we – what would we do if we lost this data bank today? What would we do to replace it? How much would it cost for us to replace it? How would we get the years, the 15-plus years of information that the other companies in the world do not have? And what we're doing for that is insuring it. And we have met with the insurance companies and the underwriters that deal with life science companies, and we are, probably within the next couple of weeks, going to insure that asset for the value so that the company is protected and it certainly validifies the value of that particular asset. In terms of being able to put it on the books or in some way incorporate it into the financial statements, no, we can't do that. That really only happens when you acquire a company. So for example, if Helomics was commercialized back in 2018, and they were bringing in revenue, and we looked at that value and said that, gee, this biobank is worth $435 million, it would have been in the acquisition price. And even if we didn't pay $435 million, we would have increased our goodwill by that amount of money and been able to put it on the books. But it's not something that you can just insert during the normal course of business.

Okay. Thank you, Bob.

Yes.

[Operator Instructions]

I'm going to add again, Howard, if you don't have that ability, please look at the tweet on Predictive Oncology and enter through that, and it will enable you to get to the phone call possibility.

Thank you. Our next question or comment comes from the line of [Robert Antonioni] (ph). Mr. Antonioni, your line is now open.

Hello.

Hello.

Hello. Can you hear me?

Yes.

So yes, first of all, thank you very much for hosting this call, and welcome, Ray. My question specifically is about something we talked about during our last call, and that was around zPREDICTA. During the last call or last sort of quarter, there was a goodwill write-down that was fairly significant. And at that time, there was some discussion around revenue realization of revenue on the books over contracts. So I just wonder if you could talk to the overall value of zPREDICTA. Is it sort of generating revenue at the rate and pace that you feel was appropriate for the acquisition? Or just any thoughts around zPREDICTA and the value that is going to be going forward? Thank you.

Raymond, I could probably answer the goodwill aspect. And the other part of that question, you may want to enhance it.

Yes, you should handle the goodwill part of it, mainly because it preceded me. But other than that, Pamela maybe better to answer that question in terms of where it fits in the continuum of services. But either way, we will address it directly.

All right. So let me start with the goodwill write-off and make sure that everybody understands the separation of the revenue from why we had to impair the goodwill. When you acquire a company, you always have to check on a quarterly basis where you stand on impairment for goodwill. And there are a number of flags that get raised, that need determination both analytically and empirically to determine whether or not you have to make an impairment. The one that we came across that unfortunately hurt us was not the revenue against forecast, what is not the value of the products zPREDICTA, but was the fact that our stock decreased so much in this terrible market. And when you calculate the stock against the value of the company you acquire, if it's below that value, then you have to impair. And that's what occurred. The flag that made us, unfortunately, impaired by [$7 million, $22 million] was the fact that our company's stock was so low, the value is beneath what we paid and we had to remove it. As far as the value of moving ahead with zPREDICTA and what it brings us, Pamela, do you want to pick up from that point?

Absolutely. I can take that. So thank you so much for the question, Robert. So there's a couple of things that we are working on from the value that came from the acquisition of the 3D models. Not only do we have established contracts with the major biopharmaceutical companies, but we have also been working internally on the development of additional tumor type models. So we have an R&D plan that is put out. We have a couple of them that are ahead of development. And we have already started to offer these to the current customers that we have. In addition, as I mentioned, the existing partnerships and customers that we have for the 3D models also provide an open door for us to cross-sell services like the PeDAL platform, as well as formulation solutions. So we are absolutely leveraging, not only the existing customers that we have from that acquisition, but also the R&D pipeline that is coming out of that product line.

Thank you, Pamela.

If I may add one --

I'm sorry, Bob.

No, it's fine.

So I would add a little bit of color commentary to that, which is to say the true value of the zPREDICTA acquisition is access. When we talk about having three or four customers who were in the top 10 of global biopharma that came through zPREDICTA. So as Pamela said, we now have the ability to upsell within an existing customer base to cross-sell our services, to basically incrementally provide more than what 3D modeling may have provided in the past. That's the real opportunity here. And I think as everyone on this call probably knows that it's easier to upsell within an existing customer base to whom you're providing a service and whom are writing a check, it's easier than going out and clubbing a new client and dragging them into the fold, not that we're not going to do that, we certainly are. But I want to be clear about there are tangible and intangible benefits to these kinds of things. And the intangible benefit was the entree to these companies. The tangible benefit will be actually being in [indiscernible] within the customer base. So I just wanted to put that in perspective.

Thank you, Raymond. And I'd like to add that we are doing everything possible to be able to name some of these customers. There are limitations contractually that prevents us from doing so. But we have connected with the customers. We are discussing where and how we could utilize their name and let you know how successful we are with these customers. And I think that's going to work, and it depends on various levels. And it depends on whether we have to actually go in and amend the contract, whether we can do a verbal agreement that says, yes, you can just at least use our name. So we understand your concerns about knowing it, and we will endeavor to bring that to you as quickly as possible. To answer the other part of the question in terms of revenue and revenue recognition, right now, we are sitting with $435,000 of unrecognized revenue. If you look on the balance sheet, it's been changed under accounting rules so it's no longer deferred revenue. It's called contract liabilities. And that amount is from zPREDICTA and will be recognized, hopefully, if not in this quarter, over the course of the next quarter. These are projects that are completed, signed by us and have to be accepted by the client. So, unfortunately, the way these contracts work, it's not a matter of just delivering and saying, okay, we did our deliverable. Now we recognize the revenue they have to take that deliverable to make sure that it meets their satisfaction and works to the way we contracted, then they sign off, we have the revenue and they pay us the rest of the money. And that's just those that we have finished. There are others that are still being worked on. So zPREDICTA still has a good value for us in terms of ongoing revenue. And it's something that Dr. Bush is going to put under her umbrella, along with the other products we have as we are One Predictive Oncology selling a number of cross products.

Okay. Thank you very much. I will move back in the queue.

Thank you.

Thank you. [Operator Instructions] We have a follow-up question from Mr. Robert Antonioni. Your line is now open sir.

Great. Thank you very much. Just a follow-up question. Last – again, from last call, the GMP labs were just recently completed or just about to be recently completed. And I think there was a comment made that there was a number of sort of clients lining up to "get in", et cetera. Wondering if there's any kind of status update you can share on the level of interest, the level of engagement, how close are we to receiving contracts and certain generating activity within GMP lab.

I'll take that, I guess. So first off, we are progressing very well. Larry Lucas who runs the site in Alabama has just got back from BioEurope. He has made an enormous number of connections and follow-up calls and meetings have occurred. We are still following up from our BIO International conference earlier in the year. And we do have negotiations ongoing and we do have offers out to customers on [indiscernible]. Now the other thing, and I want to be clear about this, is that we have NDAs with all these companies. And people say, you keep talking about NDAs, why are you hiding behind them or you can't speak about them because of NDA? What you need to know about this is before you can have any kind of a detailed discussion, and especially from our end of it, we're not going to go into what we can do or what our process is without being protected by a nondisclosure form. But that nondisclosure form also is the opening of the door. In sales, they tell you, if you can get through the door and open it, you now have an ability to connect with the customer. And that's what this is. If they sign an NDA with us, which usually involves legal expense and time on the company side, they have an interest in moving ahead with us, and talking to us and allowing us to provide an opportunity to help them and put forward an offer. So these are very important that we have these amount of NDAs because that means we are in discussions. It doesn't mean they're all going to occur. They're not all necessarily going to turn into revenue. But it means the door is open with them. We do, as I say, have active contracts offered out there, whether we can get them accepted immediately or in weeks, I'm not prepared to say that. That's being worked out with Larry and Pamela. So we'll wait and see and hopefully generate those as quickly as we can. Bear in mind that our GMP lab is opening with Phase I work. And it's is due, again, to what people are doing, but we have an excellent consultant that has succeeded 71 time with bringing drug processing through GMP labs, and he is working with us hand-in-hand to generate additional revenue in customers, and to work in the lab and increase our ability to succeed.

Thank you.

Thank you. [Operator Instructions] I'm showing no additional questions in the queue. I'd like to turn the conference back over to management for any closing remarks.

Raymond, do you want to take that?

Sure. Well, first of all, since this is the first opportunity I've had to speak with all of you directly, at least to those of you who have been able to join the call for which I'm grateful by the way, I will return to what I said at the beginning is I think it's important to note who we are, and particularly who I am and what my [indiscernible] is to make this happen. I'm not a magician. I'm not a clairvoyant, but I know this industry. I know the power of what we have in terms of technology that's been developed clearly only because of the investments that have been made in Predictive Oncology over the years. And particularly, over the last 1.5 years however much we struggled. I'm not a fan of using COVID and the volatility of the market as an excuse for not performing, but in the face of all of that, I think I need to say with all honesty, that in the face of all of that, we have made significant progress internally, which has not been realized in the marketplace. We can control what we can control internally in this organization, and I assure you that everyone is committed and me, in particular, we cannot control what's out of our control, which is basically the market. And those are interrelated realities that we have to deal with. But I can say is that I'm grateful. I'm very grateful for your continued support of this company, because without all of you, this would not be possible. And it's up to us now to show you what we can do with that. There are opportunities that we cannot discuss for all the obvious reasons. We are a highly regulated, we're a public company in…

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.