Good day, and thank you for standing by. Welcome to the Predictive Oncology Q1 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. And now I would like to hand over the conference to your speaker today, Mr. Glenn Garmont, Investor Relations. Mr. Garmont, please go ahead.

Welcome, and thank you, everyone, for dialing in to the Predictive Oncology Q1 2023 Earnings Call. First, you will hear from our Chief Executive Officer and Chairman of the Board, Raymond Vennare, then our Chief Financial Officer, Bob Myers, will review our financials. Finally, Dr. Pamela Bush, our Chief Business Officer, will join Raymond and Bob to answer any questions that you may have. Certain matters discussed during this call contain forward-looking statements. These forward-looking statements reflect our current expectations and projections about your events and are subject to substantial risks, uncertainties and assumptions about our operations and the investments we make. All statements other than statements of historical facts included in the call regarding our strategy, future operations, financial position, future revenue and financial performance, projected costs, prospects, plans and objectives of management are forward-looking statements. The words anticipate, believe, estimate, expect, intend, may, plan, would, target and similar expressions are intended to identify statements, although not all forward-looking statements contain these identifying words. Our actual future performance may materially differ from that contemplated by the forward-looking statements as a result of a variety of factors, including, among other things, factors discussed under the heading Risk Factors in our filings with the SEC. Except as expressly required by law, the company disclaims any intent or obligation to update these forward-looking statements. And now I would like to turn the call over to Raymond Vennare, our Chief Executive Officer. Raymond?

Glenn, thank you very much, and good afternoon, everyone. So as many of you already know, when I accepted the opportunity to serve as Chief Executive Officer of Predictive Oncology in November of last year, I did so because I recognize the enormous potential of this company's intellectual capital and the compelling suite of assets that are truly unique among companies that are currently applying artificial intelligence to drug discovery. These assets not only include our proprietary patient-centric discovery platform called PeDAL and our computational research engine called CORE, C-O-R-E, which, by the way, was developed by [indiscernible] computational biologists at the Center for Computational Biology at Carnegie Mellon University, but also our comprehensive biobank of more than 150,000 heterogeneous tumor samples and more than 200,000 pathology slides, all of which are currently being digitized and curated for both clinical utility and drug discovery. And I should say that the word heterogeneous is a very important term. Even though many patients are diagnosed with the same type of cancer, each of those tumors respond differently to particular cancer therapies. Each tumor and every response is unique. Understanding that heterogeneity is invaluable along the continuum of drug discovery through drug development. These Trilab assets, our assets, those being PeDAL and Core, together with our own wet lab capabilities in a CLIA certified facility allowed for both in-silico computer modeling and bench level laboratory experimentation, by predicting clinical success or failure early in the drug discovery process and by introducing the very human element of heterogeneity or earlier than previously thought possible. We offer biopharmaceutical companies and drug developers, a persuasive and multifaceted value proposition that includes; first, the mitigation of clinical risk at the most critical stage of drug discovery. Second, by identifying and validating drug targets sooner thereby avoiding unnecessary…

Thank you, Raymond. We ended the first quarter 2023 with cash and cash equivalents of $18.6 million as compared to $22.1 million as of December 31, 2022. In addition, we have 1.8 million outstanding warrants that represent an additional source of capital. We have no debt, so our balance sheet is very strong. As of March 31, 2023, shareholders' equity stood at $18.6 million as compared to $21.8 million as of December 31, 2022. We recorded first quarter 2023 revenue of $0.2 million as compared to $0.3 million for the first quarter of 2022. Our gross margin in the first quarter 2023 was 50% as compared to 65% for the first quarter of 2022. Operating expenses were $3.6 million in the first quarter of 2023 as compared to $3.6 million for the first quarter of 2022. Net cash used in operating activities during the first quarter of 2023 was $3.4 million as compared to $3.1 million for the comparable period in 2022. Net cash used in investing activities during the first quarter of 2023 was $0.1 million as compared to $0.1 million for the comparable period in 2022. Net cash provided in financing activities during the first quarter of 2023 was zero as compared to $1 million for the comparable period 2022. That concludes our financial summary. You can find additional details in our 8-K containing our earnings press release as well as our 10-Q, which is on file with the SEC and also available on our website. So with that, I'm going to turn the call over to the operator for Q&A. And as a reminder, Dr. Pamela Bush, our Chief Business Officer, is also available for this segment of the call.

[Operator Instructions] Our first question comes from Michael Broadbent, a private investor.

I actually have two questions at this time, if not I'll get back in line. But the first question really comes down to the financials. This company has put its shareholders through quite a bit over the past two years. And cash equivalents decreasing, total liabilities are up, revenues decreased significantly zPREDICTA isn't going anywhere. I know the focus is on PeDAL core, the biobank and other assets. But what is the time line for -- I'm going to ask this again, what is the time line for breakeven. And with the cancer horizons, how many molecules have you looked at yet under that partnership.

Pamela, do you want to address that or would you want me to address that or Bob [indiscernible] compound.

Sure. I can talk about the compounds. So thank you so much for the question. We are working in the first project with the Cancer Research U.K. The number of molecules is irrelevant because we can actually held and actually worked with hundreds of molecules at the same time. We are not at liberty to disclose how many molecules they have because we've talked about what is the target and the program that we're working on. So I don't want to disclose that confidential. But we are working on the first program within and we expect that this is going to expand to other targets within their pipeline.

When you say the first program, when will that program complete? And I guess, because Predictive isn't going to make money unless milestones are achieved. I guess what we want to know is the program is successful or not.

We do not have the answer to that yet. We have not completed the program yet. We are expecting it similar to the proof of concept to be about 12 weeks of actual testing and then there is the analysis of the data. So we are expecting that before the end of Q3, we're going to have the results. But that all depends because we have to follow the science.

Okay. And then my follow-up question, if I have time for Ray and Bob, there's concerns of lawsuits from, I believe, Richard, Gabriel and other employees that were previously with predictive oncology subsidiaries. Can you address those lawsuits and any ongoing process? Is that going to affect us further.

Raymond, may I take that?

Yes, go ahead, Bob. Sure.

Michael, first off, it's a singular lawsuit, and it does not involve Raymond -- Gabriel...

It's 20 per day case, Yes, I'm sorry.

Right. That's all right. Not a problem. This is a recent lawsuit and first and most obviously, I cannot comment on the lawsuit where it stands or how we are defending the lawsuit. I will say that there is a very strong commitment on our part to put this to bed and that there will be very little, if any, impact to the investors into the company as a result of this lawsuit.

The next question comes from Rob Antonia [ph], Private Investor.

Actually, just one follow-on to sort of, I guess, point of clarification for Michael's question. Can you confirm that there is, in fact, at least one compound that is physically being worked on at some point in time when it's complete, there will be some kind of milestone payment made upon successful completion of that project, if you will.

I can. So thank you for the question. Yes, I can confirm that we have a last one compound that we're working on. if the compound is successful to continue to move in development, that is when the financial terms that we have shared and milestones, that's when that will become effective. But yes, we will have a test one compound.

Okay. And that sort of, I guess, the [indiscernible] but I mean as you said, based on the science, et cetera, the target is end of third quarter-ish to determine whether that is successful or not?

That is absolutely everybody's goal. And like I said, it can be senior, but it can also be later depending on the science as we're going to follow it. but expecting that it is going to be similar to the proof of concept that we have shared in the past, that is what we're estimating to be. Yes.

Sorry, just I had just two questions. First was really just more point of clarity on in October, there was a big deal with David Smith being brought on as a as a director with a lot of value that he was going to be providing six months later, he's sort of stepped down and been replaced by Dr. Rao, who seems very, very qualified. Just curious if you could share us to the rationale and reasoning as to why David has sort of stepped down. And does he maintain his sort of, I guess, stock that he's been -- he received a point of being appointed as a director.

Right. Thank you, Robert. This is Raymond. That's a very straightforward answer. The last part first, yes, whatever stock he was awarded while he was on the board, he maintains -- the reason he stepped down is very simple. When David joined the Board, he was with [indiscernible]. After he joined the Board, he moved to DLA Piper. DLA Piper is our new law firm and DLA Piper would not waive conflict basically saying that none of their attorneys, not just David, none of their attorneys are permitted to sit on the Board's publicly traded companies. So he stepped down because he had to step down, his law firm said that he had a step down. [indiscernible] did not have that whatever that restriction was on their attorneys. However, I mean, it's sort of a blessing it occurs. It's not a curse at all. It's actually saying, he's staying on as a Board adviser and he DLA Piper is our law firm and David is now off the board. He is becoming lead counsel to the company. So we don't only have him as a Board adviser, we have him as a corporate counsel.

And I guess the other question, much like Michael, I'll kind of get back in line here if there's others that want to ask. But Raymond, you commented on Fulgen [ph], this sort of relationship and something to be expected towards the end of kind of third quarter. Was there any kind of PR made about that? I don't remember reading or seeing anything about the relationship. And can you maybe spend a little more time providing a little color on what that relationship really is.

Well, it's a very straightforward work for -- with flu gen, it's very straightforward work for hire. They've asked those 2. They've asked us to test am I permitted to you talk about flu gen? Or can you address it more directly than I can?

We are not permitted to share the details about the project. But as Raymond has shared, it is a fee-for-service project to advance the biologics that they are developing. And I would say that, that is what we can share at this time. We're hoping that...

We I think -- sorry, sorry, Pamela, go ahead.

No, I was just going to say that as work is complete, we will be able to share outcomes but that would have to be determined when the project is completed.

Yes. So Robert, I know what you're asking. And this is sort of the bane of our existence as we can say we're working with people. We can't tell you what we're doing. But the fact of the matter is we have the contract with flu gen. It is moving forward. We're doing something that's fairly novel with them, and it is progressing and there is an end point to it. That end point could be as early as the third quarter, the end of third quarter. There are two other contracts and two other companies that we're working on that are also on the formulation solubility side. that have not yet begun, but which the project plan or the plan it's out for the work that we've done are in process. So those three things are going on simultaneously or in parallel anyway.

[Operator Instructions] There are no further questions at this time. One second. Our next question comes from Michael Broadbent, a Private Investor.

Ray, Bob, I just had one quick follow-up. Do we have any insight on short term the next quarter, next six months for revenue growth for PLA, are we expecting more of the same given the current financials, are we still on a track to a breakeven in the next 12 months of profitability?

I'll grab that. Let me start, Raymond. So Michael, it's -- let me say this, that the revenue potential for the next six months is certainly greater than what we've done and certainly greater than what we've done last year. Raymond and Pamela have already indicated that we have three fee-for-service contracts. Those are billable or invoiceable if you will, at the end of the project or a fund delivery and that revenue is recognized at that time. So we are very hopeful that we're going to be able to show that within the course of this fiscal year. Additionally, we did not do it well. I know that Skyline is not a high measure of where we're going in the company, but we did not sell any machines this past quarter, which is why we were a little lower in our current revenue stream. But I will -- and I'm very happy to announce that Skyline has made an agreement in Canada, and we have just signed on with a system that has 20 hospitals. That revenue will be coming in, in the next six months or less and will bolster our ability to break in cash and to assist in the flow of expenses that go out towards PeDAL and any of the other projects we're working on. And so I do think that we'll be moving up. And the other thing, Michael, that you have to understand, we talk about breakeven. The first thing we need for breakeven is revenue. And that's what we're working towards. That's what we're trying to gain. The biggest area for that, of course, is PeDAL and PeDAL takes some time. And as you just heard, PeDAL has milestones and also has passive revenue in the future with a potential percentage from drug discovery. So this is not going to happen in the next eight or nine months and other contracts are going to have to fill that board. Meanwhile, we are working very, very hard at closing deals similar to the influence that we have, CRH, so that we can move ahead and advance that revenue speed it up, if you will, and start seeing that effect during the course of next year and the year after. And that's where you're going to start seeing the type of revenue that differentiates predictive oncology from where we are now.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Raymond Vennare, CEO, for closing comments.

Thank you very much. I appreciate it. So that is this conversation has concluded the call for today, but we hope that you take away from this call that we're really very motivated and frankly, very excited about the direction we're going. I know that the current investors have been very patient, if not impatient with some things, but very patient waiting for us to sort of break out of gate here. So everything you heard today is basically setting the company up for the next year, for the next year to two years. And obviously, many of you who are on the phone right now on the call right now, some of you have called me personally called this personally. And you know that you can always reach out and ask more specific questions. I know this isn't perfect on you to do that. but we will continue to keep you informed. We'll continue to make announcements. I know that everyone wants to hear good PR and no one wants to give more -- give TR more than we do. And so we look forward to doing that. So thank you all for your support, and I look forward to our second quarter update in August, and wish you all a good day. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.