Axe Compute Inc. (AGPU) Q3 2022 Earnings Report, Transcript and Summary

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 accepted the challenge, and I'm committing myself to it. I'm committing myself to it because I believe in it. I believe in the company, I believe in the people, I believe in the market opportunity, I believe in the growth of the company. What's most important right now, I think, is that we focus. We focus on the market opportunities and we focus on how to leverage the assets of the company. And so I will tell you one of the first things that I did was to do a forensic analysis of what we have. And what I found was, fascinating really, is that I think the first thing is investors should understand that the money that's been invested in this company has been well spent because of the value that's being created in terms of the platforms, in terms of the technologies, in terms of the people who have been brought to the table. It's been a long process, but it's been a very valuable process. So while that hasn't been recognized in market adoption yet, it certainly has been realized in terms of positioning the company to be adopted in the marketplace. None of what we have, none of what Pamela is going to speak to in a few minutes would be possible without the investment that's been made into the core technologies of the company and the quality of the people who will be doing this and have them, by the way, not – this is not experimental anymore. This is not R&D. We are launching a commercial technology. And that, by the way, is my background. Commercializing – identifying, commercializing and launching novel technologies in the marketplace, primarily in biotechnology, and specifically, in oncology. This, for many years, has been a personal commitment for me, my mother, my father, my brother and my grandfather have all died to cancer. So I literally pivoted many years ago to find some way to contribute to this process of discovery for diagnostics, therapeutics, medical devices, whatever I could do as a personal commitment to do that. And it's also why I agreed to take this position is because they want to move that forward because, there are a lot of people like me, whose families, and probably many of the families of the people on this call right now have dealt with this or are dealing with it or will deal with it. So I take that as a personal commitment on my part to do what I can to make a difference. So in the content – I'm sorry, in the process of evaluating the assets of the company, what I realized was that the technologies that we have, have been, frankly, underutilized, and underutilized because they've been underappreciated. Maybe underappreciated because we didn't recognize it, but certainly underappreciated because the market doesn't really understand what we have. One of the things that we have, we talk a lot about the artificial intelligence. All of you, I'm sure many of you on the phone right now recognize, if you've been following us for quite a while, so you know what PeDAL technology is and core technology is and what the capacity of the intellectual property is and the artificial intelligence capacity is. But the only reason that it's relevant is because we own and control probably the largest privately held tumor sample biorepository in the world. Every [indiscernible] of biomedical research that's done is done because they have access to human tissue samples. And specifically, our database is tumor-specific, meaning the tumor indications, tumor type. So when I joined, when I actually just started when I was on the board, but I began to ask questions like, what is the value of the biobank? And how is that relevant to the future direction of the company? And the simple answer to the value of the biobank it can be viewed in two different ways. One is what's the value to our customers and what's the value to the company with respect to valuation. I really can't speak to the valuation, I'll let Bob talk about that or at least in how it's handled on our balance sheet and our financials. But I will tell you that the value of the biobank alone is in excess of $400 million. I'm not at all suggesting that tomorrow, the company is going to be $400 million. What I'm saying is that it has been underappreciated and we have to understand that there's an asset that we have to leverage and utilize in order to drive us into the marketplace in a way that has not been possible in the past, not because we didn't have it, but because we didn't use it. And I'll be happy at the end of Q&A to answer any of these questions. So the combination of our PeDAL technology, which is the artificial intelligence, paired with access to the tissue samples, the tumor samples, I should say, that we have in our bio repository is what makes us unique in the marketplace. And that is what is going to differentiate us in the marketplace. And that is what the companies with whom we are speaking are interested in. And I will tell you that we actually have, again, on us, on me, I mean, I might be here now, but I'm not going to walk away from what has or hasn't happened in the past, they accepted this role to change things and make a difference. So I'm assuming full responsibility or what has or has not happened in the past, but I will leverage that to make sure that we can move forward and grow the company. So the integration of the PeDAL technology with the biobank is really the differentiator for us and sets us out to penetrate those companies whom are already customers of ours through acquisition, that include three or four, maybe five, I'll ask Pamela or Bob to clarify that for me because I've hinted this now for a full 10 days. So of the top 10 pharmaceutical companies, biopharmacy companies in the world, so we already have access to that customer base, the very customer base point. Have we penetrated it? No. But we have access to it through our acquisitions. And that is going to be a major focus, and Pamela, I'm sure, will address that. So I should also say just for context, we do have a GMP facility, Good Manufacturing Practices facility, for formulations. And that is part now of the service line of the company. So I'm sure you all know that we are consolidating, or maybe you're not, maybe I'd be saying this for the first time, you may not have heard this before. So we're not rebranding the company, we're refreshing the brand at the company. And we're doing that by integrating all of what were segments in the business into the service line within the business. So what we provide in the context of our value in the marketplace and our differentiation in the marketplace is service along the continuum of drug discovery to drug development. That is a very long process, as you all know. Biopharma, it's a business that takes a long time, primarily because it's highly regulated. But we now have services and domain expertise along the entire continuum on the front end we have, which is our most distinctive and proprietary and novel platform, is driving drug discovery to find those molecules that can go into drug development, and I'll leave this to Pamela just to explain that deeply. The formulation and 3D modeling of large cells fall along that continuum are just applied differently. So as we talk about this, I want you to understand that while the segments may disappear, the domain expertise is now consolidated into the CLIA laboratory – Predictive Oncology’s, CLIA laboratory. And so – and we're able to do that because we do have a GMP facility. So we can move from discovery to testing, to preclinical testing and to clinical testing within the GMP environment. And we are making inroads. At the moment, we're making inroads to do exactly that. We have the capacity to do that. I simply want by introducing myself to you to have a sense of who I am, what my vision is, what my commitment is, but also to reinforce the fact that, because sometimes this gets lost, and I know – so I'm an investor myself and have been for many years. The people are important. The quality of the people are important. The integrity, the commitment, the ability of the people that are involved in this are extremely important. And I have absolute confidence in the people in this company. I will also say that, although I cannot mention them right now, part of the strategy, part of my Modus Operandi is to surround this company at the Board level, on the Scientific Advisory Board level, with key thought leaders in the industry. Some have already been announced. Some will soon be announced. But I view these people as credible C-level executives in the industry who can move us in the direction that we need to go, not by parenting what we say, but by telling us where we need to go. To use the hockey metaphor, you skate to where the puck is going to be. And so part of the strategy here is external to the company to provide surrogate leadership through our advisers, to open doors in the industry that we haven't really done before, quite frankly. And for better or worse, that's going to fall to Pamela. So this is a perfect transition to Pamela. And Pamela, as you may, may or may not know, Pamela is our Senior Vice President of Strategic Sales and Business Development for the company. But I want you to know when I'm talking about the quality of the people in this company, so for those of you who do know, please forgive me for being redundant, but for those of you who don't, Pamela is a PhD MDA, who completely understands the business of science. That's different than science. The business of science is very different. Before she came to Predictive Oncology, she was lead negotiator for term sheets and contracts at Eli Lilly company. And she was at company liaison between the science and the business development assumptions of the company to in-license and not license strategic assets. But she began at Lilly in finance and oncology pharmacogenomics benchmarking process. So she understands not only the business of science, but the business of the business of science. She actually did the modeling for what it is that needs to be identified, what it is to move forward with and how to move forward with it. But before she became Director of Corporate Business Development at Lilly, she was Manager for R&D Finance, and she led the planning in the forecasting and controllership responsibilities for $1.5 billion across multiple functional areas within Lilly. So when you listen to Pamela, you're listening to someone who was in the very industry that we're trying to get into. She understands it from the inside-out. And while there may be growing pains in what we may need to adjust to market opportunities and shifts in the marketplace and changes in the way that biopharmaceutical companies do business, Pamela is the one who understands that as well or better than most. So with that, really heavy obligation, Pamela, I'd ask you to join the call, and please put some things in perspective for us all.

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 out of 10, or right now, with a track record of about 1 of 10 of those actually making to commercial success. So the – one of the issues that is driving this lack of success in the clinic is that the results are seen in preclinical studies are not necessarily translated to human results. So what might be driving that? There are a couple of those underlying issues that we are looking to address at Predictive Oncology. The first one is the architecture and complex architecture of a tumor that is three-dimensional, and includes more than just tumor cell. And the second one, which is even more complex, is the fact that each human being that has a particular kind of cancer, breast cancer, pancreatic cancer and so on, each person brings their own uniqueness, their own characteristics, their own diversity. This is called tumor heterogeneity. And tumor heterogeneity, this diversity in the population, is not evaluated in preclinical stages. So if a drug works on a particular tumor, a human tumor that may have been evaluated in preclinical, once you put it in the clinic and you're looking to see how the drug behaves, when you put it in 100 people, a couple of dozen people, depending on the stage, those results do not necessarily translate to the results that were seen in the clinic. So as Raymond mentioned earlier, we have this rich pressure of tumor samples, human tumor samples, that can be used to evaluate drug compounds in a preclinical setting. So to give you a – to paint the picture, imagine what would happen if you are at the end of a clinical trial, an oncology clinical trial, you're at the end of a Phase III clinical trial, and whether this – the trial is successful or not, you are able to take a small sample of the tumors from those patients and travel back in time, eight, 10, six years depends on the compound on the trial, back to when it was in a preclinical stage and test not only the drug compound that went into the clinic, but an additional dozen, 50, 100 compounds that are being considered to treat that cancer. So imagine being able to test in a laboratory, in an in-silico platform, how all of those compounds would or would not behave against those tissue samples that were actually in patients in the clinical trials? And not only see whether the compound that you selected would have worked in the majority of those 100 people or if there was another compound that maybe would have been better at treating the cancer that would have had a better response against the tumors from all those patients. So that is the value that the PeDAL platform is bringing to biopharmaceutical companies. It is the ability to test in a preclinical stage, which is more affordable than doing it in a human being, at a preclinical stage to be able to test what the response would be from a tumor sample and actual human tumor sample, what the response would be to a particular drug, and ideally, a collection of drug compounds that are being studied. Not only would the results of those campaigns would be informative to move compounds that are more likely to succeed in a clinical setting, but it also provides the information as to what are the best tumor indications to go after. And what might that – tumor strategy might look like for a biopharmaceutical company. So we truly have a pressure and an opportunity to disrupt the way that drug oncology drug development is currently being done by bringing that future outcomes that would only be seen in clinical trials when it's been tested in a multitude of individuals, bringing that information to a preclinical setting, to make a better and more informed decision that should have a higher likelihood of success once it goes into the clinic. So I would be happy to answer any questions that you may have around the science, but I just wanted to take a moment to step back and paint that picture to you because I think it is critical to understanding the value of what we have at Predictive Oncology. As Raymond said, there are no other privately held tumor sample collections that exist, that can be used for this kind of research to advance the research that biopharmaceutical companies are doing in oncology. So I hope that you guys are as excited now as we believe that this platform is able to disrupt the way that oncology drug development is done going forward. So with that said, I had shared it with our shareholders at the last call that we have different campaigns that we have been working through to reach out to potential clients. We continue to advance the lead contract that we have. And although I'm not able to give names or timelines, that continues to be back – that continues to be on track with what has been shared in the past. At the same time, we continue to acquire and nurture additional leads that have been developed through different partnering conferences that we have attended and through different approaches based on the marketing plan that we have put together. As Raymond mentioned, we also already have contracts and relationships with four of the top 10 biopharmaceutical companies. If you look at the biopharmaceutical companies by revenue as last reported, we are already working with four of those companies, which we are continuing to nurture those relationships to give us the opportunity to cross-sell the different products that we have at Predictive Oncology. So whether it is the 3D tumor technology, whether it is the PeDAL platform, as well as the formulation solutions that we have for large molecule development. So I'm going to stop there because I know that I took quite a bit of time going back in explaining the technology, but we are excited about what the future holds. We have started the momentum of selling. We are now pushing something that is completely stopped. There is now momentum that is building. And we are incredibly excited about the outcome of what those relationships are going to be in the remainder of the year, as well as in 2023. So with that, I will pass it on to Bob, and I thank you for your time and look forward to answering any questions that you have. Bob?

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 compounds make it to commercial, what if we're able to triple that amount? What does that savings look like to a pharmaceutical company? You can start doing the math, I'm sure, in your head. When you start thinking about how much a Phase I trial cost, how much a Phase II trial cost and a Phase III trial cost, because every time that you have a compound that is more likely to be successful, that means that a pharmaceutical company does not have to commit those ones to additional clinical trials that maybe blindly going into, not knowing whether the compound is going to succeed in that indication or not. So as I said, we're increasing the probability that the compound will be successful. We're providing a decision tool for pharma to determine what are the best indications to go into. So every trial that does not need to be done because it is not a – it is a more educated determination as to which trials to or which indications to pursue, all of that provides additional funds for a pharmaceutical company to either invest in additional early drug discovery or to invest it in other aspects that they need for the company. So there is great value that the PeDAL platform provides to a biopharmaceutical partner in the drug development process that they are going to follow for each program that we will be working in. With respect to the value that Predictive Oncology is going to be able to realize, these are not going to be transactional collaborations. These are going to be opportunities in which we're going to be working with maybe pilot programs to begin with that we are going to be able to multi-month campaigns that we are going to be doing with them to provide that information that is going to be critical for the teams to determine what are the compounds that should be moved in development. Bob, is there anything else that you would like me to add?

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 to understand that we are talking about a $435 million value that does not show in our balance sheet. And that goes back to accounting rules and acquisition and the method that occurred from back in the days when Helomics purchased Precision Therapeutics. And then Skyline at that time that to [indiscernible] purchased Helomics. So the only opportunity for us to value that money and to realize value on that money is if the company ever were to be sold, that would be our starting figure and then some for what we would do down the road to a company that was interested in us. But it also means that's the kind of value we're dealing with as an asset over the long-term to produce revenue for this company. So I hope that helps explain why it's something that's not on the balance sheet, but it's a very, very valued asset to what we have. I am not going to go through the other revenue items. I'll be more than happy to answer any of those questions, but we spent a lot of time on our talking. So operator, I'm going to turn this over to you for questions and answers, please.

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 highly regulated industry. And what we can and can't say is circumspect. So I can say that with absolute certainty, there is a path forward. We do have a validated platform technology. We do have an asset that has never been recognized before, have never been spoken about before, frankly, that we can now leverage in a way that was not possible before. So I will say to you, all of you, not having met you personally, that you have my personal commitment and I will do everything possible to raise the expectations of this company, to restore the credibility of the investors and to honor the people in this company that have actually made this happen over the last x number of years. I mean, this has been going for a long time. We talked about the business segments, but I will tell you that Helomics, the CLIA Laboratory where the biobank is – where the biobank resides rather. That business goes back 30 years, not 15 years, but 30 years. I happen to have done due diligence on that business before the original founder of this business, Dr. [indiscernible] and Sean McDonald founded it. So I know the entire trajectory of that company and that technology and that biobank and the significance of it in the marketplace. So this is a convergence of circumstance more than anything else that Pamela and I worked together in the past. I know the entire history of the opportunity that resides in the artificial intelligence and biorepository that to which we have access, and frankly, control. And those things are new. I mean, new. When I say new, I mean, at least newly realized or refreshed. But that is what we need to focus on moving forward. We also know that we're in the biopharmaceutical industry, and this does not happen overnight. This is a long, regulated, meticulous process. So I want everyone to be comfortable with the fact that we know what we're doing, but we are also at the disposal of those mechanisms and those workflows that are inherent to the very industry and the companies with whom we will be working. We have to fit into the work, their workflow. They're not going to change their workflow for us. So as I said at the very beginning, I am used to launching novel technologies. It's sort of like when you change standard of care for a drug, it takes a lot of effort to get people comfortable with that because you're telling them that they have to change the way that they've been doing things for many years. The difference is they're eager for it, they're desperate for it. There's a different mechanism of action here in terms of advancing drug discovery and drug development. The one thing I can say with absolute certainty is that with this company, and with this team, and with the industry in which we're working, the primary focus is on saving lives. It's on saving lives. It's about the patients who are desperately in need of cancer care. These are the people that we're focused on. We are going to be an anonymous, invisible, transparent thread that goes throughout this discovery and development process. But we are critical to it because we can advance it. And my hope is that we can expedite that process in ways that have never been possible before. So with that, I thank you all. I thank you all for sticking with us for as long as you have, and I appreciate it.

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