Good afternoon, and welcome to the Predictive Oncology Earnings Conference Call for the Second Quarter Ending June 30, 2019. All participants will be in a listen-only mode.

[Operator Instructions] Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A replay of the call will be available approximately one hour after the end of the call through July 31, 2019.

I would now like to turn the conference call over to Scott Gordon, President of CORE IR, the Company's Investor Relations firm. Please go ahead, sir..

Thank you, Ben, and thank you all for joining today's conference call to discuss Predictive Oncology's corporate developments and financial results for the second quarter ending June 30, 2019. With us today are Dr.

Carl Schwartz, Company's Chief Executive Officer; and Bob Myers, the Company's Chief Financial Officer, Gerald Vardzel; President of Helomics, Amelia Warner, COO of Helomics. At 5:15 P.M. Eastern Time today, Predictive Oncology released financial results for the second quarter ending June 30, 2019.

If you have not received Predictive Oncology's earnings release, please visit the Investors page at www.predictive-oncology.com. During the course of this conference call, the company will be making forward-looking statements. The company cautions you that any statement that is not a statement of historical fact is a forward-looking statement.

This includes any projections of earnings, revenues, cash or other statements relating to the company's future financial results.

Any statements about plans, strategies or objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding anticipated new relationships or agreements, any statements regarding expectations for the success of the company's products and services in the U.S.

and international markets, any statements regarding future economic conditions or performance, statements of belief and any statements of assumptions underlying any of the foregoing.

These statements are based on expectations and assumptions as of the date of this conference call and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

Some of these risks are described in the section of today's press release titled Cautionary Note on forward-looking statements and in the public periodic reports the company files with the Securities and Exchange Commission. Investors or potential investors should read these risks.

Predictive Oncology assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. It is now my pleasure to turn the call over to Dr. Carl Schwartz, CEO of Predictive Oncology. Dr.

Schwartz?.

Thank you, Scott. Welcome everyone and thank you for joining today's conference. Predictive Oncology focuses on applying its smart tumor profiling, an AI platform, to extensive genomic and biomarker patient data sets to predict clinical outcomes. Today, we are proud to announce initiation of our new corporate focus CancerQuest 2020.

The goal of our CancerQuest 2020 is to partner with pharmaceutical companies to bring more effective therapies to patients in realtime. Jerry Vardzel, of our Helomics division will describe how recently signed projects fit into tactical business plan for CancerQuest 2020.

Then Amelia Warner, COO of Helomics will show how she could leverage these projects to partner with pharmaceutical companies. Then our CFO, Bob Myers will preview and review the quarterly financials. As we focus our – shift our focus to Helomics, our second goal is to monetize the value of our STREAMWAY business.

To build a roadmap for we have engaged a firm to help us understand the value of the STREAMWAY business as a standalone entity or in combination with industry player. We are currently involved in sensitive discussions and cannot comment further on the developments at this time.

I would like to turn this call over to Jerry Vardzel of Helomics and for his comment.

Jerry?.

Thanks Carl. Today it’s my pleasure to frame our corporate initiative CancerQuest 2020. There are four drivers of this initiative that are critical valuation drivers for the company going forward. Before I explain the initiative, let me briefly recap the foundation on which we're launching the program.

Predictive Oncology has two unique assets from its acquisition of Helomics. First, a clinically validated patient-derived tumor profiling platform, which has had over $200 million invested in it. This platform generates drug response and biomarker profile and it was clinically validated in ovarian cancer.

Importantly, this asset can be leverage both to generate new data, as well as generate additional and deeper information on existing samples. Second, our existing database has drug response and biomarker profiles of over 150,000 tumors and that is across a 137 cancer types that has been obtained from over 10 plus years of clinical testing.

Now, let me introduce CancerQuest 2020. There are four steps in executing on this plan. Number one, we are validating our first AI-driven predictive model in ovarian cancer by leveraging our recently signed collaboration with UPMC Magee-Womens Hospital.

This will provide retrospective data on outcomes from over 400 patients that already have their drug – tumor drug response tested at Helomics. This will also generate deeper genomic data. Dr. Mark Collins is leading this initiative.

Number two; following our recently signed collaboration with Interpace Diagnostics, we are analyzing their clinical testing to develop AI-driven predictive models of indolent and aggressive thyroid cancer. Dr. Mark Collins is also leading this initiative. Third, we are expanding our predictive models to lung.

This is accomplished through our [reach back] [ph] program to key clinical centers. I am personally leading this initiative. Fourth, Dr. Amelia Warner, our Chief Operating Officer is focused on monetizing the first three steps by partnering with pharmaceutical companies following the capital market's plan of Foundation Medicine and Roche.

As part of these drug discovery programs, we intend to offer an additional way for new drugs to be tested against various cancers with our TumorGenesis system. The system is being design to allow new drugs to be tested against tumors created in the lab that more closely mimic the behavior in the patient.

I am very happy to report that we have made significant progress in advancing CancerQuest 2020. First, Helomics recently announced a joint collaborative agreement with UPMC to study the use of artificial intelligence to improve clinical decision-making for ovarian cancer patients.

Second, Helomics with Interpace Diagnostics are modeling Interpace's existing clinical data to identify new drugs for treatment of indolent and aggressive thyroid cancers.

Next, Helomics signed the collaborative research agreement with the Pittsburgh-based company based on molecular imaging, ChemImage to better determine disease progression in prostate cancer. Helomics has also contracted to provide CRO and data analysis services to SpeciCare for a precision medicine trial.

Finally, Helomics initiated collaboration with Viome to determine the role of gut microbiome in ovarian cancer. These are exciting times for us and we look to continue to build out these collaborations and relationships. At this time, I would like to turn it over to Dr.

Amelia Warner for a few comments as it relates to our market acceptance of our CancerQuest 2020. Amelia..

Thanks Jerry. There's extreme interest in the field and I came on board more specifically because I was excited by the direction that Jerry and Mark had pivoted the focus of innovation here at Helomics towards. We're currently evaluating several possible pharmaceutical partners at this time.

And as we progress through the programs that Jerry just outlined, we intend to release interim milestones during the year for both investors to better understand our progress and learn about our initiative and how we're pivoting to the market.

Bob?.

Thanks Amelia. I am pleased to announce that we’ve restructured the STREAMWAY business for two reasons, first, to reduce the burn rate while we focus on CancerQuest 2020. Second, as we progress our strategic discussions with industry players, we wanted to eliminate potential redundancy.

Revenue for the quarter ended June 30, 2019 was $286,151, compared with $358,586 for the same period of 2018, a 20% decrease year-over-year. Revenue includes the sale of 14 STREAMWAY systems and disposable supplies, 10 domestically and four internationally compared to 25 sales of the system in the comparable period of 2018.

Cost of sales was $118,000 in the second quarter of 2019, compared to $109,000 in Q2 2018. Gross profit margin declined to 59% versus 70% in the second quarters of 2019 and 2018 respectively. Operating expenses for the quarter ended June 30, 2019 were $1,271,258 compared to $378,906 for the second quarter of 2018.

General and accounting expenses were approximately $3,310,368, compared to approximately $729,528 during the same period of the previous year. Sales and marketing expenses remained relatively consistent at $685,029, compared to $554,084 for the second quarter of 2018.

Carl?.

Thank you, Bob. I would like to turn – have the operator open this call for questions if you would please..

Thank you. At this time we have allotted 30 minutes to address questions for participants. [Operator Instructions] Our first question comes from Jason Kolbert with Dawson James. Please go ahead..

Hi, guys. Thanks for the quarterly review. Could you please take a few moments with me and just kind of walk me through what you see is the next catalyst, particularly on the AI diagnostic side.

And then I want to go through a couple of the financial numbers, better understanding both the G&A expense and the sales and marketing expense in the quarter and how we should be looking at kind of the burn rate given the balance sheet of the company? Thank you..

Jerry, you want to answer the Helomics side..

Sure. So the next step of walking through is to leverage our assets to build the predictive tumor model. So, right now we are building the AI-driven multi-omic predictive models. And two things, that outcome in multi-omic data that we have from two collaborations, the Magee study and the U.K.

project is really -- the focus right now to generate clinically actionable model. We'll continue to rapidly generate this multi-omic data going forward. So the next step for example would be the sequence approximately 400 banks of ovarian tumor samples that were sent by Magee.

We'll continue to do that and reach back to the patients for consent additional data as we build out these predictive tumor models going forward. So it's monetizing the assets. These two collaborations and the one recently signed are the first step as we continue to validate the model going forward and we're excited about it.

Hopefully, that addresses your question..

Yes, very clear. Thank you. And so can you digress with me a little bit on the finances. Given the fact that you had a very high burn rate in the quarter, balance sheet is not as strong as I'm sure you'd like it to be. Help me understand kind of how things are going to unfold going forward? Thank you..

Bob, do you want to take that..

Sure. I think when you look at the 10-Q that's recently been filed you'll notice that there's a lot of finances there in the expenses that are paper expenses and things that occur one time. We just went through a major acquisition with the merger with Helomics and there are some additional expenses there that are rather large.

As we said, we began looking at our burn rate in order to remove redundancy to become more effective and more efficient. I think our balance sheet is certainly strong for a company coming off a merger and I think that you'll see improvement in the future..

Okay. Thanks. Good luck guys..

Thank you..

Our next question comes from [Nicholas Guerrieri] [ph] who is a Private Investor. Please go ahead..

Hey, guys. Just want to thank you for the time for – about to answer my call here. Congrats on the progress of Helomics and it seems like there's a lot of activity there. But my question is more so focused on the STREAMWAY system.

Last year you guys projected around 100 units you guys were going to sell and looks like you guys came up short only getting around 50 or so. The last six years it looks like you guys are [indiscernible] around 150 units sold and it seems like the focus is starting to drift away from STREAMWAY.

I don't know if you touched on this earlier, but what do you see as the barrier as to why you guys can reach meaningful sales in there? And what are some things you guys are looking to do differently in order to ramp sales in that department? Thanks..

Well, this is Dr. Schwartz. We have pared back our burn rate at Skyline and we will continue to sell. But as we said earlier, we're looking at all our options for this company which would include as a standalone or as merging with someone else that could help us along, but that's what all I can say at the moment. But we understand your concerns.

We have the same concerns..

Okay. And just further going on that, I appreciate the answer.

What did see specifically as the -- what's holding you back in selling those units?.

Well, I don't want to get in too deep, but it’s always been a problem both -- we're sort of a one trick pony, so we just have the one product and sometimes it is very difficult to break down the barriers in the hospitals as they're put up by very large companies that sort of limit our penetration with these hospitals, but overseas is starting to pick up.

So we're encouraged by that..

Okay. And did you guys increase your number of salesmen, your sales force.

Did you increase that or did you have some layoffs or what's the current standing on your sales force in terms of STREAMWAY?.

I don't want to say much more STREAMWAY at the moment. This time we're doing a critical evaluation and we'll be back with you as soon as we can talk about it. But we understand your concerns and we have the same concerns..

Okay. Thank you, guys. I really appreciate your time and good luck moving forward..

Thanks..

Our next question comes from [Indiscernible] who is a Private Investor. Please go ahead..

Hey, guys. I wanted to dive in the path to profitability here with Helomics a little bit more. Last year when this first came about and you got 25%? You had talked about late last year, you'd be profitable and then that's slipped to March.

Now where are we at? When do you think Helomics will be profitable? And what's holding us back?.

Jerry.

Bob?.

Yes. Carl, I think I'll that if you don't mind. This is Bob. Nothing is holding us back whatsoever. I think it would be foolish for me to tell you when we think would be profitable.

What we're looking at right now with the milestones that we made and were listed in our call that are extremely important to the success of the business and will bring in revenue from that especially on the AI side and the CRO side.

So, be a little bit patient, keep your eye on this, watch our announcements, but you'll see that, I think that over the course of the next six months it will be some good changes towards profit. But again I don't want to say that we'll be profitable in six months..

Okay. So that six months mark sounds great. Or we need to be over a dollar again in the next six months.

Do you see that happening? What was our case to NASDAQ to actually get this last extension?.

Well, we filed with NASDAQ for an extension and we did with -- everybody does, we presented the fact that we have a strong business strategy going forward that we had some successful collaborations and deals going with the UPMC and some other organizations. And we focus on the fact on where we're moving.

So they gave us an extra six months and we had the time now for some of these things to bear fruit and have the stock price on its own core..

Okay. And then last question, database sequencing, so its my understanding it was not properly sequence for enriched data like to the extent that Roche foundations was for Roche.

Where are we at with that and when do we expect to finish that deeper sequencing to monetize this database?.

So, this is Carl. So in terms of the sequencing, you are correct, the initial sequencing data that was acquired by – again I think its part of clinical test is next generation sequencing. It looks that the targeted set of biomarkers, target set of genes. We expect to complete that sequencing assuming everything aligned appropriately.

I would imagine by end of the year, the latest in terms of sequencing those Magee samples that we need to validate our first predictive AI-based model of ovarian cancer. And we're also doing deeper sequencing and I don't to get too technical, but sequencing both mutations and gene expression.

So we have a fuller picture of the sequencing and that sequence stage is more inline with what pharma customers expect us to have..

So with that, sequencing but us on par with foundation per say?.

That sequencing data together with the outcome data that we're getting from Magee would certainly allow us to build the model of ovarian cancer that would be in our opinion extremely valuable to pharma and eventually for use clinically..

What percentage of our tumor database is oncology?.

100%..

100%. Okay.

And did we go in the 70-K in the bank? Did I miss that part, Bob?.

We have not discussed our cash at this point in time, but we certainly have a fair amount more at this point..

Okay.

Can you tell us how much we have?.

No, I'm not at liberty to discuss that..

Okay. All right. Thank you, gentlemen..

Thank you..

This concludes our allotted time for question and answers and also Predictive Oncology's earnings conference call for today. Thank you for attending today's presentation. You may now disconnect..